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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 2020

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: 001-38112

 

ATHENEX, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

43-1985966

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

1001 Main Street, Suite 600

Buffalo, NY

14203

(Address of principal executive offices)

(Zip Code)

 

(716) 427-2950

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

ATNX

 

The Nasdaq Global Select 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, 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

 

☐ 

  

Small 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  ☒

 

As of July 31, 2020, the registrant had 81,725,534 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 

 

Table of Contents

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

1

Item 1.

 

Financial Statements

 

1

 

 

Condensed Consolidated Balance Sheets (Unaudited)

 

1

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

 

2

 

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

 

3

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

4

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

5

Item 2.

 

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

 

26

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

40

Item 4.

 

Controls and Procedures

 

41

PART II.

 

OTHER INFORMATION

 

42

Item 1.

 

Legal Proceedings

 

42

Item 1A.

 

Risk Factors

 

42

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

47

Item 3.

 

Defaults Upon Senior Securities

 

47

Item 4.

 

Mine Safety Disclosures

 

47

Item 5.

 

Other Information

 

47

Item 6.

 

Exhibits

 

48

Signatures

 

49

 

 

 

i

 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

(In thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

105,901

 

 

$

127,674

 

Restricted cash

 

 

11,000

 

 

 

—

 

Short-term investments

 

 

10,414

 

 

 

33,139

 

Accounts receivable, net of chargebacks and other deductions of $12,769

   and $14,394, respectively, and provision for credit losses

   of $163 and $124, respectively

 

 

38,620

 

 

 

16,689

 

Inventories

 

 

31,143

 

 

 

32,630

 

Prepaid expenses and other current assets

 

 

19,528

 

 

 

20,794

 

Total current assets

 

 

216,606

 

 

 

230,926

 

Property and equipment, net

 

 

26,867

 

 

 

23,153

 

Goodwill

 

 

38,496

 

 

 

38,513

 

Intangible assets, net

 

 

8,015

 

 

 

8,522

 

Operating lease right-of-use assets, net

 

 

7,846

 

 

 

8,818

 

Other assets

 

 

222

 

 

 

—

 

Total assets

 

$

298,052

 

 

$

309,932

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

15,945

 

 

$

23,331

 

Accrued expenses

 

 

47,144

 

 

 

44,307

 

Current portion of operating lease liabilities

 

 

2,713

 

 

 

3,010

 

Current portion of long-term debt

 

 

1,107

 

 

 

880

 

Total current liabilities

 

 

66,909

 

 

 

71,528

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term operating lease liabilities

 

 

6,850

 

 

 

7,620

 

Long-term debt and finance lease obligations

 

 

95,389

 

 

 

52,366

 

Deferred tax liabilities

 

 

51

 

 

 

—

 

Other long-term liabilities

 

 

2,607

 

 

 

2,563

 

Total liabilities

 

 

171,806

 

 

 

134,077

 

Commitments and contingencies (See Note 16)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, par value $0.001 per share, 250,000,000 shares authorized at

   June 30, 2020 and December 31, 2019; 83,362,454 and 83,231,063 shares

   issued at June 30, 2020 and December 31, 2019, respectively; 81,689,534

   and 81,558,143 shares outstanding at June 30, 2020 and

   December 31, 2019, respectively

 

 

83

 

 

 

83

 

Additional paid-in capital

 

 

775,042

 

 

 

763,648

 

Accumulated other comprehensive loss

 

 

(1,067

)

 

 

(635

)

Accumulated deficit

 

 

(627,345

)

 

 

(567,465

)

Less: treasury stock, at cost; 1,672,920 shares at June 30, 2020 and

   December 31, 2019

 

 

(7,406

)

 

 

(7,406

)

Total Athenex, Inc. stockholders' equity

 

 

139,307

 

 

 

188,225

 

Non-controlling interests

 

 

(13,061

)

 

 

(12,370

)

Total stockholders' equity

 

 

126,246

 

 

 

175,855

 

Total liabilities and stockholders' equity

 

$

298,052

 

 

$

309,932

 

 

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

1

 

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

40,167

 

 

$

22,033

 

 

$

58,714

 

 

$

47,196

 

License and other revenue

 

 

5

 

 

 

164

 

 

 

28,393

 

 

 

308

 

Total revenue

 

 

40,172

 

 

 

22,197

 

 

 

87,107

 

 

 

47,504

 

Cost of sales

 

 

33,006

 

 

 

16,942

 

 

 

52,578

 

 

 

36,844

 

Gross Profit

 

 

7,166

 

 

 

5,255

 

 

 

34,529

 

 

 

10,660

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

22,015

 

 

 

18,507

 

 

 

39,207

 

 

 

42,982

 

Selling, general, and administrative expenses

 

 

17,486

 

 

 

17,169

 

 

 

43,234

 

 

 

32,357

 

Total operating expenses

 

 

39,501

 

 

 

35,676

 

 

 

82,441

 

 

 

75,339

 

Operating loss

 

 

(32,335

)

 

 

(30,421

)

 

 

(47,912

)

 

 

(64,679

)

Interest income

 

 

185

 

 

 

475

 

 

 

598

 

 

 

758

 

Interest expense

 

 

1,565

 

 

 

1,754

 

 

 

3,238

 

 

 

3,509

 

Loss on extinguishment of debt

 

 

7,230

 

 

 

—

 

 

 

7,230

 

 

 

—

 

Loss before income tax expense

 

 

(40,945

)

 

 

(31,700

)

 

 

(57,782

)

 

 

(67,430

)

Income tax expense

 

 

106

 

 

 

405

 

 

 

2,987

 

 

 

905

 

Net loss

 

 

(41,051

)

 

 

(32,105

)

 

 

(60,769

)

 

 

(68,335

)

Less: net loss attributable to non-controlling interests

 

 

(600

)

 

 

(74

)

 

 

(889

)

 

 

(1,071

)

Net loss attributable to Athenex, Inc.

 

$

(40,451

)

 

$

(32,031

)

 

$

(59,880

)

 

$

(67,264

)

Unrealized gain (loss) on investment, net of income taxes

 

 

117

 

 

 

(83

)

 

 

49

 

 

 

(80

)

Foreign currency translation adjustment, net of income taxes

 

 

(43

)

 

 

(446

)

 

 

(481

)

 

 

622

 

Comprehensive loss

 

$

(40,377

)

 

$

(32,560

)

 

$

(60,312

)

 

$

(66,722

)

Net loss per share attributable to Athenex, Inc. common

   stockholders, basic and diluted (See Note 13)

 

$

(0.50

)

 

$

(0.44

)

 

$

(0.73

)

 

$

(0.96

)

Weighted-average shares used in computing net loss per share

   attributable to Athenex, Inc. common stockholders, basic and

   diluted (See Note 13)

 

 

81,564,441

 

 

 

73,114,392

 

 

 

81,551,995

 

 

 

70,079,771

 

 

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

 

2

 

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(In thousands, except share data)

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

other

 

 

Treasury Stock

 

 

Total

Athenex,

Inc.

 

 

Non-

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

paid-in

capital

 

 

Accumulated

deficit

 

 

comprehensive

income (loss)

 

 

Shares

 

 

Amount

 

 

stockholders'

equity

 

 

controlling

interests

 

 

stockholders'

equity

 

Balance at January 1, 2019

 

 

68,668,986

 

 

$

69

 

 

$

591,064

 

 

$

(443,716

)

 

$

(656

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

139,355

 

 

$

(10,586

)

 

$

128,769

 

Stock-based compensation cost

 

 

—

 

 

 

—

 

 

 

1,693

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,693

 

 

 

—

 

 

 

1,693

 

Stock options and warrants exercised

 

 

49,632

 

 

 

—

 

 

 

278

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

278

 

 

 

—

 

 

 

278

 

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(35,233

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(35,233

)

 

 

(997

)

 

 

(36,230

)

Other comprehensive income, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,071

 

 

 

—

 

 

 

—

 

 

 

1,071

 

 

 

—

 

 

 

1,071

 

Balance at March 31, 2019 (unaudited)

 

 

68,718,618

 

 

 

69

 

 

 

593,035

 

 

 

(478,949

)

 

 

415

 

 

 

(1,672,920

)

 

 

(7,406

)

 

 

107,164

 

 

 

(11,583

)

 

 

95,581

 

Sale of common stock, net of costs of $54

 

 

10,033,362

 

 

 

10

 

 

 

100,309

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

100,319

 

 

 

—

 

 

 

100,319

 

Stock-based compensation cost

 

 

92,723

 

 

 

—

 

 

 

3,382

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,382

 

 

 

—

 

 

 

3,382

 

Stock options exercised

 

 

92,442

 

 

 

—

 

 

 

559

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

559

 

 

 

—

 

 

 

559

 

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(32,031

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(32,031

)

 

 

(74

)

 

 

(32,105

)

Other comprehensive loss, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(529

)

 

 

—

 

 

 

—

 

 

 

(529

)

 

 

—

 

 

 

(529

)

Balance at June 30, 2019 (unaudited)

 

 

78,937,145

 

 

$

79

 

 

$

697,285

 

 

$

(510,980

)

 

$

(114

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

178,864

 

 

$

(11,657

)

 

$

167,207

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

other

 

 

Treasury Stock

 

 

Total

Athenex,

Inc.

 

 

Non-

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

paid-in

capital

 

 

Accumulated

deficit

 

 

comprehensive

income (loss)

 

 

Shares

 

 

Amount

 

 

stockholders'

equity

 

 

controlling

interests

 

 

stockholders'

equity

 

Balance at January 1, 2020

 

 

83,231,063

 

 

$

83

 

 

$

763,648

 

 

$

(567,465

)

 

$

(635

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

188,225

 

 

$

(12,370

)

 

$

175,855

 

Stock-based compensation cost

 

 

—

 

 

 

—

 

 

 

1,864

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,864

 

 

 

—

 

 

 

1,864

 

Restricted stock expense

 

 

(3,000

)

 

 

—

 

 

 

397

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

397

 

 

 

—

 

 

 

397

 

Stock options exercised

 

 

70,200

 

 

 

—

 

 

 

344

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

344

 

 

 

—

 

 

 

344

 

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(19,429

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(19,429

)

 

 

(289

)

 

 

(19,718

)

Other comprehensive loss, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(506

)

 

 

—

 

 

 

—

 

 

 

(506

)

 

 

—

 

 

 

(506

)

Balance at March 31, 2020 (unaudited)

 

 

83,298,263

 

 

 

83

 

 

 

766,253

 

 

 

(586,894

)

 

 

(1,141

)

 

 

(1,672,920

)

 

 

(7,406

)

 

 

170,895

 

 

 

(12,659

)

 

 

158,236

 

Sale of common stock and issuance of stock in connection with acquisition

 

 

51,691

 

 

 

—

 

 

 

269

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

269

 

 

 

—

 

 

 

269

 

Stock-based compensation cost

 

 

—

 

 

 

—

 

 

 

2,640

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,640

 

 

 

—

 

 

 

2,640

 

Restricted stock expense

 

 

—

 

 

 

—

 

 

 

413

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

413

 

 

 

—

 

 

 

413

 

Stock options exercised

 

 

12,500

 

 

 

—

 

 

 

125

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

125

 

 

 

—

 

 

 

125

 

Issuance of warrants, net

 

 

—

 

 

 

—

 

 

 

5,342

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,342

 

 

 

—

 

 

 

5,342

 

Non-controlling interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

198

 

 

 

198

 

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(40,451

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(40,451

)

 

 

(600

)

 

 

(41,051

)

Other comprehensive income, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

74

 

 

 

—

 

 

 

—

 

 

 

74

 

 

 

—

 

 

 

74

 

Balance at June 30, 2020 (unaudited)

 

 

83,362,454

 

 

$

83

 

 

$

775,042

 

 

$

(627,345

)

 

$

(1,067

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

139,307

 

 

$

(13,061

)

 

$

126,246

 

 

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

 

 

3

 

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(60,769

)

 

$

(68,335

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,121

 

 

 

1,807

 

Stock-based compensation expense

 

 

5,314

 

 

 

5,075

 

Amortization of debt discount

 

 

553

 

 

 

513

 

Loss on disposal of assets and impairment charges

 

 

173

 

 

 

—

 

Loss on extinguishment of debt

 

 

7,230

 

 

 

—

 

Deferred income taxes

 

 

51

 

 

 

486

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Receivables, net

 

 

(21,931

)

 

 

3,387

 

Prepaid expenses and other assets

 

 

1,044

 

 

 

(25,310

)

Inventories

 

 

1,487

 

 

 

1,548

 

Accounts payable and accrued expenses

 

 

(5,341

)

 

 

43,056

 

Net cash used in operating activities

 

 

(70,068

)

 

 

(37,773

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(4,566

)

 

 

(4,891

)

Payments for licenses

 

 

(83

)

 

 

(4,175

)

Purchases of short-term investments

 

 

(23,571

)

 

 

(43,461

)

Sales and maturities of short-term investments

 

 

46,345

 

 

 

57,291

 

Net cash provided by investing activities