HUMANIGEN, INC Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Form 10-Q)

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



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

continue its activity on favorable terms or not at all;

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

and resources;

? the timing of initiation, registration and completion and the results of

or planned clinical trials;

? our ability to obtain third-party sponsorship for the inclusion of

lenzilumab, or LENZ®, as part of a large multicenter platform trial to study

effects of lenzilumab on patients with COVID-19;

? our ability to resolve disputes with certain subcontractors

Organizations (“CMOs”) regarding our obligations to make payments to them

despite their inability to produce lenzilumab to contractual specifications,

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

courses of action for certain other commitments and provisioned amounts June 30th,

2022;

? our ability to address the multi-facility clinical supply disruption and

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

prevent termination of the MSA;

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

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

marketed competing products or alternative therapies;

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

lenzilumab in chronic myelomonocytic leukemia (“CML”) and in patients with

risk of acute graft versus host disease (“aGvHD”), respectively, as currently

intended;

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

with commercially available chimeric antigen receptor T cells (“CAR-T”)

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

(“ITI”);

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

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

? our ability to maintain licenses with third parties;

? our ability to obtain commercial exclusivity and/or to obtain, retain, protect

and enforce our intellectual property and operate our business without

infringe, misappropriate or otherwise violate intellectual property

rights of others;

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

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

may not work as expected;

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

take advantage of the expected benefits of various regulatory incentives,

or the imposition of regulations that affect our products; and

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

   requirements and needs for additional financing.




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



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Overview



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



We are focusing our efforts on the development of our lead product candidate,
lenzilumab. Lenzilumab is a monoclonal antibody that has been demonstrated to
neutralize human GM-CSF, a cytokine that we believe leads to the overproduction
of monocytes which are responsible for CMML and is of critical importance in the
hyperinflammatory cascade, sometimes referred to as CRS or cytokine storm,
associated with aGvHD associated with bone marrow transplants.



Market opportunity in CMML and related hematological cancers



Clonal cytogenic abnormalities are commonly seen in CMML patients. RAS
(Retrovirus-Associated DNA Sequence) mutations, which make leukemic cells
hyperresponsive to GM-CSF, are seen in approximately 30%-40% of CMML patients
and are the anticipated target patient population for lenzilumab. The incidence
of new CMML patients in the U.S., UK, and Australia is about 1,700 patients
annually.1 RAS mutations, which may drive GM-CSF hyperresponsiveness, are also
seen in additional myeloid hematological malignancies including juvenile
myelomonocytic leukemia ("JMML"), myelodysplastic syndromes ("MDS") and acute
myeloid leukemia ("AML"), totaling over 4,500 new cases annually in the U.S. We
believe success with CMML may provide proof of principle for targeting RAS
pathway mutations in myeloid leukemias with lenzilumab and allow us to develop,
and if successful, commercialize lenzilumab in these additional patient
populations.



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



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



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



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

1Incidence extrapolated by applying American Cancer Society incidence rate of four per million people at the population of WE, UKand Australia.
https://www.cancer.org/cancer/chronic-myelomonocytic-leukemia/about/key-statistics.html

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

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



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



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


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Recent Developments



In July 2022, we announced a strategic realignment of our pipeline and
resources. We plan to accelerate the development of LENZ in CMML, a rare blood
cancer, for which the PREACH-M study is already underway, and to continue our
plans for the RATinG study in aGvHD that occurs in patients undergoing bone
marrow transplant, which is expected to enroll its first patient in the third
quarter of 2022. These studies are majority funded by our partners. In addition,
we are currently assessing requests for IIT of lenzilumab in combination with
CAR-T therapies; the previously planned SHIELD study of lenzilumab with certain
CAR-T therapies has been terminated. We also plan to continue the development of
iFab, an EpAh-3 targeted monoclonal antibody currently in Phase 1 development,
as part of an antibody drug conjugate ("ADC"), for certain solid tumors.



Key elements of the strategic realignment plan include:

? Advance and expand the ongoing PREACH-M study of lenzilumab for the

treatment of high-risk CMML in patients with genetic NRAS, KRAS and CBL

mutations to more quickly reach the initial clinical evaluation of this

open-label study, once enough patients have received 3 cycles of treatment

with lenzilumab in addition to azacitidine. Three patients treated with lenzilumab

were enrolled in the study and followed for multiple cycles, with what we

believe to be encouraging results.

? Continued execution of the RATinG study for lenzilumab for early treatment

of aGvHD with the aim of reporting a planned interim assessment of the first

20 patients in the second quarter of 2023.

? Evaluate and support further clinical evaluation of lenzilumab for

prevention of toxicities associated with CAR-T therapy with an IIT.

? Investigate potential inclusion of lenzilumab in a large-scale international study

Study of the COVID-19 platform in partnership.

? Significantly reduce our research and development activities in cash and

General and administrative expenses.

? Eliminate long-term debt from the balance sheet by removing our seniors entirely

secured term loan, reducing interest costs and improving our ability to

generate additional cash from our intellectual property by releasing it from

   the loan's collateral requirements.




In July 2022, preliminary topline results from the Accelerating COVID-19
Therapeutic Interventions and Vaccines-5 ("ACTIV-5") and Big Effect Trial, in
the "B" arm of the trial ("BET-B"), referred to as the ACTIV-5/BET-B trial, were
released. The study was sponsored and funded by the National Institutes of
Health ("NIH") and evaluated lenzilumab in combination with remdesivir, compared
to placebo and remdesivir, in hospitalized COVID-19 patients. Based on
preliminary topline results, the trial did not achieve statistical significance
on the primary endpoint, although did indicate that lenzilumab demonstrated a
positive trend in mortality. We continue to support NIH's further analysis of
the data and lenzilumab has interest from a global group of leading institutions
and research networks to include lenzilumab in their large-scale, multinational
studies of COVID-19. Tocilizumab and baricitinib demonstrated mortality benefit
following inclusion in such studies having failed to do so in smaller studies.
With the recent preliminary topline results from the ACTIV-5/BET-B trial, we are
reconsidering our regulatory strategy. Under the realignment plan, we will
deemphasize the deployment of certain resources for the development of
lenzilumab for COVID-19 and currently do not plan to file for Emergency Use
Authorization ("EUA") in the United States in 2022. We had previously planned to
respond to the rolling review written questions received last year from the
Medicines and Healthcare Products Regulatory Agency ("MHRA") following receipt
of the results from the ACTIV-5/BET-B trial but do not plan to respond to these
written questions in 2022. We no longer intend to submit a Conditional Marketing
Authorization ("CMA") for lenzilumab with an Accelerated Approval request to
European Medicines Agency ("EMA") in 2022. The Named Patient program in select
European Countries will be terminated. With the exception of lenzilumab batches
in process, we plan to stop the manufacturing of lenzilumab. We plan to
consolidate the remaining inventory of lenzilumab bulk drug substance and drug
product in a central location for potential future use.



In July 2022, we paid $25.0 million of outstanding principal, together with
approximately $1.7 million of accrued interest, fees and other amounts, due
under the Term Loan with Hercules. In connection with the prepayment, the Term
Loan with Hercules was terminated, and all obligations, liens and security
interests under the Term Loan were released, discharged and satisfied. See Notes
5 and 11 to the Condensed Consolidated Financial Statements of this Quarterly
Report on Form 10-Q for additional information on the Term Loan.



As of the end of July 2022, the C-SMART study in cancer patients with COVID-19
will not be taking on any new patients in all arms of the trial and is being
brought to a conclusion, due to changes in COVID-19 treatment in Australia. As
no patients have been entered into the lenzilumab arm, due to low numbers of
cancer patients being hospitalized with COVID-19 and associated logistics
issues, we aim to utilize the investigational product as part of a larger
Victorian Government-funded trial.



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In May 2022, our partners in South Korea dosed the final healthy volunteer of
the 20 required for their Phase 1 bridging study. This study is being conducted
to explore the safety, tolerability, and pharmacokinetic ("PK") properties of
lenzilumab and compare it between Koreans and Caucasians. With the trial now
fully enrolled, we anticipate the results will be available in the fourth
quarter of 2022.



Our Pipeline


Our product candidates are in clinical development and require significant time, resources, research and development, and regulatory approval before commercialization. Our current pipeline is shown below:


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Significant Accounting Policies and Use of Estimates



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



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



Results of Operations



At June 30, 2022, we had an accumulated deficit of $662.5 million. Since
inception, we have recognized a nominal amount of revenue from payments for
license or collaboration fees. Our product candidates may never be successfully
developed or commercialized and we may therefore never realize revenue from any
product sales. Accordingly, we expect to continue to incur substantial losses
from operations for the foreseeable future, and there can be no assurance that
we will ever generate significant revenue or profits. Our ability to continue as
a going concern depends on our ability to attain a significant amount of
additional financing, as more fully described below under "-Liquidity and
Capital Resources" and in "Risk Factors" in Item 1A of Part II below.



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Comparison of three and six month periods ended June 30, 2022 and 2021

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


                                 Three Months Ended June 30,           Increase/ (Decrease)          Six Months Ended June 30,          Increase/ (Decrease)
(in thousands)                    2022                 2021             Amount             %           2022               2021           Amount             %
Revenue:
License revenue              $        1,036       $        1,036     $           -                 $       2,072       $    1,522     $         550          36
Total revenue                         1,036                1,036                 -                         2,072            1,522               550          36

Operating expenses:
Research and development             26,438               63,012           (36,574 )       (58 )          43,658          122,946           (79,288 )       (64 )
General and administrative            3,949                8,076            (4,127 )       (51 )           8,294           13,024            (4,730 )       (36 )
Total operating expenses             30,387               71,088           (40,701 )       (57 )          51,952          135,970           (84,018 )       (62 )

Loss from operations                (29,351 )            (70,052 )         (40,701 )       (58 )         (49,880 )       (134,448 )         (84,568 )       (63 )

Other expense:
Interest expense                       (768 )               (746 )              22           3            (1,502 )           (765 )             737          96
Other expense, net                      (30 )                 (5 )              25         500               (45 )         (1,157 )          (1,112 )       (96 )
Net loss                     $      (30,149 )     $      (70,803 )   $     (40,654 )       (57 )   $     (51,427 )     $ (136,370 )   $     (84,943 )       (62 )




Revenue



Revenue in the three and six months ended June 30, 2022 and 2021, represents
license revenue under the license agreement (the "South Korea Agreement") with
KPM Tech Co., Ltd. ("KPM") and its affiliate, Telcon RF Pharmaceutical, Inc.
(together with KPM, the "Licensee") described in more detail in Note 4 to the
Condensed Consolidated Financial Statements included in this Quarterly Report on
Form 10-Q. License revenue was $1.0 million and $2.1 million for the three and
six months ended June 30, 2022, respectively, as compared to $1.0 million and
$1.5 million for the three and six months ended June 30, 2021, respectively.



Research and development costs



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


? expenses incurred under agreements with research organizations under contract,

investigational sites and consultants who conduct our clinical trials and our

preclinical activities;

? the cost of acquisition and manufacturing of clinical trials, pre-commercial and

other materials, the bulk drug manufacturing process transfer cost

material and fill/finish production, development and periodic performance

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

product characterization, costs associated with quality management,

preparation of documents and information required for filing with regulatory authorities

authorities; and

? other costs associated with development activities, including

   studies.




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



The following table shows our total research and development expenditures for the three and six months ended June 30, 2022 and 2021:



                                       Three Months Ended June 30,             Six Months Ended June 30,
(in thousands)                          2022                 2021              2022                2021
External Costs
  Lenzilumab                       $       25,971       $       61,913     $     42,419       $      121,139
  Ifabotuzumab                                 25                   25              183                   50
Internal costs                                442                1,074            1,056                1,757

Total research and development $26,438 $63,012 $43,658 $122,946



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Research and development expenses decreased by $36.6 million from $63.0 million
for the three months ended June 30, 2021 to $26.4 million for the three months
ended June 30, 2022 and decreased by $79.2 million from $122.9 million for the
six months ended June 30, 2021 to $43.7 million for the six months ended June
30, 2022. The decrease in the three months ended June 30, 2022 as compared to
June 30, 2021 is primarily due to a $34.6 million decrease in lenzilumab
manufacturing costs, while the decrease in the six months ended June 30, 2022
compared to the six months ended June 30, 2021 is primarily due to a $70.3
million decrease in lenzilumab manufacturing costs, a $5.4 million decrease in
clinical trial expenses as the LIVE-AIR study has been completed and the first
patient has not yet been dosed in the CAR-T trial and a $1.0 million decrease in
consulting expenses.



We expect our research and development costs will continue to decrease in 2022
as compared to 2021. We have sought to mitigate our financial commitments by
ceasing additional manufacturing of lenzilumab, certain operational activities,
and reducing staff and consultants in connection with our realignment plan. Our
earlier mitigation efforts included the amendment or in some cases cancelation
of certain of our agreements with CMOs for future manufacturing work, some of
which were contingent on an EUA, in an effort to reduce our future spending. We
incurred cancellation fees for several of these modifications. We also have
disputed several invoices for cancellation fees and for production batches for
lenzilumab that had been submitted by CMOs that failed to produce lenzilumab
within our stated release specifications, but our mitigation efforts may not be
successful to recoup any such loss of lenzilumab bulk drug substance ("BDS") or
drug product ("DP"). See Notes 6, 10 and 11 to the Condensed Consolidated
Financial Statements included in this Quarterly Report on Form 10-Q for more
information on these disputes.



General and administrative expenses



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



General and administrative expenses decreased by $4.2 million from $8.1 million
for the three months ended June 30, 2021 to $3.9 million for the three months
ended June 30, 2022 and decreased by $4.7 million from $13.0 million for the six
months ended June 30, 2021 to $8.3 million for the six months ended June 30,
2022. The decrease for the three months ended June 30, 2022, is primarily due to
decreases of $2.9 million in consulting expenses, $0.5 million in
compensation-related expenses, $0.4 million in investor and public relations
expenses and $0.2 million in professional fees, while the decrease for the six
months ended June 30, 2022, is primarily due to decreases of $4.2 million in
consulting expenses and $0.8 million in investor and public relations expenses
partially offset by a $0.4 million increase in compensation related expenses,
primarily non-cash stock-based compensation expense. We expect that our overall
general and administrative costs may decrease in the near-term due to our
realignment plan designed to significantly reduce our go-forward, cash-based
general and administrative expenses.



Interest Expense



Interest expense for both periods is primarily related to the Loan and Security
Agreement with Hercules Capital as agent for its affiliates serving as lenders
thereunder (the "Term Loan"). Interest expense was $0.8 million and $0.6 million
for the three months ended June 30, 2022 and 2021, respectively, while interest
expense increased to $1.5 million for the six months ended June 30, 2022 as
compared to $0.6 million for the six months ended June 30, 2021, as we drew the
initial $25.0 million under the Term Loan on March 29, 2021. After giving effect
to payment of fees and expenses associated with the draw, we received net
proceeds of approximately $24.4 million.



In July 2022, we paid $26.7 million in full settlement of the Term Loan with
Hercules. See Notes 5 and 11 to the Condensed Consolidated Financial Statements
of this Quarterly Report on Form 10-Q for additional information on the Term
Loan.



Other Expense


Other expenses decreased by $1.1 million for the six months ended June 30, 2022primarily due to litigation costs incurred in the prior year period.

Cash and capital resources



Since our inception, we have financed our operations primarily through proceeds
from the public offerings of our common stock, private placements of our common
and preferred stock, debt financings, interest income earned on cash, and cash
equivalents, and marketable securities, and borrowings against lines of credit,
and with the proceeds under the South Korea Agreement. At June 30, 2022, we had
cash and cash equivalents of $47.0 million. In the first half of 2022, we sold
an aggregate of 7,215,309 shares of our common stock under the Controlled Equity
OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co.
("Cantor"), raising net proceeds of approximately $21.8 million.



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Main sources and uses of cash

The following table presents the main sources and uses of cash and cash equivalents for each of the periods presented below:

                                                         Six Months Ended June 30,
(In thousands)                                             2022             

2021

Net cash (used in) provided by:

  Operating activities                                 $     (44,819 )     

($103,784)

  Financing activities                                        21,849        

156,583

Net increase (decrease) in cash and cash equivalents ($22,970) $52,799




Net cash used in operating activities was $44.8 million and $103.8 million for
the six months ended June 30, 2022 and 2021, respectively. Cash used in
operating activities of $44.8 million for the six months ended June 30, 2022,
primarily related to our net loss of $51.4 million, adjusted for non-cash items,
such as $3.2 million in stock-based compensation, and a net change in operating
assets and liabilities of $3.1 million, including a $12.0 million increase in
accounts payable and a $5.5 million decrease in accrued expenses.



Cash used in operating activities of $103.8 million for the six months ended
June 30, 2021, primarily related to our net loss of $136.4 million, adjusted for
non-cash items, such as $2.4 million in stock-based compensation, and a net
change in operating assets and liabilities of $30.0 million, including a $21.9
million increase in accounts payable and a $5.8 million increase in accrued
expenses.



Net cash provided by financing activities was $21.8 million for the six months
ended June 30, 2022 and consists of net proceeds from the issuance of common
stock in connection with the Sales Agreement with Cantor.



Net cash provided by financing activities was $156.6 million for the six months
ended June 30, 2021 and consists primarily of net proceeds of approximately
$94.2 million related to the sale of 5,427,017 shares of our common stock in
connection with an underwritten public offering, $36.1 million received from the
issuance of common stock in connection with the Sales Agreement with Cantor,
$24.4 million in net proceeds received from the Term Loan, and $1.9 million
received from the exercise of stock options.



Recent Financings



Controlled Equity Offering



On December 31, 2020, we entered into the Sales Agreement with Cantor, under
which we could issue and sell shares of our common stock, having an aggregate
gross sales price of up to $100 million through Cantor, as sales agent. On April
14, 2022, we filed a prospectus in respect of the Sales Agreement which provides
us with the ability to offer and sell shares of common stock having an aggregate
offering price of up to $75.0 million. As mentioned above, for the first half of
2022, we issued and sold 7,215,309 shares of our common stock under the Sales
Agreement, raising net proceeds of $21.8 million, and for the first half of
2021, we issued and sold 1,796,858 shares of our common stock under the Sales
Agreement, raising net proceeds of $36.1 million. Subsequent to June 30, 2022
and through August 10, 2022, as disclosed in Note 11 below, the Company issued
and sold 33,628,000 shares of common stock pursuant to the Sales Agreement and
received net proceeds of approximately $15.9 million, after deducting fees and
expenses. As of August 10, 2022, we had the ability to offer and sell shares of
common stock having an aggregate offering price of up to $68.4 million under the
Sales Agreement. The ability to continue to utilize the Sales Agreement at terms
acceptable to us and in sufficient quantities relies on future market conditions
that are uncertain and cannot be relied upon. See "Risk Factors" in Item 1A of
Part II below.


Public offer subscribed 2021



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



Term Loan with Hercules



On March 10, 2021, we entered into the Term Loan with Hercules which provided us
with the ability to draw an initial amount of $25.0 million, which we drew on
March 29, 2021. In July 2022, we paid $26.7 million in full settlement of the
Term Loan with Hercules. See Notes 5 and 11 to the Condensed Consolidated
Financial Statements in this Quarterly Report on Form 10-Q for additional
information on the Term Loan.



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Liquidity and manufacturing commitments



As of June 30, 2022, we had cash and cash equivalents of $47.0 million and paid
$26.7 million in full settlement of the Term Loan with Hercules in July 2022,
fully extinguishing and terminating the Term Loan in the process. Considering
our current cash resources and our current and expected levels of operating
expenses for the next twelve months, which includes our combined accounts
payable and accrued expenses as of June 30, 2022 of $71.1 million, and our
non-manufacturing commitments of $0.3 million and manufacturing commitments of
$36.5 million for the remaining six months of 2022, $7.6 million for 2023, and
$6.6 million thereafter related to our manufacturing agreements, as further
described below (see "-Contracts"), we require additional capital to fund our
planned operations and capital requirements. Certain of these commitments and
amounts accrued at June 30, 2022 are in dispute. We intend to seek to defer
these and other payments, negotiate lower amounts or seek other courses of
action, which may include legal recourse for the amounts in question. We will
seek to raise additional capital through public or private equity offerings,
including under the Sales Agreement with Cantor, grant financing, convertible
and other debt financings, collaborations, strategic alliances, or licensing
arrangements. Subsequent to June 30, 2022 and through August 10, 2022, as
disclosed in Note 11 to the Condensed Consolidated Financial Statements in this
Quarterly Report on Form 10-Q, the Company issued and sold 33,628,000 shares of
common stock pursuant to the Sales Agreement and received net proceeds of
approximately $15.9 million, after deducting fees and expenses. Additional funds
may not be available when we need them on terms that are acceptable to us, or at
all. If adequate funds are not available, we may be required to delay or reduce
the scope of or eliminate one or more of our research or development programs,
our commercialization efforts or our manufacturing commitments and capacity. In
addition, if we raise additional funds through collaborations, strategic
alliances, or licensing arrangements with third parties, we may have to
relinquish rights to our technologies, future revenue streams or product
candidates or to grant licenses on terms that may not be favorable to us. While
we believe our strategic realignment plan and our plans to raise additional
funds will alleviate the conditions that raise substantial doubt about our
ability to continue as a going concern, these plans are not entirely within our
control and cannot be assessed as being probable of occurring at this time. If
we are unsuccessful in our efforts to raise additional capital, based on our
current and expected levels of operating expenses our current capital will not
be sufficient to fund our operations for the next twelve months.



Contracts



Eversana Agreement



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



On September 21, 2021, we notified Eversana that due to the EUA status in the
U.S., we were terminating the initial statement of work related to
commercialization support of lenzilumab for the treatment of COVID-19 in the
United States. Eversana is disputing the termination notice and has requested
payment of approximately $4.0 million it has asserted we owe for services
rendered from April 1, 2021 to September 30, 2021. We have disputed this
assertion and Eversana has filed for arbitration to resolve this dispute. See
Note 10 to the Condensed Consolidated Financial Statements in this Quarterly
Report on Form 10-Q for additional information.



Manufacturing Agreements



We entered into agreements with several CMOs to manufacture BDS and fill/finish
DP for our lenzilumab clinical trial activities in COVID-19 as well as to
manufacture BDS and DP for a potential launch of lenzilumab in anticipation of
an EUA or CMA, should one have been obtained in that indication. We also entered
into agreements for packaging of the drug. These agreements provided for upfront
amounts prior to commencement of manufacturing and progress payments through the
course of the manufacturing process and payments for technology transfer.
Certain of these CMOs were unsuccessful in their efforts to manufacture some
batches of lenzilumab to our specifications for various reasons. As of July 22,
2022, there are approximately 11,500 lenzilumab treatments in production.
Approximately 65,800 lenzilumab treatments are being stored and 9,000 treatments
are being sent for destruction as a result of expiry of drug substance (an
intermediate step to final drug product). Current shelf life of drug product is
36 months and bulk drug substance is 12 months. One of our CMOs, Catalent Pharma
Solutions, LLC ("Catalent"), has notified us that we are in breach of contract
and has issued a demand for payment for outstanding amounts owed. Catalent has
demanded payment of the past due balance of $12.8 million by August 8, 2022 to
cure this breach and has threatened to cancel the manufacturing agreement if
payment is not made. See Notes 10 and 11 to the Condensed Consolidated Financial
Statements in this Quarterly Report on Form 10-Q for additional information.
Unless we comply with Catalent's demands, it is unlikely that we will be able to
utilize treatments in production and treatments for which production has been
completed. Another 33,000 treatments are in production at one of our CMOs,
Thermo Fisher Scientific, Inc. ("Thermo"), for which material has not yet been
released by us, and which may require reprocessing prior to release. We have
disputed the amounts owed to Thermo as a result of Thermo's failure to produce
usable material within stated release specifications. See Note 1 to the
Condensed Consolidated Financial Statements in this Quarterly Report on Form
10-Q for additional information. At this time, it is unlikely that these 33,000
treatments would be released by us. Inventory of treatments produced at our CMOs
for which the process has not been validated or released will likely be
destroyed in the future if no potential commercial use is found.



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



License Agreements


We are obligated to make future payments to third parties under licensing agreements, including sublicensing fees, royalties and payments that become due upon the achievement of certain development and commercialization milestones.

We recognize upfront and milestone payments made to third parties under license agreements as an expense. Initial payments are recorded when incurred and milestone payments are recorded when the specific milestone has been reached.



Outlicensing Agreements



The South Korea Agreement



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



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



Indemnification



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

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