inhibrx-20230930


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 September 30, 2023

☐ 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)

	N/A
(Former name, former address and former fiscal year, if changed since last report)

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 13(a) 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 October 31, 2023, the registrant had 47,290,666 shares of common stock outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains express and implied 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 ability to continue operations and advance our therapeutic candidates through clinical trials, as well as 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 current market conditions, labor conditions and geopolitical events;

•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 under the header “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission, or the SEC, on March 6, 2023, and as updated in our Quarterly Report on Form 10-Q for the three months ended March 31, 2023, filed with the SEC on May 8, 2023. 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 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 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.

TABLE OF CONTENTS


		Page
	Part I. Financial Information
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	4
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and September 30, 2022	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and September 30, 2022	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and September 30, 2022	8
	Notes to the Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	40

	Part II. Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchase of Equity Securities	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42

	Signatures	43

Part I — Financial Information

Item 1. Financial Statements.

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


	SEPTEMBER 30,		DECEMBER 31,
	2023		2022

Assets
Current assets:
Cash and cash equivalents	$	337,327	$	273,865
Accounts receivable	331		243
Receivables from related parties	—		14
Prepaid expenses and other current assets	25,639		6,371
Total current assets	363,297		280,493
Property and equipment, net	2,864		2,501
Operating right-of-use asset	3,408		4,717

Other non-current assets	3,164		3,164
Total assets	$	372,733	$	290,875
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,858	$	8,326
Accrued expenses	25,902		17,224
Deferred revenue	—		166

Current portion of operating lease liability	2,011		1,860


Total current liabilities	35,771		27,576


Long-term debt, including final payment fee	205,721		202,069

Non-current portion of operating lease liability	1,646		3,173



Total liabilities	243,138		232,818
Commitments and contingencies (Note 8)

Stockholders’ equity
Preferred stock, $0.0001 par value; 15,000,000 shares authorized as of September 30, 2023 and December 31, 2022; no shares issued or outstanding as of September 30, 2023 and December 31, 2022.	—		—
Common stock, $0.0001 par value; 120,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 47,290,666 and 43,564,283 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.	5		4
Additional paid-in-capital	649,720		430,426
Accumulated deficit	(520,130)		(372,373)
Total stockholders’ equity	129,595		58,057
Total liabilities and stockholders’ equity	$	372,733	$	290,875

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

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


	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2023		2022		2023		2022

Revenue:
License fee revenue	$	119	$	278	$	166	$	1,904
Grant revenue	—		—		—		14
Total revenue	119		278		166		1,918
Operating expenses:
Research and development	38,057		24,934		109,549		79,735
General and administrative	7,889		5,347		21,549		15,800

Total operating expenses	45,946		30,281		131,098		95,535
Loss from operations	(45,827)		(30,003)		(130,932)		(93,617)
Other income (expense):
Interest expense	(8,149)		(5,547)		(23,617)		(11,067)
Interest income	2,324		207		7,221		305
Other income (expense), net	(135)		18		(422)		72


Total other expense	(5,960)		(5,322)		(16,818)		(10,690)
Loss before income tax expense	(51,787)		(35,325)		(147,750)		(104,307)
Provision for income taxes	2		—		7		4

Net loss	(51,789)		(35,325)		(147,757)		(104,311)
Net loss per share, basic and diluted	$	(1.10)	$	(0.90)	$	(3.30)	$	(2.67)
Weighted-average shares of common stock and pre-funded warrants outstanding, basic and diluted	47,151		39,071		44,803		39,043

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

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


	Common Stock (Shares)	Common Stock (Amount)		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
Balance as of December 31, 2022	43,564	$	4	$	430,426	$	(372,373)	$	58,057
Stock-based compensation expense	—	—		5,636		—		5,636
Issuance of shares upon exercise of stock options	31	—		356		—		356
Net loss	—	—		—		(48,916)		(48,916)
Balance as of March 31, 2023	43,595	$	4	$	436,418	$	(421,289)	$	15,133
Stock-based compensation expense	—	—		6,253		—		6,253
Issuance of shares upon exercise of stock options	72	—		854		—		854
Net loss	—	—		—		(47,052)		(47,052)
Balance as of June 30, 2023	43,667	$	4	$	443,525	$	(468,341)	$	(24,812)
Stock-based compensation expense	—	—		6,530		—		6,530
Issuance of shares upon exercise of stock options	2	—		21		—		21
Issuance of common stock and pre-funded warrants in private placement, net of issuance costs	3,621	1		199,644		—		199,645
Net loss	—	—		—		(51,789)		(51,789)
Balance as of September 30, 2023	47,290	$	5	$	649,720	$	(520,130)	$	129,595


	Common Stock (Shares)	Common Stock (Amount)		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
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
Stock-based compensation expense	—	—		5,296		—		5,296
Issuance of shares upon exercise of stock options	15	—		164		—		164
Net loss	—	—		—		(37,732)		(37,732)
Balance as of June 30, 2022	39,041	$	4	$	291,207	$	(296,133)	$	(4,922)
Stock-based compensation expense	—	—		4,691		—		4,691
Issuance of shares upon exercise of stock options	45	—		506		—		506
Net loss	—	—		—		(35,325)		(35,325)
Balance as of September 30, 2022	39,086	$	4	$	296,404	$	(331,458)	$	(35,050)

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

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

(Unaudited)


	NINE MONTHS ENDED SEPTEMBER 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(147,757)	$	(104,311)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	893		923
Accretion of debt discount and non-cash interest expense	3,652		2,190
Stock-based compensation expense	18,419		15,095
Non-cash lease expense	1,309		1,203
Loss on disposal of fixed assets	3		18
Changes in operating assets and liabilities:
Accounts receivable	(88)		130
Receivables from related parties	14		433
Prepaid expenses and other current assets	(19,268)		(383)

Other non-current assets	—		(1,317)
Accounts payable	(801)		(724)
Accrued expenses	8,678		4,984
Operating lease liability	(1,376)		(1,238)
Deferred revenue, current portion	(166)		(1,594)
Deferred revenue, non-current portion	—		(110)

Net cash used in operating activities	(136,488)		(84,701)
Cash flows from investing activities
Purchase of fixed assets	(1,151)		(419)

Net cash used in investing activities	(1,151)		(419)
Cash flows from financing activities




Proceeds from issuance of common stock and pre-funded warrants in private placement	200,000		—
Issuance costs associated with issuance of common stock and pre-funded warrants in private placement	(130)		—
Proceeds from the issuance of debt	—		98,871
Payment of fees associated with debt	—		(50)



Proceeds from the exercise of stock options	1,231		1,071

Net cash provided by financing activities	201,101		99,892
Net increase in cash and cash equivalents	63,462		14,772
Cash and cash equivalents at beginning of period	273,865		131,301
Cash and cash equivalents at end of period	$	337,327	$	146,073


Supplemental schedule of non-cash investing and financing activities
Payable for purchase of fixed assets	$	108	$	261
Issuance costs associated with the issuance of common stock and pre-funded warrants in private placement in accounts payable	$	225	$	—
Fair value of warrants issued to lender in conjunction with February 2022 Amendment (as defined in Note 3)	$	—	$	712

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

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 biopharmaceutical company focused on developing a broad pipeline of novel biologic therapeutic candidates. The Company combines target biology with protein engineering, technologies, and research and development to design 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 condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

The unaudited interim condensed consolidated 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 consolidated 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 condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 6, 2023.

Liquidity

As of September 30, 2023, the Company had an accumulated deficit of $520.1 million and cash and cash equivalents of $337.3 million. From its inception and through September 30, 2023, 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, pre-commercialization activities, organizing and staffing the Company, establishing its intellectual property portfolio and raising capital to support and expand these activities.

In August 2023, the Company received gross proceeds of $200.0 million before deducting $0.4 million of offering expenses payable by the Company in a private placement transaction, or the Private Placement, with certain institutional and other accredited investors, or Purchasers, in which the Company sold and issued 3,621,314 shares of the Company’s common stock and, with respect to certain Purchasers, pre-funded warrants to purchase 6,714,636 shares of the Company’s common stock. See Note 4 for further discussion of this equity offering.

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, strategic transactions and other similar arrangements.

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, 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.

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 evaluation of 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, the incremental borrowing rate estimated in relation to the Company’s operating lease, 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.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash held in financial institutions including readily available checking, overnight sweep, and money market accounts, and highly liquid investments in debt securities with an original maturity of three months or less. The Company’s investments in debt securities have consisted of U.S. Treasury Bills, which were recorded at their amortized cost, reflective of the amortization or accretion of premiums or discounts.

As of September 30, 2023, the Company held no investments in debt securities. As of December 31, 2022, the Company held investments in debt securities of $196.3 million.

Concentrations of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits by the Federal Deposit Insurance Corporation, or FDIC, of up to $250,000. The Company’s cash management and investment policy limits investment instruments to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds can be used in operations. 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.

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.

During the nine months ended September 30, 2023, the Company’s investments in debt securities consisted of U.S. Treasury Bills, which were classified as Level 1 in the fair value hierarchy. Due to the short-term nature of these securities which were classified as cash equivalents, the amortized value approximated fair value and the Company did not remeasure these instruments at fair value. As of September 30, 2023, the Company held no investments in debt securities following their maturity during the three months ended September 30, 2023. The Company’s outstanding debt is classified as Level 2 in the fair value hierarchy. As of September 30, 2023 and December 31, 2022, the Company had no financial instruments measured at fair value on a recurring basis.

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.

Collaborative Research, Development, and License Agreements

The Company enters into collaborative agreements with partners which may include the transfer of licenses, options to license and the performance of research and development activities. The terms associated with these agreements may 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. 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.

Typically, license fees, non-refundable upfront fees and funding of research activities are considered fixed, while milestone payments, including option exercise fees, are identified as variable consideration, which is constrained and excluded from the transaction price. The Company will recognize revenue for sales-based royalty if and when a subsequent sale occurs.

The Company applies significant judgment when making estimates and assumptions under these agreements, including evaluating whether contractual obligations represent distinct performance obligations, including the assessment of whether options represent material rights, determining whether there are observable standalone prices and allocating transaction price to performance obligations within a contract, assessing whether any licenses are functional or symbolic, determining when performance obligations have been met, and assessing the recognition of variable consideration. 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, performance obligations consisting of a transfer of a license or the achievement of milestones are recognized at a point in time upon the transfer, while performance obligations consisting of research activities are recognized over time using an input method which is representative of the Company’s efforts to fulfill the performance obligation, based on costs incurred with third-parties or internal labor hours performed.

Accrued Research and Development and Clinical Trial Costs

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 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 stock 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 stock equivalent 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.

The weighted average number of common stock used in the basic and diluted net loss per common stock calculations includes the weighted-average pre-funded warrants outstanding during the period as they are exercisable at any time for nominal cash consideration.

For purposes of the diluted net loss per share calculation, warrants for purchase of common stock, other than pre-funded warrants as discussed above, and stock options are considered to be potentially dilutive securities. Accordingly, for the nine months ended September 30, 2023 and September 30, 2022, 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):


	THREE MONTHS ENDED SEPTEMBER 30,		NINE MONTHS ENDED SEPTEMBER 30,
	2023	2022	2023	2022

Outstanding stock options	6,650	5,229	6,269	4,925

Warrants to purchase common stock	47	47	47	40
	6,697	5,276	6,316	4,965

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 Financial Accounting Standards Board, or 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 June 2016, the FASB issued Accounting Standards Update, or ASU, 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as held-to-maturity debt securities. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. The Company adopted ASU 2016-13 as of January 1, 2023, which did not result in a material impact on its condensed consolidated financial statements and related disclosures.

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
	SEPTEMBER 30, 2023		DECEMBER 31, 2022
Clinical drug substance and product manufacturing (1)	$	18,405	1,171
Clinical trials (2)	6,015		$	4,294
Licenses	578		493
Other outside research and development services (3)	305		232

Other	336		181
Prepaid expense and other current assets	$	25,639	$	6,371

(1) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. As of September 30, 2023, the balance includes a prepayment to one of the Company’s CDMO partners for the purchase of $15.2 million in specialized raw materials with no alternative future use. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

(2) Relates primarily to the Company’s prepayments to third-party CROs for management of clinical trials and prepayments for drug supply to be used in combination with the Company’s therapeutics. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

(3) Relates to the Company’s usage of third-parties for other research and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

Property and Equipment, Net

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


	AS OF		AS OF
	SEPTEMBER 30, 2023		DECEMBER 31, 2022

Machinery and equipment	$	8,073	$	7,023
Furniture, fixtures, and other	527		524
Leasehold improvements	441		441
Computer software	53		53
Construction in process	159		—
Total property and equipment	9,253		8,041
Less: accumulated depreciation and amortization	(6,389)		(5,540)
Property and equipment, net	$	2,864	$	2,501

Depreciation and amortization expense totaled $0.3 million for each of the three months ended September 30, 2023 and September 30, 2022, and $0.9 million for each of the nine months ended September 30, 2023 and September 30, 2022 and consisted of the following (in thousands):


	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
	2023		2022		2023		2022
Research and development	$	261	$	251	$	740	$	757
General and administrative	43		58		153		166
Total depreciation and amortization expense	$	304	$	309	$	893	$	923

Accrued Expenses

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


	AS OF		AS OF
	SEPTEMBER 30, 2023		DECEMBER 31, 2022

Clinical trials(1)	$	7,205	$	4,527
Clinical drug substance and product manufacturing(2)	5,339		5,381
Compensation-related	5,032		3,374
Other outside research and development (3)	4,817		1,164

Interest expense	2,253		2,124
Professional fees	919		428

Other	337		226
Accrued expenses	$	25,902	$	17,224

(1) Relates primarily to the Company’s usage of third-party CROs for management of clinical trials. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

(2) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

3. DEBT

2020 Loan Agreement

In July 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, or Term D. The February 2022 Amendment also provided for an increase in the interest rate and for three future tranches of debt to be funded upon the achievement of certain milestones. In June 2022, the Company received additional gross proceeds of $30.0 million, or Term E, following the initiation of part 4 of the Phase 1/2 clinical trial of INBRX-105, as well as an additional $30.0 million in gross proceeds, or Term F, following the receipt of positive topline data from the Phase 1 clinical trial of INBRX-101.

In October 2022, the Company entered into an amendment to the Amended 2020 Loan Agreement, or the October 2022 Amendment. The October 2022 Amendment amended the milestone terms of the last remaining tranche, Term G, under the Amended 2020 Loan Agreement to provide for the funding of $30.0 million upon the announcement of the regulatory path for INBRX-101 rather than upon the initiation of a registration-enabling clinical trial of

INBRX-101. In October 2022, the Company met this milestone and drew the final tranche for additional gross proceeds of $30.0 million.

The Company determined the November 2020, June 2021, February 2022, and October 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. The Company will continue to amortize the existing debt discounts prior to modification through the Amended Maturity Date (as defined below).

As of July 1, 2023, a LIBOR Transition Event, as defined in the Amended 2020 Loan Agreement, occurred, and pursuant to the Amended 2020 Loan Agreement, Oxford selected a LIBOR Replacement Rate, as defined in the Amended 2020 Loan Agreement, replacing the 30 day U.S. Dollar London InterBank Offered Rate with the 1-Month Chicago Mercantile Exchange term secured overnight financing rate, or 1-Month CME Term SOFR, causing an amendment to the interest rate of the Company’s outstanding loans. No other terms were changed. The Company has elected the optional expedient under ASC Topic 848-20 and therefore deemed the modification to not be substantial.

As of September 30, 2023, the Company had $200.0 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 1-Month CME Term SOFR on the last business day of the month that immediately precedes the month in which the interest will accrue, (ii) 0.10%, and (iii) 8.19%. Under the Amended 2020 Loan Agreement, the repayment schedule provides for interest-only payments through February 1, 2025, followed by 23 months of principal and interest payments. In the event of a qualifying financing event in which the Company raises at least $100.0 million in upfront licensing or partnership proceeds by February 2025, the interest-only period may be extended an additional 12 months through February 1, 2026, which would then be followed by 11 months of equal payments of principal plus interest, beginning on March 1, 2026. 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 $18.0 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 September 30, 2023 and December 31, 2022 (in thousands).


	AS OF		AS OF
	SEPTEMBER 30, 2023		DECEMBER 31, 2022
Term A	$	10,900	$	10,900
Term B	21,800		21,800
Term C	43,600		43,600
Term D	43,600		43,600
Term E	32,700		32,700
Term F	32,700		32,700
Term G	32,700		32,700

SEC Form 10-Q filed by Inhibrx Inc.