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EX-10.1 - EX-10.1 - AGENUS INCagen-ex101_144.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

For the quarterly period ended June 30, 2017

or

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

For the transition period from              to             

Commission File Number: 000-29089

Agenus Inc.

(exact name of registrant as specified in its charter)

 

 

Delaware

 

06-1562417

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

3 Forbes Road, Lexington, Massachusetts 02421

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code:

(781) 674-4400

 

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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

 

  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

 

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

Number of shares outstanding of the issuer’s Common Stock as of July 31, 2017: 99,712,305 shares

 

 

 

 


Agenus Inc.

Six Months Ended June 30, 2017

Table of Contents

 

 

 

 

 

Page

PART I

 

 

ITEM 1.

 

Financial Statements:

 

2

 

 

Condensed Consolidated Balance Sheets as of June 30, 2017 (Unaudited) and December 31, 2016

 

2

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2017 and 2016 (Unaudited)

 

3

 

 

Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2017 and 2016 (Unaudited)

 

4

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

5

ITEM 2.

 

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

 

14

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

19

ITEM 4.

 

Controls and Procedures

 

20

 

 

 

PART II

 

 

ITEM 1A.

 

Risk Factors

 

21

ITEM 5.

 

Other Information

 

44

ITEM 6.

 

Exhibits

 

44

 

 

Signatures

 

45

 

 

 

 


PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

AGENUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

June 30, 2017

 

 

December 31, 2016

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

81,829,729

 

 

$

71,448,016

 

Short-term investments

 

 

14,936,047

 

 

 

4,988,751

 

Inventories

 

 

87,000

 

 

 

88,200

 

Accounts Receivable

 

 

3,943,904

 

 

 

11,352,022

 

Prepaid expenses

 

 

8,943,072

 

 

 

2,596,675

 

Other current assets

 

 

950,615

 

 

 

838,538

 

Total current assets

 

 

110,690,367

 

 

 

91,312,202

 

Property, plant and equipment, net of accumulated amortization and depreciation of

   $33,096,539 and $31,243,967 at June 30, 2017 and December 31, 2016, respectively

 

 

25,575,340

 

 

 

25,633,985

 

Goodwill

 

 

23,351,728

 

 

 

22,392,411

 

Acquired intangible assets, net of accumulated amortization of $4,420,834 and

   $3,193,092 at June 30, 2017 and December 31, 2016, respectively

 

 

15,590,903

 

 

 

16,364,726

 

Other long-term assets

 

 

1,282,662

 

 

 

1,282,662

 

Total assets

 

$

176,491,000

 

 

$

156,985,986

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current portion, long-term debt

 

$

146,061

 

 

$

146,061

 

Current portion, deferred revenue

 

 

2,645,302

 

 

 

2,610,719

 

Accounts payable

 

 

4,571,916

 

 

 

5,428,452

 

Accrued liabilities

 

 

20,569,516

 

 

 

27,874,703

 

Other current liabilities

 

 

4,979,607

 

 

 

4,791,265

 

Total current liabilities

 

 

32,912,402

 

 

 

40,851,200

 

Long-term debt, net of current portion

 

 

138,530,646

 

 

 

130,542,424

 

Deferred revenue, net of current portion

 

 

11,192,448

 

 

 

12,344,782

 

Contingent purchase price considerations

 

 

6,500,000

 

 

 

7,561,000

 

Other long-term liabilities

 

 

4,836,323

 

 

 

4,812,846

 

Commitments and contingencies

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Preferred stock, par value $0.01 per share; 5,000,000 shares authorized:

 

 

 

 

 

 

 

 

Series A-1 convertible preferred stock; 31,620 shares designated, issued, and

   outstanding at June 30, 2017 and December 31, 2016; liquidation value

   of $32,522,287 at June 30,2017

 

 

316

 

 

 

316

 

Common stock, par value $0.01 per share; 240,000,000 shares authorized; 99,602,582

   and 87,794,933 shares issued at June 30, 2017 and December 31, 2016,

   respectively

 

 

996,026

 

 

 

877,949

 

Additional paid-in capital

 

 

938,412,195

 

 

 

866,854,348

 

Accumulated other comprehensive loss

 

 

(2,289,854

)

 

 

(1,529,559

)

Accumulated deficit

 

 

(954,599,502

)

 

 

(905,329,320

)

Total stockholders’ deficit

 

 

(17,480,819

)

 

 

(39,126,266

)

Total liabilities and stockholders’ deficit

 

$

176,491,000

 

 

$

156,985,986

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

2


AGENUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service

 

$

 

 

$

 

 

$

 

 

$

147,456

 

Research and development

 

 

4,207,573

 

 

 

6,592,285

 

 

 

31,163,416

 

 

 

12,403,705

 

Total revenues

 

 

4,207,573

 

 

 

6,592,285

 

 

 

31,163,416

 

 

 

12,551,161

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

(25,824,431

)

 

 

(22,361,786

)

 

 

(58,464,422

)

 

 

(47,400,264

)

General and administrative

 

 

(8,136,252

)

 

 

(7,117,232

)

 

 

(15,905,760

)

 

 

(16,348,753

)

Contingent purchase price consideration fair value adjustment

 

 

865,000

 

 

 

(721,000

)

 

 

1,061,000

 

 

 

(379,000

)

Operating loss

 

 

(28,888,110

)

 

 

(23,607,733

)

 

 

(42,145,766

)

 

 

(51,576,856

)

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating income

 

 

1,649,811

 

 

 

(508,794

)

 

 

2,389,946

 

 

 

(185,711

)

Interest expense, net

 

 

(4,474,743

)

 

 

(4,203,352

)

 

 

(9,060,400

)

 

 

(8,335,815

)

Net loss

 

 

(31,713,042

)

 

 

(28,319,879

)

 

 

(48,816,220

)

 

 

(60,098,382

)

Dividends on Series A-1 convertible preferred stock

 

 

(51,344

)

 

 

(51,021

)

 

 

(102,608

)

 

 

(101,962

)

Net loss attributable to common stockholders

 

$

(31,764,386

)

 

$

(28,370,900

)

 

$

(48,918,828

)

 

$

(60,200,344

)

Per common share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss attributable to common stockholders

 

$

(0.32

)

 

$

(0.33

)

 

$

(0.51

)

 

$

(0.69

)

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

99,201,975

 

 

 

86,964,777

 

 

 

96,370,777

 

 

 

86,825,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation (loss) gain

 

$

(628,456

)

 

$

(143,543

)

 

$

(760,295

)

 

$

395,088

 

Other comprehensive (loss) gain

 

 

(628,456

)

 

 

(143,543

)

 

 

(760,295

)

 

 

395,088

 

Comprehensive loss

 

$

(32,392,842

)

 

$

(28,514,443

)

 

$

(49,679,123

)

 

$

(59,805,256

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

3


AGENUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(48,816,220

)

 

$

(60,098,382

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,057,142

 

 

 

2,519,873

 

Share-based compensation

 

 

5,129,035

 

 

 

6,317,596

 

Non-cash interest expense

 

 

8,783,464

 

 

 

7,983,749

 

Loss on disposal of assets

 

 

9,209

 

 

 

 

Gain on issuance of stock for settlement of milestone obligation

 

 

(14,063

)

 

 

 

Change in fair value of contingent obligations

 

 

(1,061,000

)

 

 

379,000

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

7,408,118

 

 

 

434,257

 

Prepaid expenses

 

 

(6,330,969

)

 

 

(802,505

)

Accounts payable

 

 

(1,225,694

)

 

 

474,526

 

Deferred revenue

 

 

(1,117,884

)

 

 

(2,629,753

)

Accrued liabilities and other current liabilities

 

 

(6,032,357

)

 

 

5,385,328

 

Other operating assets and liabilities

 

 

(2,000,691

)

 

 

11,452

 

Net cash used in operating activities

 

 

(42,211,910

)

 

 

(40,024,859

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of plant and equipment

 

 

120,000

 

 

 

 

Purchases of plant and equipment

 

 

(1,405,932

)

 

 

(3,164,423

)

Purchases of held-to-maturity securities

 

 

(14,936,047

)

 

 

(49,895,350

)

Proceeds from securities held-to-maturity

 

 

5,000,000

 

 

 

35,000,000

 

Net cash used in investing activities

 

 

(11,221,979

)

 

 

(18,059,773

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from sale of equity

 

 

63,677,302

 

 

 

 

Proceeds from employee stock purchases and option exercises

 

 

342,476

 

 

 

471,357

 

Purchase of treasury shares to satisfy tax withholdings

 

 

(527,223

)

 

 

(667,050

)

Payment under a purchase agreement for in-process research and development

 

 

 

 

 

(5,000,000

)

Payment of capital lease obligation

 

 

(133,300

)

 

 

(24,110

)

Net cash provided by (used in) financing activities

 

 

63,359,255

 

 

 

(5,219,803

)

Effect of exchange rate changes on cash

 

 

456,347

 

 

 

(696

)

Net increase (decrease) in cash and cash equivalents

 

 

10,381,713

 

 

 

(63,305,131

)

Cash and cash equivalents, beginning of period

 

 

71,448,016

 

 

 

136,702,873

 

Cash and cash equivalents, end of period

 

$

81,829,729

 

 

$

73,397,742

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

555,397

 

 

$

555,397

 

Supplemental disclosures - non-cash activities:

 

 

 

 

 

 

 

 

Purchases of plant and equipment in accounts payable and

   accrued liabilities

 

 

355,814

 

 

 

62,219

 

Issuance of common stock, $0.01 par value, issued in connection with the

   settlement of milestone obligation

 

 

1,485,937

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


AGENUS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2017

 

Note A - Business, Liquidity and Basis of Presentation

Agenus Inc. (including its subsidiaries, collectively referred to as “Agenus,” the “Company,” “we,” “us,” and “our”) is a clinical stage immuno-oncology company focused on the discovery and development of therapies that engage the body’s immune system to fight cancer. Our approach to cancer immunotherapy involves a diverse portfolio of antibody-based therapeutics, adjuvants and cancer vaccine platforms. We, in collaboration with our partners, are developing a number of immuno-modulatory antibodies against important nodes of immune regulation.  These include antibodies targeting CTLA-4, GITR, OX40 and PD-1 that are in clinical development. Our discovery pipeline consists of a number of proprietary checkpoint modulating (“CPM”) antibodies against innovative targets such as TIGIT and 4-1BB (also known as CD137).  We believe that tailored combination therapies are essential to combat some of the most resistant cancers.  Accordingly, our immune education strategy focuses on pursing antibodies as well as vaccine candidates in conjunction with adjuvants.  We are developing a comprehensive immuno-oncology portfolio driven by the following platforms and programs, which we intend to utilize individually and in combination:

 

our antibody discovery platforms, including our Retrocyte Display™, SECANT® yeast display, and phage display technologies designed to produce quality human antibodies;

 

our antibody candidate programs, including our CPM programs;

 

our vaccine programs, including Prophage™, AutoSynVax™ and PhosPhoSynVaxTM; and

 

our saponin-based vaccine adjuvants, principally our QS-21 Stimulon® adjuvant (“QS-21 Stimulon”).

Our business activities have included product research and development, intellectual property prosecution, manufacturing, regulatory and clinical affairs, corporate finance and development activities, and support of our collaborations. Our product candidates require clinical trials and approvals from regulatory agencies, as well as acceptance in the marketplace. Part of our strategy is to develop and commercialize some of our product candidates by continuing our existing arrangements with academic and corporate collaborators and licensees and by entering into new collaborations.

Our cash, cash equivalents, and short-term investments at June 30, 2017 were $96.8 million, an increase of $20.3 million from December 31, 2016.

The following table outlines our quarter end cash, cash equivalents and short-term investments balances and the changes therein.

 

 

 

Quarter Ended

 

 

 

March 31, 2017

 

 

June 30,

2017

 

Cash, cash equivalents and short-term investments

 

$

123.8

 

 

$

96.8

 

Increase (decrease) in cash, cash equivalents and short-term

   investments

 

$

47.4

 

 

$

(27.0

)

Cash used in operating activities

 

$

14.8

 

 

$

27.4

 

Reported net loss

 

$

17.3

 

 

$

31.7

 

 As of December 31, 2016, we along with all public companies, adopted the provisions of Accounting Standards Update 2014-15 (“ASU 2014-15”), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern which requires management to assess the Company’s ability to continue as a going concern for twelve months after the date each periodic financial statement is issued.  This disclosure is a result of and in accordance with the provisions of this standard.  We have incurred significant losses since our inception. As of June 30, 2017, we had an accumulated deficit of $954.6 million. Since our inception, we have successfully financed our operations primarily through the sale of equity and convertible and other notes, corporate partnerships, and interest income earned on cash, cash equivalents, and short-term investments balances. Based on our current plans and activities, our cash, cash equivalents and short-term investments balance of $96.8 million as of June 30, 2017 would only be sufficient to satisfy our liquidity requirements through the first quarter of 2018 without any additional funding before that time, which we anticipate.  Regardless of this anticipated funding, in accordance with ASU 2014-15 this is deemed to be a condition which raises substantial doubt regarding our ability to continue as a going concern for at least one year from when these financial statements were issued.  In order to continue as a going concern, we expect to raise additional funding from currently contemplated transactions before year end. We also continue to monitor the likelihood of success of our key initiatives and are prepared to discontinue funding of such activities if they do not prove to be feasible, restrict capital expenditures and/or reduce the scale of our operations, if necessary.

5


Our future liquidity needs will be determined primarily by the success of our operations with respect to the progression of our product candidates and key development and regulatory events in the future. We anticipate raising additional funding by: (1) pursuing collaboration, out-licensing and/or partnering opportunities for our portfolio programs and product candidates with one or more third parties, (2) renegotiating third party agreements, (3) selling assets, (4) securing additional debt financing and/or (5) selling equity securities.  We believe the execution of one or more of these transactions will enable us to fund our planned operations for at least one year from when these financial statements were issued.  Our ability to address our liquidity needs will largely be determined by the success of our product candidates and key development and regulatory events and our decisions in the future as well as the execution of one or more of the aforementioned contemplated transactions.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual consolidated financial statements. In the opinion of our management, the condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of our financial position and operating results. All significant intercompany transactions and accounts have been eliminated in consolidation. Operating results for the six months ended June 30, 2017, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. For further information, refer to our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2017.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

For our foreign subsidiaries the local currency is the functional currency. Assets and liabilities of our foreign subsidiaries are translated into U.S. dollars using rates in effect at the balance sheet date while revenues and expenses are translated into U.S. dollars using average exchange rates during the period. The cumulative translation adjustment resulting from changes in exchange rates are included in the consolidated balance sheets as a component of accumulated other comprehensive loss in total stockholders’ deficit.

 

 

Note B - Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding (including common shares issuable under our Directors’ Deferred Compensation Plan, or “DDCP”). Diluted income per common share is calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding (including common shares issuable under our DDCP) plus the dilutive effect of outstanding instruments such as warrants, stock options, nonvested shares, convertible preferred stock, and convertible notes. Because we reported a net loss attributable to common stockholders for all periods presented, diluted loss per common share is the same as basic loss per common share, as the effect of utilizing the fully diluted share count would have reduced the net loss per common share. Therefore, the following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as of June 30, 2017 and 2016, as they would be anti-dilutive:

 

 

 

Six Months Ended June 30,

 

 

 

2017

 

 

2016

 

Warrants

 

 

4,351,450

 

 

 

4,351,450

 

Stock options

 

 

15,287,781

 

 

 

11,659,125

 

Nonvested shares

 

 

2,022,324

 

 

 

1,999,294

 

Convertible preferred stock

 

 

333,333

 

 

 

333,333

 

 

Note C - Investments

Cash equivalents and short-term investments consisted of the following as of June 30, 2017 and December 31, 2016 (in thousands):

 

 

 

June 30, 2017

 

 

December 31, 2016

 

 

 

Cost

 

 

Estimated

Fair Value

 

 

Cost

 

 

Estimated

Fair Value

 

Institutional money market funds

 

$

60,669

 

 

$

60,669

 

 

$

38,913

 

 

$

38,913

 

U.S. Treasury Bills

 

 

34,890

 

 

 

34,890

 

 

 

14,978

 

 

 

14,978

 

Total

 

$

95,559

 

 

$

95,559

 

 

$

53,891

 

 

$

53,891

 

6


 

For the six months ended June 30, 2017, we received proceeds of approximately $5.0 million from the maturity of U.S. Treasury Bills classified as short-term investments. As a result of the short-term nature of our investments, there were minimal unrealized holding gains or losses for the three and six months ended June 30, 2017 and 2016.

Of the investments listed above, $80.6 million and $48.9 million have been classified as cash equivalents and $14.9 million and $5.0 million as short-term investments on our condensed consolidated balance sheets as of June 30, 2017 and December 31, 2016, respectively.

 

 

Note D - Goodwill and Acquired Intangible Assets

The following table sets forth the changes in the carrying amount of goodwill for the six months ended June 30, 2017 (in thousands):

 

Balance, December 31, 2016

 

$

22,392

 

Foreign currency translation adjustment

 

 

960

 

Balance, June 30, 2017

 

$

23,352

 

 

Acquired intangible assets consisted of the following as of June 30, 2017 and December 31, 2016 (in thousands):

 

 

 

As of June 30, 2017

 

 

 

Amortization

period

(years)

 

Gross carrying

amount

 

 

Accumulated

amortization

 

 

Net carrying

amount

 

Intellectual property

 

7-15 years

 

$

16,630

 

 

$

(3,374

)

 

$

13,256

 

Trademarks

 

4.5 years

 

 

842

 

 

 

(631

)

 

 

211

 

Other

 

2-6 years

 

 

575

 

 

 

(416

)

 

 

159

 

In-process research and development

 

Indefinite

 

 

1,965

 

 

 

 

 

 

1,965

 

Total

 

 

 

$

20,012

 

 

$

(4,421

)

 

$

15,591

 

 

 

 

As of December 31, 2016

 

 

 

Amortization

period

(years)

 

Gross carrying

amount

 

 

Accumulated

amortization

 

 

Net carrying

amount

 

Intellectual property

 

7-15 years

 

$

16,358

 

 

$

(2,384

)

 

$

13,973

 

Trademarks

 

4.5 years

 

 

791

 

 

 

(505

)

 

 

286

 

Other

 

2-6 years

 

 

563

 

 

 

(303

)

 

 

260

 

In-process research and development

 

Indefinite

 

 

1,846

 

 

 

 

 

 

1,846

 

Total

 

 

 

$

19,558

 

 

$

(3,193

)

 

$

16,365

 

 

The weighted average amortization period of our finite-lived intangible assets is 9 years. Amortization expense related to acquired intangibles is estimated at $1.1 million for the remainder of 2017, $2.0 million for the year ending December 31, 2018, $1.9 million for the year ending December 31, 2019 and $1.9 million for each of the years ending December 31, 2020 and 2021.

 

 

7


Note E - Debt

Debt obligations consisted of the following as of June 30, 2017 and December 31, 2016(in thousands):  

 

Debt instrument

 

Principal at

June 30,

2017

 

 

Non-cash

Interest

 

 

Unamortized

Debt Issuance

Costs

 

 

Unamortized

Debt Discount

 

 

Balance at

June 30,

2017

 

Current Portion:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debentures

 

$

146

 

 

$

 

 

$

 

 

$

 

 

$

146

 

Long-term Portion:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015 Subordinated Notes

 

 

14,000

 

 

 

 

 

 

 

 

 

(1,642

)

 

 

12,358

 

Note Purchase Agreement

 

 

100,000

 

 

 

27,664

 

 

 

(1,279

)

 

 

(212

)

 

 

126,173

 

Total long-term

 

$

114,000

 

 

$

27,664

 

 

$

(1,279

)

 

$

(1,854

)

 

$

138,531

 

Total

 

$

114,146

 

 

$

27,664

 

 

$

(1,279

)

 

$

(1,854

)

 

$

138,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt instrument

 

Principal at

December 31,

2016

 

 

Non-cash

Interest

 

 

Unamortized

Debt Issuance

Costs

 

 

Unamortized

Debt Discount

 

 

Balance at

December 31,

2016

 

Current Portion:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debentures

 

$

146

 

 

$

 

 

$

 

 

$

 

 

$

146

 

Long-term Portion:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015 Subordinated Notes

 

 

14,000

 

 

 

 

 

 

 

 

 

(1,311

)

 

 

12,689

 

Note Purchase Agreement

 

 

100,000

 

 

 

19,421

 

 

 

(1,345

)

 

 

(222

)

 

 

117,853

 

Total long-term

 

$

114,000

 

 

$

19,421

 

 

$

(1,345

)

 

$

(1,533

)

 

$

130,542

 

Total

 

$

114,146

 

 

$

19,421

 

 

$

(1,345

)

 

$

(1,533

)

 

$

130,688

 

 

In June 2016, we executed a capital lease agreement that expires in June 2020 for equipment with a carrying value of approximately $0.9 million, which is included in property, plant and equipment, net on our condensed consolidated balance sheets as of June 30, 2017. Under the terms of the capital lease agreement, we will remit payments to the lessor of $144,000 for the remainder of 2017, $288,000 for each of the years 2018 through 2019 and $144,000 for the year ending December 31, 2020.  As of June 30, 2017, our remaining obligations under the capital lease agreement are approximately $0.8 million, of which $290,000 and $465,000 are classified as other current and other long-term liabilities, respectively, on our condensed consolidated balance sheets.

In March 2017, we and the holders of our subordinated notes issued in February 2015 (the “2015 Subordinated Notes”) entered into an Amendment to Notes and Warrants, pursuant to which the parties (i) extended the term of the 2013 Warrants by two years from April 15, 2017 to April 15, 2019 and (ii) extended the maturity date of the 2015 Notes by two years from February 20, 2018 to February 20, 2020.  This resulted in an additional debt discount of $0.7 million, which will be amortized using the effective interest method over three years, the expected life of the 2015 Subordinated Notes. The 2013 Warrants and 2015 Subordinated Notes are otherwise unchanged.

 

 

Note F - Accrued and Other Current Liabilities

Accrued liabilities consisted of the following as of June 30, 2017 and December 31, 2016 (in thousands):

 

 

 

June 30, 2017

 

 

December 31, 2016

 

Payroll

 

$

4,757

 

 

$

6,504

 

Professional fees

 

 

3,968

 

 

 

2,373

 

Contract manufacturing costs

 

 

5,270

 

 

 

10,492

 

Research services

 

 

5,224

 

 

 

5,639

 

Leasehold improvements

 

 

10

 

 

 

1,280

 

Other

 

 

1,341

 

 

 

1,587

 

Total

 

$

20,570

 

 

$

27,875

 

 

Other current liabilities consisted of the following as of June 30, 2017 and December 31, 2016 (in thousands):

 

 

 

June 30, 2017

 

 

December 31, 2016

 

Current portion of deferred purchase price

 

$

4,000

 

 

$

3,948

 

Other

 

 

980

 

 

 

843

 

Total

 

$

4,980

 

 

$

4,791

 

8


 

Note G - Fair Value Measurements

We measure our cash equivalents and short-term investments and contingent purchase price considerations at fair value.  Our cash equivalents and short-term investments are comprised solely of U.S. Treasury Bills that are valued using quoted market prices with no valuation adjustments applied.  Accordingly, these securities are categorized as Level 1 assets.

The fair values of our contingent purchase price considerations, $6.5 million, are based on significant inputs not observable in the market, which require them to be reported as Level 3 liabilities within the fair value hierarchy. The valuation of these liabilities use assumptions we believe would be made by a market participant and are based on estimates from a Monte Carlo simulation of our market capitalization and share price, and other factors impacting the probability of triggering the milestone payments. Market capitalization and share price were evolved using a geometric brownian motion, calculated daily for the life of the contingent purchase price considerations.

Assets and liabilities measured at fair value are summarized below (in thousands):

 

Description

 

June 30,

2017

 

 

Quoted Prices in

Active

Markets for

Identical Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

19,954

 

 

$

19,954

 

 

$

 

 

$

 

Short-term investments

 

 

14,936

 

 

 

14,936

 

 

 

 

 

 

 

Total

 

$

34,890

 

 

$

34,890

 

 

$

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent purchase price considerations

 

$

6,500

 

 

$

 

 

$

 

 

$

6,500

 

Total

 

$

6,500

 

 

$

 

 

$

 

 

$

6,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description

 

December 31,

2016

 

 

Quoted Prices in

Active

Markets for

Identical Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

9,990

 

 

$

9,990

 

 

$

 

 

$

 

Short-term investments

 

 

4,988

 

 

 

4,988

 

 

 

 

 

 

 

Total

 

$

14,978

 

 

$

14,978

 

 

$

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent purchase price consideration

 

$

7,561

 

 

$

 

 

$

 

 

$

7,561

 

Total

 

$

7,561

 

 

$

 

 

$

 

 

$

7,561

 

 

The following table presents our liabilities measured at fair value using significant unobservable inputs (Level 3), as of June 30, 2017 (in thousands):

 

Balance, December 31, 2016

 

$

7,561

 

Change in fair value of contingent purchase price considerations

   during the period

 

 

(1,061

)

Balance, June 30, 2017

 

$

6,500

 

The estimated fair values of all of our financial instruments, excluding our outstanding debt, approximate their carrying amounts in our condensed consolidated balance sheets.

The fair value of our outstanding debt balance at June 30, 2017 and December 31, 2016 was $136.5 million and $129.2 million, respectively, based on the Level 2 valuation hierarchy of the fair value measurements standard using a present value methodology that was derived by evaluating the nature and terms of each note and considering the prevailing economic and market conditions at the balance sheet date. The principal amount of our outstanding debt balance at both June 30, 2017 and December 31, 2016 was $114.1 million.

 

9


 

Note H - Collaboration Agreement

 

On February 14, 2017, we amended our License, Development and Commercialization Agreement, dated January 9, 2015, with Incyte Corporation (“Incyte”) by entering into a First Amendment to License, Development and Commercialization Agreement (the “Amendment”). Pursuant to the terms of the Amendment, the GITR and OX40 programs immediately converted from profit-share programs to royalty-bearing programs and we became eligible to receive a flat 15% royalty on global net sales should any candidates from either of these two programs be approved. Incyte is now responsible for global development and commercialization and all associated costs for these programs. In addition, the profit-share programs relating to the two undisclosed targets were removed from the collaboration, with one reverting to Incyte and one to us. Should any of those programs be successfully developed by a party, the other party will be eligible to receive the same milestone payments as the royalty-bearing programs and royalties at a 15% rate on global net sales. The terms for the remaining three royalty-bearing programs targeting TIM-3, LAG-3 and one undisclosed target remain unchanged, with Incyte being responsible for global development and commercialization and all associated costs. The Amendment gives Incyte exclusive rights and all decision-making authority for manufacturing, development, and commercialization with respect to all royalty-bearing programs.

 

In connection with the Amendment, Incyte paid us $20.0 million in accelerated milestones related to the clinical development of the antibody candidates targeting GITR and OX40. We are now eligible to receive up to an additional $510.0 million in future potential development, regulatory and commercial milestones across all programs in the collaboration. The Company recognized the $20.0 million received as revenue during the six months ended June 30, 2017.

 

On February 14, 2017, we also entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Incyte, pursuant to which Incyte purchased 10 million shares of our common stock (the “Shares”) at a purchase price of $6.00 per share. Immediately following the transaction, Incyte owned approximately 18.1% of our outstanding shares. Under the Stock Purchase Agreement, Incyte agreed not to dispose of any of the Shares for a period of 12 months and to vote the Shares in accordance with the recommendations of the Agenus board of directors in connection with certain equity incentive plan or compensation matters for a period of 18 months, and we agreed to certain registration rights with respect to the Shares. Under the Amendment, the parties also revised the existing standstill provision to permit Incyte’s acquisition of the Shares, but Incyte is precluded from acquiring any additional shares of our voting stock until December 31, 2019.

 

 

Note I - Share-based Compensation Plans

 

We primarily use the Black-Scholes option pricing model to value stock options granted to employees and non-employees, including stock options granted to members of our Board of Directors. All stock options have 10-year terms and generally vest ratably over a 3 or 4-year period. A non-cash charge to operations for the stock options granted to non-employees that have vesting or other performance criteria is affected each reporting period, until the non-employee options vest, by changes in the fair value of our common stock.

A summary of option activity for the six months ended June 30, 2017 is presented below:

 

 

 

Options

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term

(in years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding at December 31, 2016

 

 

11,693,400

 

 

$

4.52

 

 

 

 

 

 

 

 

 

Granted

 

 

4,020,507

 

 

 

3.78

 

 

 

 

 

 

 

 

 

Exercised

 

 

(45,950

</