inhibrx-20220331


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 March 31, 2022

☐ 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: 001-39452



INHIBRX, INC.

(Exact name of registrant as specified in its charter)

Delaware		82-4257312
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

11025 N. Torrey Pines Road, Suite 200
La Jolla, California		92037
(Address of principal executive offices)		(Zip Code)

	(858) 795-4220
(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 $0.0001

INBX

The Nasdaq Global 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 7(a)(2)(B) of the Securities 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 April 29, 2022, the registrant had 39,037,343 shares of common stock outstanding.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Quarterly Report, of Inhibrx, Inc., or Inhibrx, or the Company, (also referred to as “we,” “us,” and “our”) contains forward-looking statements that involve risks and uncertainties. Except as otherwise indicated by the context, references in this Quarterly Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “design,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•the initiation, timing, progress and results of our research and development programs as well as our preclinical studies and clinical trials;

•our ability to advance therapeutic candidates into, and successfully complete, clinical trials;

•our interpretation of initial, interim or preliminary data from our clinical trials, including interpretations regarding disease control and disease response;

•the timing or likelihood of regulatory filings and approvals;

•the commercialization of our therapeutic candidates, if approved;

•the pricing, coverage and reimbursement of our therapeutic candidates, if approved;

•our ability to utilize our technology platform to generate and advance additional therapeutic candidates;

•the implementation of our business model and strategic plans for our business and therapeutic candidates;

•our ability to successfully manufacture our therapeutic candidates for clinical trials and commercial use, if approved;

•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•the scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates;

•our ability to enter into strategic partnerships and the potential benefits of such partnerships;

•our estimates regarding expenses, capital requirements and needs for additional financing;

•our ability to raise funds needed to satisfy our capital requirements, which may depend on financial, economic and market conditions and other factors, over which we may have no or limited control;

•our financial performance;

•our expectations regarding the impact of the COVID-19 pandemic on our business;

•our and our third party partners and service providers’ ability to continue operations and advance our therapeutic candidates through clinical trials and the ability of our third party manufacturers to provide the required raw materials, antibodies and other biologics for our preclinical research and clinical trials in light of the COVID-19 pandemic, current market conditions and geopolitical events such as the ongoing conflict in Ukraine;

•our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals; and

•developments relating to our competitors and our industry.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements

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should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to new information, actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report and the documents that we file with the Securities and Exchange Commission, or the SEC, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

This Quarterly Report includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Quarterly Report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.

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		Page
	Part I. Financial Information
Item 1.	Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2 021	4
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and March 31, 2021 (unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and March 31, 202 1 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and March 31, 2021 (unaudited)	7
	Notes to the Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	33

	Part II. Other Information	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	38
Item 6.	Exhibits	39

	Signatures	40

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Part I — Financial Information

Item 1. Financial Statements.

Inhibrx, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data and par value)
(Unaudited)


	MARCH 31,		DECEMBER 31,
	2022		2021

Assets
Current assets:
Cash and cash equivalents	$	143,467	$	131,301
Accounts receivable	377		373
Receivables from related parties	56		505
Prepaid expenses and other current assets	6,502		6,933
Total current assets	150,402		139,112
Property and equipment, net	2,988		3,153
Right-of-use asset	5,946		6,338

Other non-current assets	1,847		1,847
Total assets	$	161,183	$	150,450
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,893	$	9,125
Accrued expenses	9,265		9,621
Current portion of deferred revenue	1,228		2,034

Current portion of lease liability	1,719		1,674


Total current liabilities	20,105		22,454


Long-term debt, net of current portion and including final payment fee	109,141		70,470

Non-current portion of lease liability	4,587		5,033
Non-current portion of deferred revenue	—		110


Total liabilities	133,833		98,067
Commitments and contingencies (Note 8)

Stockholders’ equity
Preferred stock, $0.0001 par value; 15,000,000 shares authorized as of March 31, 2022 and December 31, 2021; no shares issued or outstanding as of March 31, 2022 and December 31, 2021.	—		—
Common stock, $0.0001 par value; 120,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 39,026,469 and 38,991,307 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.	4		4
Additional paid-in-capital	285,747		279,526
Accumulated deficit	(258,401)		(227,147)
Total stockholders’ equity	27,350		52,383
Total liabilities and stockholders’ equity	$	161,183	$	150,450

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

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Inhibrx, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)


	THREE MONTHS ENDED MARCH 31,
	2022		2021

Revenue:
License fee revenue	$	915	$	863
Grant revenue	14		26
Total revenue	929		889
Operating expenses:
Research and development	24,895		16,438
General and administrative	5,051		3,009

Total operating expenses	29,946		19,447
Loss from operations	(29,017)		(18,558)
Other income (expense):
Interest expense, net	(2,274)		(745)
Other income, net	37		16


Total other income (expense)	(2,237)		(729)
Loss before income tax expense	(31,254)		(19,287)
Provision for income taxes	—		2

Net loss	(31,254)		(19,289)
Net loss per share, basic and diluted	$	(0.80)	$	(0.51)
Weighted-average shares of common stock outstanding, basic and diluted	39,017		37,736

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

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Inhibrx, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)


	Common Stock (Shares)	Common Stock (Amount)		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
Balance as of December 31, 2021	38,991	$	4	$	279,526	$	(227,147)	$	52,383
Stock-based compensation expense	—	—		5,108		—		5,108
Issuance of shares upon exercise of stock options	35	—		401		—		401
Issuance of warrants	—	—		712		—		712
Net loss	—	—		—		(31,254)		(31,254)
Balance as of March 31, 2022	39,026	$	4	$	285,747	$	(258,401)	$	27,350


	Common Stock (Shares)	Common Stock (Amount)		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
Balance as of December 31, 2020	37,712	$	4	$	220,848	$	(145,379)	$	75,473
Stock-based compensation expense	—	—		3,421		—		3,421
Issuance of shares upon exercise of stock options	93	—		988		—		988
Net loss	—	—		—		(19,289)		(19,289)
Balance as of March 31, 2021	37,805	$	4	$	225,257	$	(164,668)	$	60,593

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

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Inhibrx, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)


	THREE MONTHS ENDED MARCH 31,
	2022		2021
Cash flows from operating activities
Net loss	$	(31,254)	$	(19,289)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	307		291
Accretion of debt discount and non-cash interest expense	510		201
Stock-based compensation expense	5,108		3,421
Non-cash lease expense	392		362


Changes in operating assets and liabilities:
Accounts receivable	(4)		46
Receivables from related parties	449		212
Prepaid expenses and other current assets	481		(2,162)


Accounts payable	(1,257)		660
Accrued expenses and other current liabilities	(356)		(5,417)
Operating lease liability	(401)		(360)
Deferred revenue, current portion	(806)		994
Deferred revenue, non-current portion	(110)		(607)

Net cash used in operating activities	(26,941)		(21,648)
Cash flows from investing activities
Purchase of fixed assets	(117)		(14)

Net cash used in investing activities	(117)		(14)
Cash flows from financing activities




Proceeds from the issuance of debt	38,873		—
Payment of fees associated with debt	(50)		—



Proceeds from the exercise of stock options	401		988

Net cash provided by financing activities	39,224		988
Net increase (decrease) in cash and cash equivalents	12,166		(20,674)
Cash and cash equivalents at beginning of period	131,301		128,664
Cash and cash equivalents at end of period	$	143,467	$	107,990
Supplemental disclosure of cash flow information
Cash paid for interest	$	1,502	$	597
Cash paid for income taxes	$	—	$	—
Supplemental schedule of non-cash investing and financing activities
Payable for purchase of fixed assets	$	25	$	173









Fair value of warrants issued to lender in conjunction with February 2022 Amendment	$	712	$	—

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

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Inhibrx, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Inhibrx, Inc., or the Company, or Inhibrx, is a clinical-stage biotechnology company focused on developing a broad pipeline of novel biologic therapeutic candidates. The Company combines a deep understanding of target biology with innovative protein engineering, proprietary discovery technologies, and an integrative approach to research and development to design highly differentiated therapeutic candidates. The Company’s current pipeline is focused on oncology and orphan diseases.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, related to an interim report on the Form 10-Q.

The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, the accompanying unaudited interim financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K filed with the SEC.

Liquidity

As of March 31, 2022, the Company had an accumulated deficit of $258.4 million and cash and cash equivalents of $143.5 million. From its inception and through March 31, 2022, the Company has devoted substantially all of its efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of its therapeutic candidates, organizing and staffing the Company, establishing its intellectual property portfolio and raising capital to support and expand these activities.

The Company believes that its existing cash and cash equivalents will be sufficient to fund the Company’s operations for at least 12 months from the date these condensed consolidated financial statements are issued. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements.

As discussed in Note 4, the Company entered into the Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or the Sales Agent, under which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent, or the ATM Offering. During the year ended December 31, 2021, the Company sold 921,042 shares pursuant to the Sales Agreement for net proceeds of $40.2 million, after deducting commissions. During the three months ended March 31, 2022, the Company did not issue any shares under the Sales Agreement.

As discussed in Note 3, the Company received $40.0 million in gross proceeds upon entering into the February 2022 Amendment to the 2020 Loan Agreement, as amended (both as defined below). Pursuant to the Amended 2020 Loan Agreement (as defined below), there are three future tranches available upon the occurrence of contingent events, for additional gross proceeds of up to $90.0 million.

If the Company does raise additional capital through public or private equity or convertible debt offerings, the ownership interests of its existing stockholders will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect its stockholders’ rights. If the Company raises capital through additional debt financings, it may be subject to covenants limiting or restricting its ability to take specific actions,

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such as incurring additional debt or making certain capital expenditures. To the extent that the Company raises additional capital through strategic licensing, collaboration or other similar agreement, it may have to relinquish valuable rights to its therapeutic candidates, future revenue streams or research programs at an earlier stage of development or on less favorable terms than it would otherwise choose, or to grant licenses on terms that may not be favorable to the Company. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure adequate additional funding, it will need to reevaluate its operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of its development programs, or relinquish rights to its technology on less favorable terms than it would otherwise choose. These actions could materially impact its business, financial condition, results of operations and prospects.

The rules and regulations of the SEC or any other regulatory agencies may restrict the Company’s ability to conduct certain types of financing activities, or may affect the timing of and amounts it can raise by undertaking such activities.

Impact of COVID-19 Pandemic

In response to the global outbreak of COVID-19 and the World Health Organization’s classification of the outbreak as a pandemic, the Company continues to take the necessary precautions to ensure the safety of its employees and to minimize interruptions to its operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of these financial statements. While the pandemic has not yet had a material effect on the Company’s financial results, it is uncertain as to the full magnitude of impact the pandemic will have on the Company’s financial condition, liquidity and future results of operations. Management is actively monitoring the risks to public health and the impact of overall global business activity on its financial condition, liquidity, operations, suppliers, industry, and workforce.

The U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which, among a number varied provisions aimed to ease tax burdens on companies during the COVID pandemic, permitted employers to defer the payment of the employer share of social security taxes due for the period beginning March 27, 2020 and ending December 31, 2020. Of the amounts deferred, 50% was required to be paid by December 31, 2021 and the remaining 50% is required to be paid by December 31, 2022. The Company began deferring payment of the employer share of social security taxes in April 2020 and deferred a total of $0.4 million of such taxes during the period. The Company paid $0.3 million of deferred taxes during December 2021. As of March 31, 2022, the Company has a remaining deferred payment of $0.1 million of such taxes which are classified as accrued expenses in the Company’s condensed consolidated balance sheets.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The Company’s most significant estimates relate to whether revenue recognition criteria have been met, accounting for development work and preclinical studies and clinical trials, determining the assumptions used in measuring stock-based compensation, and valuation allowances for the Company’s deferred tax assets. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. The Company’s actual results may differ from these estimates under different assumptions or conditions.

Concentrations of Credit Risk

The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial condition of the depository institutions in which those deposits are held.

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Fair Value Measurements

The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. These tiers include:

•Level 1 - Quoted prices in active markets for identical assets or liabilities.

•Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

As of March 31, 2022 and December 31, 2021, the Company had no financial instruments measured at fair value on a recurring basis.

Deferred Offering Costs

The Company capitalizes costs that are directly associated with equity financings until such financings are consummated, at which time such costs are recorded against the gross proceeds of the offering. Legal, accounting, and filing fees related directly to the Company’s Sales Agreement are capitalized as deferred offering costs. Deferred offering costs associated with the Sales Agreement are reclassified to additional paid-in capital when the Company completes offerings under the Shelf Registration. In November 2021, the Company completed an ATM Offering under the Sales Agreement and offset $1.7 million of offering costs against the proceeds.

Financial Instruments with Characteristics of Both Liabilities and Equity

The Company accounts for issued warrants either as a liability or equity in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480-10”) or ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (“ASC 815-40”). Under ASC 480-10, warrants are considered a liability if they are mandatorily redeemable and they require settlement in cash, other assets, or a variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the warrants should be classified as a liability or as equity. Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting period. Any change in the fair value of the warrants after the issuance date is recorded in other expense, net in the condensed consolidated statements of operations as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or under another applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date. The Company’s outstanding warrants do not meet the requirements for liability classification under ASC-480-10 or ASC-815-40. Therefore, the warrants were treated as equity at the time of issuance.

Revenue Recognition

The Company has generated revenue from its license and collaboration agreements with partners, as well as from grants from government agencies and private not-for-profit organizations. Payments received from customers are included in deferred revenue, allocated between current and non-current on the condensed consolidated balance sheet until all revenue recognition criteria are met. In accordance with ASC Topic 606, Revenue from Contracts with

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Customers, or ASC Topic 606, the Company recognizes revenue when, or as, the promised goods or services are transferred to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those services. To determine revenue recognition for arrangements the Company concludes are within the scope of ASC Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligation(s) in the contract; and (5) recognize revenue when (or as) the performance obligation(s) are satisfied. At contract inception, the Company assesses the goods or services promised within each contract, assesses whether each promised good or service is distinct and identifies those that are performance obligations. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when, or as, the performance obligation is satisfied.

Collaborative Research, Development, and License Agreements

The Company enters into collaborative agreements with partners that typically include one or more of the following: (1) license fees; (2) nonrefundable up-front fees; (3) payments for reimbursement of research costs; (4) payments associated with achieving specific development, regulatory, or commercial milestones; and (5) royalties based on specified percentages of net product sales, if any. At the initiation of an agreement, the Company analyzes whether each unit of account results in a contract with a customer under ASC Topic 606 or in an arrangement with a collaborator subject to guidance under ASC Topic 808, Collaborative Arrangements. The Company’s licensing arrangements are typically for functional intellectual property as it exists at a point in time, being the time that the license agreement is executed. The Company typically does not have an ongoing performance obligation to support or maintain the licensed intellectual property.

The Company considers a variety of factors in determining the appropriate estimates and assumptions under these arrangements, such as whether the elements are distinct performance obligations, whether there are observable stand-alone prices, and whether any licenses are functional or symbolic. The Company evaluates each performance obligation to determine if it can be satisfied and recognized as revenue at a point in time or over time. Typically, license fees, non-refundable upfront fees, and funding of research activities are considered fixed, while milestone payments are identified as variable consideration which must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price. The Company estimates the amount of variable consideration using the most likely amount, as milestone payments typically only have two possible outcomes. The Company recognizes revenue for sales-based royalty promised in exchange for the license of intellectual property only when the subsequent sale occurs. In the case of an agreement which provides the partner with an option to license a therapeutic or therapeutic candidate in the future, the Company evaluates whether this option represents a material right at the inception of the agreement. If determined to be a material right, the Company will consider the option a separate performance obligation. The Company has historically concluded that the option to grant a license in the future is not a material rights as it is are contingent upon future events which may not occur. When an option is exercised, the Company will identify any separate performance obligations.

The Company may allocate transaction price using a number of methods including estimating standalone selling price of performance obligations and using the residual approach when the standalone selling price of the license is highly variable or uncertain, and observable standalone selling prices exist for the other goods or services promised in the contract.

Research and Development and Clinical Trial Accruals

Research and development costs are expensed as incurred and include the cost of compensation and related expenses, as well as expenses for third parties who conduct research and development on the Company’s behalf, pursuant to development and consulting agreements in place. The Company’s preclinical studies and clinical trials are performed internally, by third party contract research organizations, or CROs, and/or clinical investigators. The Company also engages with contract development and manufacturing organizations, or CDMOs, for clinical supplies and manufacturing scale-up activities related to its therapeutic candidates. Invoicing from these third parties may be monthly based upon services performed or based upon milestones achieved. The Company accrues these expenses based upon its assessment of the status of each clinical trial and the work completed, and upon information obtained from the CROs and CDMOs. The Company’s estimates are dependent upon the timeliness and accuracy of data provided by the CROs and CDMOs regarding the status and cost of the studies. Costs incurred related to the

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Company’s purchases of in-process research and development for early-stage products or products that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred. Costs incurred related to the licensing of products that have not yet received marketing approval to be marketed, or that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the same period. Diluted net loss per share is computed by dividing net loss by the weighted average number of common and common equivalent shares outstanding during the same period. The Company excludes common stock equivalents from the calculation of diluted net loss per share when the effect is anti-dilutive.

For purposes of the diluted net loss per share calculation, warrants for purchase of common stock and stock options are considered to be potentially dilutive securities. Accordingly, for the three months ended March 31, 2022 and March 31, 2021, there is no difference in the number of shares used to calculate basic and diluted shares outstanding.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in thousands):


	AS OF MARCH 31,
	2022	2021

Outstanding stock options	4,626	4,117

Warrants to purchase common stock	47	7
	4,673	4,124

Segment Information

The Company operates under one segment which develops biologic therapeutic candidates. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. The Company believes that the impact of the recently issued accounting pronouncements that are not yet effective will not have a material impact on its condensed consolidated financial condition or results of operations upon adoption.

Adoption of New Accounting Pronouncements

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which intends to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The Company adopted ASU 2021-04 on January 1, 2022, which did not result in a material impact on its condensed consolidated financial statements and related disclosures.

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2. OTHER FINANCIAL INFORMATION

Prepaid Expense and Other Current Assets

Prepaid expense and other current assets were comprised of the following (in thousands):


	AS OF		AS OF
	MARCH 31, 2022		DECEMBER 31, 2021

Outside research and development services	$	5,902	$	6,343


Other	600		590
Prepaid expense and other current assets	$	6,502	$	6,933

Property and Equipment, Net

Property and equipment, net were comprised of the following (in thousands):


	AS OF		AS OF
	MARCH 31, 2022		DECEMBER 31, 2021

Machinery and equipment	$	6,456	$	6,286
Leasehold improvements	441		441
Computer software	42		42
Furniture and fixtures	514		514
Construction in process	253		281
Total property and equipment	7,706		7,564
Less: accumulated depreciation and amortization	(4,718)		(4,411)
Property and equipment, net	$	2,988	$	3,153

Depreciation and amortization expense totaled $0.3 million for each of the three months ended March 31, 2022 and March 31, 2021, and consisted of the following (in thousands):


	THREE MONTHS ENDED MARCH 31,
	2022		2021
Research and development	$	258	$	245
General and administrative	49		46
Total depreciation and amortization expense	$	307	$	291

Accrued Expenses

Accrued expenses were comprised of the following (in thousands):


	AS OF		AS OF
	MARCH 31, 2022		DECEMBER 31, 2021

Clinical research and development	$	3,047	$	4,496
Other outside research and development	3,662		2,893
Compensation-related	840		1,322
Professional fees	817		261

Other	899		649
Accrued expenses	$	9,265	$	9,621

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The amount accrued for research and development expense relates primarily to the Company’s usage of third-party CROs and CDMOs for clinical and development efforts as its therapeutic candidates progress. See Note 1 for further discussion of the components of research and development.

3. DEBT

2020 Loan Agreement

On July 15, 2020, the Company entered into a loan and security agreement, or the 2020 Loan Agreement, with Oxford Finance LLC, or Oxford, pursuant to which it received $10.0 million in gross proceeds, or Term A. The 2020 Loan Agreement was subsequently amended in November 2020, or the November 2020 Amendment, upon which a second tranche in an aggregate principal amount of $20.0 million was funded, or Term B, and in June 2021, or the June 2021 Amendment, upon which a third tranche in an aggregate principal amount of $40.0 million was funded, or Term C. In February 2022, the Company entered into an additional amendment, or the February 2022 Amendment, to the 2020 Loan Agreement, collectively, the Amended 2020 Loan Agreement, upon which the Company received gross proceeds of $40.0 million, net of $1.1 million of legal and amendment fees. The amendment also provides for three future tranches of debt and an increase in the interest rate, which are discussed in further detail below.

The Company determined the November 2020, June 2021, and February 2022 Amendments should be treated as modifications of the original 2020 Loan Agreement since the terms and resulting cash flows were not substantially changed upon each of the amendments.

As of March 31, 2022, the Company had $110.0 million in gross principal outstanding in term loans under the Amended 2020 Loan Agreement. The outstanding term loans will mature on January 1, 2027, or the Amended Maturity Date, and bear interest at a floating per annum rate equal to the greater of (1) 8.30% or (2) the sum of (i) the 30 day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (ii) 8.19%. The repayment schedule provides for interest-only payments through February 1, 2025. The interest-only period is followed by 23 months of equal payments of principal and interest beginning on March 1, 2025. The interest-only period may be extended by an additional 12 months in the event the Company raises at least $100.0 million in upfront licensing or partnership proceeds by February 2025, which would then be followed by 11 months of principal repayments. Upon the Amended Maturity Date, a final payment of 9.0% of the original principal amount will be due to Oxford. This final payment of $9.9 million is being accreted over the life of the Amended 2020 Loan Agreement using the effective interest method. The Company has the option to prepay the outstanding balance of the term loans in full prior to the Amended Maturity Date, subject to a prepayment fee ranging from 1.0% to 3.0%, depending upon the timing of the prepayment.

The Company’s outstanding debt balance under the Amended 2020 Loan Agreement consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands).


	AS OF		AS OF
	MARCH 31, 2022		DECEMBER 31, 2021
Term A	$	10,900	$	10,900
Term B	21,800		21,800
Term C	43,600		43,600
Term D	43,600		—
Less: debt discount	(10,759)		(5,830)
Total debt	109,141		70,470
Less: Current portion, including debt discount	—		—
Long-term debt, including debt discount and final payment fee	$	109,141	$	70,470

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Through 2024, the Company is required to make interest-only payments on the outstanding principal balance, with future principal payments and final fee payments beginning in 2025, as follows (in thousands):


	AS OF
	MARCH 31, 2022
2025	$	47,826
2026	57,391
2027	14,683
Total future minimum payments	119,900
Less: unamortized debt discount	(10,759)
Total debt	$	109,141

Following the February 2022 Amendment, the Amended 2020 Loan Agreement also provides for three future tranches, as follows: (a) the fifth tranche in an aggregate principal amount of $30.0 million to be funded subject to the initiation of part 4 of the Phase 1 clinical trial in INBRX-105 on or before September 30, 2022, or Term E, (b) the sixth tranche in an aggregate principal amount of $30.0 million to be funded subject to the receipt of positive topline data from the Phase 1 clinical trial in INBRX-101 on or before September 30, 2022, or Term F, and (c) the seventh tranche in an aggregate principal amount of $30.0 million to be funded subject to the initiation of the registrational clinical trial of INBRX-101 on or before June 30, 2023, or Term G.

The Company’s obligations under the Amended 2020 Loan Agreement are secured by a first priority security interest of substantially all of the Company’s assets with a positive lien on intellectual property. The Amended 2020 Loan Agreement includes customary events of default, including instances of a material adverse change in the Company’s operations, that may require prepayment of the outstanding term loans. Additionally, the Amended 2020 Loan Agreement requires a minimum cash balance of $20.0 million to be maintained in a collateral account. As of March 31, 2022, the Company is in compliance with all covenants under the Amended 2020 Loan Agreement and has not received any notification or indication from Oxford of an intent to declare the loan due prior to maturity.

Concurrently with the February 2022 Amendment, the Company issued 40,000 warrants to Oxford to purchase shares of the Company’s common stock at an exercise price of $45.00. Upon issuance, the warrants were classified as equity and recorded at their fair value of $0.7 million. See Note 4 for further discussion of these warrants.

Interest Expense

Interest expense is calculated using the effective interest method and is inclusive of non-cash amortization of the debt discount and accretion of the final payment. Interest expense was approximately $2.3 million and $0.8 million for the three months ended March 31, 2022 and March 31, 2021, respectively, all of which was related to the Amended 2020 Loan Agreement in each period.

4. STOCKHOLDERS’ EQUITY

Common Stock

In September 2021, the Company entered into the Sales Agreement with the Sales Agent, under which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent, or the ATM Offering. Pursuant to the Sales Agreement, the Company will pay the Sales Agent a commission for its services in acting as an agent in the sale of common stock in an amount equal to 3% of the gross sales price per share sold. During the year ended December 31, 2021, the Company sold 921,042 shares pursuant to the Sales Agreement for net proceeds of $40.2 million, after deducting commissions. During the three months ended March 31, 2022, the Company did not issue any shares under the Sales Agreement.

Common Stock Warrants

The Company has 7,354 warrants outstanding at an exercise price of $17.00 per share, which are exercisable for shares of common stock through their expiration date of July 15, 2030. As of March 31, 2022, the warrants are equity-classified and reflected in additional paid-in-capital at a fair value of $0.1 million.

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Upon the February 2022 Amendment, the Company issued 40,000 warrants, which are exercisable for shares of common stock of the Company at $45.00 per share. The warrants are exercisable through their expiration date of February 18, 2032. The warrants are equity-classified and reflected in additional paid-in-capital at a fair value of $0.7 million. The fair value of the warrants was determined using the Black-Scholes model on the date of issuance.

No subsequent remeasurement is required for equity-classified warrants.

5. EQUITY COMPENSATION PLAN

Stock Incentive Plan

The Company’s share-based compensation plan, the Amended and Restated 2017 Employee, Director and Consultant Equity Incentive Plan, or the 2017 Plan, provides for the issuance of incentive stock options, restricted and unrestricted stock awards, and other stock-based awards. As of March 31, 2022, an aggregate of 6.1 million shares of common stock were reserved for issuance under the 2017 Plan, of which 1.0 million were available.

Stock Option Activity

The Company recognizes compensation costs related to stock-based awards, including stock options, based on the estimated fair value of the awards on the date of grant. The Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant. The options are subject to four-year vesting with a one-year cliff and have a contractual term of 10 years.

A summary of the Company’s stock option activity under its 2017 Plan for the three months ended March 31, 2022 is as follows (in thousands, except for per share data and years):


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value



Outstanding as of December 31, 2021	4,064	$	22.19
Granted	794	$	33.21
Exercised	(35)	$	11.41
Forfeited	(197)	$	28.69
Outstanding as of March 31, 2022	4,626	$	23.89	8.2	$	20,034
Vested and exercisable as of March 31, 2022	1,778	$	16.77	6.9	$	14,661

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2022 and March 31, 2021 was $1.0 million and $1.2 million, respectively. Aggregate intrinsic value of stock options exercised and outstanding is calculated using the fair value of common stock on the date of exercise and as of March 31, 2022, respectively.

Stock-Based Compensation Expense

The weighted-average assumptions used by the Company to estimate the fair value of stock option grants using the Black-Scholes option pricing model, as well as the resulting weighted-average fair value for the three months ended March 31, 2022 and March 31, 2021 were as follows:

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	THREE MONTHS ENDED MARCH 31,
	2022			2021

Risk-free interest rate	1.58		%	0.62		%
Expected volatility	84.96		%	93.64		%
Expected dividend yield	—		%	—		%
Expected term	6.08			6.08
Weighted average fair value	$	23.88		$	24.92

Stock-based compensation expense for stock options consisted of the following (in thousands):


	THREE MONTHS ENDED MARCH 31,
	2022		2021
Research and development	$	3,679	$	2,774
General and administrative	1,429		647
Total stock-based compensation expense	$	5,108	$	3,421

As of March 31, 2022, the Company had $56.7 million of total unrecognized stock-based compensation expense related to its stock options, which is expected to be recognized over a weighted-average period of 3.1 years.

6. LICENSE AND GRANT REVENUES

The following table summarizes the total revenue recorded in the Company’s condensed consolidated statements of operations (in thousands):


	THREE MONTHS ENDED MARCH 31,
	2022		2021




License fee revenue
Phylaxis BioScience, LLC	$	674	$	641

Chiesi Farmaceutici S.p.A.	241		222

Total license fee revenue	915		863




Grant revenue	14		26
Total revenue	$	929	$	889

License and Collaboration Agreements

Phylaxis

In July 2020, the Company entered into a joint venture with an entity affiliated with ArrowMark Partners, Phylaxis BioScience, LLC, or Phylaxis. In connection with the joint venture, the Company entered into the following agreements: Contribution Agreement, License Agreement, Limited Liability Company Agreement, and Master Services Agreement, or collectively the Phylaxis Agreements, pursuant to which the Company licensed certain intellectual property and know-how to Phylaxis and agreed to provide services to develop certain compounds. Upon closing, the Company received a $2.5 million nonrefundable, upfront payment from Phylaxis under the Master Services Agreement, or MSA. The Company has also received an additional $2.5 million, which was payable within 180 days from closing under the MSA, in two payments of $1.25 million each, received in October 2020 and January 2021. Upon closing, the Company received a 10% equity interest in Phylaxis as consideration for the contribution of the license of the Company’s intellectual property and know-how and is entitled to receive an additional 5% based on the achievement of certain milestones. Under the License Agreement, the Company is also entitled to specified development and commercialization milestone payments of up to an aggregate of $225.0 million and $175.0 million, respectively. The Company is also entitled to share in a percentage of the profits of Phylaxis under the Limited Liability Company Agreement.

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In order to determine the fair value of the equity interest in Phylaxis, the Company engaged a third-party valuation specialist. The valuation report utilized a market approach to establish the total equity value of Phylaxis using inputs not observable in the market, including the discount rate. The fair value of the equity interest was $0.5 million, which has been accounted for under the equity method. The fair value of the equity interest upon the execution of the agreements has been included in the transaction price, along with the $5.0 million of payments due pursuant to the MSA.

The Company identified the transfer of the exclusive licenses for, and performance of, development services to modify the first and second compounds as one performance obligation and allocated the transaction price evenly between the two compounds. Revenue related to the performance obligation will be recognized over time as services are performed, based on the Company’s progress to satisfy the performance obligation.

During the three months ended March 31, 2022 and March 31, 2021, the Company recognized $0.7 million and $0.6 million, respectively, of revenue related to this performance obligation. As of March 31, 2022 and December 31, 2021, deferred revenue related to the Phylaxis Agreements was $0.4 million and $1.1 million, respectively, all of which was classified as current at each date.

Chiesi

In May 2019, the Company entered into an Option Agreement, as amended by the First Amendment to Option Agreement, dated August 19, 2019, or the Chiesi Option Agreement, with Chiesi Farmaceutici S.p.A., or Chiesi, pursuant to which the Company granted to Chiesi an exclusive option to obtain an exclusive license to develop and commercialize INBRX-101 outside of the United States and Canada. Under the terms of the Chiesi Option Agreement, the Company received a one-time, non-refundable option initiation payment of $10.0 million in August 2019. If Chiesi chooses to exercise its option under the Chiesi Option Agreement, then Chiesi must pay the Company a one-time, non-refundable fee of $12.5 million upon the effective date of the definitive agreement granting Chiesi the exclusive license. If the option is exercised, under the license agreement, the Company may be entitled to receive specified milestone payments of up to $122.5 million, as well as royalties on future product sales.

The Company has identified one performance obligation as of the effective date of the Chiesi Option Agreement, which is to perform research and development services for Chiesi during the option period, which will continue (unless the Chiesi Option Agreement is terminated earlier by Chiesi or the Company) until 60 days following the last to occur of (i) the Company’s delivery to Chiesi of the trial phase data for the first Phase I Clinical Trial, (ii) the Company’s delivery to Chiesi of the finalized minutes from the definitive U.S. Food and Drug Administration, or FDA, scientific advice meeting conducted following completion of such Phase I Clinical Trial, and (iii) the Company’s delivery to Chiesi of the finalized minutes from the definitive parallel EMA-HTA scientific advice meeting conducted following completion of such Phase I Clinical Trial. The Company has determined that the option to grant a license in the future is not a material right.

The $10.0 million upfront payment has been allocated to the single performance obligation. Revenue is recognized over time as services are performed during the option period, based on the Company’s effort to satisfy the performance obligation relative to the total expense estimated to be incurred during the option period. During the three months ended March 31, 2022 and March 31, 2021, the Company recognized $0.2 million in revenue in each period related to this agreement. As of March 31, 2022, the Company has $0.8 million of deferred revenue related to this agreement, all of which is classified as current. As of December 31, 2021, the Company had $0.9 million and $0.1 million of current and non-current deferred revenue related to this agreement, respectively.

7. RELATED PARTY TRANSACTIONS

From time to time, the Company will enter into an agreement with a related party in the ordinary course of its business. These agreements are ratified by the Company’s Board of Directors or a committee thereof pursuant to policy.

LAV Summit Limited

LAV Summit Limited, or LAV SL, a limited company, is a principal shareholder which owned more than 5% of the Company’s outstanding equity interest during the year ended December 31, 2021. Due to this equity ownership, LAV SL was considered a related party. LAV SL’s General Partner, Lilly Asia Ventures, or LAV, through one of its

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funds, holds a significant equity ownership position in Chinese biotechnology company, Elpiscience Biopharmaceuticals, Inc., or Elpiscience, and the Venture Partner of LAV is the CEO, Founder, and Director at Elpiscience. Accordingly, the Company identified Elpiscience as a related party and all agreements entered into between the Company and Elpiscience through December 31, 2021 are deemed related party agreements. As of December 31, 2021, LAV SL no longer held more than 5% of the Company’s outstanding equity interest, accordingly, any future contracts entered into with LAV SL affiliates will not be considered related party transactions.

Elpiscience

In April 2018, the Company entered into the OX40 License Agreement with Elpiscience, whereby the Company granted Elpiscience an exclusive license to the Company’s multivalent protein therapeutic directed to the biological target OX40, or INBRX-106. Under this agreement, the Company is entitled to reimbursement for certain CMC and toxicology expenses incurred for which Elpiscience has paid the Company approximately $5.3 million to date as of March 31, 2022. During the three months ended March 31, 2022, the Company received $0.2 million in reimbursements related to expenses previously incurred and did not derecognize any additional expenses during the period. During the three months ended March 31, 2021, the Company did not receive any reimbursements and did not derecognize any expenses incurred. As of March 31, 2022, reimbursements of approximately $38,000 related to multi-year stability studies remain, which will be recognized and paid upon completion.

In July 2020, the Company entered into an additional cost sharing agreement with Elpiscience related to the OX40 License Agreement. Under this agreement, the Company is entitled to reimbursement for certain formulation development costs. Through March 31, 2022, the Company has received $0.5 million of reimbursements for expenses already incurred under this agreement. During the three months ended March 31, 2022, the Company received $0.3 million in reimbursements related to expenses previously incurred. During the three months ended March 31, 2021, the Company received reimbursements of $0.2 million for expenses already incurred. The Company did not derecognize any expenses incurred during either the three months ended March 31, 2022 or 2021.

8. COMMITMENTS AND CONTINGENCIES

Operating Leases

In September 2017, the Company entered into a seven-year lease agreement for approximately 34,000 square feet as its sole location in La Jolla, California. The lease expires in June 2025 with an option to extend the lease an additional five years. The lease contained an initial base rent of approximately $0.1 million per month with 2% annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which to be determined annually.

In May 2019, the Company executed an amendment to its lease agreement to expand its facilities by approximately 9,000 square feet and began occupying this space in January 2020. The amended lease terminates coterminously with the initial lease agreement and contains an initial base rent of approximately $30,000 per month with 2% annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which is to be determined annually.

The right-of-use asset and operating lease liability as of March 31, 2022 and December 31, 2021 are as follows (in thousands):


	AS OF		AS OF
	MARCH 31, 2022		DECEMBER 31, 2021

Right-of-use asset	$	5,946	$	6,338

Operating lease liability
Current	$	1,719	$	1,674
Non-current	4,587		$	5,033
Total operating lease liability	$	6,306	$	6,707

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During the three months ended March 31, 2022, the Company recognized operating lease expense of $0.8 million and paid $0.5 million for amounts included in the measurement of the lease liability. During the three months ended March 31, 2021, the Company recognized operating lease expense of $0.7 million and paid $0.5 million for amounts included in the measurement of the lease liability.

As of March 31, 2022 and December 31, 2021, the Company’s operating lease had a remaining term of 3.3 and 3.5 years, respectively. The Company discounts its lease payments using its incremental borrowing rate as of the commencement of the lease. The Company has determined a weighted-average discount rate of 8.2% as of March 31, 2022 and December 31, 2021.

Future minimum rental commitments for the Company’s operating leases reconciled to the lease liability are as follows (in thousands):


	AS OF
	MARCH 31, 2022

2022	$	1,625
2023	2,203
2024	2,247
2025	1,137
Thereafter	—
Total future minimum lease payments	$	7,212
Less: imputed interest	(906)
Present value of operating lease liability	6,306
Less: current portion of operating lease liability	(1,719)
Non-current portion of operating lease liability	$	4,587

Litigation

The Company is not party to any material legal proceedings. From time to time, it may be involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report, and our audited financial statements and notes thereto as of and for the year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report contain forward-looking statements that involve risk and uncertainties, including those described in the section titled “Special Note Regarding Forward-Looking Statements.” As a result of many factors, including those factors set forth in the section of this Quarterly Report titled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biotechnology company with a pipeline of novel biologic therapeutic candidates, developed using our protein engineering expertise and proprietary single domain antibody, or sdAb, platform. Our sdAb platform allows us to pursue validated targets with clinical promise where other antibody and biologic based approaches have failed. Highly modular, our sdAbs can be combined with precise valencies and multiple specificities, creating therapeutic candidates designed to be capable of enhanced cell signaling, conditional activation or combined synergistic functions.

We have multiple programs in various stages of development from discovery to preclinical to clinical. We currently have four programs in ongoing clinical trials. Three of these programs are for the treatment of various cancers, and one for the treatment of Alpha-1 Antitrypsin Deficiency, or AATD. INBRX-101 is an optimized, recombinant alpha-1 antitrypsin, or AAT, augmentation therapy candidate for AATD. In October 2021, we announced interim results from the Phase 1 clinical trial. The data from the single ascending dose cohorts revealed the potential to achieve normal AAT levels with monthly dosing and also showed a favorable safety and tolerability profile with no drug-related severe or serious adverse events at doses up to and including 120 mg/kg single dose and 80 mg/kg multi-dose administered intravenously. In March 2022, the U.S. Food and Drug Administration, or FDA, granted orphan-drug designation for INBRX-101 for the treatment of AATD. We plan to announce additional data from the INBRX-101 single dose and multi-dose cohorts in May 2022.

Our most advanced therapeutic candidate, INBRX-109, is a tetravalent death receptor 5, or DR5, agonist currently being evaluated in patients diagnosed with difficult-to-treat cancers, such as chondrosarcoma, mesothelioma, colorectal cancer, Ewing sarcoma and pancreatic adenocarcinoma. We have ongoing Phase 1 cohorts with INBRX-109 in combination with standard chemotherapies in several indications. In June 2021, we initiated a potentially registration-enabling Phase 2 trial for the treatment of unresectable or metastatic conventional chondrosarcoma for which the FDA granted orphan-drug designation in November 2021.

INBRX-106 is a hexavalent OX40 agonist, currently being investigated as a single agent and in combination with Keytruda, a PD-1 blocking checkpoint inhibitor, in patients with locally advanced or metastatic solid tumors. In January 2022, we announced initial Phase 1 dose escalation results for INBRX-106 in combination with Keytruda, which was observed to be well tolerated with predominantly mild or moderate immune-related toxicities noted.

INBRX-105 is a conditional 4-1BB agonist that is currently being investigated as a single agent and in combination with Keytruda in patients with locally advanced or metastatic solid tumors. Both of the INBRX-109 and INBRX-106 programs are designed to achieve target agonism through precise control of therapeutic valency.

We anticipate additional data releases from all four of our clinical programs over the next year.

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We have developed a diverse pipeline of therapeutic candidates that are specifically designed to leverage the power of our core sdAb platform and protein engineering expertise, as shown below:

INBRX-101

INBRX-109

INBRX-106

INBRX-105

AAT-Fc fusion protein

Tetravalent DR5 agonist

Hexavalent OX40 agonist

PD-L1x4-1BB tetravalent conditional agonist

Program

Therapeutic Area

Target(s)/Format

STAGE OF DEVELOPMENT

Preclinical

Phase 1

Phase 2

Phase 3

INBRX-101*

Orphan/Respiratory

Neutrophil Elastase
AAT-Fusion Protein

INBRX-109**

Oncology

DR5
Tetravalent Agonist

INBRX-106***

Oncology

OX40
Hexavalent Agonist

INBRX-105***

Oncology

PD-L1 x 4-1BB
Tetravalent Conditional Agonist

__________________

* Commercialization and development rights outside of the United States and Canada, subject to an option agreement with Chiesi Farmaceutici S.p.A., or Chiesi

** Third party partnership with Chinese biotechnology company, Transcenta Holding, Ltd. (formerly Hangzhou Just Biotherapeutics Co., Ltd.), or Transcenta, currently in place for development and commercialization in China, Hong Kong, Macau and/or Taiwan.

*** Third party partnership with Chinese biotechnology company, Elpiscience Biopharmaceuticals, Inc, or Elpiscience, currently in place for development and commercialization in China, Hong Kong, Macau and/or Taiwan.

Liquidity, Capital Resources and Financial Condition

Sources of Liquidity

Sources of capital raised to fund our operations have been comprised of the sale of equity securities, payments received from commercial partners for licensing rights to our therapeutic candidates under development and grants, borrowings under loan and security agreements, and proceeds from the sale and issuance of convertible promissory notes.

The sale of equity securities includes proceeds under our initial public offering, or IPO, from which our aggregate net proceeds from the offering were $125.9 million, net of underwriting discounts, commissions and offering costs,

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as well as proceeds under our Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or the Sales Agent. Under the Sales Agreement, which we entered into in September 2021, we may, from time to time, sell shares of common stock through the Sales Agent with an aggregate offering price of up to $200.0 million. Sales of our common stock made pursuant to the Sales Agreement, if any, will be made under our $400.0 million Shelf Registration on Form S-3ASR, which became automatically effective upon filing on September 3, 2021. During the year ended December 31, 2021, we sold 921,042 shares pursuant to the Sales Agreement for net proceeds of $40.2 million, after deducting commissions. During the three months ended March 31, 2022, we did not issue any shares under the Sales Agreement.

Our borrowings under the loan and security agreement, or the Amended 2020 Loan Agreement, with Oxford Finance LLC, or Oxford, include $110.0 million in gross proceeds received in four tranches between July 2020 and February 2022. Upon amending the loan in February 2022, we have three future tranches which we may draw upon based on the achievement of certain contingent events, for additional gross proceeds of $90.0 million in total.

Future Funding Requirements

Since our inception, we have devoted substantially all of our efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of our therapeutic candidates, hiring to support our research and development activities and financial reporting capabilities, establishing our intellectual property portfolio, and raising capital to support and expand these activities. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

Our net loss for the three months ended March 31, 2022 and March 31, 2021 was $31.3 million and $19.3 million, respectively. As of March 31, 2022, we had an accumulated deficit of $258.4 million and cash and cash equivalents of $143.5 million. Based upon our current operating plans, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months from the date these condensed consolidated financial statements are issued. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.

The process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain. We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses to increase as we continue our development of, and seek marketing approvals for, our therapeutic candidates (especially as we move more candidates from preclinical to clinical development as well as study candidates in later stages of clinical development), and begin to commercialize any approved products, if ever. If we elect to proceed with the commercialization of any of our product candidates, we would incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We also expect our general and administrative expenses and losses to increase as we hire additional personnel and incur increased accounting, audit, legal, regulatory, and compliance costs, and as we incur increased costs from investor and public relations expenses associated with operating as a public company.

Until such time, if ever, we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including strategic licensing and collaboration or other similar agreements. However, there can be no assurance as to the availability or terms upon which such finances or capital might be available in the future. If we are unable to secure adequate additional funding, we will need to reevaluate our operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our intellectual property on less favorable terms than we would otherwise choose. These actions could materially impact our business, results of operations, financial condition, and prospects.

Our future liquidity and capital funding requirements will depend on numerous factors, including:

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•the outcome, costs and timing of preclinical studies and clinical trials for our current or future therapeutic candidates;

•whether and when we are able to obtain marketing approval to market any of our therapeutic candidates;

•our ability to successfully commercialize any therapeutic candidates that receive marketing approval;

•the emergence and effect of competing or complementary therapeutics or therapeutic candidates;

•our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

•our ability to retain our current employees and the need and ability to hire additional management and scientific and medical personnel;

•the terms and timing of any strategic licensing, collaboration or other similar agreement that we have established or may establish;

•our ability to repay, refinance or restructure our indebtedness when payment is due, including in the event such indebtedness is accelerated;

•the valuation of our capital stock; and

•the continuing or future effects of the COVID-19 pandemic and geopolitical events such as the ongoing conflict in Ukraine on capital and financial markets.

We do not own or operate manufacturing facilities for the production of any of our therapeutic candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on a limited number of third-party contract manufacturers for all of our required raw materials, antibodies, and other biologics for our preclinical research, clinical trials, and if and when applicable, commercial product, and employ internal resources to manage our manufacturing relationships with these third parties.

Commitments

Our material cash requirements from known contractual and other obligations primarily relate to our lease obligations, debt, and services provided by our third party contract research organizations, or CROs, and contract development and manufacturing organizations, or CDMOs.

We have two leases for our laboratory and office space, which expire in 2025, with an option to extend the leases for an additional five years. As of March 31, 2022, we have future minimum rental obligations under these leases of $7.2 million, of which $2.2 million and $5.0 million are current and non-current, respectively. For more information regarding these lease agreements, refer to Note 8 to the condensed consolidated financial statements.

Under the Amended 2020 Loan Agreement, we are required to make interest-only payments through February 2025, with all principal payments and final fee payments beginning in March 2025 and continuing through the maturity date, or January 2027. As of March 31, 2022, we have an obligation of $156.3 million of long-term debt, including interest and final fee payments, of which $9.4 million and $146.9 million are current and non-current, respectively. For more information regarding the Amended 2020 Loan Agreement, refer to Note 3 to the condensed consolidated financial statements.

We enter into contracts in the normal course of business with CROs related to our ongoing preclinical studies and clinical trials with CDMOs for clinical supplies and manufacturing scale-up activities. These contracts are generally cancellable, with notice, at our option. We have recorded accrued expenses of approximately $6.7 million in our condensed consolidated balance sheets for expenditures incurred by CROs and CDMOs as of March 31, 2022.

While these contracts are generally cancellable, some may contain specific activities that involve one or more non-cancellable commitments, including minimum purchase commitments, binding annual forecasts, and capital equipment investments. Additionally, depending on the timing and reasoning of the exit, certain termination penalties may apply and can range from the cost of work performed to date up to twelve months of future committed manufacturing costs. As of March 31, 2022, the non-cancellable portion of these contracts total in aggregate, excluding amounts recorded in accounts payable and accrued expenses as of this date, approximately $2.2 million.

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License and Collaboration Agreements

Celgene Agreement

On July 1, 2013, we entered into a license agreement with Celgene Corporation, a Bristol Myers Squibb Company, or Celgene, as amended on November 23, 2018, or the Celgene Agreement, pursuant to which we granted Celgene an exclusive, global license for the development, manufacture and commercialization of our proprietary CD47 binding domain, or the Celgene Licensed Intellectual Property. Per the terms of the Celgene Agreement, Celgene is operationally and financially responsible for the development, manufacturing and commercialization activities of Celgene Licensed Intellectual Property and any additional related antibodies covered by the Celgene Agreement.

As payment for the license granted in the Celgene Agreement, we may be eligible to receive development and regulatory milestones of an aggregate of $934.1 million, assuming the achievement of all potential milestones in the Celgene Agreement, as well as percentage tiered royalties based on future worldwide sales, with rates ranging between the high single-digits and low teens, subject to potential reduction when and if comparable third party products attain certain levels of competitive market share (on a country-by-country basis) and, subject to certain limitations, payments to third parties for third-party intellectual property rights. We are obligated to pay 2% of future amounts received under the Celgene Agreement to advisors who assisted us with the negotiations and other matters in connection with the Celgene Agreement.

2seventy bio Agreements

On December 20, 2018, we entered into an exclusive license agreement with bluebird bio, Inc., or bluebird, to research, develop and commercialize CAR T-cell therapies using our proprietary sdAb platform. In November 2021, bluebird assigned the 2018 2seventy Agreement to its affiliate 2seventy bio, Inc., or 2seventy, in connection with an internal restructuring and subsequent spin-out of 2seventy. Under the terms of this license agreement, we provided 2seventy the exclusive worldwide rights to develop, manufacture and commercialize certain cell therapy products containing sdAbs directed to various cancer targets. In January 2019, we received a $7.0 million payment and pursuant to the license agreement, we are entitled to receive developmental milestone payments of up to an aggregate of $51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single digits. In August 2021, we received a $2.0 million milestone payment under this agreement.

On June 9, 2020, we entered into the 2020 2seventy Agreement, which was also assigned to 2seventy in November 2021 in connection with bluebird’s internal restructuring and subsequent spin-out of 2seventy. We received a non-refundable upfront option fee of $0.2 million in connection with each of the two initial programs, or $0.4 million in aggregate, and we are entitled to an upfront option fee for each additional program. We also granted an option in which 2seventy may acquire an exclusive license with respect to all binders and cell therapy products developed under the 2020 2seventy Agreement, which entitles us to additional fees upon exercise of the option. We are also entitled to receive certain developmental milestone payments of up to an aggregate of $51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single-digits.

In May 2021, pursuant to the option extension terms in the 2020 2seventy Agreement, bluebird requested to extend the option term for one of the initial programs by an additional six months in exchange for an option extension fee of $0.1 million. In August 2021, pursuant to the option exercise terms in the agreement, bluebird exercised its option to exclusively license one of the initial programs in exchange for an option exercise fee of $2.1 million, the payment of which was received in October 2021.

Chiesi

In May 2019, we entered into the Chiesi Option Agreement. Under this agreement, we granted to Chiesi an exclusive option to obtain an exclusive license to develop and commercialize INBRX-101 outside of the United States and Canada. Under the terms of the Chiesi Option Agreement, we received a one-time, non-refundable option initiation payment of $10.0 million in August 2019. Pursuant to the Chiesi Option Agreement, we are performing research and development services for Chiesi during the option period, which will continue (unless the Chiesi Option Agreement is terminated earlier by the Chiesi or the Company) until 60 days following the last to occur of (i) the Company’s delivery to Chiesi of the trial phase data for the first Phase I Clinical Trial, (ii) the Company’s delivery to Chiesi of the finalized minutes from the definitive FDA scientific advice meeting conducted following completion of such Phase I Clinical Trial, and (iii) the Company’s delivery to Chiesi of the finalized minutes from

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the definitive parallel EMA-HTA scientific advice meeting conducted following completion of such Phase I Clinical Trial.

If Chiesi chooses to exercise its option under the Chiesi Option Agreement, we will receive a one-time, non-refundable fee of $12.5 million upon the effective date of the definitive agreement granting Chiesi the exclusive license. If the option is exercised, under the license agreement, we may be entitled to receive specified milestone payments of up to $122.5 million, as well as royalties on future product sales.

Other Collaboration Agreements

In addition to these contracts, we have entered into strategic collaborations with other third parties, including Phylaxis BioScience, LLC, or Phylaxis, Transcenta, and Elpiscience. For more information regarding these agreements, refer to Note 6 to the condensed consolidated financial statements.

Components of Results of Operations

Revenue

To date, all of our revenue has been derived from licenses with collaboration partners and grant awards. We have not generated any revenue from the commercial sale of approved therapeutic products, and we expect our revenue for the next several years will be derived primarily from payments under our current and any future grant awards and agreements with our collaboration partners.

Operating Expenses

Research and Development

To date, our research and development expenses have related primarily to research activities, including our discovery efforts, and preclinical and clinical development and the manufacturing of our therapeutic candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We do not track our internal research and development expenses on a program-by-program basis as they primarily relate to personnel, early research and consumable costs, which are deployed across multiple projects under development.

Research and development expenses consist primarily of:

•External expenses, consisting of:

◦expenses incurred in connection with the preclinical development of our programs;

◦clinical trials of our therapeutic candidates, including under agreements with third parties, such as consultants and CROs;

◦expenses associated with manufacturing our contract development and manufacturing therapeutic candidates including under agreements with CDMOs; and

◦other external expenses, such as laboratory services related to our discovery and development programs and other shared services, and

•Internal expenses, consisting of:

◦salaries, benefits and other related costs, including stock-based compensation, for personnel engaged in research and development functions;

◦facilities, depreciation and other expenses, which include direct and allocated expenses for depreciation and amortization, rent and maintenance of facilities; and

◦other internal expenses, such as laboratory supplies and other shared research and development costs.

We expect that research and development expense will continue to increase over the next several years as we continue development of our therapeutic candidates currently in clinical stage development, support our preclinical programs, and continue to discover new therapeutic candidates, as well as increase our headcount. In particular, clinical development of our therapeutic candidates, as opposed to preclinical development, generally has higher development costs, primarily due to the increased size and duration of later-stage clinical trials. Moreover, the costs associated with our CDMOs to manufacture our therapeutic candidates and future commercial products is also much

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more costly as compared to early stage preclinical development. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our therapeutic candidates due to the inherently unpredictable nature of preclinical and clinical development. Preclinical and clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which therapeutic candidates to pursue and how much funding to direct to each therapeutic candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each therapeutic candidate’s commercial potential. We will need substantial additional capital in the future to support these efforts. In addition, we cannot forecast which therapeutic candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our clinical development costs may vary significantly based on factors such as:

•per patient trial costs;

•the number of trials required for approval;

•the number of sites included in the trials;

•the countries in which the trials are conducted;

•the length of time required to enroll eligible patients;

•the number of patients that participate in the trials;

•the number of doses that patients receive;

•the drop-out or discontinuation rates of patients;

•potential additional safety monitoring requested by regulatory agencies;

•the duration of patient participation in the trials and follow-up;

•the cost and timing of manufacturing of our therapeutic candidates;

•the phase and development of our therapeutic candidates;

•the efficacy and safety profile of our therapeutic candidates; and

•uncertainties related to the COVID-19 pandemic.

General and Administrative

G&A expenses consist primarily of:

•salaries, benefits and other related costs, including stock-based compensation, for personnel engaged in G&A functions;

•expenses incurred in connection with accounting and audit services, legal services, and investor relations, as well as consulting expense under agreements with third parties, such as consultants and contractors;

•expenses incurred in connection with commercial and business development activity; and

•facilities, depreciation and other expenses, which include direct and allocated expenses for depreciation and amortization, rent and maintenance of facilities, insurance and supplies.

We expect our G&A expenses will continue to increase over the next several years as we continue to increase our headcount and incur increased accounting, audit, legal, regulatory, commercialization, business development, and compliance costs as well as investor and public relations expenses associated with operating as a public company.

Other Income (Expense)

Interest expense. Interest expense consists primarily of our interest on our loans with Oxford, offset in part by our interest income.

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Results of Operations

Comparison of the Three Months Ended March 31, 2022 and March 31, 2021

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


	THREE MONTHS ENDED MARCH 31,				CHANGE
	2022		2021		($)		(%)

Revenue:
License fee revenue	$	915	$	863	$	52	6	%
Grant revenue	14		26		(12)		(46)	%
Total revenue	929		889		40		4	%
Operating expense:
Research and development	24,895		16,438		8,457		51	%
General and administrative	5,051		3,009		2,042		68	%
Total operating expense	29,946		19,447		10,499		54	%
Loss from operations	(29,017)		(18,558)		(10,459)		56	%
Other income (expense)
Interest expense, net	(2,274)		(745)		(1,529)		205	%
Other income, net	37		16		21		131	%


Total other income (expense)	(2,237)		(729)		(1,508)		207	%
Provision for income taxes	—		2		(2)		—	%

Net loss	$	(31,254)	$	(19,289)	$	(11,965)	62	%

License Fee Revenue

License fee revenue during each of the three months ended March 31, 2022 and March 31, 2021 remained consistent at $0.9 million in each period. During the three months ended March 31, 2022, approximately $0.7 million of license fee revenue recognized was related to our agreements with Phylaxis while approximately $0.2 million of license fee revenue recognized was related to our effort to satisfy the performance obligation relative to the total expense estimated to be incurred during the option period under our option agreement with Chiesi. During the three months ended March 31, 2021, $0.2 million of license fee revenue earned was related to our option agreement with Chiesi. We also recognized $0.6 million of revenue under our agreements with Phylaxis during the three months ended March 31, 2021.

Grant Revenue

Grant revenue during the three months ended March 31, 2022 and March 31, 2021 consisted of revenue earned under a grant with the Department of Defense of $14,000 and $26,000, respectively.

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Research and Development Expense

The following table sets forth the primary external and internal research and development expenses (in thousands, except percentages):


	THREE MONTHS ENDED MARCH 31,				CHANGE
	2022		2021		($)		(%)

External expenses:
Contract manufacturing	$	6,893	$	2,602	$	4,291	165	%
Clinical trials	5,007		3,401		1,606		47	%
Preclinical studies	992		613		379		62	%
Other external research and development	1,086		745		341		46	%
Internal expenses:
Personnel	8,429		6,737		1,692		25	%
Equipment, depreciation, and facility	1,382		1,304		78		6	%
Other internal research and development	1,106		1,036		70		7	%
Total research and development expenses	$	24,895	$	16,438	$	8,457	51	%

Research and development expenses increased by $8.5 million to $24.9 million during the three months ended March 31, 2022 from $16.4 million during the three months ended March 31, 2021. The overall increase was primarily due to the following factors:

•contract manufacturing expense increased by $4.3 million, which was primarily attributable to the timing of work performed and raw materials purchased by our CDMO partners for the formulation and manufacturing of certain of our therapeutic candidates;

•clinical trial expense increased by $1.6 million, which was primarily attributable to increased CRO costs from the progression of our Phase 1 trials and the initiation of our potentially registration-enabling Phase 2 trial;

•preclinical expense increased by $0.4 million, which was primarily attributable to additional preclinical studies;

•personnel-related expense increased by $1.7 million, which was attributable to an increase in our headcount and the issuance of additional stock options; and

•facility and equipment-related expense increased by $0.1 million, which was attributable to an increase in depreciable equipment.

G&A Expense

G&A expenses increased by $2.1 million to $5.1 million during the three months ended March 31, 2022 from $3.0 million during the three months ended March 31, 2021. During the three months ended March 31, 2022, personnel expenses increased by $1.4 million as compared to the same period in the prior year, primarily related to an increase in headcount and additional stock option grants to employees. We also incurred market research expenses of $0.4 million during the three months ended March 31, 2022 related to the initiation of our potential commercialization efforts for INBRX-101 and INBRX-109.

Other income (expense)

Interest expense, net. Interest expense, net, increased by $1.6 million to $2.3 million during the three months ended March 31, 2022 from $0.7 million during the three months ended March 31, 2021. During the three months ended March 31, 2022, we recorded $2.3 million of interest related to interest paid and the amortization of debt discounts related to the Amended 2020 Loan Agreement. During the three months ended March 31, 2021, we incurred $0.8 million of interest related to interest paid and the amortization of debt discounts related to the Amended 2020 Loan with Oxford.

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Cash Flow Summary

The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):


	THREE MONTHS ENDED MARCH 31,
	2022		2021


Net cash used in operating activities	$	(26,941)	$	(21,648)
Net cash used in investing activities	(117)		(14)
Net cash provided by financing activities	39,224		988
Net increase (decrease) in cash and cash equivalents	$	12,166	$	(20,674)

Operating Activities

Net cash used in operating activities was $26.9 million during the three months ended March 31, 2022 and consisted primarily of a net loss of $31.3 million, adjusted for non-cash items including accretion on our debt discount and the non-cash portion of interest expense related to our debt of $0.5 million, stock-based compensation expense of $5.1 million, depreciation and amortization of $0.3 million, and non-cash lease expense of $0.4 million. Changes in operating assets and liabilities also contributed to the cash used in operating activities, primarily related to decreases in accounts payable of $1.3 million and accrued expenses and other current liabilities of $0.4 million due to the timing of clinical activity and contract manufacturing work performed by our CDMO partners. Additionally, deferred revenue decreased by $0.9 million and the operating lease liability decreased by $0.4 million. These changes were offset in part by decreases in related parties receivables of $0.4 million following the collection of balances and in prepaid expenses and other current assets of $0.5 million.

Net cash used in operating activities was $21.6 million during the three months ended March 31, 2021 and consisted primarily of a net loss of $19.3 million, adjusted for non-cash items including accretion on our debt discount and the non-cash portion of interest expense related to our debt of $0.2 million, stock-based compensation expense of $3.4 million, depreciation and amortization of $0.3 million, and non-cash lease expense of $0.4 million. Changes in operating assets and liabilities also contributed to the cash used in operating activities, primarily related to an increase in prepaid expenses and other current assets of $2.2 million and a decrease in accrued expenses and other current liabilities of $5.4 million due to the timing of clinical activity and contract manufacturing work performed by our CDMO partners. These were offset in part by an increase in deferred revenue of $0.4 million and an increase in accounts payable of $0.7 million.

Investing Activities

Net cash used in investing activities was $0.1 million and $14,000 during the three months ended March 31, 2022 and March 31, 2021, respectively, and was related to capital purchases, including laboratory equipment.

Financing Activities

Net cash provided by financing activities was $39.2 million during the three months ended March 31, 2022 and consisted primarily of approximately $38.9 million of proceeds from Oxford under the Amended 2020 Loan Agreement upon draw of the Term D Loan in February 2022. Additionally, we received approximately $0.4 million of proceeds upon the exercise of stock options.

Net cash provided by financing activities was $1.0 million during the three months ended March 31, 2021 and consisted of approximately $1.0 million of proceeds received upon the exercise of stock options.

Critical Accounting Estimates and Policies

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 United States of America, or GAAP. The preparation of financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues, costs and expenses

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and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in estimates are reflected in reported results for the period in which they become known. Actual results could differ significantly from the estimates made by our management.

There have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements

See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of recent accounting pronouncements and their effect, if any, on us.

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Item 3. Quantitative and Qualitative Disclosures about Market Risks.

Interest Rate Risk

Our cash and cash equivalents consist of cash held in readily available checking and money market accounts. We are exposed to market risk related to fluctuations in interest rates and market prices. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of United States interest rates. However, due to the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition or results of operations.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and research and development contract costs. We do not believe inflation has had a material effect on our results of operations during the periods presented.

Foreign Currency Exchange Risk

We are exposed to market risk related to changes in foreign currency exchange rates. We contract with vendors that are located outside the United States, and certain invoices are denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these arrangements. To date, we have not experienced any material effects from foreign currency fluctuations.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were designed and operating effectively at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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Part II — Other Information

Item 1. Legal Proceedings.

We are not currently a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.

Item 1A. Risk Factors.

Except for the risk factor set forth below, which has been updated to reflect risks associated with current global conditions, there have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021:

We rely on third parties to conduct all of our clinical trials and certain of our preclinical studies and intend to continue to do so. If these third parties do not perform as contractually required, fail to satisfy regulatory or legal requirements or miss expected deadlines, our development programs could be delayed with material and adverse effects on our business, financial condition, results of operations and prospects.

While we expect to continue our current clinical trials and expect to initiate clinical trials in the near term for many of our therapeutic candidates, we do not independently conduct clinical trials. As such, while we perform certain functions internally, we currently rely and intend to continue to rely on third-party CROs, clinical data management organizations and consultants to help us design, conduct, supervise and monitor clinical trials of our therapeutic candidates. As a result, we will have less control over the timing, quality and other aspects of our clinical trials than we would have had we conducted them on our own. There is a limited number of third party service providers that specialize or have the expertise required to achieve our business objectives. If any of our relationships with these third-party CROs or clinical investigators terminate, we may not be able to enter into arrangements with alternative CROs or investigators or to do so on commercially reasonable terms. Further, these investigators, CROs and consultants are not our employees and we have limited control over the amount of time and resources that they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs. The third parties with which we contract might not be diligent, careful or timely in conducting our preclinical studies or clinical trials. These third parties may also be susceptible to disruption as a result of health crises such as the COVID-19 pandemic or periods of societal unrest. For example, we currently retain CROs located in Hong Kong. These CROs may be negatively affected by, or subject to disruption arising from, the societal unrest and regulatory regime change related to China’s passage of a national security law exerting additional control by mainland China over activities in Hong Kong. In addition, regarding the current conflict in Ukraine, we do not have any clinical trial sites or operations in Ukraine or Russia. However, if the current conflict in the region continues, there is the potential for trial sites planned in other eastern European countries to slow or stop enrollment, or to be unable to administer our clinical trials. If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy the legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines for any reason, our clinical development programs could be delayed and otherwise adversely affected.

In all events, we will be responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the relevant study or trial. The FDA requires nonclinical studies to be conducted in accordance with good laboratory practices and clinical trials to be conducted in accordance with GCPs including practices and requirements for designing, conducting, recording and reporting the results of nonclinical studies and clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. Our reliance on third parties we do not control will not relieve us of these responsibilities and requirements. Any adverse development or delay in our clinical trials could have a material and adverse effect on our business, financial condition, results of operations and prospects.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Recent Sales of Unregistered Securities

None.

(b) Use of Proceeds

On August 18, 2020, the SEC declared effective our registration statement on Form S-1 (File No. 333-240135), as amended, filed in connection with our IPO. Our IPO closed on August 21, 2020, and we issued and sold 8,050,000 shares of our common stock at a price to the public of $17.00 per share, which included the exercise in full of the underwriters’ option to purchase additional shares. We received gross proceeds from our IPO of $136.9 million, before deducting underwriting discounts, commissions and offering costs of $11.0 million, for net proceeds of approximately $125.9 million. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates.

The joint book-running managing underwriters of the offering were Jefferies LLC, Evercore Group L.L.C. and Credit Suisse Securities (USA) LLC, with LifeSci Capital as Co-Manager.

Upon receipt, the net proceeds from our IPO were held in cash and cash equivalents, primarily bank deposits and money market funds. Through March 31, 2022, we have used a portion of the net proceeds from our IPO for the research and development of our programs and for general corporate purposes. There has been no material change in the planned use of proceeds from our IPO from those disclosed in the Prospectus for our IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on August 18, 2020.

For the quarter ended March 31, 2022, we did not repurchase any equity securities.

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Item 3. Defaults Upon Senior Securities.

None.

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Item 4. Mine Safety Disclosures.

Not applicable.

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Item 5. Other Information.

None.

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Item 6. Exhibits.

(a) Exhibits.

Exhibit No.

Description of Exhibit

Filed Herewith

Form

Incorporated By Reference File No.

Date Filed

10.1

Fourth Amendment to Loan and Security Agreement, dated February 18, 2022, by and between the Company and Oxford Finance LLC

8-K

001-39452

02/22/2022

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101

* This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						INHIBRX, INC.

Date: May 9, 2022						/s/ Mark P. Lappe
						Mark P. Lappe
						Chief Executive Officer and Chairman
						(Principal Executive Officer)

Date: May 9, 2022						/s/ Kelly D. Deck
						Kelly D. Deck, C.P.A.
						Chief Financial Officer
						(Principal Financial and Accounting Officer)