You should read the following discussion and analysis together with our
financial statements and the notes to those statements included elsewhere in
this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the
fiscal year ended December 31, 2021. This Quarterly Report on Form 10-Q contains
statements that discuss future events or expectations, projections of results of
operations or financial condition, trends in our business, business prospects
and strategies and other "forward-looking" information. In some cases, you can
identify "forward-looking statements" by words like "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"intends," "potential" or "continue" or the negative of those words and other
comparable words. These statements may relate to, among other things, our
expectations regarding the scope, progress, timing, expansion, and costs of
researching, developing and commercializing our product candidates; our
expectations relating to regulatory pathways to emergency use or other
conditional marketing authorizations and the opportunity to benefit from various
regulatory incentives; expectations for our financial results, revenue,
operating expenses and other financial measures in future periods; the adequacy
of our sources of liquidity to satisfy our working capital needs, capital
expenditures, and other liquidity requirements; and our exploration of strategic
alternatives. Among the factors that could cause actual results to differ
materially are the factors discussed under "Risk Factors" in "Part I, Item 1A--
Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, and the additional or modified risk factors disclosed in our
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 and
this Quarterly Report on Form 10-Q. Some additional factors that could cause
actual results to differ include:

? our ability to attain the significant amount of additional financing we need to

continue as a going concern on favorable terms or at all;

? our ability to successfully execute the strategic realignment of our pipeline

and resources;

? our ability to identify and execute upon a strategic transaction to maximize

value for our stakeholders;

? the timing of the initiation, enrollment and completion and results of ongoing

or planned clinical trials;

? our ability to obtain sponsorship from a third party for inclusion of

lenzilumab, or LENZ®, in a large multi-center platform trial to study the

effects of lenzilumab on patients with COVID-19;

? our ability to resolve disputes with certain Contract Manufacturing

Organizations ("CMOs") regarding our obligations to make payments to them

despite their failure to produce lenzilumab within contractual specifications,

and our ability to defer payments, negotiate lower amounts or seek other

courses of action for certain amounts accrued at September 30, 2022;

? our ability to cure the breach of the Multiple Facility Clinical Supply and

Services Agreement (the "MSA") with Catalent Pharma Solutions, LLC ("Catalent")

to prevent termination of the MSA;

? our ability to research, develop and commercialize our product candidates,

including our ability to do so after our competitors have developed and

commercialized competing products or alternative therapies;

? the ability of partners to initiate and conduct the PREACH-M and RATinG studies

of lenzilumab in chronic myelomonocytic leukemia ("CMML") and in patients at

risk of acute Graft versus Host Disease ("aGvHD"), respectively, as currently

planned;

? our ability to assess and support further clinical assessment of lenzilumab

with commercially available chimeric antigen receptor T-cell ("CAR-T")

therapies in non-Hodgkin lymphoma through an investigator-initiated trial

("IIT");

? increasing levels of market acceptance of CAR-T therapies and stem cell

transplants and the development of a market for lenzilumab in these therapies;

? our ability to maintain licenses with third parties;

? our ability to attain market exclusivity and/or to obtain, maintain, protect

and enforce our intellectual property and to operate our business without

infringing, misappropriating or otherwise violating, the intellectual property

rights of others;

? our ability to achieve collaborations, strategic alliances, or licensing

arrangements for LENZ in chronic inflammatory conditions including rheumatoid

arthritis, eosinophilic asthma, and ulcerative colitis;

? the outcome of pending, threatened or future litigation or arbitration;

? acquisitions or in-licensing or out-licensing transactions that we may pursue

may fail to perform as expected;

? changes in the regulatory landscape that may prevent us from pursuing or

realizing any of the expected benefits from the various regulatory incentives,

or the imposition of regulations that affect our products;

? our ability to regain and maintain compliance with the listing requirements of

the Nasdaq Capital Market; and

? the accuracy of our estimates regarding expenses, future revenues, capital


   requirements and needs for additional financing.




These are only some of the factors that may affect the forward-looking
statements contained in this Form 10-Q. For a discussion identifying additional
important factors that could cause actual results to vary materially from those
anticipated in the forward-looking statements, see "Risk Factors" in Item 1A of
Part II below and in Part I, Item 1A of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2021. You should review these risk factors,
together, for a more complete understanding of the risks associated with an
investment in our securities. However, we operate in a competitive and rapidly
changing environment and new risks and uncertainties emerge, are identified or
become apparent from time-to-time. It is not possible for us to predict all
risks and uncertainties that could have an impact on the forward-looking
statements contained in this Form 10-Q. You should be aware that the
forward-looking statements contained in this Form 10-Q are based on our current
views and assumptions. We undertake no obligation to revise or update any
forward-looking statements made in this Form 10-Q to reflect events or
circumstances after the date hereof or to reflect new information or the
occurrence of unanticipated events, except as required by law.



 15


   Table of Contents




Overview



We are a clinical stage biopharmaceutical company, developing our portfolio of
proprietary Humaneered® anti-inflammatory immunology and immuno-oncology
monoclonal antibodies. Our proprietary, patented Humaneered technology platform
is a method for converting existing antibodies (typically murine) into
engineered, high-affinity human antibodies designed for therapeutic use,
particularly with acute and chronic conditions. We have developed or in-licensed
targets or research antibodies, typically from academic institutions, and then
applied our Humaneered technology to optimize them. Our lead product candidate,
lenzilumab, and our other product candidate, ifabotuzumab ("iFab"), are
Humaneered monoclonal antibodies. Our Humaneered antibodies are closer to human
antibodies than chimeric or conventionally humanized antibodies and have a high
affinity for their target. In addition, we believe our Humaneered antibodies
offer further important advantages, such as high potency, a slow off-rate and a
lower likelihood to induce an inappropriate immune response or infusion related
reaction.



We are focusing our efforts on the development of our lead product candidate,
lenzilumab. Lenzilumab is a monoclonal antibody that has been demonstrated to
neutralize human GM-CSF, a cytokine that we believe leads to the overproduction
of monocytes which are responsible for CMML and is of critical importance in the
hyperinflammatory cascade, sometimes referred to as CRS or cytokine storm,
associated with aGvHD associated with bone marrow transplants. As previously
announced in July 2022, we are currently executing a strategic realignment of
our pipeline and resources. Our strategic realignment plans include accelerating
the development of LENZ in CMML, for which the PREACH-M study is already
underway, and continuing our plans for the RATinG study in aGvHD, as these
studies are majority funded by our partners. In addition, we are currently
assessing requests for IIT of lenzilumab in combination with CAR-T therapies.
The previously planned Company-sponsored study of lenzilumab with certain CAR-T
therapies has been terminated. We also plan to continue the development of iFab,
an EpAh-3 targeted monoclonal antibody currently in Phase 1 development, as part
of an antibody drug conjugate ("ADC"), for certain solid tumors.



PREACH-M Study



We are currently evaluating lenzilumab for the treatment of high-risk CMML in
patients with NRAS, KRAS, and CBL genetic mutations in an ongoing Phase 2 study,
known as "PREcision Approach to Chronic Myelomonocytic Leukemia" or "PREACH-M."
The PREACH-M study is being conducted in partnership with the South Australian
Health & Medical Research Institute ("SAHMRI") and the University of Adelaide.
The study is currently enrolling at sites in Australia and New Zealand. As of
November 8, 2022, seven lenzilumab-treated patients have been enrolled in the
study and followed for multiple cycles, with what we believe to be encouraging
results.



We will provide lenzilumab for this study and the majority of the study costs
will be borne by the partner and funded by a grant from the Medical Research
Futures Fund, a research fund set up by the Australian Government.



RATinG Study



We are currently evaluating lenzilumab for the early treatment of aGvHD in
patients undergoing bone marrow transplants in a Phase 2/3 potentially
registrational trial, known as the "RATinG" study. The study is being conducted
by the IMPACT Partnership, a collection of 22 stem cell transplant centers
located in the United Kingdom. Recruitment for the RATinG study is temporarily
halted due to an administrative issue and we are currently unable to estimate
when the first patient will be enrolled in the study.



We will provide lenzilumab for the study including the cost of import, labeling
and distribution of the study drug, and support certain laboratory tests related
to the study, but the majority of the study costs will be borne by the IMPACT
Partnership. The goal of the study is to determine the efficacy and safety of
lenzilumab in reducing non-relapse mortality at six months.



 16


   Table of Contents

Market Opportunity in CMML and Related Hematological Cancers





Clonal cytogenic abnormalities are commonly seen in CMML patients. RAS
(Retrovirus-Associated DNA Sequence) mutations, which make leukemic cells
hyperresponsive to GM-CSF, are seen in approximately 50% of CMML patients and
are the anticipated target patient population for lenzilumab. The incidence of
new CMML patients in the U.S., UK, and Australia is about 1,700 patients
annually.1 RAS mutations, which may drive GM-CSF hyperresponsiveness, are also
seen in additional myeloid hematological malignancies including juvenile
myelomonocytic leukemia ("JMML"), myelodysplastic syndromes ("MDS") and acute
myeloid leukemia ("AML"), totaling approximately 4,000 new cases annually in the
U.S. We believe success with CMML may provide proof of principle for targeting
RAS pathway mutations in myeloid leukemias with lenzilumab and allow us to
develop, and if successful, commercialize lenzilumab in these additional patient
populations.



As a treatment for a rare disease, lenzilumab may qualify for certain regulatory
and commercial benefits that may accelerate development and approval. Pricing
and reimbursement for rare diseases are traditionally higher than treatments for
more common diseases and can exceed $100,000 per year.



We are assessing regulatory pathways that may enable early results to support a
regulatory submission and potential approval by the Therapeutic Goods
Administration in Australia, which could be expanded through Project Orbis, an
international regulatory agency collaboration, to the United States and the
United Kingdom.



There have been no new therapeutic agents for patients with high-risk CMML in 30
years2 and independent publications have demonstrated the key role of GM-CSF and
RAS pathway mutations in this and other cancers, including JMML, myelodysplastic
syndromes, myeloproliferative neoplasms, and acute myeloid leukemia.3,4,5

A clinical protocol is also being developed for JMML with NRAS, KRAS, PTPN11 and/or NF1 genetic mutations.





Lenzilumab for COVID-19



As previously disclosed, in July 2022, preliminary topline results from the
Accelerating COVID-19 Therapeutic Interventions and Vaccines-5 ("ACTIV-5") and
Big Effect Trial, in the "B" arm of the trial ("BET-B"), referred to as the
ACTIV-5/BET-B trial, were released. The study was sponsored and funded by the
National Institutes of Health ("NIH") and evaluated lenzilumab in combination
with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19
patients. Based on preliminary topline results, the trial did not achieve
statistical significance on the primary endpoint, although the preliminary
topline results did indicate that lenzilumab demonstrated a positive trend in
mortality. We continue to support NIH's further analysis of the data and a
global group of leading institutions and research networks has indicated
interest in including lenzilumab in their large-scale, multinational studies of
COVID-19. Tocilizumab and baricitinib demonstrated mortality benefit following
inclusion in REMAP-CAP and RECOVERY having failed to do so in smaller studies.



With the recent preliminary topline results from the ACTIV-5/BET-B trial, we are
executing the strategic realignment plan to deemphasize the deployment of
certain resources for the development of lenzilumab for COVID-19 and currently
do not plan to pursue regulatory pathways, pending further data from
ACTIV-5/BET-B or a future large-scale study; the Named Patient program in select
European Countries has been terminated.

With the exception of lenzilumab batches in process, we plan to stop the manufacturing of lenzilumab and consolidate the remaining inventory of lenzilumab bulk drug substance and drug product in a central location for potential future use.

1 Incidence extrapolated by applying American Cancer Society incidence rate of four per one million people to the population of U.S., UK, and Australia. https://www.cancer.org/cancer/chronic-myelomonocytic-leukemia/about/key-statistics.html

2 Aim of first-ever CMML study - to improve survival. Leukaemia Foundation. (2021, October 11). Retrieved July 21, 2022, from https://www.leukaemia.org.au/stories/aim-of-first-ever-cmml-study-to-improve-survival/

3 Gupta, A. et al. (2021, February 28). Juvenile myelomonocytic leukemia-A comprehensive review and recent advances in management. American Journal of Blood Research, 11(1), 1-21. Retrieved July 21, 2022, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8010610/pdf/ajbr0011-0001.pdf





4 Padron, E., et al. (2013, June 20). GM-CSF-dependent PSTAT5 sensitivity is a
feature with therapeutic potential in chronic myelomonocytic
leukemia. Blood, 121(25), 5068-5077.
https://doi.org/10.1182/blood-2012-10-460170

5Emanuel, P. D., et al. (1991, March 1). Selective hypersensitivity to granulocyte-macrophage colony-stimulating factor by juvenile chronic myeloid leukemia hematopoietic progenitors. Blood, 77(5), 925-929. https://doi.org/10.1182/blood.v77.5.925.925





 17


   Table of Contents




C-SMART Study



As of the end of July 2022, the C-SMART study in cancer patients with COVID-19
ceased taking on any new patients in all arms of the trial and is being
concluded. The investigational product is in the process of being destroyed, due
to COVID-19 being deprioritized by us and the Australian Government.

Phase 1 Study by South Korean Partners





In May 2022, our partners in South Korea dosed the final healthy volunteer of
the 20 required for their Phase 1 bridging study. This study is being conducted
to explore the safety, tolerability, and pharmacokinetic ("PK") properties of
lenzilumab and compare it between Koreans and Caucasians.

Review of Strategic Options and Alternatives





We have engaged SC&H Capital, an affiliate of SC&H Group, ("SC&H") to advise us
on exploration of strategic options. SC&H is an investment banking and advisory
firm providing merger and acquisition (M&A), financial restructuring and related
business advisory solutions. SC&H will act as our advisor as we explore
strategic options to maximize value around lenzilumab and ifabotuzumab. We also
intend to evaluate a full range of options to address, satisfy, defer or
restructure our accounts payable and accrued liabilities to manufacturing and
other parties.



Our review of strategic options and alternatives could result in, among other
things, a sale, merger, consolidation or business combination, asset
divestiture, partnering, licensing or other collaboration agreements, or
potential acquisitions, recapitalizations or restructurings, in one or more
transactions, or continuing to operate with our current business plan and
executing our strategic realignment plan discussed above. We may incur
substantial expenses associated with identifying, evaluating and pursuing
potential strategic alternatives. Our board of directors has not set a timetable
for the conclusion of its review of strategic alternatives, and there can be no
assurance that this process will result in any transaction to maximize value for
our stakeholders. See Part II, Item 1A, "Risk Factors."



Nasdaq Listing Deficiencies



As previously reported, we have received two notices from The Nasdaq Stock
Market, LLC regarding our failures to satisfy the $1 minimum bid price and $35
million total market value of listed securities standards for continued listing.
As disclosed, we have 180 days from the date of the applicable notice to cure
each deficiency. In addition, our common stock may be subject to immediate
delisting from the Nasdaq Capital Market if our common stock has a closing bid
price of $0.10 or less for any ten consecutive trading days. See Part II, Item
1A, "Risk Factors."



Our Pipeline

Our product candidates are in the clinical stage of development and require substantial time, resources, research and development, and regulatory approval prior to commercialization. Our current pipeline is depicted below:





 18


   Table of Contents




                               [[Image Removed]]

Critical Accounting Policies and Use of Estimates





Our management's discussion and analysis of our financial condition and results
of operations is based on our Condensed Consolidated Financial Statements, which
have been prepared in accordance with accounting principles generally accepted
in the U.S., or GAAP. The preparation of our financial statements in conformity
with GAAP requires our management to make estimates and assumptions that affect
the amounts and disclosures reported in the financial statements and
accompanying notes. Actual results could differ materially from those estimates.
Our management believes judgment is involved in determining revenue recognition,
the fair value-based measurement of stock-based compensation, and accruals. Our
management evaluates estimates and assumptions as facts and circumstances
dictate. As future events and their effects cannot be determined with precision,
actual results could differ from these estimates and assumptions, and those
differences could be material to the Condensed Consolidated Financial
Statements. If our assumptions change, we may need to revise our estimates, or
take other corrective actions, either of which may also have a material adverse
effect on our statements of operations, liquidity and financial condition.



There were no significant and material changes in our critical accounting
policies and use of estimates during the nine months ended September 30, 2022,
as compared to those disclosed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Critical Accounting Policies and
Use of Estimates" in our 2021 Annual Report on Form 10-K, filed with the SEC on
March 1, 2022.



Results of Operations



At September 30, 2022, we had an accumulated deficit of $686.2 million. Since
inception, we have recognized a nominal amount of revenue from payments for
license or collaboration fees. Our product candidates may never be successfully
developed or commercialized and we may therefore never realize revenue from any
product sales. Accordingly, we expect to continue to incur substantial losses
from operations for the foreseeable future, and there can be no assurance that
we will ever generate significant revenue or profits. Our ability to continue as
a going concern depends on our ability to attain a significant amount of
additional financing, as more fully described under "-Liquidity and Capital
Resources" and in "Risk Factors" in Item 1A of Part II below.



 19


   Table of Contents

Comparison of Three and Nine Months Ended September 30, 2022 and 2021

The following table summarizes the results of our operations for the periods indicated (amounts in thousands, except percentages):





                                 Three Months Ended September 30,           Increase/ (Decrease)            Nine Months Ended September 30,           Increase/ (Decrease)
(in thousands)                      2022                   2021              Amount           %              2022                   2021               Amount            %
Revenue:
License revenue               $            221       $          1,036     $       (815 )        (79 )   $         2,293       $           2,558     $        (265 )       (10 )
Total revenue                              221                  1,036             (815 )                          2,293                   2,558              (265 )

Operating expenses:
Research and development                18,929                 60,811          (41,882 )        (69 )            62,587                 183,757          (121,170 )       (66 )
General and administrative               4,013                  6,204           (2,191 )        (35 )            12,307                  19,228            (6,921 )       (36 )
Total operating expenses                22,942                 67,015          (44,073 )        (66 )            74,894                 202,985

(128,091 ) (63 )



Loss from operations                   (22,721 )              (65,979 )        (43,258 )        (66 )           (72,601 )              (200,427 )

(127,826 ) (64 )



Other income (expense):
Interest expense                        (1,298 )                 (751 )            547           73              (2,800 )                (1,516 )           1,284          85
Other income (expense), net                326                     (9 )           (335 )     (3,722 )               281                  (1,166 )          (1,447 )      (124 )
Net loss                      $        (23,693 )     $        (66,739 )   $    (43,046 )        (64 )   $       (75,120 )     $        (203,109 )   $    (127,989 )       (63 )




Revenue



Revenue in the three and nine months ended September 30, 2022 and 2021,
represents license revenue under the license agreement (the "South Korea
Agreement") with KPM Tech Co., Ltd. ("KPM") and its affiliate, Telcon RF
Pharmaceutical, Inc. (together with KPM, the "Licensee") described in more
detail in Note 4 to the Condensed Consolidated Financial Statements included in
this Quarterly Report on Form 10-Q. Through June 30, 2022, revenue was being
amortized through March 31, 2023, the expected end of the performance period.
During the quarter ended September 30, 2022, the performance period was
reevaluated, and the estimated end date of the performance period was adjusted
to December 31, 2025. The change in estimate resulted in a decrease of $0.8
million in quarterly license revenue, as compared to amounts that would have
been recorded under the previous timeline. Therefore, we recognized license
revenue totaling approximately $0.2 million and $2.3 million in the three and
nine months ended September 30, 2022, respectively, and $1.0 million and $2.6
million in the three and nine months ended September 30, 2021, respectively.
Prospective periods will reflect the impact of this change in estimate.

Research and Development Expenses





Conducting research and development is central to our business model. We expense
both internal and external research and development costs as incurred. We track
external research and development costs incurred by project for each of our
clinical programs. Our external research and development costs consist primarily
of:

? expenses incurred under agreements with contract research organizations,

investigative sites, and consultants that conduct our clinical trials and our

pre-clinical activities;

? the cost of acquiring and manufacturing clinical trial, pre-commercial and

other materials, the cost to transfer the manufacturing process for bulk drug

substance and fill/finish production, development of and periodic performance

of a variety of tests and assays for stability, release, comparability and

product characterization, costs associated with quality management, the

preparation of documents and information necessary to file with regulatory

authorities; and

? other costs associated with development activities, including additional


   studies.




Other research and development costs consist primarily of internal research and
development costs such as salaries and related fringe benefit costs for our
employees, stock-based compensation charges, and travel costs not allocated to
one of our clinical programs. Internal research and development costs generally
benefit multiple projects and are not separately tracked per project.



 20


   Table of Contents

The following table shows our total research and development expenses for the three and nine months ended September 30, 2022 and 2021:





                                      Three Months Ended Septmber 30,           Nine Months Ended September 30,
(in thousands)                          2022                  2021                2022                  2021
External Costs
Lenzilumab                         $        18,553       $        59,950     $       60,972       $        181,089
Ifabotuzumab                                   138                    25                321                     75
Internal costs                                 238                   836              1,294                  2,593

Total research and development $ 18,929 $ 60,811

 $       62,587       $        183,757




Research and development expenses decreased by $41.9 million from $60.8 million
for the three months ended September 30, 2021 to $18.9 million for the three
months ended September 30, 2022 and decreased by $121.2 million from $183.8
million for the nine months ended September 30, 2021 to $62.6 million for the
nine months ended September 30, 2022. The decrease in the three months ended
September 30, 2022 as compared to September 30, 2021 is primarily due to a $38.4
million decrease in lenzilumab manufacturing costs and $1.5 million in clinical
trial expenses, while the decrease in the nine months ended September 30, 2022
compared to the nine months ended September 30, 2021 is primarily due to a
$108.7 million decrease in lenzilumab manufacturing costs, a $6.8 million
decrease in clinical trial expenses as the LIVE-AIR study has been completed and
the CAR-T trial was terminated in Q3 2022, as part of our plan to reduce costs,
and a $2.4 million decrease in consulting expenses.



We expect our research and development costs will continue to decrease in 2022
as compared to 2021. We have sought to mitigate our financial commitments by
ceasing additional manufacturing of lenzilumab, certain operational activities,
and reducing staff and consultants in connection with our realignment plan. Our
earlier mitigation efforts included the amendment or in some cases cancelation
of certain of our agreements with CMOs for future manufacturing work, some of
which were contingent on an EUA, in an effort to reduce our future spending. We
incurred cancellation fees for several of these modifications. We also have
disputed several invoices for cancellation fees and for production batches for
lenzilumab that had been submitted by CMOs that failed to produce lenzilumab
within our stated release specifications, but our mitigation efforts may not be
successful to recoup any such loss of lenzilumab bulk drug substance ("BDS") or
drug product ("DP"). See Notes 6 and 10 to the Condensed Consolidated Financial
Statements included in this Quarterly Report on Form 10-Q for more information
on these disputes.

General and Administrative Expenses





General and administrative expenses consist principally of personnel-related
costs (including stock-based compensation), professional fees for legal and
patent expenses, insurance, consulting, audit, investor relations costs, and
other general operating expenses not otherwise included in research and
development.



General and administrative expenses decreased by $2.2 million from $6.2 million
for the three months ended September 30, 2021 to $4.0 million for the three
months ended September 30, 2022 and decreased by $6.9 million from $19.2 million
for the nine months ended September 30, 2021 to $12.3 million for the nine
months ended September 30, 2022. The decrease for the three months ended
September 30, 2022, is primarily due to a decrease of $2.2 million in consulting
expenses, while the decrease for the nine months ended September 30, 2022, is
primarily due to decreases of $6.4 million in consulting expenses and $1.1
million in investor and public relations expenses partially offset by a $0.6
million increase in compensation related expenses, primarily non-cash
stock-based compensation expense. We expect that our overall general and
administrative costs may decrease in the near-term due to our realignment plan
designed to significantly reduce our go-forward, cash-based general and
administrative expenses.



Interest Expense



Interest expense for both periods is primarily related to the Loan and Security
Agreement with Hercules Capital as agent for its affiliates serving as lenders
thereunder (the "Term Loan"). Interest expense related to the Term Loan was $1.3
million and $0.8 million for the three months ended September 30, 2022 and 2021,
respectively, and $2.8 million for the nine months ended September 30, 2022 as
compared to $1.5 million for the nine months ended September 30, 2021. Interest
expense in the three months ended September 30, 2022 included $1.2 million in
unamortized loan fees recognized in connection with the loan payoff. We drew the
initial $25.0 million under the Term Loan on March 29, 2021. After giving effect
to payment of fees and expenses associated with the draw, we received net
proceeds of approximately $24.4 million.



In July 2022, we paid $26.7 million in full settlement of the Term Loan with
Hercules. See Note 5 to the Condensed Consolidated Financial Statements of this
Quarterly Report on Form 10-Q for additional information on the Term Loan.

Other Income (Expense), Net





Other income (expense), net decreased by $1.5 million for the nine months ended
September 30, 2022, primarily due to litigation settlement costs incurred in the
prior year period.



 21


   Table of Contents

Liquidity and Capital Resources





Since our inception, we have financed our operations primarily through proceeds
from the public offerings of our common stock, private placements of our common
and preferred stock, debt financings, interest income earned on cash, and cash
equivalents, and marketable securities, and borrowings against lines of credit,
and with the proceeds under the South Korea Agreement. At September 30, 2022, we
had cash and cash equivalents of $24.7 million. In the nine-month period ended
September 30, 2022, we sold an aggregate of 55,052,506 shares of our common
stock under the Controlled Equity OfferingSMSales Agreement (the "Sales
Agreement") with Cantor Fitzgerald & Co. ("Cantor"), raising net proceeds of
approximately $41.8 million. No shares have been sold under the Sales Agreement
subsequent to September 30, 2022.

Primary Sources of and Uses of Cash

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below:





                                                           Nine Months Ended September 30,
(In thousands)                                              2022                   2021

Net cash (used in) provided by:


  Operating activities                                 $       (62,128 )

$ (151,786 )


  Financing activities                                          16,837                 160,549

Net increase (decrease) in cash and cash equivalents $ (45,291 )

 $           8,763




Net cash used in operating activities was $62.1 million and $151.8 million for
the nine months ended September 30, 2022 and 2021, respectively. Cash used in
operating activities of $62.1 million for the nine months ended September 30,
2022, primarily related to our net loss of $75.1 million, adjusted for non-cash
items, such as $4.6 million in stock-based compensation, and a net change in
operating assets and liabilities of $8.4 million, including a $8.6 million
increase in accounts payable, a $2.3 million increase in accrued expenses and a
$2.3 million decrease in deferred revenue.



Cash used in operating activities of $151.8 million for the nine months ended
September 30, 2021, primarily related to our net loss of $203.1 million,
adjusted for non-cash items, such as $3.8 million in stock-based compensation,
and a net change in operating assets and liabilities of $47.1 million, including
a $30.6 million increase in accounts payable and a $15.4 million increase in
accrued expenses.



Net cash provided by financing activities was $16.8 million for the nine months
ended September 30, 2022 and consists of net proceeds of $41.8 million from the
issuance of common stock in connection with the Sales Agreement with Cantor,
offset by the Hercules loan repayment of $25.0 million.



Net cash provided by financing activities was $160.5 million for the nine months
ended September 30, 2021 and consists primarily of net proceeds of approximately
$94.2 million related to the sale of 5,427,017 shares of our common stock in
connection with an underwritten public offering, $40.0 million received from the
issuance of common stock in connection with the Sales Agreement with Cantor,
$24.4 million in net proceeds received from the Term Loan, and $1.9 million
received from the exercise of stock options.



Recent Financings



Controlled Equity Offering



On December 31, 2020, we entered into the Sales Agreement with Cantor, under
which we could issue and sell shares of our common stock, having an aggregate
gross sales price of up to $100 million through Cantor, as sales agent. On April
14, 2022, we filed a prospectus in respect of the Sales Agreement which provides
us with the ability to offer and sell shares of common stock having an aggregate
offering price of up to an additional $75.0 million. As mentioned above, for the
nine-month period ended September 30, 2022, we issued and sold 55,052,506 shares
of our common stock under the Sales Agreement, raising net proceeds of $41.8
million, and for the nine-month period ended September 30, 2021, we issued and
sold 2,397,791 shares of our common stock under the Sales Agreement, raising net
proceeds of $40.0 million. The ability to continue to utilize the Sales
Agreement at terms acceptable to us and in sufficient quantities relies on
future market conditions that are uncertain and cannot be relied upon. See "Risk
Factors" in Item 1A of Part II below.



 22


   Table of Contents

2021 Underwritten Public Offering





On March 30, 2021, we entered into an underwriting agreement with Jefferies LLC,
Credit Suisse Securities (USA) LLC and Cantor, as representatives of the several
underwriters, in connection with the public offering of 5,000,000 shares of our
common stock. In addition, we granted the underwriters a 30-day option to
purchase an additional 750,000 shares of our common stock. The initial offering
closed on April 5, 2021. On May 3, 2021, we closed on the sale of an additional
427,017 shares of our common stock related to the exercise of the underwriters'
30-day option. The aggregate gross proceeds from the sale of the 5,427,017
shares in the offering, inclusive of the additional shares purchased by the
underwriters, were approximately $100.4 million. The net proceeds from this
offering, after deducting underwriting discounts and offering costs, were
approximately $94.2 million.



Term Loan with Hercules



On March 10, 2021, we entered into the Term Loan with Hercules which provided us
with the ability to draw an initial amount of $25.0 million, which we drew on
March 29, 2021. In July 2022, we paid $26.7 million in full settlement of the
Term Loan with Hercules. See Note 5 to the Condensed Consolidated Financial
Statements in this Quarterly Report on Form 10-Q for additional information on
the Term Loan.

Liquidity and Manufacturing Commitments





As of September 30, 2022, we had cash and cash equivalents of $24.7 million.
Considering our current cash resources and our current and expected levels of
operating expenses for the next twelve months, which includes our combined
accounts payable and accrued expenses as of September 30, 2022 of $75.5 million,
certain of which are in dispute, and our manufacturing commitments of $3.2
million for the remaining three months of 2022, $2.3 million for 2023, and $3.8
million thereafter related to our manufacturing agreements, as further described
below (see "-Contracts"), we require additional capital to fund our planned
operations and capital requirements. We intend to seek to defer these and other
payments, negotiate lower amounts or seek other courses of action, which may
include legal recourse for the amounts in question. We may seek to raise
additional capital through public or private equity offerings, including under
the Sales Agreement with Cantor, grant financing, convertible and other debt
financings, collaborations, strategic alliances, or licensing arrangements.
Additional funds may not be available when we need them on terms that are
acceptable to us, or at all. If adequate funds are not available, we may be
required to delay or reduce the scope of or eliminate one or more of our
research or development programs, our commercialization efforts or our
manufacturing commitments and capacity. In addition, if we raise additional
funds through collaborations, strategic alliances, or licensing arrangements
with third parties, we may have to relinquish rights to our technologies, future
revenue streams or product candidates or to grant licenses on terms that may not
be favorable to us. While we believe our strategic realignment plan and our
plans to raise additional funds will alleviate the conditions that raise
substantial doubt about our ability to continue as a going concern, these plans
are not entirely within our control and cannot be assessed as being probable of
occurring at this time. If we are unsuccessful in our efforts to raise
additional capital, based on our current and expected levels of operating
expenses our current capital will not be sufficient to fund our operations for
the next twelve months.



Contracts



Eversana Agreement



On January 10, 2021, we announced that we had entered into a master services
agreement (the "Eversana Agreement") with Eversana Life Science Services, LLC
("Eversana") pursuant to which Eversana will provide us with services in
connection with the potential launch of lenzilumab.



On September 21, 2021, we notified Eversana that due to the EUA status in the
U.S., we were terminating the initial statement of work related to
commercialization support of lenzilumab for the treatment of COVID-19 in the
United States. Eversana is disputing the termination notice and has requested
payment of approximately $4.5 million it has asserted we owe for services
rendered from April 1, 2021 to September 30, 2021. We have disputed this
assertion and Eversana has filed for arbitration to resolve this dispute. See
Note 10 to the Condensed Consolidated Financial Statements in this Quarterly
Report on Form 10-Q for additional information.



Manufacturing Agreements



We entered into agreements with several CMOs to manufacture BDS and fill/finish
DP for our lenzilumab clinical trial activities in COVID-19 as well as to
manufacture BDS and DP for a potential launch of lenzilumab in anticipation of
an EUA or CMA, should one have been obtained in that indication. We also entered
into agreements for packaging of the drug. These agreements provided for upfront
amounts prior to commencement of manufacturing and progress payments through the
course of the manufacturing process and payments for technology transfer.
Certain of these CMOs were unsuccessful in their efforts to manufacture some
batches of lenzilumab to our specifications for various reasons.



 23


   Table of Contents




We believe we have sufficient supply to conduct our contemplated clinical
development efforts. We estimate the number of vials required per patient in our
clinical trials is between 48 and 150. We have stopped all manufacturing of
lenzilumab, with the exception of batches in process at one of our CMOs,
Catalent Pharma Solutions, LLC ("Catalent"). As of October 31, 2022, there were
an additional approximately 630,000 lenzilumab vials either in production or
available for storage at Catalent. If we are unable to obtain regulatory
approval for lenzilumab prior to the expiration of the shelf life at that time,
the remaining inventory will not be available for commercial use. Catalent has
notified us that it claims we are in breach of our manufacturing agreement with
Catalent and has stopped all manufacturing activities being performed under the
agreement. The parties are negotiating a resolution; however, approximately
630,000 lenzilumab vials at Catalent may not be released if we are unable to
reach an agreement with Catalent.



Another 594,000 lenzilumab vials are in production at one of our other CMOs,
Thermo Fisher Scientific, Inc. ("Thermo"), for which material has not yet been
released by us because the batches produced are out of specification.
Nonetheless, Thermo has notified us that they have stopped production and have
recently filed a lawsuit against us in Delaware Superior Court for $25.9
million. We deny Thermo's claims and assertions and will vigorously defend
against them.

See Notes 6 and 10 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information on these disputes.





Please see our Form 10-K for the year ended December 31, 2021, Part I, Item 1A -
Risk Factors-"Risks Related to Our Efforts to Develop Lenzilumab for COVID-19-
Manufacturing efforts relating to our lenzilumab program in COVID-19 have been
extremely costly and inefficient in producing treatments for use in our clinical
development program or potential sale."



License Agreements

We are obligated to make future payments to third parties under in-license agreements, including sublicense fees, royalties, and payments that become due and payable on the achievement of certain development and commercialization milestones.

We record upfront and milestone payments made to third parties under licensing arrangements as an expense. Upfront payments are recorded when incurred and milestone payments are recorded when the specific milestone has been achieved.





Outlicensing Agreements



The South Korea Agreement



On November 3, 2020, we entered into a License Agreement (the "South Korea
Agreement") with KPM and Telcon (together, the "Licensee"). Pursuant to the
South Korea Agreement, among other things, we granted the Licensee a license
under certain patents and other intellectual property to develop and
commercialize our lead product candidate, lenzilumab (the "Product"), for
treatment of COVID-19 pneumonia, in South Korea and the Philippines (the
"Territory"), subject to certain reservations and limitations. The Licensee will
be responsible for gaining regulatory approval for, and subsequent
commercialization of, lenzilumab in those territories.



As consideration for the license, the Licensee has agreed to pay us (i) an
up-front license fee of $6.0 million (or $4.5 million net of withholding taxes
and other fees and royalties), payable promptly following the execution of the
License Agreement, which was received in the fourth quarter of 2020, (ii) up to
an aggregate of $14.0 million in two payments based on our achievement of two
specified milestones in the U.S., of which the first milestone was met in the
first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes
and other fees and royalties) was received in the second quarter of 2021,and
(iii) subsequent to the receipt by the Licensee of the requisite regulatory
approvals, double-digit royalties on the net sales of lenzilumab in South Korea
and the Philippines. The Licensee has agreed to certain development and
commercial performance obligations. It is expected that we will supply
lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from
an existing or future manufacturer. The Licensee has agreed to certain minimum
purchases of lenzilumab on an annual basis.



Indemnification



In the normal course of business, we enter into contracts and agreements that
contain a variety of representations and warranties and provide for general
indemnifications. Our exposure under these agreements is unknown because it
involves claims that may be made against us in the future but have not yet been
made. To date, we have not paid any claims or been required to defend any action
related to our indemnification obligations. However, we may record charges in
the future as a result of these indemnification obligations.



 24


   Table of Contents

© Edgar Online, source Glimpses