# EDGAR Filing Document

**Accession Number:** 0001300699
**File Stem:** 0000950170-23-008734
**Filing Date:** 2023-3
**Character Count:** 909140
**Document Hash:** 6f79deab99bd68cab9f3a17743581a6c
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-008734.hdr.sgml**: 20230320

**ACCESSION NUMBER**: 0000950170-23-008734

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 138

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230320

**DATE AS OF CHANGE**: 20230320

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Athenex, Inc.
- **CENTRAL INDEX KEY:** 0001300699
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **IRS NUMBER:** 431985966
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38112
- **FILM NUMBER:** 23745863

**BUSINESS ADDRESS:**
- **STREET 1:** 1001 MAIN STREET
- **STREET 2:** SUITE 600
- **CITY:** BUFFALO
- **STATE:** NY
- **ZIP:** 14203
- **BUSINESS PHONE:** 716-898-8625

**MAIL ADDRESS:**
- **STREET 1:** 1001 MAIN STREET
- **STREET 2:** SUITE 600
- **CITY:** BUFFALO
- **STATE:** NY
- **ZIP:** 14203

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Kinex Pharmaceuticals, Inc.
- **DATE OF NAME CHANGE:** 20131223

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Kinex Pharmaceuticals LLC
- **DATE OF NAME CHANGE:** 20040817

?xml version="1.0" encoding="ASCII"? 10-K

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM** 10-K

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**(Mark One)**

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

**For the ﬁscal year ended** **December 31,** 2022

**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

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ATHENEX, INC.

**(Exact Name of Registrant as Specified in Its Charter)** 

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| | |
|:---|:---|
| Delaware | 43-1985966 |
| **State or other jurisdiction of**<br>**incorporation or organization** | **(I.R.S. Employer**<br>**Identiﬁcation No.)** |
| 1001 Main Street**,** Suite 600<br>Buffalo**,** NY |  |
| **United States** | 14203 |
| **(Address of principal executive ofﬁces)** | **(Zip Code)** |

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**<u>(</u>**716**<u>)</u>** 427-2950

**Registrant's telephone number, including area code**

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

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| | | |
|:---|:---|:---|
| **<u>Title of Each Class</u>** | **<u>Trading Symbol</u>** | **<u>Name of Exchange on Which Registered</u>** |
| Common Stock, par value $0.001 per share | ATNX | The Nasdaq Global Select Market |

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**Securities registered pursuant to section 12(g) of the Act: None**

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 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 ☐ <br> Non-accelerated ﬁler ☒ Smaller reporting companyEmerging 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive oﬃcers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of common equity held by non-afﬁliates of the registrant calculated based on the closing price of $8.19 of the registrant's common stock as reported on The Nasdaq Global Market on June 30, 2022, the last business day of the registrant's most recently completed second ﬁscal quarter, was approximately $32.5 million.

As of March 13, 2023, 8,663,209 shares of common stock of the registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for its 2023 annual meeting of stockholders are incorporated by reference into Part III Items 10, 11, 12, 13 and 14 of this Form 10-K.

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| | | |
|:---|:---|:---|
|  |  | &nbsp;&nbsp;&nbsp;**Page** |
| [**<u>PART I.</u>**](#part_i) |  | 3 |
| Item 1. | [<u>Business</u>](#item_1_business) | 3 |
| Item 1A. | [<u>Risk Factors</u>](#item_1a_risk_factors) | 28 |
| Item 1B. | [<u>Unresolved Staff Comments</u>](#item_1b_unresolved_staff_comments) | 70 |
| Item 2. | [<u>Properties</u>](#item_2_properties) | 70 |
| Item 3. | [<u>Legal Proceedings</u>](#item_3_legal_proceedings) | 70 |
| Item 4. | [<u>Mine Safety Disclosures</u>](#item_4_mine_safety_disclosures) | 71 |
| [**<u>PART II.</u>**](#part_ii) |  | 72 |
| Item 5. | [<u>Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities</u>](#item_5_market_for_registrants_common_equ) | 72 |
| Item 6. | [<u>\[Reserved\]</u>](#item_6_reserved) | 73 |
| Item 7. | [<u>Management's Discussion and Analysis of Financial Condition and Results of Operations</u>](#item_7_managements_discussion_analysis_f) | 74 |
| Item 7A. | [<u>Quantitative and Qualitative Disclosures About Market Risk</u>](#item_7a_quantitative_qualitative_disclos) | 91 |
| Item 8. | [<u>Financial Statements and Supplementary Data</u>](#item_8_financial_statements_supplementar) | 91 |
| Item 9. | [<u>Changes in and Disagreements With Accountants on Accounting and Financial Disclosure</u>](#item_9_changes_in_disagreements_with_acc) | 140 |
| Item 9A. | [<u>Controls and Procedures</u>](#item_9a_controls_procedures) | 140 |
| Item 9B. | [<u>Other Information</u>](#item_9b_or_information) | 141 |
| Item 9C. | [<u>Disclosure Regarding Foreign Jurisdictions that Prevent Inspections</u>](#item_9c_disclosure_regarding_foreign_jur) | 141 |
| [**<u>PART III.</u>**](#part_iii) |  | 142 |
| Item 10. | [<u>Directors, Executive Officers and Corporate Governance</u>](#item_10_directors_executive_ficers_corpo) | 142 |
| Item 11. | [<u>Executive Compensation</u>](#item_11_executive_compensation) | 142 |
| Item 12. | [<u>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</u>](#item_12_security_ownership_certain_benef) | 142 |
| Item 13. | [<u>Certain Relationships and Related Transactions, and Director Independence</u>](#item_13_certain_relationships_related_tr) | 142 |
| Item 14. | [<u>Principal Accounting Fees and Services</u>](#item_14_principal_accounting_fees_servic) | 142 |
| [**<u>PART IV.</u>**](#part_iv) |  | 143 |
| Item 15. | [<u>Exhibits and Financial Statement Schedules</u>](#item_15_exhibits_financial_statement_sch) | 143 |
| Item 16. | [<u>Form 10-K Summary</u>](#item16_form_10k_summary) | 144 |
|  | [<u>Signatures</u>](#signatures) | 150 |

---

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**SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS**

This Annual Report on Form 10-K (the "Annual Report") contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), section 27A of the Securities Act of 1933, as amended (the "Securities Act") and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are "forward-looking statements" for purposes of this Annual Report. These forward-looking statements may include, but are not limited to, statements regarding our future results of operations and financial position, business strategy, market size, potential growth opportunities, clinical development activities, the timing and results of clinical trials and potential regulatory approval and commercialization of product candidates. In some cases, forward-looking statements may be identified by terminology such as "believe," "may," "will," "should," "predict," "goal," "strategy," "potential," "estimate," "continue," "anticipate," "intend," "indicate," "could," "would," "project," "plan," "expect," "seek," "strategy," "mission," "outlook," "likely," "forecast," "target," and similar expressions and variations thereof. These words are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the "Risk Factors" section and elsewhere in this Annual Report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, actual results could differ materially and adversely from those anticipated or implied in the forward-looking 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 report to conform these statements to actual results or to changes in our expectations, except as required by law.

Unless the context indicates otherwise, as used in this Annual Report, the terms "Athenex," the "Company," "we," "us," and "our" refer to Athenex, Inc., a Delaware corporation, and its subsidiaries taken as a whole, unless otherwise noted.

**Risk Factors Summary**

The following factors are among the principal risks we face. For a more detailed description of the risks material to our business, see "Part I-Item 1A-Risk Factors" in this Annual Report on Form 10-K. The following summary should not be considered an exhaustive summary of the material risks we face and should be read in conjunction with the "Risk Factors" section and the other information in this Annual Report. Some of the factors that could cause our results to differ materially from our expectations or beliefs include, without limitation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the substantial doubt about our ability to continue as a going concern and the volatility of our financial results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our strategic pivot to focus on our cell therapy platform and our plan to dispose of non-core assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to obtain additional financing to fund our operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to repay, refinance, or restructure our substantial indebtedness owed to our senior secured lender at maturity or upon an event of default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the uncertainty of ongoing legal proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the early stage of development of our primary clinical candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our failure to identify or discover additional drug candidates or to prioritize development of certain product candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the novel approach to some of our drug candidates, which may delay or impede our ability to achieve regulatory approval or market acceptance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•costs and delays if our drug candidates fail to demonstrate safety and efficacy;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the unpredictable and lengthy regulatory approval processes of the FDA and other regulatory authorities, including whether the FDA accepts data from clinical trials outside of the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the delay or prevention of regulatory approval or limitation of the commercial profile of an approved label due to undesirable adverse events caused or that may be caused by our approved drugs and drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•ongoing regulatory obligations, which may result in significant additional expenses, for Klisyri® and our product candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our dependence on the efforts of Almirall S.A. and our other out-license partners for the commercialization of Klisyri;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our limited experience in marketing proprietary drug products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•if Klisyri or any other drug candidates become subject to unfavorable pricing regulations, third-party reimbursement practices, or healthcare reform initiatives;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•competition from brand and generic drug products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the impact of legal, regulatory or legislative strategies that limit our ability to generate revenue;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to successfully protect our intellectual property rights, a significant portion of which are pending patent applications, and defend against claims of infringement by others;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to protect the confidentiality of our trade secrets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to comply with obligations in license agreements and maintain the rights that are important to our business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our reliance on third parties to conduct preclinical studies and clinical trials and to manufacture most of our drug candidate supplies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our dependence on a limited number of pharmaceutical wholesalers to generate revenue;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our dependence on our key personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the impact of conflicts of interest and transactions with affiliates and related parties that were not negotiated at arms' length;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•if we or our third party service providers suffer security breaches;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the impact of claims in excess of our insurance coverage, including product liability lawsuits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in political and economic policies of the Chinese government, or changes in the interpretation and enforcement of laws, rules and regulations in China;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to comply with the continued listing standards of the Nasdaq Global Market; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the impact of macroeconomic factors, like inflation, supply chain disruptions, and the war in Ukraine, on our business and clinical development activities.

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**PART I**

**Item 1. Business.** 

**Overview**

Athenex, Inc., together with its subsidiaries ("Athenex," the "Company," "we," "us" or "our"), is a clinical-stage biopharmaceutical company dedicated to becoming a leader in the discovery, development and commercialization of next-generation products for the treatment of cancer. Our mission is to become a leader in bringing innovative cancer treatments to the market and to improve patient health outcomes. In pursuit of this mission, Athenex leverages years of experience in research and development, clinical trials, regulatory standards, and manufacturing.

We are focused on our innovative cell therapy platform, based on natural killer T ("NKT") cells. NKT cells have unique biology that has potential advantages over current T cell and NK cell-based technologies. The potential advantages of NKT cell therapy technology over other immune effector cell types are to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Address a major unmet medical need in hematological malignancies and solid tumors in that even in those indications where autologous chimeric antigen receptor ("CAR") T cells have been previously approved, up to 60% of patients receiving CAR-T therapy do not achieve long-term durable responses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Overcome the challenges in the treatment of solid tumors by naturally homing to tumors, reversing immunosuppressive tumor microenvironments, and possessing long-term memory and persistence;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Reduce the frequency and severity of toxicity commonly caused by CAR-T cell therapies. such as cytokine release syndrome ("CRS") and immune effector cell-associated neurotoxicity syndrome ("ICANS");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)Manufacture allogeneic CAR-NKT cells without high risk of graft-versus-host disease ("GvHD") starting with the lymphocytes of healthy donors, rather than patients (who are the source of autologous cell therapy starting materials), resulting in a more robust and consistent product without exposure to previous cytotoxic cancer therapy; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)Provide allogeneic ("off-the-shelf") CAR-NKT cell therapy products produced at larger scale than autologous cell therapy products, potentially at lower cost.

In 2023, we plan to focus on developing our novel immune effector cell therapy platform and its product candidates. See "Our R&D Programs – Cell Therapy Platform" below for more information.

We are also continuing certain studies of oral paclitaxel and encequidar ("Oral Paclitaxel"), the currently active product candidate using our Orascovery technology, based on a P-glycoprotein ("P-gp") pump inhibitor. Oral Paclitaxel received a Complete Response Letter ("CRL") from the U.S. Food and Drug Administration ("FDA") in February 2021. In October 2021, after careful consideration of the FDA's feedback, we determined to redeploy our resources to focus on our cell therapy platform and ongoing studies of Oral Paclitaxel. We are continuing to (i) support a study being conducted in combination with a checkpoint inhibitor (dostarlimab) +/- carboplatin in the neoadjuvant chemotherapy setting for breast cancer and (ii) evaluate Oral Paclitaxel in combination with pembrolizumab for the treatment of non-small cell lung cancer ("NSCLC"). See "Our R&D Programs – Orascovery Platform" below for more information.

In early 2022, we announced a new vision for the future of Athenex that is focused on the cell therapy platform. We redirected our research and development ("R&D") resources to develop and advance our promising NKT cell therapy programs and execute on several financial initiatives, including cost savings measures, to right-size the company and support our transformation. We determined to discontinue the Orascovery platform apart from Oral Paclitaxel. We also planned to monetize non-core assets consistent with our new focus and strategy. During the year, we executed a number of actions and transactions as we worked to transform Athenex into a lean, cell therapy-focused company. See "Recent Strategic Actions and Transactions" below for more information. In 2023, we are pursuing a broader range of strategic alternatives while remaining focused on improving our balance sheet as we continue to advance what we believe are promising clinical development programs.

As we continue to pursue these strategic priorities, we expect to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase as we seek to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•advance the preclinical research and clinical development activities of our cell therapy platform;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•identify additional research programs and product candidates within our cell therapy platform;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•continue selected activities related to our other R&D programs and businesses, including evaluating and pursuing a range of strategic alternatives; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•maintain, expand, and protect our intellectual property portfolio.

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**Our R&D Programs**

**Cell Therapy Platform**

NKT cells are a core aspect of our immune effector cell therapy platform. NKT cells comprise a rare subset of lymphocytes that share properties of both innate and adaptive immune cells. NKT cells acquire effector memory functions immediately after exiting the thymus and, thus, behave similarly to innate immunity cells like natural killer ("NK") cells. Within the immune system, NKT cells have an important function, acting among the first cells in response to either infection or stress in the tissues.

The target recognition for both NKT and T cells is strictly restricted and antigen specific. Although both NKT and T -cells express T-cell receptors ("TCRs"), their models for recognition of antigen (target) are distinct. Both T cells and NKT cells recognize target antigens in association with other molecules, a phenomenon called "restriction." T-cell TCRs are restricted by either human leukocyte antigen ("HLA") class I or class II, whereas NKT cell TCRs are restricted by CD1d, which is related to class I HLA in structure. The CD1d molecule is identical in all people (monomorphic) while HLA class I and class II molecules are polymorphic (see following figure). T cells utilize a wide variety of different TCRs, whereas type 1 NKT cells (which we use) employ an invariant TCR ("iTCR"). As a result, without major genetic engineering, the majority of T-cell products must be limited to autologous use, given their potential for toxicity if they are infused into a genetically different recipient (e.g., GvHD). In contrast, because CD1d is the same in all individuals, and NKT cells express an iTCR restricted by CD1d, the potential for GvHD toxicity is minimal. We believe that this provides a promising basis to use NKT cells for an "off-the-shelf" product without the need for complex genetic engineering to prevent GvHD.

![img103648461_0.jpg](img103648461_0.jpg)

iTCR = invariant T-cell receptor

HLA = human leukocyte antigen

MHC = major histocompatibility complex

NKT = natural killer T (cell)

Product Candidates

We are developing autologous and allogeneic, or "off-the-shelf", NKT cell immunotherapies for the treatment of solid tumors and hematological malignancies. We acquired the foundation of this technology in 2021 through our acquisition of Kuur Therapeutics, Inc. (formerly known as Cell Medica, "Kuur") and are pursuing the development of their legacy CAR-NKT cell therapy product candidates, KUR-501, KUR-502, and KUR-503, and are exploring new applications for this technology, such as TCR-NKT cell therapy. The following table summarizes the development status of our current pipeline of cell therapy product candidates as of March 20, 2023:

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![img103648461_1.jpg](img103648461_1.jpg)

KUR-501 is an autologous product in which NKT cells are engineered with a CAR targeting disialoganglioside ("GD2"). GD2 is expressed on almost all neuroblastoma tumors and certain other malignancies. Neuroblastoma is a rare pediatric cancer and patients with relapsed or refractory ("R/R") high-risk neuroblastoma ("HRNB") have very poor outcomes. Therefore, we believe there is a significant unmet medical need for better treatment options. KUR-501 is currently being evaluated in a Phase 1 dose-escalation clinical trial ("GINAKIT2") treating children with R/R HRNB. Updated clinical data from this trial was presented at the American Society of Gene & Cell Therapy Annual Meeting in May 2022. The data demonstrated expansion of CAR-NKT cells post-transfer in all patients and objective responses in patients with R/R HRNB, including patients previously treated with anti-GD2 monoclonal antibody. Overall Response Rate ("ORR") was 25%, or three responses out of 12 patients, and Disease Control Rate was 58% with four stable disease, two partial responses ("PR"), and one complete response ("CR"). Two of these responses occurred at the highest dose level tested so far of 100 million cells/m<sup>2</sup>, and the CR lasted for nearly 14 months. KUR-501 has been well-tolerated without dose limiting toxicity ("DLT"), as the majority of adverse events observed were cytopenias related to the preconditioning nonmyeloablative lymphodepletion chemotherapy regimen. There was no evidence of ICANS in any of the patients at the first four dose levels, and there was one case of Grade 2 CRS. The GINAKIT2 study is supported by Athenex and is being conducted by Athenex's collaborator, the Baylor College of Medicine ("BCM"). BCM temporarily suspended patient enrollment on this study after a young heavily pretreated male patient with R/R HRNB treated at the fifth dose level of 300 million cells/m<sup>2</sup>died within three weeks of CAR-NKT cell therapy product administration. He was found to have human metapneumovirus infection, then Grade 1 CRS that was treated with immunosuppressants, and he later developed polyclonal hyperleukocytosis complicated by multiorgan dysfunction without evidence of sepsis. This was followed by a recent FDA-imposed clinical hold on the KUR-501 Investigational New Drug ("IND") while BCM completes their investigation of the etiology and pathogenesis of this event and devises a safety risk mitigation plan to reopen the clinical trial, one that could include excluding patients with concomitant viral infections. No study patients are receiving or scheduled to receive additional treatment with KUR-501. While we intend to work with BCM to help address the FDA's questions and target to reopen the clinical trial during the year, BCM may not resume GINAKIT2 study patient enrollment unless and until the FDA lifts their clinical hold on the KUR-501 IND. There can be no assurance that BCM will be able to resume the Phase 1 clinical trial of KUR-501.

KUR-502 is an allogeneic ("off-the-shelf") product in which NKT cells isolated from healthy donors are engineered with a CAR targeting CD19, which is widely expressed on both normal and malignant B cells. In addition to the CAR, KUR-502 is genetically engineered to downregulate surface expression of HLA class I and class II proteins, resulting in reduced recognition and elimination by the host immune system following infusion. KUR-502 is currently being evaluated in a single-center, BCM-sponsored, Phase 1 clinical trial (ANCHOR) treating adults with R/R CD19-positive malignancies, including B cell non-Hodgkin lymphoma ("NHL"), acute lymphoblastic leukemia ("ALL"), and chronic lymphocytic leukemia. An interim data update on seven evaluable patients was presented at the Tandem Meetings of the American Society of Transplantation and Cellular Therapy and the Center for International Blood & Marrow Transplant Research in April 2022. Five patients were enrolled and treated at the first two dose levels in the NHL cohort, and there were two CRs and one PR for an ORR of 60%, including responses in two patients who were previously treated with CD19-directed CAR-T cell therapy. Both CRs were durable and persisted for more than six months. Two patients were enrolled at the first dose level of the ALL cohort, and there was one CR and one progressive disease ("PD") for an ORR of 50%. KUR-502 has been well tolerated without DLT, as the majority of adverse events observed were cytopenias related to the preconditioning nonmyeloablative lymphodepletion chemotherapy regimen. There have been three cases of Grade 1 CRS, all observed in the ALL cohort, but there have not been any cases of ICANS or GvHD attributable to CAR-NKT cells. In March 2022, the Company's IND application to expand the ANCHOR study to a multicenter, Athenex-sponsored Phase 1 study (ANCHOR2) was allowed to proceed by the FDA, which began enrolling patients in Q4 2022.

KUR-503 is an allogeneic ("off-the-shelf") product in which NKT cells are engineered with a CAR targeting glypican-3 ("GPC3"). GPC3 is a molecule that is highly expressed on most hepatocellular carcinomas but not on normal liver or other non-neoplastic tissue. KUR-503 is currently in preclinical development, and we are planning to submit an IND application to the FDA in 2024.

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The cell therapy program also includes TCR-NKT cell therapy products, including ones targeting p53 and KRAS, which are the most commonly altered genes in epithelial cancers. These HLA class I- or class II-restricted cell therapy products are presently undergoing preclinical screening to identify those candidates with the best TCR-NKT cell isolation efficiency, transduction efficiency, and functional activity. We plan to engineer the TCRs into the NKT cell therapy platform to develop an allogeneic "off-the-shelf" approach for solid tumor treatment.

Cell Therapy Collaboration and License Agreements

<u>Baylor College of Medicine</u>

In October 2021, we simultaneously entered into the Second Amended and Restated Exclusive License and Option Agreement (the "Baylor License Agreement") and the Second Amended and Restated Co-Development Agreement (the "Baylor Co-Development Agreement," and together with the Baylor License Agreement, the "Baylor Agreements") with BCM, which were first entered into in 2016 between BCM and Kuur. Under the Baylor Co-Development Agreement, BCM is responsible for developing the cell therapy products using an annual budget paid by us and under the supervision of a joint steering committee composed of five BCM appointees and five of our appointees. The Baylor License Agreement grants us, among other rights, worldwide rights to research, sell, and commercialize NKT, NKT-CAR, and NKT process technology in the prevention, treatment, or modulation of cancer in humans as well as exclusive future oncology and non-oncology and field expansion options. The Baylor Agreements include execution fees, annual fees, royalties, and milestones. Under the Baylor License Agreement, we have agreed to pay BCM up to $128.5 million in the event defined development and sales milestones are achieved, along with tiered royalties at single digit rates based on annual net sales of licensed products and tiered percentages of sublicensing revenue ranging from mid-single digits to royalty rates in the mid-teens. The Baylor Agreements will remain in effect on a country-by-country basis until the expiration of (i) the date of expiration of the last such patent rights issued in such country; or (ii) in the event that no patents issue in such country, the day immediately following the tenth anniversary of the first commercial sale in such country. The agreements contain customary termination rights such as for material default or failure, insolvency, or convenience on a product-by-product basis.

<u>National Cancer Institute of the National Institutes of Health</u>

In November 2021, we licensed a portfolio of TCRs that recognize "hotspot" mutations in p53, KRAS, and EGFR genes and methods of isolating T-cells that are reactive to p53-, KRAS-, and EGFR-specific mutated antigens from the National Cancer Institute ("NCI"), an institute of the National Institutes of Health ("NIH"). Under the terms of the agreement, we are granted worldwide rights to the development, manufacturing, and commercialization of allogeneic NKT cell therapy products engineered via viral and non-viral means, and autologous T cell therapy products engineered via retrovirus and lentivirus-mediated gene transfer, to express certain TCRs discovered in the laboratory of Dr. Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI. The licensed TCRs recognize unique antigens derived from "hotspot" mutations in p53, KRAS, and EGFR genes shared among multiple patients and tumor types.

**Orascovery Platform**

Our Orascovery platform is based on the novel P-gp pump inhibitor molecule, encequidar. Oral administration of encequidar in combination with established chemotherapy agents such as paclitaxel has been shown to improve the absorption of these agents by blocking the P-gp pump in the intestinal wall.

Oral Paclitaxel is our lead asset in our Orascovery platform. Intravenous ("IV") paclitaxel is used widely for the treatment of breast, ovarian, and lung cancers. Due to its poor solubility, paclitaxel is usually dissolved in ethanol and polyethoxylated castor oil, which is a major cause of IV hypersensitivity reactions. As a result, premedication with high dose steroids and antihistamines is required to minimize these adverse reactions. Additional common toxicities associated with IV administration of paclitaxel include neuropathy, neutropenia, and alopecia. These side effects limit dose intensification and often require reduction in dosing.

As part of our strategic pivot to a cell therapy company, we are limiting the resources we devote to the development of the Orascovery platform and focusing only on ongoing studies of Oral Paclitaxel. For Oral Paclitaxel, we are continuing to (i) support a study being conducted in combination with a checkpoint inhibitor (dostarlimab) +/- carboplatin in the neoadjuvant chemotherapy setting for breast cancer and (ii) evaluate Oral Paclitaxel in combination with pembrolizumab for the treatment of NSCLC. The following table summarizes the development status of ongoing studies of Oral Paclitaxel as of March 20, 2023:

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Oral Paclitaxel in Breast Cancer

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<u>I-SPY 2 TRIAL in the Neoadjuvant Treatment of Breast Cancer</u>

Oral Paclitaxel is being evaluated in combination with dostarlimab (a checkpoint inhibitor) +/- carboplatin in the neoadjuvant treatment of breast cancer, as part of the I-SPY 2 TRIAL (Investigation of Serial studies to Predict Your Therapeutic Response with Imaging And moLecular analysis 2). On December 20, 2022, we announced that collaborators at the Quantum Leap Healthcare Collaborative ("QLHC") reported that Oral Paclitaxel in combination with a PD-1 inhibitor and carboplatin graduated in the triple-negative subgroup of high-risk early-stage breast cancer. Oral Paclitaxel, relative to IV paclitaxel, was associated with less neuropathy and was not associated with an increase in febrile neutropenia. The study has been completed and QLHC anticipates presenting these results at upcoming national meetings in the second quarter of 2023. We plan to discuss the I-SPY 2 TRIAL data with the FDA with respect to our metastatic breast cancer New Drug Application ("NDA").

The I-SPY 2 TRIAL was designed to evaluate the safety and efficacy of Oral Paclitaxel with dostarlimab +/- carboplatin in stage 2/3 HER2- breast cancer patients and plus trastuzumab in HER2+ patients, followed, if needed, by doxorubicin plus cyclophasamide chemotherapy and surgical resection of breast tissue. The trial was designed to rapidly screen promising experimental treatments and identify those most effective in specific patient subgroups based on molecular characteristics (biomarker signatures). The trial is a unique collaborative effort by a consortium that includes the FDA, industry, patient advocates, philanthropic sponsors, and clinicians from 16 major U.S. cancer research centers. Under the terms of the collaboration agreement, QLHC is the trial sponsor and manages all study operations, and Athenex provides Oral Paclitaxel.

<u>KX-ORAX-001 Trial in Metastatic Breast Cancer</u>

The Phase 3 study of Oral Paclitaxel in metastatic breast cancer ("mBC") (KX-ORAX-001) was a randomized, active-controlled clinical trial comparing Oral Paclitaxel monotherapy against IV paclitaxel monotherapy. The trial randomized subjects in a 2:1 ratio to Oral Paclitaxel, and was designed to compare the safety and efficacy of Oral Paclitaxel with IV paclitaxel. The primary endpoint was ORR (confirmed by scans at two consecutive timepoints) as assessed by RECIST v1.1 criteria, a generally accepted method for assessing tumor response. Blinded assessments of tumor response were made by independent radiologists. A total of 402 metastatic breast cancer patients were enrolled (Oral Paclitaxel=265 vs. IV paclitaxel=137), which represented the intent-to-treat ("ITT") population.

In the final analysis of the primary endpoint of the study, Oral Paclitaxel (205 mg/m<sup>2</sup> per day 3 days/week) showed a statistically significant improvement in ORR. Based on ITT analysis, Oral Paclitaxel showed a statistically significant improvement in ORR over IV paclitaxel, with 35.8% ORR, compared to 23.4% for IV paclitaxel, a difference of 12.4% (p=0.011).

Secondary endpoints in the study included progression free survival ("PFS") and overall survival ("OS"). In December 2020, we presented updated PFS and OS data from this clinical trial at the 2020 San Antonio Breast Cancer Symposium ("SABCS"). In the ITT population, the median PFS showed a benefit for Oral Paclitaxel versus IV paclitaxel (8.4 months vs. 7.4 months, respectively; hazard ratio ("HR") = 0.768; 95% confidence interval ("CI"): 0.584, 1.01; p = 0.046). The median OS data demonstrated a trend favoring Oral Paclitaxel versus IV paclitaxel (22.7 months vs. 16.5 months, respectively; HR = 0.794; 95% CI: 0.607, 1.037; p = 0.082).

Based on data presented at the 2019 SABCS, 31.1% of IV paclitaxel patients experienced Grade ≥ 2 neuropathy versus 7.6% of Oral Paclitaxel patients. The results also showed lower incidence of alopecia compared to IV paclitaxel, with 28.8% of the Oral Paclitaxel group experiencing alopecia versus 48.2% of the IV paclitaxel group in treatment-emergent adverse events of interest. For other treatment-emergent adverse events of interest, there was a higher incidence of neutropenia with Common Terminology Criteria for Adverse Events ("CTCAE") Grade ≥ 3 (29.9% vs. 28.1%; with Grade 4 14.8% vs 8.9%) and gastro-intestinal side effects, such as diarrhea with CTCAE Grade ≥ 3 (5.3% vs. 1.5%) and vomiting or nausea with CTCAE Grade ≥ 3 (6.8% vs. 0.7%), in the Oral Paclitaxel group as compared to the IV paclitaxel group.

Based on data presented at the 2020 SABCS: all grades of neuropathy were observed in 22% of Oral Paclitaxel patients versus 64% of IV paclitaxel patients, and Grade 3 neuropathy was observed in 2% of Oral Paclitaxel patients versus 15% of IV paclitaxel patients. Also presented were data on the effect of prophylactic treatments on the incidence and severity of gastrointestinal ("GI")-related adverse events. After approximately 30% of patients were enrolled, the Phase 3 trial protocol was amended to allow patients randomized to the Oral Paclitaxel arm to receive prophylactic pre-medications for GI side effects. Overall GI-related adverse events ("AE") were less frequent in the IV paclitaxel arm. GI-related adverse events improved in the Oral Paclitaxel arm following the amendment, as measured by lower incidences of Grade 2 vomiting before and after amendment (24% vs. 7%) and Grade 2 diarrhea before and after protocol amendment (27% vs. 16%).

In December 2021, we presented a subgroup analysis from the Phase 3 study of Oral Paclitaxel in mBC patients, at the 2021 SABCS. Analysis of safety data demonstrated that patients with elevated liver function tests were at increased risk of neutropenia related toxicities. Post hoc analysis of this subgroup of patients with hepatic impairment was conducted and showed a median survival rate of 18.9 months in patients treated with Oral Paclitaxel vs 10.1 months in those treated with IV Paclitaxel, with an HR of 0.59.

<u>Regulatory Status of Oral Paclitaxel in Metastatic Breast Cancer</u>

In the United States, we plan to discuss the I-SPY 2 TRIAL data with the FDA with respect to our NDA for Oral Paclitaxel for the treatment of mBC. We received a CRL from the FDA in February 2021 regarding our NDA for Oral Paclitaxel. We then held two Type A meetings with the FDA to discuss the deficiencies raised in the CRL, review a proposed design for a new clinical trial intended to address the deficiencies raised in the CRL, and discuss the potential regulatory path forward for Oral Paclitaxel in mBC in

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the U.S. We believe the data from the I-SPY 2 TRIAL may address some of the deficiencies raised by the FDA in the CRL, but no assurance can be given that we will be successful in pursuing this path forward with the NDA.

In the United Kingdom, we are pursuing approval of the Marketing Authorization Application for Oral Paclitaxel by the U.K. Medicines and Healthcare products Regulatory Agency ("MHRA") based on the Phase 3 study of Oral Paclitaxel in mBC (KX-ORAX-001) described above. On January 3, 2023, we announced that the Oral Paclitaxel formulation did not receive regulatory approval from the MHRA for mBC based on CMC issues. The MHRA application was not rejected based on any clinical efficacy or safety concerns expressed by the MHRA. MHRA regulations allow an applicant to request a re-examination of an opinion by an independent board which the Company plans to pursue. The Company views the identified Chemistry, Manufacturing, and Controls ("CMC") issues as addressable. The MHRA application was supplemented with safety data from the I-SPY 2 TRIAL and no major clinical efficacy or safety concerns were expressed.

Oral Paclitaxel in Lung Cancer

We are collaborating with Merck (known as MSD outside the U.S. and Canada) on the expansion phase of a Phase 1/2 clinical trial evaluating Oral Paclitaxel in combination with Merck's anti-PD-1 therapy KEYTRUDA® (pembrolizumab) for certain NSCLC patients. Recruitment for the expansion phase of this clinical trial is currently ongoing.

Orascovery Technology – Encequidar

Encequidar is a P-gp pump inhibitor and an oral absorption enhancer that prevents the P-gp pump-mediated efflux of chemotherapy agents back into the GI tract. The P-gp plays an important physiologic role as a transporter protein at multiple barrier sites, including the GI tract and the blood brain barrier. The demonstrated role of P-gp in limiting intestinal absorption of multiple cancer chemotherapies highlighted the potential utility of a small molecule P-gp inhibitor for enabling oral administration of P-gp substrate drugs otherwise restricted to IV dosing. Encequidar was originally identified by Hanmi as a highly selective and potent P-gp inhibitor, capable of elevating the oral bioavailability of paclitaxel from less than 5% (in the absence of encequidar) to 41% in rats. Encequidar is distinct from previously developed small molecule P-gp inhibitors because it is designed to not be systemically absorbed in the GI tract following oral administration with only small amounts detectable in the plasma even after relatively high doses. This unique property makes encequidar a good candidate for co-administration with P-gp substrate drugs, such as paclitaxel, which normally exhibit poor oral bioavailability and are therefore limited to IV routes of dosing.

In three separate pharmacokinetics studies of encequidar conducted in healthy subjects, a total of 81 individuals received single oral doses of encequidar tablets in single doses of up to 900 mg, and 30 individuals were enrolled in multiple dose cohorts with treatment groups receiving encequidar tablets ranging from 60 to 360 mg per day for five days. Encequidar was well-tolerated, with mostly mild GI side effects. No serious adverse events were reported. At the current clinical dose of 15 mg given once daily for up to five days, the maximal concentration of the drug in plasma (Cmax) in systemic circulation is low. Drug-drug interaction studies of encequidar with digoxin and dabigatran have been conducted, and the metabolism and routes of excretion in humans has been determined.

Proprietary Dual (CYP/P-gp) Inhibitor

We are developing a proprietary class of "dual" absorption enhancers that are intended to inhibit both the P-gp transporter and the cytochrome p450 3A ("CYP") enzymes within the GI tract. These dual absorption enhancers may lead to better performing next-generation oral medicines in our pipeline of clinical products. The development of these dual absorption enhancers is at the preclinical stage. Proof of concept, providing increased oral bioavailability in preclinical species, has been obtained with several absorption enhancers and candidate drugs. Currently additional filters such as patentability/freedom to operate, physical-chemical characterization, pre-formulation studies, manufacturing analysis and preliminary toxicity testing are being applied to our first group of lead candidates to facilitate election of an IND candidate.

Orascovery License Agreements

We entered into a series of license agreements with Hanmi Pharmaceuticals Ltd. ("Hanmi") pursuant to which we obtained an exclusive, sublicensable license for development and commercialization activities utilizing Hanmi's patents and know-how related to the Orascovery platform worldwide except in South Korea, and a non-exclusive license to utilize the same intellectual property in manufacturing worldwide for sales inside those territories (the "Hanmi Agreements"). Under the Hanmi Agreements, we are responsible for all clinical studies and development and commercialization activities, and the related expenses, resulting from the agreements.

Under the Hanmi Agreements, we are obligated to pay Hanmi tiered royalty payments in the teens based on aggregate net sales of any products using the licensed intellectual property in the territory. These royalties will be reduced if competing generic products gain market share in the applicable country. We also granted to Hanmi a one-time right of first negotiation to purchase all of our rights in Oral Paclitaxel under the Hanmi Agreements during development and prior that, at Hanmi's discretion, requires us to negotiate in good faith the sale of our rights under such agreement to Hanmi at a purchase price determined by an internationally-recognized investment banking firm with an office in Hong Kong at any time prior to the earlier of (1) our first commercial sale of products using such technology or (2) receipt by Hanmi of written notice from our company of the sublicense of the rights in an applicable product to a third party.

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The Hanmi Agreements expire on the earlier of (1) expiration of the last of Hanmi's patent rights licensed under the agreement or (2) invalidation of Hanmi's patent rights which are the subject of the agreement, provided that the term will automatically be extended for consecutive one-year periods unless either party gives notice to the other at least 90 days prior to expiration of the patent rights licensed under the agreement or before the then-current annual expiration date of the agreement. The patent rights licensed to us under the Hanmi Agreements have expiry dates ranging from in 2023 to 2033, unless the terms of such licensed patents are extended in accordance with applicable laws and regulations.

We have out-licensed certain of the rights we obtained under the Hanmi Agreements to third parties to develop and commercialize products from the Orascovery platform in certain territories. Under these out-licenses, we are entitled to receive payments and royalties from the licensees (a portion of which we will be obligated to pay Hanmi under the Hanmi Agreements).

**Recent Strategic Actions and Transactions** 

In 2022, we made significant progress on our strategy to monetize non-core assets as we pivoted to focusing on our cell therapy platform.

**Monetization of Klisyri (tirbanibulin)**

During 2022, we received an aggregate of $87.6 million by (i) monetizing certain of our rights to Klisyri® (tirbanibulin), an ointment approved in the United States, European Union and the United Kingdom for the treatment of actinic keratosis ("AK") that we developed and out-licensed, through the revenue interest financing described below; and (ii) receiving upfront fees and milestone payments through the other license agreements we hold relating to tirbanibulin. Tirbanibulin, formerly known as KX2-391 or KX-01, is a novel small molecule that we discovered and developed, which demonstrates at least two mechanisms of action relevant to the potential control of cancer and hyper-proliferative disorders. Tirbanibulin is a compound that, as a free base, has advantageous physical properties for topical ointment formulations. We may pursue additional strategic licensing and partnership opportunities with tirbanibulin that will create potential value for stockholders.

Revenue Interest Purchase Agreement

On June 21, 2022, the Company and ATNX SPV, LLC (the "SPV"), a subsidiary of the Company, entered into a revenue interest purchase agreement ("RIPA") with the affiliates of Sagard Healthcare Partners ("Sagard") and funds managed by Oaktree Capital Management, L.P. ("Oaktree" and together with Sagard, the "Purchasers") for the sale of revenues from U.S. and European royalty and milestone interests in Klisyri® (tirbanibulin) for an aggregate purchase price of $85.0 million (the "Purchase Price"). Of the total Purchase Price, $5.0 million was placed into escrow to be paid to the Company upon the satisfaction of certain manufacture and supply milestones for Klisyri prior to December 31, 2025, $5.0 million was used to pay for transaction expenses, $52.5 million was used to pay down the Company's Senior Credit Agreement with Oaktree, and $7.5 million in Segregated Funds was deposited and held in a segregated account of the Company (the "Segregated Funds"). The Purchasers released the $7.5 million of Segregated Funds to the Company in August 2022, and $1.5 million of the amount placed in escrow was released to the Company upon completion of an escrow release trigger milestone in September 2022. The net proceeds after deducting transaction expenses and debt repayments were available for the Company's operations.

In connection with this transaction, the Company formed the SPV and contributed its interest in the license agreement with Almirall S.A. ("Almirall") relating to Klisyri and certain related assets (the "Almirall License Agreement") to the SPV. Oaktree and Sagard each own a 10% equity interest in the SPV. Pursuant to the RIPA, the SPV sold its right to the cash received in respect of certain royalties and certain milestone interests under the Almirall License Agreement to the Purchasers. The SPV retained the right to receive 50% of certain of the milestone interests under the Almirall License Agreement, equal to $155.0 million in the aggregate if those milestones are achieved, and 50% of the royalties paid under the Almirall License Agreement for sales of Klisyri once net sales of Klisyri exceed a certain dollar amount.

License Agreements Related to Tirbanibulin

We have entered into license agreements under which we licensed certain of our intellectual property related to tirbanibulin for a variety of indications in territories including the United States, European Union, Australia, New Zealand, Canada, Taiwan, Japan, South Korea, and China. In exchange, we are entitled to upfront fees, milestone payments and/or royalties, depending on the agreement. The most significant of these agreements are described below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>•</u><u>United States and European countries</u>: In December 2017, we entered into the Almirall License Agreement pursuant to which we granted to Almirall an exclusive, sublicensable license of certain of our intellectual property for the development and commercialization of pharmaceutical preparations containing tirbanibulin to treat and prevent skin disorders and diseases in humans in the U.S. and substantially all European countries (including Russia and Turkey). The first label indication is actinic keratosis ("AK"). In the licensed territory, Almirall also holds a right of first negotiation to license any compound that we may develop in the future with the same mechanism of action as tirbanibulin and for topical administration for the treatment of skin disorders and diseases if we decide to collaborate with a third party regarding that newly developed compound. Under the RIPA, we sold some of our rights to royalty and milestone payments under the Almirall License Agreement to the Purchasers. See "– Revenue Interest Purchase Agreement" above. Almirall may

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terminate the agreement in its entirety or with regard to a certain territory in its sole discretion by providing six months' notice to us. The agreement also contains customary termination rights for both parties, such as in the event of a breach of the agreement or if the other party defaults in performance of its obligations under the agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>•</u><u>Taiwan, Japan, and South Korea</u>: We granted PharmaEssentia Corp. ("PharmaEssentia") an exclusive, sublicensable license to use any pharmaceutical preparation containing tirbanibulin for use in treating (i) AK in a territory that includes Taiwan, Japan, and South Korea, (ii) psoriasis and other nonmalignant skin conditions in a territory that includes Taiwan, Japan, South Korea, China, Hong Kong, Macau, Singapore, and Malaysia, and (iii) all other dermatology indications, including skin cancer, in a territory that includes Taiwan, Japan, South Korea, Singapore, and Malaysia. We may be entitled to an additional aggregate amount of up to $13.0 million in associated with the achievement of certain development and sales milestones. We will also be eligible to receive tiered royalties ranging from the high single-digits to low double digits on net sales of each product commercialized by PharmaEssentia, which may be reduced accordingly upon the entrance of competing generic products. Prior to the expiration of the term of each agreement, PharmaEssentia may terminate the agreement in its sole discretion, by providing six months' notice to us. Subject to certain conditions, we may also terminate the agreement if PharmaEssentia fails to comply with certain development timelines set out in each of the agreements. The agreements also contain customary termination rights for either party, such as in the event of a breach of the agreement or the initiation of bankruptcy proceedings by the other party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>•</u><u>China</u>: We granted Guangzhou Xiangxue Pharmaceutical Co., Ltd. ("Xiangxue") an exclusive license to develop and commercialize ointment preparations of tirbanibulin ointment in China for certain indications, including AK. We may be eligible to receive $40.0 million if the defined regulatory milestones are achieved, sales milestones up to $30.0 million when certain sales targets of tirbanibulin ointment among other products are met, and tiered royalties at rates starting from the low teens. The license may be terminated in its entirety upon the mutual agreement of the parties, by Xiangxue for convenience upon requisite notice, or by either party for material breach as set forth in the license. The license also will be terminated with respect to any licensed product for Xiangxue's failure to meet agreed upon regulatory milestones with respect to such licensed product.

**Sale of Rights to Dunkirk Facility**

During 2022, we received $40.0 million upon the sale of our interest in the manufacturing facility in Dunkirk, New York (the "Dunkirk Facility") to ImmunityBio, Inc. ("ImmunityBio"). The Dunkirk Facility had been constructed in connection with our agreement with Fort Schuyler Management Corporation ("FSMC"), a not-for-profit corporation affiliated with the State of New York, for a medical technology research, development, innovation and commercialization alliance (the "Alliance Agreement"). Under the Alliance Agreement, FSMC had been responsible for the costs of construction and equipment for the facility up to an aggregate of $200.0 million, plus any additional funds available from the previous $25.0 million grant, and FSMC would retain ownership of the facility and equipment.

In a series of agreements with ImmunityBio, we sold our leasehold interest, our interest in certain leased manufacturing equipment and personal property and owned personal property and inventory at the Dunkirk Facility, and our rights in and obligations under our agreements relating to the Dunkirk Facility with the Empire State Development Corporation, FSMC and County of Chautauqua Industrial Development Agency and other parties. We did not assign any of our rights to our corporate headquarters in Buffalo, New York, in connection with the sale of the leasehold interest in the Dunkirk Facility and we retained all of our rights and obligations with respect to our corporate headquarters. We are sub-leasing the space from FSMC for a 10-year term expiring in October 2025, with an option to extend the term for an additional 10 years.

**Sale of Interest in API Business**

During 2022, we received an aggregate of approximately $11 million from the sale of our interests in our active pharmaceutical ingredient ("API") manufacturing business in China, and expect to receive an additional $5.6 million in the first half of 2023. We completed the sale of our equity interests in our China subsidiaries, including Chongqing Taihao Pharmaceutical Co. Ltd. ("Taihao") and Athenex Pharmaceuticals (Chongqing) Limited (together, the "Chongqing Companies") to Chongqing Comfort Pharmaceutical Inc. as assignee of TiHe Capital (Beijing) Co. Ltd. (the "API Buyer") in November 2022. The Chongqing Companies had operated a current Good Manufacturing Practices ("cGMP") high potency oncology API plant based in Chongqing, China, and completed construction of a new facility in Chongqing. The aggregate purchase price of this sale was RMB129.4 million, or approximately $18 million. At closing, we received 70% of the sale proceeds in cash (net of PRC withholding tax and stamp duty). We expect to receive the remainder of the proceeds in the first half of 2023. At closing, we entered into a supply agreement ("Supply Agreement") with affiliates of the API Buyer (the "Supplier"). Under the Supply Agreement, we and the Supplier agreed to pricing and other supply terms for certain API ("API Products"), including those used in Klisyri® (tirbanibulin) and oral paclitaxel, to be manufactured at certain manufacturing sites by the Supplier. The Supplier also agreed to fill purchase orders from the Company before orders from other parties, if it was unable to fulfill orders for API Products. The Company also agreed to place orders for API Products, other than tirbanibulin, with the Supplier before placing orders with any other party. The pricing terms of the Supply Agreement will remain in effect for at least five years, and then may be adjusted on an annual basis upon agreement of the parties. The Supply Agreement will expire on the later of 10 years from the effective date or the expiration of the last of the Company's license agreements for the API

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Products. If the Supply Agreement is terminated prior to the end of this period, we have the right to request that the Supplier enter into a new supply agreement with us on substantially the same terms.

**Exit from 503B Sterile Compounding Business of Athenex Pharma Solutions**

In the fourth quarter of 2022 and during the first quarter of 2023, we received an aggregate of $0.1 million by exiting the 503B sterile compounding business of Athenex Pharma Solutions ("APS"). APS manufactured products under Section 503B of the Compounding Quality Act ("Section 503B") within the Federal Food, Drug, and Cosmetic Act ("FDCA") and supplied sterile injectable drugs to hospital pharmacies across the U.S.

**Other Business**

**Athenex Pharmaceutical Division**

Our Athenex Pharmaceutical Division ("APD") business develops and sources products through licensing agreements with various partners, whom we collectively refer to as our Global Partner network. Our team has unique commercial expertise in multisource injectable products and has developed a number of Global Partners that develop and manufacture multisource products for the U.S. market. We primarily market products to acute hospital group purchasing organizations, which supply to integrated healthcare networks, clinics, and directly to physicians. As of December 31, 2022, APD markets 39 products with 74 SKUs.

We distribute APD products primarily through pharmaceutical wholesalers and, to a lesser extent, specialty distributors that focus on particular therapeutic product categories, for use by a wide variety of end-users, including hospitals, integrated delivery networks and alternative site facilities. For the year ended December 31, 2022, the products we sold through our 3 largest wholesalers in the U.S. accounted for 63% of our total revenue.

We utilize an outside third-party logistics contractor, Eversana Life Science Services, LLC, to distribute our U.S. products. Since the inception of the launch of our specialty products, the third-party logistics provider has been handling all aspects of our product logistics efforts and related services for us, including warehousing and shipment services, order-to-cash services, contract administration services and chargeback processing. Our products are warehoused and distributed through a third-party logistics provider located in Memphis, Tennessee. Under our agreement with the third-party logistics provider, we maintain ownership of our finished products until sale to our customers. The initial term of the agreement is three years following the initial delivery date and will automatically renew for successive 12-month periods, unless either we or the other party give notice of intent to terminate at least 90 days in advance of such automatic renewal. We may also have the opportunity to terminate the agreement within 30 days of receiving notice of certain price increases by the third-party logistics provider. The agreement also contains customary termination rights for either party, such as in the event of a breach of the agreement.

We have also created a product portal, which allows APD customers to order from us online, and us to distribute directly from Eversana or our Clarence facility. This portal was created primarily due to prohibitions on wholesaling under Section 503B of the FDCA.

When necessary, APD purchases or licenses the rights to sell these generic products from the product's patent holder. The following are examples of the licenses held by APD:

<u>Gland Term Sheets</u>

From August 2016 to May 2017, we entered into four binding term sheets with Gland Pharma Ltd ("Gland") to market twenty-seven of Gland's products. Gland has obtained FDA approval for twenty-two of such products and has filed an abbreviated new drug application ("ANDA") in the U.S. for the remaining five products. For each of the licensed products, we will pay a license fee to Gland. Additionally, during the terms of the term sheets we have a profit-sharing arrangement pursuant to which we will pay to Gland between 0% and 60% of the net profits from sales of each of the licensed products, depending on the product. The initial term of each of the Gland term sheets is five years from the launch of each product licensed pursuant to the term sheet, subject to automatic renewal for additional two-year terms, unless terminated by either party upon at least 90 days' notice in advance of a renewal date. To date, none of the term sheets have been terminated.

<u>MAIA Agreement</u>

In December 2018, we entered into a distribution and supply agreement with MAIA Pharmaceuticals ("MAIA") effective as of October 3, 2018 whereby we acquired the exclusive license to a generic version of an approved product, which we began selling in January 2019. In connection with the execution of this agreement, we agreed to pay an upfront milestone payment in addition to profit sharing of 50% of the net profits from the sales of the licensed product. We also agreed to pay an additional milestone payment to MAIA in the event the FDA approves the ANDA for the licensed product. The initial term of the agreement is for seven years from the launch of the product and is subject to an automatic two-year renewal term unless terminated by either party upon at least 180 days' notice in advance of the renewal date.

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In December 2019, the agreement with MAIA was amended to grant us the license to a branded product which MAIA holds the approved NDA. In connection with this amendment, we agreed to an upfront milestone payment and 56% of the net profits from sales of the licensed product.

<u>Ingenus Agreements</u>

In September 2020, we entered into an asset purchase and sale agreement with Ingenus Pharmaceuticals, LLC ("Ingenus") whereby we purchased from Ingenus all of their right, title and interest in and to Glycopyrrolate Injection ("Glycopyrrolate") in the U.S. and pursuant to which Ingenus transferred to us the ANDA for Glycopyrrolate.

In November 2020, we entered into a co-marketing, manufacturing and supply agreement with Ingenus pursuant to which Ingenus will be our exclusive supplier of the Cyclophosphamide Injection and granted us a license to market and sell the product to acute care group purchasing organizations ("GPOs") and their entire memberships as provided by the GPOs, integrated delivery networks ("IDNs") and to hospitals within the U.S. Under the agreement, we are entitled to 25% of the net profits from our sales of the product and we are entitled to a marketing allowance. The agreement has a 3-year term, which may be extended if we mutually agree.

In January 2021, we entered into a manufacture and supply agreement with Ingenus for Arsenic Trioxide Injection pursuant to which Ingenus will be our exclusive supplier of the product and granted us a license to market and sell the product to acute care GPOs and their entire memberships as provided by the GPOs, IDNs and to hospitals within the U.S. Under the agreement, we are entitled to 45% of the net profits from our sales of the product and we are entitled to a marketing allowance. The agreement has a 5-year term, which may be extended if we mutually agree. We have subsequently expanded the products that we market for Ingenus under substantially similar terms and APD now markets 4 products for Ingenus.

<u>Maiva Agreements</u>

In March 2023, we entered into a supply agreement with Maiva Pharma Private Limited ("Maiva") for the manufacture of Athenex-owned ANDA products and supply of certain of Maiva's co-developed products. For certain of the products, we have a profit-sharing arrangement pursuant to which we will pay to Maiva between 20% and 50% of the amount by which the sales price of certain products exceeds established targets. Under this agreement, we are responsible for coordinating the FDA review of ANDAs for a majority of the products and Maiva is responsible for manufacturing, packaging, testing, and quality assurance of the products. The agreement has a seven-year term and will automatically renew for additional two-year periods unless earlier terminated by us or Maiva.

**Research and Development**

We have research, product formulation, clinical development and regulatory affairs capabilities primarily in the U.S. Our research and development facilities are largely concentrated in Buffalo, New York. The range of capabilities at these facilities includes medicinal chemistry, biochemistry, cell biology, formulation, chemical manufacturing and control, quality control, pharmacokinetics/ pharmacodynamics ("PK/PD") and data management, as well as pharmacovigilance, clinical development and regulatory affairs expertise functions. Animal efficacy, PK/PD and toxicology studies are carried out at various contract research organizations, or CROs, in order to facilitate the drug research and development process. We and our partners are currently conducting clinical trials at sites in the U.S., and we may add additional clinical trial study sites outside of the U.S. in the future.

**Competition** 

The biopharmaceutical industry and the oncology subsector are characterized by rapid evolution of technologies, fierce competition, and strong defense of intellectual property. Any product candidates that we successfully develop and commercialize will have to compete with existing therapies and new therapies that may become available in the future. While we believe that our product candidates, technology platforms, and scientific expertise in the field of biotechnology and oncology provide us with competitive advantages, a wide variety of institutions, including large biopharmaceutical companies, specialty biotechnology companies, academic research departments and public and private research institutions, are actively developing potentially competitive products and technologies. We face substantial competition from biotechnology and biopharmaceutical companies developing oncology products. In cell therapy, we face competition from these companies and/or their products: Adicet Bio, Allogene Therapeutics, Appia Bio, Arovella Therapeutics, Atara Bio, Autolus, BrightPath Biotherapeutics, Caribou Biosciences, Cellectis, Celyad, Century Therapeutics, Crispr Therapeutics, Cytovia Therapeutics, Editas Medicine, Fate Therapeutics, GammaDelta Therapeutics, Immatics, In8bio, Kiromic, Lava Therapeutics, MiNK Therapeutics, Nkarta, ONK Therapeutics, Precision Biosciences, Poseida Therapeutics, Senti Bio, Takeda, and TC Biopharm. In the oral administration of oncology products, we and our products compete with Taxol, Abraxane, Cynviloq, Camptosar, Onivyde, Taxotere, and Hycamtin.

Many of the companies, either alone or with strategic partners, against which we are competing or against which we may compete in the future have significantly greater financial, technical and human resources, and clinical, regulatory, commercialization

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and manufacturing capabilities than we do. Accordingly, our competitors may be more successful than us in obtaining approval for treatments and achieving widespread market acceptance, rendering our treatments obsolete or non-competitive. Accelerated merger and acquisition activity in the biotechnology and biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. These companies also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical study sites and patient registration for clinical studies, acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunity could be substantially limited in the event that our competitors develop and commercialize products that are more effective, safer, less toxic, more convenient or less expensive than our comparable products. In geographies that are critical to our commercial success, competitors may also obtain regulatory approvals before us, resulting in our competitors building a strong market position in advance of our products' entry. We believe the factors determining the success of our programs will be the efficacy, safety and convenience of our product candidates.

**Intellectual Property** 

We strive to protect and enhance the proprietary technologies, inventions, products and product candidates, methods of manufacture, methods of using our products and product candidates, and improvements thereof that are commercially important to our business. We protect our proprietary intellectual property position by, among others, filing patent applications in the U.S. and in jurisdictions outside of the U.S. covering our proprietary technologies, inventions, products and product candidates, methods, and improvements that are important to the development and implementation of our business. We also rely on trade secrets, know-how, continuing innovation, and licensing opportunities to develop, strengthen and maintain our proprietary intellectual property position.

Granted patents and pending patent applications related to our platforms and product candidates cover such aspects as composition-of-matter claims to our lead product candidates and their analogs, claims to pharmaceutical compositions comprising such candidates, and claims to methods of making and method of treatment using such candidates. As of January 20, 2023, we owned approximately 200 granted patents and over 70 pending patent applications, including five allowed patent applications worldwide, that relate to the platform technology from which tirbanibulin was developed. Not accounting for any patent term adjustment, patent term extension or terminal disclaimer, and, assuming that all annuity and/or maintenance fees are paid, the patents and, if granted, patent applications, will expire from 2025 to 2040.

In addition, we have in-licensed various patent, pending patent applications, and technologies. Pursuant to our collaboration with the Center for Cell and Gene Therapy at BCM, which began in October 2021, we maintain a robust portfolio related to our CAR-NKT cell therapy. We also licensed a portfolio of TCRs that recognize "hotspot" mutations in p53, KRAS, and EGFR genes and methods of isolating T-cells that are reactive to p53 and KRAS specific mutated antigens from the NCI. We continue to maintain licenses for patents related to TCR T-cell therapy and the Orascovery platform, and their use as anti-cancer and anti-viral therapies.

The term of individual patents depends upon the laws of the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing of a non-provisional patent application. In the U.S., the term of a patent may be lengthened by patent term adjustment to compensate the patentee for administrative delays by the U.S. Patent and Trade Office ("USPTO") in examining and granting the patent or may be shortened if the patent is terminally disclaimed over an earlier-filed patent. In addition, a patent term may be extended to restore a portion of the term effectively lost as a result of FDA regulatory review. However, the restoration period cannot be longer than five years and cannot extend the remaining term of a patent beyond a total of fourteen years from the date of FDA approval, and only one patent applicable to an approved drug may be extended. Similar extensions as compensation for regulatory delays are available in Europe and other jurisdictions. We have sought patent term extensions in the U.S. and Supplementary Protection Certificates in Europe and intend to seek similar regulatory extensions in other jurisdictions when available. However, there is no guarantee that the applicable authorities will agree with our assessment of whether such extensions should be granted, and we cannot predict the length of the extensions even if they are granted. The actual protection afforded by a patent varies on a claim-by-claim basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent. For a granted patent to remain in force most countries require the payment of annuities or maintenance fees, either yearly or at certain intervals during the term of a patent. If an annuity or maintenance fee is not paid, the patent may lapse irrevocably.

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**Government Regulation and Product Approval** 

Governmental authorities in the U.S., at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, approval, quality control, labeling, packaging, promotion, storage, advertising, distribution, post-approval monitoring, marketing and export and import of products such as those we are developing. In order to be lawfully marketed in the U.S., our therapeutic product candidates must comply with either Section 503B (outsourcing facility) or Section 505 (new drug approval) or Section 351 of the Public Health Service Act of 1944, as amended ("PHSA") (new biological product approval) of the FDCA as applicable. They will be subject to similar premarket requirements in other countries. The process of obtaining regulatory approvals and ensuring compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.

**U.S. Government Regulation** 

In the U.S., the FDA regulates drugs and biologics under the FDCA and its implementing regulations, with the exception that biologics are approved for marketing under provisions of the PHSA, via a Biologics License Application ("BLA"). Failure to comply with the applicable U.S. requirements at any time during the product development or approval process, or after approval, may subject an applicant to administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions could include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•refusal to approve pending applications;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•withdrawal of an approval;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•imposition of a clinical hold;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•warning or untitled letters;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•seizures or administrative detention of product;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•total or partial suspension of production or distribution; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•injunctions, fines, restitution, disgorgement, refusal of government contracts, or civil or criminal penalties.

NDA and BLA approval processes

The process required by the FDA before a therapeutic drug product may be marketed in the U.S. generally involves the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•completion of extensive nonclinical laboratory tests, animal studies and formulation studies conducted in accordance with GLPs and other applicable regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•submission to the FDA of an IND application, which must be authorized before human clinical trials may begin;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•performance of adequate and well-controlled human clinical trials in accordance with federal regulations and Good Clinical Practices, or GCPs, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors, to establish the safety and efficacy of the product candidate for its intended use;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•submission to the FDA of an NDA or BLA;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product candidate is produced to assess readiness for commercial manufacturing and conformance to the manufacturing-related elements of the application, to conduct a data integrity audit, and to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to assure the product candidate's identity, strength, quality and purity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•potential FDA audit of the clinical trial sites that generated the data in support of the NDA or BLA; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•FDA review and approval of the NDA or BLA.

Once a therapeutic candidate is identified for development, it enters the preclinical or nonclinical testing stage. Nonclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. Such studies must generally be conducted in accordance with the FDA's GLPs. An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND application. Some nonclinical testing may continue even after the IND application is submitted. In addition to including the results of the nonclinical studies, the IND application will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination. The IND application automatically becomes effective thirty days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical

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hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted under the IND application. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA.

The manufacture of investigational drugs and biologics for the conduct of human clinical trials is subject to cGMP requirements. Investigational drugs and API imported into the U.S. are also subject to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational products outside of the U.S. may be subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FDCA.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP requirements, which include, among other things, the requirements that all research subjects provide their informed consent in writing for their participation in any clinical trial. Investigators must also provide certain information to the clinical trial sponsors to allow the sponsors to make certain financial disclosures to the FDA. Clinical trials must be conducted under protocols detailing, among other things, the objectives of the trial, dosing procedures, research subject selection and exclusion criteria and the safety and effectiveness endpoints to be evaluated. Each protocol, and any subsequent material amendment to the protocol, must be submitted to the FDA as part of the IND application, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors also must report to the FDA serious and unexpected adverse reactions in a timely manner. Reporting requirements also apply to, among other things, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator's brochure and any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product candidate. An institutional review board, or IRB, with jurisdiction at each institution participating in the clinical trial must review and approve the protocol before a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each research subject or the subject's legal representative, monitor the study until completed and otherwise comply with IRB regulations.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Phase 1—The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some therapeutic candidates for severe or life-threatening diseases, such as cancer, especially when the product candidate may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Phase 2—Clinical trials are performed on a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Phase 3—Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for product labeling.

A pivotal study is a clinical study that adequately meets regulatory agency requirements for the evaluation of a product candidate's efficacy and safety such that it can be used to justify the approval of the product. Generally, pivotal studies are also Phase 3 studies but may be Phase 2 studies, with the agreement of FDA, if the trial design provides a reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need.

In the case of a 505(b)(2) NDA, which is a marketing application in which the sponsor may rely on investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted, some of the above-described studies and nonclinical studies may not be required or may be abbreviated. The applicant may rely upon the FDA's prior findings of safety and efficacy for a previously approved product or on published scientific literature in support of its application. Bridging studies, including clinical studies, may be needed, however, to demonstrate that it is scientifically appropriate to rely on the findings of the studies that were previously conducted by other sponsors to the drug that is the subject of the marketing application.

In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational product candidate.

The outcome of human clinical trials is inherently uncertain, and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed or may not be completed at all. The FDA or the sponsor may suspend a clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the product candidate has been associated with unexpected serious harm to patients.

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During the development of a new product candidate, sponsors are given opportunities to interact with the FDA at certain points; specifically, prior to the submission of an IND, at the end of Phase 2 and before an NDA or BLA application is submitted. Interactions at other times may be requested. These interactions may take the form of meetings, usually by teleconference, or by formal written exchange. These interactions can provide an opportunity for the sponsor to share information about the data gathered to date and for the FDA to provide advice on the next phase of development. Sponsors typically use the interaction at the end of Phase 2 to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trials that they believe will support the approval of the new therapeutic. A sponsor may request a Special Protocol Assessment, or SPA, the purpose of which is to reach agreement with the FDA on the Phase 3 clinical trial protocol design and analysis that will form the primary basis of an efficacy claim. The agreement will be binding on the FDA and may not be changed by the sponsor or the FDA after the trial begins except with the written agreement of the sponsor and the FDA or if the FDA determines that a substantial scientific issue essential to determining the safety or efficacy of the product candidate was identified after the testing began.

Post-approval trials, sometimes referred to as "Phase 4" clinical trials, may be required after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication.

Concurrent with clinical trials, sponsors usually complete additional animal safety studies, develop additional information about the chemistry and physical characteristics of the product candidate and finalize a process for manufacturing commercial quantities of the product candidate in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and the manufacturer must develop methods for testing the quality, purity and potency of the product candidate. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its proposed shelf-life.

The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and other control mechanisms, proposed labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market the product. An NDA or BLA must also contain data to assess the safety and effectiveness of the product for the claimed indication in all relevant pediatric populations. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA or BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual program fee for each prescription drug, including biologics. Fee waivers or reductions are available in certain circumstances, such as where a waiver is necessary to protect the public health, where the fee would present a significant barrier to innovation or where the applicant is a small business submitting its first human therapeutic application for review. Product candidates that are designated as orphan drugs are also not subject to user fees unless the application contains an indication other than an orphan indication.

Within sixty days following submission of an NDA or BLA, FDA reviews the application to determine if it is substantially complete before the agency files it. The FDA may refuse to file any NDA or BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the NDA or BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA files it. Once the submission is filed, the FDA begins an in-depth substantive review of the NDA or BLA. The FDA has agreed to certain performance goals in the review of NDAs and BLAs. FDA seeks to review applications for standard review products that are not new molecular entities, or NMEs, within ten months of the date the NDA or BLA is submitted, while FDA seeks to review applications for standard review NMEs within ten months of the date FDA files the NDA or BLA. FDA seeks to review applications for priority review products that are not NMEs within six months of the date the NDA or BLA is submitted, while FDA seeks to review applications for priority review NMEs within six months of the date FDA files the NDA or BLA. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission. The FDA may refer applications for novel drug products or drug products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and, if so, under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

During the product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, plan is necessary to assure the safe use of the product. If the FDA concludes that a REMS plan is needed, the sponsor of the NDA or BLA must submit a proposed REMS plan prior to approval. The FDA has authority to require a REMS plan when necessary to ensure that the benefits of a drug outweigh the risks. In determining whether a REMS plan is necessary, the FDA must consider the size of the population likely to use the drug, the seriousness of the disease or condition to be treated, the expected benefit of the drug, the duration of treatment, the seriousness of known or potential adverse events, and whether the drug is a new molecular entity. A REMS plan may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate health care providers of the risks, limitations on who may prescribe or dispense the drug or other measures that the FDA

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deems necessary to assure the safe use of the drug or biologic. In addition, the REMS plan must include a timetable to assess the strategy at eighteen months, three years and seven years after the strategy's approval.

The FDA may also require a REMS plan for a product that is already on the market if it determines, based on new safety information, that a REMS plan is necessary to ensure that the product's benefits outweigh its risks.

Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are compliant with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements. To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production and quality control.

Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that an NDA or BLA does not satisfy its regulatory criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than the applicant. If the agency decides not to approve the NDA or BLA in its then present form, the FDA will issue a complete response letter that describes all of the specific deficiencies in the NDA identified by the FDA, with no implication regarding the ultimate approvability of the application or the timing of any such approval, if ever. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant must either resubmit the NDA or BLA, addressing all of the deficiencies identified in the letter, withdraw the application, or appeal the decision.

Even if a product receives regulatory approval, the approval may be significantly limited to specific indications and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as "Phase 4" clinical trials, designed to further assess a product's safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.

Expedited Review and Approval

The FDA has various programs, including Fast Track, priority review, accelerated approval and breakthrough therapy designation, which are intended to expedite or simplify the process for reviewing therapeutic candidates, or provide for the approval of a product candidate on the basis of a surrogate endpoint. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product candidate no longer meets the conditions for qualification or that the time period for FDA review or approval will be lengthened. Generally, therapeutic candidates that are eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development and expedite the review of therapeutic candidates to treat serious or life-threatening diseases or conditions and fill unmet medical needs. Priority review is designed to give therapeutic candidates that offer major advances in treatment or provide a treatment where no adequate therapy exists an initial review within six months of the date that FDA files the NDA or BLA as compared to a standard review time of ten months of the date that FDA files the NDA or BLA.

Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent communications with a sponsor of a Fast Track designated product candidate and expedite review of the application for a product candidate designated for priority review. Under the Fast Track program, the sponsor of a new drug candidate may request that FDA designate the drug candidate for a specific indication as a fast track product concurrent with, or after, the filing of the IND for the product candidate. FDA must determine if the candidate qualifies for fast track designation within 60 days of receipt of the sponsor's request. The Fast Track program and FDA's accelerated approval regulations, which are described in Subpart H of 21 CFR Part 314, provide for an earlier approval for a new product candidate that is (1) intended to treat a serious or life-threatening disease or condition; (2) generally provides a meaningful advantage over available therapies and (3) demonstrates an effect on either a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM, and is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. A surrogate endpoint is a laboratory measurement or physical sign used as an indirect or substitute measurement representing a clinically meaningful outcome. As a condition of approval, the FDA will require that a sponsor of a product candidate receiving accelerated approval diligently perform post-marketing studies to verify and describe the predicted effect on IMM or other clinical endpoint. The product may be subject to accelerated withdrawal procedures under certain circumstances. The Food and Drug Omnibus Reform Act of 2022 ("FDORA") was recently enacted, which included provisions related to the accelerated approval pathway. Pursuant to FDORA, the FDA is authorized to require a post-approval study to be underway prior to approval or within a specified time period following approval. FDORA also

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requires the FDA to specify conditions of any required post-approval study, which may include milestones such as a target date of study completion and requires sponsors to submit progress reports for required post-approval studies and any conditions required by the FDA not later than 180 days following approval and not less frequently than every 180 days thereafter until completion or termination of the study. FDORA enables the FDA to initiate enforcement action for the failure to conduct with due diligence a required post-approval study, including a failure to meet any required conditions specified by the FDA or to submit timely reports.

In addition to the Fast Track, accelerated approval and priority review programs discussed above, a sponsor may seek a breakthrough therapy designation. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or conditions, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. A breakthrough therapy designation conveys all of the Fast Track program features, as well as more intensive FDA guidance on an efficient drug development program and a commitment from FDA to involve senior managers and experienced review staff in a proactive collaborative, cross-disciplinary review.

Abbreviated New Drug Applications for Generic Drugs and 505(b)(2)NDAs

NDA applicants are required to list with the FDA each patent with claims covering the applicant's product or method of using the product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic or 505(b)(2) applicants in support of approval of an ANDA, or a 505(b)(2) application. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, preclinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way can often be substituted by pharmacists under prescriptions written for the original listed drug. A 505(b)(2) NDA is an application that contains full reports of investigations of safety and effectiveness but where some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. A 505(b)(2) applicant may be able to rely on published literature or on FDA's previous findings of safety and effectiveness for an approved drug. A 505(b)(2) NDA may be submitted for changes to a previously approved drug, including, for example, in the dosage form, route of administration, or indication.

The ANDA or 505(b)(2) applicant is required to make a certification to the FDA concerning any patents listed for the approved NDA product in the FDA's Orange Book. Specifically, the ANDA or 505(b)(2) applicant must certify that: (1) the required patent information has not been filed; (2) the listed patent has expired (3) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (4) the listed patent is invalid or will not be infringed by the new product. The ANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA labeling does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents, the ANDA or 505(b)(2) application will not be approved until all the listed patents claiming the referenced product have expired.

A certification that the ANDA or 505(b)(2) product will not infringe the already approved product's listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the ANDA or 505(b)(2) applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA or 505(b)(2) application has been received by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within forty-five days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) application until the earlier of thirty months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA or 505(b)(2) application will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of our drug candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of fourteen years from the product's approval date. The patent term restoration period is generally one-half the time between the effective date of an IND application and the submission date of an NDA or BLA plus the time between the submission date of an NDA or BLA and the approval of that application, except that this review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the

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patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, if available, we intend to apply for restorations of patent term for some of our currently owned patents beyond their current expiration dates, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA or BLA; however, there can be no assurance that any such extension will be granted to us.

Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA, or a 505(b)(2) NDA, submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA under 505(b)(1) of the FDCA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant Orphan Drug Designation to therapeutic candidates intended to treat a rare disease or condition, which is generally a disease or condition that affects either (1) fewer than 200,000 individuals in the U.S., or (2) more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making available in the U.S. a product candidate for this type of disease or condition will be recovered from sales in the U.S. for that product candidate. Orphan Drug Designation must be requested before submitting an NDA. We have received Orphan Drug Designation for KX2-361 for the treatment of gliomas and Oral Paclitaxel for the treatment of angiosarcomas. After the FDA grants Orphan Drug Designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan Drug Designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product candidate that has Orphan Drug Designation subsequently receives the first FDA approval for the disease for which it has such designation, the product candidate is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except under limited circumstances, for seven years. Orphan drug exclusivity, however, could also block the approval of one of our therapeutic candidates for seven years if a competitor obtains approval of the same drug for the same disease or condition as defined by the FDA or if our product candidate is determined to be contained within the competitor's product candidate for the same indication or disease. Orphan drug exclusivity does not prevent FDA from approving the same drug for a different disease or a different drug for the same disease.

Pediatric Exclusivity and Pediatric Use

Under the Best Pharmaceuticals for Children Act (BPCA), certain therapeutic candidates may obtain an additional six months of exclusivity if the sponsor submits information requested in writing by the FDA, referred to as a Written Request, relating to the use of the active moiety of the product candidate in children. Although the FDA may issue a Written Request for studies on either approved or unapproved indications, it may only do so where it determines that information relating to that use of a product candidate in a pediatric population, or part of the pediatric population, may produce health benefits in that population. This six-month exclusivity may be granted if an NDA or BLA sponsor submits pediatric data that fairly responds to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied. If the FDA determines that the studies fairly respond to the FDA's request and the studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity covering the product are extended by six months and, in the case of drug products approved via NDA, patent protection is also extended. In addition, the Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric studies for most therapeutic candidates, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safety and effectiveness of the product candidate for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product candidate is safe and effective. The FDA may grant a waiver or a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the product candidate is ready for approval for use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. The law requires the FDA to send a PREA Non-Compliance letter to sponsors who have failed to submit their pediatric assessments required under PREA, have failed to seek or obtain a deferral

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or deferral extension or have failed to request approval for a required pediatric formulation. It further requires the FDA to post the PREA Non-Compliance letter and sponsor's response.

Additional Controls for Biologics

To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend biologics licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases within the United States.

After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the lot manufacturing history and the results of all of the manufacturer's tests performed on the lot. The FDA may also perform certain confirmatory tests on lots of some products, such as viral vaccines, before allowing the manufacturer to release the lots for distribution. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products. As with drugs, after approval of a BLA, biologics manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval.

Post-Approval Requirements

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval in a supplemental NDA, or sNDA, or supplemental BLA, or sBLA. An sNDA must contain all of the information necessary to support the change. In the case of a new indication, that information usually consists of at least one clinical trial, and often more. Like an NDA or BLA, FDA determines whether the sNDA or sBLA is sufficiently complete to permit review before it files the sNDA or sBLA. FDA then reviews the sNDA or sBLA. Like an NDA or BLA, FDA can either approve the sNDA or sBLA or issue a complete response letter outlining the deficiencies in the sNDA or sBLA. In addition, the FDA may under some circumstances require testing and surveillance programs to monitor the effect of approved therapeutic products that have been commercialized, and the FDA under some circumstances has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

Any therapeutic products manufactured or distributed pursuant to FDA approvals for prescription drugs are subject to continuing regulation by the FDA, including, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•reporting and record-keeping requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•reporting of adverse experiences;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•providing the FDA with updated safety and efficacy information;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•product sampling and distribution requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•notifying the FDA and gaining its approval of specified manufacturing or labeling changes and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•complying with FDA promotion and advertising requirements, which include, among other things, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in or consistent with the product's approved labeling, limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet.

Therapeutic manufacturers and other entities involved in the manufacturing of approved therapeutic products are required to register their establishments with the FDA and obtain licenses in certain states and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with cGMP and other laws. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural, substantive and record-keeping requirements. In addition, changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require FDA approval before being implemented. FDA regulations would also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers used. Accordingly, manufacturers

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must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA-regulated products, including drugs and biologics, are required to register and disclose certain clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed under certain limited circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs. The government recently released a regulation and policy to expand and enhance the requirements related to registering and reporting the results of which may result in greater enforcement of these requirements in the future.

Regulation of Outsourcing Facilities

Pharmaceutical drug compounding is a practice in which a licensed pharmacist, a licensed physician, or in the case of an outsourcing facility, a person under the direct supervision of a licensed pharmacist, combines, mixes, or alters ingredients of a drug to create a medication. We have historically been engaged in the compounding of sterile drugs as an outsourcing facility registered with FDA under FDCA Section 503B. Title I of the Drug Quality and Security Act, the Compounding Quality Act, or CQA, allows a facility that compounds sterile drugs to register with FDA as an outsourcing facility. Once registered (which includes payment of an annual fee, among other requirements), an outsourcing facility must meet certain conditions in order to be statutorily exempt from the FDCA's new drug approval requirements, the requirement to label products with adequate directions for use, and certain product tracing and serialization requirements. Under the CQA, a drug must be lawfully compounded in compliance with the provisions set forth in Section 503B including FDA's cGMP regulations and related cGMP guidance for outsourcing facilities in order to remain eligible for the statutory exemptions. The outsourcing facility must also bi-annually report specific information about the products that it compounds, including a list of all of the products it compounded during the previous six months pursuant to Section 503B(b)(2). The source of any bulk substance active ingredient used in compounding must be a Section 510-registered manufacturer, and the substances must be accompanied by a Certificate of Analysis. If the outsourcing facility compounds using bulk drug substances, the bulk drug substances must either appear on FDA's "interim" Category 1 list of bulk substances that may be used in compounding under Section 503B, which are bulk drug substances for which FDA has determined there is a clinical need for use in compounding. Drugs may also be compounded if an FDA-approved drug product appears on FDA's published drug shortage list.

FDA has not yet finalized its list of bulk drug substances for which there is a clinical need. Provided certain conditions are met, FDA will exercise enforcement discretion concerning interim Category 1 substances pending evaluation of the substances for inclusion on FDA's final list of bulk drug substances for which there is a clinical need.

In addition, an outsourcing facility must meet other conditions described in the CQA, including reporting adverse events pursuant to Section 503B(b)(5) of the FDCA, and labeling its compounded products with certain information pursuant to Section 503B(a)(10). Outsourcing facilities are prohibited from transferring or otherwise selling compounded drugs through a wholesale distributor, or from compounding drugs that are essentially copies of commercially available, FDA-approved drugs. Outsourcing facilities are subject to FDA inspection, and FDA conducts inspections on a risk-based frequency under Section 503B(b)(4).

Pharmaceutical Coverage, Reimbursement and Pricing

Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval or compound. In the U.S., sales of any products for which we may compound or receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third-party payors. Third-party payors include managed care providers, private health insurers and other organizations as well as government payors such as Medicare, Medicaid, TRICARE and the Department of Veterans Affairs.

The process for determining whether a payor will provide coverage for a product is typically separate from the process for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list or formulary which might not include all of the FDA-approved products for a particular indication. Also, third-party payors may refuse to include a particular branded drug on their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. However, under Medicare Part D—Medicare's outpatient prescription drug benefit—there are protections in place to ensure coverage and reimbursement for oncology products and all Part D prescription drug plans are required to cover substantially all anti-cancer agents. However, a payor's decision to provide coverage for a product does not imply that an adequate reimbursement rate will be available. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

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Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of any products, in addition to the costs required to obtain regulatory approvals. Our drug candidates may not be considered medically necessary or cost-effective. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover an approved product as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.

<u>Government Programs</u>

<u>Medicaid, the 340B Drug Pricing Program, and Medicare</u>

Federal law requires that a pharmaceutical manufacturer, as a condition of having its products receive federal reimbursement under Medicaid and Medicare Part B, must pay rebates to state Medicaid programs for all units of its covered outpatient drugs dispensed to Medicaid beneficiaries and paid for by a state Medicaid program under either a fee-for-service arrangement or through a managed care organization. This federal requirement is effectuated through a Medicaid drug rebate agreement between the manufacturer and the Secretary of Health and Human Services. The Centers for Medicare & Medicaid Services ("CMS") administers the Medicaid drug rebate agreements, which provide, among other things, that the manufacturer will pay rebates to each state Medicaid agency on a quarterly basis and report certain price information on a monthly and quarterly basis. The rebates are based on prices reported to CMS by manufacturers for their covered outpatient drugs. For innovator products, that is, drugs that are marketed under approved NDAs or BLAs, the basic rebate amount is the greater of 23.1% of the average manufacturer price ("AMP") for the quarter or the difference between such AMP and the best price for that same quarter. The AMP is the weighted average of prices paid to the manufacturer (1) directly by retail community pharmacies and (2) by wholesalers for drugs distributed to retail community pharmacies. The best price is essentially the lowest price available to non-governmental entities. Innovator products are also subject to an additional rebate that is based on the amount, if any, by which the product's current AMP has increased over the baseline AMP, which is the AMP for the first full quarter after launch, adjusted for inflation. For non-innovator products, generally generic drugs marketed under approved ANDAs, the basic rebate amount is 13% of the AMP for the quarter. Non-innovator products are also subject to an additional rebate. The additional rebate is similar to that discussed above for innovator products, except that the baseline AMP quarter is the fifth full quarter after launch (for non-innovator multiple source drugs launched on April 1, 2013 or later) or the third quarter of 2014 (for those launched before April 1, 2013). To date, the rebate amount for a drug has been capped at 100% of the AMP; however, effective January 1, 2024, this cap will be eliminated, which means that a manufacturer could pay a rebate amount on a unit of the product that is greater than the average price the manufacturer receives for the product.

The terms of participation in the Medicaid drug rebate program impose an obligation to correct the prices reported in previous quarters, as may be necessary. Any such corrections could result in additional or lesser rebate liability, depending on the direction of the correction. In addition to retroactive rebates, if a manufacturer were found to have knowingly submitted false information to the government, federal law provides for civil monetary penalties for failing to provide required information, late submission of required information, and false information.

A manufacturer must also participate in a federal program known as the 340B drug pricing program in order for federal funds to be available to pay for the manufacturer's products under Medicaid and Medicare Part B. Under this program, the participating manufacturer agrees to charge certain federally funded clinics and safety net hospitals no more than an established discounted price for its covered outpatient drugs, including biologics. The formula for determining the discounted price is defined by statute and is based on the AMP and the unit rebate amount as calculated under the Medicaid drug rebate program, discussed above. Manufacturers are required to report pricing information to the Health Resources and Services Administration ("HRSA") on a quarterly basis. HRSA has also issued regulations relating to the calculation of the ceiling price as well as imposition of civil monetary penalties for each instance of knowingly and intentionally overcharging a 340B covered entity.

Federal law also requires that manufacturers report data on a quarterly basis to CMS regarding the pricing of products that are separately reimbursable under Medicare Part B. These are generally drugs or biologics, such as injectable products, that are administered "incident to" a physician service and are not generally self-administered. The pricing information submitted by manufacturers is the basis for reimbursement to physicians and suppliers for drugs covered under Medicare Part B. As with the Medicaid drug rebate program, federal law provides for civil monetary penalties for failing to provide required information, late submission of required information, and false information.

Medicare Part D provides prescription drug benefits for seniors and people with disabilities. Medicare Part D enrollees once had a gap in their coverage (between the initial coverage limit and the point at which catastrophic coverage begins) where Medicare did not cover their prescription drug costs, known as the coverage gap. However, beginning in by 2019, Medicare Part D beneficiaries paid 25% of brand drug costs after they reached the initial coverage limit - the same percentage they were responsible for before they reached that limit - thereby closing the coverage gap from the enrollee's point of view. Most of the cost of closing the coverage gap is being borne by innovator companies and the government through subsidies. Each manufacturer of a drug approved under an NDA or BLA is required to enter into a Medicare Part D coverage gap discount agreement and provide a 70% discount on those drugs

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dispensed to Medicare Part D enrollees in the coverage gap, in order for its drugs to be reimbursed by Medicare Part D. Beginning in 2025, the Inflation Reduction Act of 2022 ("IRA") eliminates the coverage gap under Medicare Part D by significantly lowering the enrollee maximum out-of-pocket cost and requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of Part D enrollees' prescription costs for brand drugs below the out-of-pocket maximum, and 20% once the out-of-pocket maximum has been reached. Although these discounts represent a lower percentage of enrollees' costs than the current discounts required below the out-of-pocket maximum (that is, in the coverage gap phase of Part D coverage), the new manufacturer contribution required above the out-of-pocket maximum could be considerable for very high-cost patients and the total contributions by manufacturers to a Part D enrollee's drug expenses may exceed those currently provided.

The IRA will also allow the U.S. Department of Health and Human Services ("HHS") to negotiate the selling price of certain drugs and biologics that CMS reimburses under Medicare Part B and Part D, although only high-expenditure single-source drugs that have been approved for at least 7 years (11 years for biologics) can be selected by CMS for negotiation, with the negotiated price taking effect two years after the selection year. The negotiated prices, which will first become effective in 2026, will be capped at a statutory ceiling price. Beginning in October 2023, the IRA will also penalize drug manufacturers that increase prices of Medicare Part B and Part D drugs at a rate greater than the rate of inflation.

<u>Federal Contracting/Pricing Requirements</u>

Manufacturers are also required to make their covered drugs, which are generally drugs approved under NDAs and BLAs, available to authorized users of the Federal Supply Schedule ("FSS") of the General Services Administration. The law also requires manufacturers to offer deeply discounted FSS contract pricing for purchases of their covered drugs by the Department of Veterans Affairs, the Department of Defense ("DoD"), the Coast Guard, and the Public Health Service (including the Indian Health Service) in order for federal funding to be available for reimbursement or purchase of the manufacturer's drugs under certain federal programs. FSS pricing to those four federal agencies for covered drugs must be no more than the Federal Ceiling Price ("FCP"), which is at least 24% below the Non-Federal Average Manufacturer Price ("Non-FAMP") for the prior year. The Non-FAMP is the average price for covered drugs sold to wholesalers or other middlemen, net of any price reductions.

The accuracy of a manufacturer's reported Non-FAMPs, FCPs, or FSS contract prices may be audited by the government. Among the remedies available to the government for inaccuracies is recoupment of any overcharges to the four specified federal agencies based on those inaccuracies. If a manufacturer were found to have knowingly reported false prices, in addition to other penalties available to the government, the law provides for civil monetary penalties of $100,000 per incorrect item. Finally, manufacturers are required to disclose in FSS contract proposals all commercial pricing that is equal to or less than the proposed FSS pricing, and subsequent to award of an FSS contract, manufacturers are required to monitor certain commercial price reductions and extend commensurate price reductions to the government, under the terms of the FSS contract Price Reductions Clause. Among the remedies available to the government for any failure to properly disclose commercial pricing and/or to extend FSS contract price reductions is recoupment of any FSS overcharges that may result from such omissions.

<u>Tricare Retail Pharmacy Network Program</u>

The DoD provides pharmacy benefits to current and retired military service members and their families through the Tricare healthcare program. When a Tricare beneficiary obtains a prescription drug through a retail pharmacy, the DoD reimburses the pharmacy at the retail price for the drug rather than procuring it from the manufacturer at the discounted FCP discussed above. In order for the DoD to realize discounted prices for covered drugs (generally drugs approved under NDAs or BLAs), federal law requires manufacturers to pay refunds on utilization of their covered drugs sold to Tricare beneficiaries through retail pharmacies in DoD's Tricare network. These refunds are generally the difference between the Non-FAMP and the FCP and are due on a quarterly basis. Absent an agreement from the manufacturer to provide such refunds, DoD will designate the manufacturer's products as Tier 3 (non-formulary) and require that beneficiaries obtain prior authorization in order for the products to be dispensed at a Tricare retail network pharmacy. However, refunds are due whether or not the manufacturer has entered into such an agreement.

<u>Branded Pharmaceutical Fee</u>

A branded pharmaceutical fee is imposed on manufacturers and importers of branded prescription drugs, generally drugs approved under NDAs or BLAs. The fee is $2.8 billion in 2019 and subsequent years. This annual fee is apportioned among the participating companies based on each company's sales of qualifying products to or utilization by certain U.S. government programs during the preceding calendar year. The fee is not deductible for U.S. federal income tax purposes. Utilization of generic drugs, generally drugs approved under ANDAs, is not included in a manufacturer's sales used to calculate its portion of the fee.

<u>The ACA</u>

Effective in 2010, the Affordable Care Act ("ACA") made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers' rebate liability by raising the minimum basic Medicaid rebate on most branded prescription drugs from 15.1% of average manufacturer price, or AMP, to 23.1% of AMP, and adding a new rebate calculation for "line

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extensions" (i.e., new formulations, such as extended release formulations) of solid oral dosage forms of branded products, as well as potentially impacting their rebate liability by modifying the statutory definition of AMP. The ACA also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization as of 2010 and by expanding the population potentially eligible for Medicaid drug benefits. CMS will expand Medicaid rebate liability to the territories of the U.S. as well, beginning in 2023, if the territories elect to enroll in the Medicaid Drug Rebate Program. In addition, the ACA provides for the public availability of retail survey prices and certain weighted average AMPs under the Medicaid program. The implementation of this requirement by CMS may also provide for the public availability of pharmacy acquisition cost data, which could influence our decisions related to setting product prices and offering related discounts.

With regard to the 340B program, effective in 2010, the ACA expanded the types of entities eligible to receive discounted 340B pricing; although, under the current state of the law, with the exception of children's hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs when used for the orphan indication.

The adoption of government controls and measures and tightening of restrictive policies in jurisdictions with existing controls and measures, could also limit payments for pharmaceuticals.

The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Generic Drugs

Given that we manufacture and market generic drug products, our business may be impacted by laws and policies governing the coverage, pricing and reimbursement of generic drugs. Generic drugs are the same API as initial innovator medicines and are typically more affordable in comparison to the innovator's products. Sales of generic medicines have benefitted from policies encouraging generic substitution and a general increasing acceptance of generic drugs on the part of healthcare insurers, consumers, physicians and pharmacists. However, while the U.S. generics market is one of the largest in the world, the recent trend of rising generic drug prices has drawn scrutiny from the U.S. government. Specifically, generic drug pricing is the subject of Congressional inquiries and media attention, and many generic drug manufacturers are the targets of government investigations.

In addition, like branded drug manufacturers, generic drug manufacturers are now required to pay an inflation penalty if price increases on generic drugs exceed the rate of inflation.

Also, the ACA revised the methodology for setting Medicaid generic drug reimbursement in order to further limit the reimbursement of generic drugs under the Medicaid program. Specifically, the Federal Upper Limit ("FUL"), which establishes the government's maximum payment amount for certain generic drugs, is no less than 175% of the weighted average of the most recently reported monthly AMPs for pharmaceutically and therapeutically equivalent multiple source drug products that are available for purchase by retail community pharmacies on a nationwide basis. Similarly, reimbursement for generic drugs is also limited in Medicare Part B, as the Average Sales Price (the metric upon which reimbursement is based or ASP) for multiple-source drugs included within the same multiple-source drug billing and payment code is the volume-weighted average of the various manufacturers' ASPs for those drug products.

Reimbursement for Compounded Drugs

Given that we intend to compound and sell compounded products, some of which may include APIs that we manufacture, our business may be impacted by the downstream coverage and reimbursement of compounded products. Generally, federal reimbursement is available for compounded drugs but is typically dependent upon whether the individual ingredients or bulk drug substances that make up the compounded product are FDA-approved. Certain of our API products have not yet received FDA approval.

There is a national payment policy for compounded drugs under Medicare Part B, but the policy is unclear because it does not stipulate whether payment is available for ingredients that are bulk drug substances, which are generally not FDA-approved. Under Medicare Part B, claims for compounded drugs are typically submitted using a billing code for "not otherwise classified drugs," and CMS contractors who process Part B claims may conduct further reviews of outpatient claims to determine whether the drug billed under a nonspecific billing code is a compounded drug and to identify its ingredients in order to make payment decisions. However, CMS contractors who process Part B claims do not always collect information on the FDA-approval status of drug ingredients, and, therefore, payment may be made for ingredients that are not FDA-approved products. Therefore, there is uncertainty as to whether Medicare payments for compounded drugs are consistent with the Medicare Part B policy.

Under Medicare Part D, federal payments are not available for non-FDA-approved products—including bulk drug substances—and inactive ingredients used to make a compounded drug. Insurers that offer Medicare Part D benefits and Part D-only sponsors, generally, pay pharmacies for each ingredient in the compounded drug that is an FDA-approved product and is otherwise eligible for reimbursement under Part D. However, with respect to non-FDA approved bulk drug substances, insurers that offer Medicare Part D

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benefits and Part D-only sponsors may choose to pay for such bulk substances but may not submit these payments as part of the Part D transaction data CMS uses to determine federal payments to Part D plans.

Healthcare Fraud and Abuse Laws and Compliance Requirements

We are subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may impact, among other things, our proposed sales and marketing programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration (a term interpreted broadly to include anything of value, including, for example, gifts, discounts, chargebacks, and credits), directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid or other third-party payors that are false or fraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money owed to the federal government;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•provisions of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes, referred to as the "HIPAA All-Payor Fraud Prohibition," that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the federal transparency laws, including the federal Physician Payment Sunshine Act, which was part of the ACA, that require manufacturers of certain drugs and biologics to track and annually report payments and other transfers of value they make to U.S. physicians, physician assistants, certain types of advance care nurses, and teaching hospitals, as well as physician ownership and investment interests in the manufacturer, and that such information is subsequently made publicly available in a searchable format on a CMS website;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state transparency reporting and compliance laws; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and which may not have the same effect, thus complicating compliance efforts.

The ACA broadened the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and the applicable criminal healthcare fraud statutes contained within 42 U.S.C. § 1320a-7b. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.

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The federal False Claims Act prohibits anyone from, among other things, knowingly presenting, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services that are false or fraudulent. Although we would not submit claims directly to payors, manufacturers can be held liable under these laws if they are deemed to "cause" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. For example, pharmaceutical companies have been prosecuted under the federal False Claims Act in connection with their alleged off-label promotion of drugs, purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes, and allegedly providing free product to customers with the expectation that the customers would bill federal health care programs for the product. Penalties for a False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim, the potential for exclusion from participation in federal healthcare programs, and, although the federal False Claims Act is a civil statute, conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. In addition, private individuals have the ability to bring actions under the federal False Claims Act, and certain states have enacted laws modeled after the federal False Claims Act.

New Legislation and Regulations

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the testing, approval, manufacturing, marketing, coverage and reimbursement of products regulated by the FDA or other government agencies. In addition to new legislation, FDA and healthcare fraud and abuse and coverage and reimbursement regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products. Most recently, the IRA made significant changes to reimbursement under Medicare Part B and Part D, among other things. Additional reforms could have an adverse effect on anticipated revenues from therapeutic candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop therapeutic candidates. However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.

Furthermore, in the U.S., the health care industry is subject to political, economic and regulatory influences. Initiatives to reduce the federal budget and debt and to reform health care coverage are increasing cost-containment efforts. We anticipate that federal agencies, Congress, state legislatures and the private sector will continue to review and assess alternative health care benefits, controls on health care spending, and other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit coverage or the amounts that federal and state governments will pay for health care products and services, which could also result in reduced demand for our products or additional pricing pressures and limit or eliminate our spending on development projects and affect our ultimate profitability. We are not able to predict whether further legislative changes will be enacted or whether FDA or healthcare fraud and abuse or coverage and reimbursement regulations, guidance, policies or interpretations will be changed or what the effect of such changes, if any, may be.

Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act of 1977 ("FCPA") prohibits any U.S. individual or business from corruptly offering, paying, promising or authorizing the provision of anything of value, directly or indirectly, to any foreign official, foreign political party or official thereof, or candidate for foreign political office to obtain or retain business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with accounting provisions requiring the issuer to maintain books and records that accurately and fairly reflect all transactions of the issuer and its controlled subsidiaries and to devise and maintain an adequate system of internal accounting controls.

Environment

We are subject to inspections by the FDA for compliance with cGMP and other U.S. regulatory requirements, including U.S. federal, state and local regulations regarding environmental protection and hazardous and controlled substance controls, among others. Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. We have incurred, and may continue to incur, significant expenditures to ensure that we are in compliance with these laws and regulations. We would be subject to significant penalties for failure to comply with these laws and regulations.

**Rest of the World Regulation** 

For countries outside of the U.S., the requirements governing the conduct of clinical trials, drug licensing, pricing and reimbursement vary from country to country. In all cases the clinical trials must be conducted in accordance with GCP requirements and the applicable regulatory requirements and the ethical principles having their origin in the Declaration of Helsinki.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

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**Human Capital**

As of December 31, 2022, we had 269 full-time employees and 11 part-time employees. Of these, 85 are engaged in full-time research and development and laboratory operations, 101 are engaged in manufacturing activities and 94 are engaged in full-time selling, general and administrative functions. Following the exit from the 503B sterile compounding business of APS, we expect to have 175 full-time employees and 8 part-time employees.

As of December 31, 2022, approximately 93% of our personnel were located in the U.S. and approximately 7% were located in Asia, Latin America and Europe. We have also engaged and may continue to engage independent consultants and contractors to assist us with our operations. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any employment related work stoppages, and we consider our relations with our employees to be good.

Supporting our people is a fundamental value for Athenex. We believe the Company's success depends on its ability to attract, develop and retain key personnel. We monitor our compensation and total reward programs closely and provide a competitive mix of compensation and benefits for all employees. This includes competitive salaries, bonus opportunities and long-term incentives in the form of stock options and other equity awards for the majority of our employees. Benefits include opportunities for 401(k) matches, insurance covering health, dental and life, and HSA contributions.

Athenex maintains a rich diverse culture. We believe this diversity is an asset and with the skills, experience and industry knowledge of our employees significantly benefit our operations and performance. We believe in a culture of equity, diversity and inclusion. We are also committed to advancing safe and respectful work environments. We recognize and value that our employees can make important contributions to our business based on their individual talents, backgrounds, and expertise, allowing everyone to thrive personally and professionally. We strive for a diverse workforce at every level of the company and its board of directors.

**Segment, Corporate and Financial Information** 

We manage our operations and allocate resources in line with our two distinct reportable segments: (1) our Oncology Innovation Platform, dedicated to the research and development of our proprietary drugs and (2) our Commercial Platform, focused on the sales and marketing of our specialty drugs and the market development of our proprietary drugs. We previously operated a third distinct reportable segment, our Global Supply Chain Platform, dedicated to providing a stable and efficient supply of active pharmaceutical ingredients ("API") for our clinical and commercial efforts. The components within this reportable segment were sold or otherwise discontinued during 2022.

Athenex has operations with offices and facilities in Buffalo and Clarence, New York; Cranford, New Jersey; Houston, Texas; Chicago, Illinois; Hong Kong; Guatemala City, Guatemala and Buenos Aires, Argentina. Under the Alliance Agreement with FSMC, we are obligated to spend $100.0 million in the Buffalo area over the initial 10-year term of the lease and an additional $100.0 million during the second 10-year term if we elect to extend the lease. We also committed to hiring 250 permanent employees in the Buffalo area within the first 5 years of completion of the project. As of December 31, 2022, we had hired 36 permanent employees in the Buffalo area. In the event we are unable to hire enough employees in the Buffalo area or meet our other obligations under this agreement, FSMC may terminate the agreement and we may have to renegotiate our lease or relocate our North American headquarters.

Financial information regarding our operations, assets and liabilities, including our net loss for the years ended December 31, 2022 and 2021 and our total assets as of December 31, 2022 and 2021, is included in our Consolidated Financial Statements in Item 8 of this Annual Report.

We were originally formed under the laws of the state of Delaware in November 2003 under the name Kinex Pharmaceuticals, LLC. In December 2012, we converted from a limited liability company to a Delaware corporation, Kinex Pharmaceuticals, Inc. In August 2015, we changed our name to Athenex, Inc. Our principal executive offices are located at 1001 Main Street, Suite 600, Buffalo, New York 14203, and our telephone number is (716) 427-2950. Our website address is <u>www.athenex.com</u>. Information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report, and you should not consider information on our website to be part of this Annual Report.

**Available Information**

We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission ("SEC"). Our filings with the SEC are available on the SEC's website at www.sec.gov<u>.</u> You may also access our press releases, financial information and reports filed with the SEC (for example, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those Forms) on our website under the "Investor Relations" tab. Copies of any documents on our website are available without charge, and reports filed with or furnished to the SEC will be available as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.

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**Item 1A. Risk Factors.**

Investing in our common stock involves a high degree of risk. You should consider carefully the following risk factors, as well as the other information in this report, including our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations", before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition and results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment.

**Risks Related to Our Financial Position and Need for Additional Capital** 

**We have incurred net losses every year since our inception and anticipate that we will continue to incur net losses for the foreseeable future, and as a result, our management has identified and our auditors agreed that there is a substantial doubt about our ability to continue as a going concern.** 

Investment in pharmaceutical product development is highly speculative because it entails substantial upfront costs and expenses and significant risk that a drug candidate will fail to gain regulatory approval or become commercially viable. Since our formation, we have relied on a combination of public and private securities offerings, public-private partnerships, the issuance of convertible notes and public grants to fund our operations. We have devoted most of our financial resources to research and development, including our non-clinical development activities and clinical trials, and only one of the product candidates we developed has been commercialized to date. We have not generated substantial revenue from product sales to date, and we continue to incur significant development and other expenses related to our ongoing operations. As a result, we incurred losses in the last two fiscal years. For the years ended December 31, 2022 and 2021, we reported net losses of $104.4 million and $202.0 million, respectively, and had an accumulated deficit of $1,016.8 million as of December 31, 2022. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from selling, general and administrative expenses associated with our operations.

We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we pivot to focus on the cell therapy platform and continue our development of, and seek regulatory approvals for, our product candidates. Because none of the potential product candidates in the cell therapy platform were as advanced in the review process as Oral Paclitaxel in the Orascovery platform before we received the CRL, we expect to continue to incur losses for longer than initially anticipated. Typically, it takes many years to develop a new drug before it is available for treating patients. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses, our ability to generate revenue and the timing and amount of milestones, payments due pursuant to our financing arrangements, and other required payments to third parties in connection with our potential future arrangements with third parties. If any of our drug candidates fail in clinical trials or do not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our stockholders' equity and working capital.

We expect our research and development expenses to continue to be significant in connection with our continued investment in our drug candidates and our ongoing and planned clinical trials for our drug candidates. In addition, as a public company, we incur additional costs associated with operating as a public company. As a result, we expect to continue to incur significant operating losses and negative cash flows from operations for the foreseeable future. These losses have had and will continue to have a material adverse effect on our stockholders' equity, financial position, cash flows and working capital.

The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business or force us to seek bankruptcy protection.

**Our strategic pivot to focus on our cell therapy platform and our disposal of non-core assets may not result in anticipated savings, could result in total costs and expenses that are greater than expected, could make it more difficult to retain qualified personnel and may significantly disrupt our operations, each of which could have a material adverse effect on our business.**

In 2022, we began a strategic pivot to become a cell therapy company and monetized non-core assets to raise capital to support the development of our cell therapy platform. We sold (i) certain of our rights to payments under the Almirall License Agreement for Klisyri, (ii) our rights to the Dunkirk Facility, and (iii) our interest in our API manufacturing business in China. We also exited the APS 503B sterile compounding business. The process of monetizing these assets has been disruptive to our daily operating activities

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and resulted in a shift in focus of our business. To the extent we are able to monetize other non-core assets, the attention of our management team may be diverted and our operating activities may be further disrupted.

There can be no assurance that our divestiture of these assets will be successful, or that the sale of any additional non-core assets will raise sufficient funds for us to continue our business. We may not realize in full the anticipated benefits, savings and improvements in our strategic pivot efforts due to unforeseen difficulties, delays, disruptions or unexpected costs. The costs of disposing of the assets may exceed the cost savings we generate. Any cost-saving measures we implement, including further workforce reductions, may distract remaining employees from our business, cause unplanned employee attrition, reduce employee morale and productivity, disrupt our disclosure controls and procedures and internal control over financial reporting, yield other unanticipated consequences and damage our reputation.

There can be no assurance that our focus on our cell therapy platform will be successful, result in the advancement of a proprietary drug product, or yield any revenue in the future. The drug development process is expensive, can take many years to complete, and its outcome is inherently uncertain. We may suffer significant additional setbacks in focusing on our cell therapy platform and may never become profitable. Any of these factors could have a material adverse effect on our business.

**Our financial results are subject to volatility related to our revenue and expenses, and we have not yet been and may never become profitable.** 

Our financial results are subject to volatility based on a number of factors, including the timing of milestone licensing fees that we receive or are required to pay, the amount and timing of our debt repayment obligations, the change in product types sold by APD and whether those products are in high demand, our ability to predict the products in high demand in the market, competition in the market for generic drugs. Our ability to generate revenue and become profitable depends upon our ability to successfully complete the development of, and obtain the necessary regulatory approvals for, our proprietary drug candidates, which may not occur for many years. Our revenue and gross margins are also subject to fluctuation due to changes in APD product mix and the expenses we incur to continue our research and development and commercialization efforts.

We expect to continue to incur substantial losses through the projected development of our drug candidates. None of our current proprietary drug candidates have been approved for marketing in the U.S. or any other jurisdiction, and they may never receive such approval. Our ability to achieve revenue and profitability is dependent on our ability to complete the development of our proprietary drug candidates, obtain necessary regulatory approvals, and have our proprietary drugs manufactured and successfully marketed.

Even if we receive regulatory approval of our proprietary drug candidates for commercial sale, we do not know when they will generate revenue, if at all. Our ability to generate revenue from product sales of our drug candidates depends on a number of factors, including our ability to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•complete research regarding, and non-clinical and clinical development of, our proprietary drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•formulate appropriate dosing protocols, drug preparations and capsule encapsulation methods;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•obtain regulatory approvals and marketing authorizations for drug candidates for which we complete clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•develop a sustainable and scalable manufacturing processes, including establishing and maintaining commercially viable supply relationships with third parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•compliantly launch and commercialize proprietary drug candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•obtain market acceptance of our proprietary drug candidates and their routes of administration as viable treatment options;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•obtain optimal pricing for products in key global markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•obtain adequate coverage and reimbursement for our proprietary drug candidates from government (including U.S. federal healthcare programs) and private payors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•identify, assess, acquire and/or develop new proprietary drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•address any competing technological and market developments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•negotiate and maintain favorable terms in any collaboration, licensing or other arrangements into which we may enter;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•maintain, protect and expand our portfolio of intellectual property rights, including patents, trade secrets and know-how;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•successfully commercialize our U.S. specialty pharmaceutical products; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•attract, hire and retain qualified personnel.

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In addition, because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of increased expenses, or if we will be able to achieve profitability. Our expenses could increase beyond expectations if we are required by the FDA or regulatory authorities in other jurisdictions to perform studies in addition to those that we currently anticipate. For example, we will incur additional expenses to re-engage with the FDA by discussing the data from the I-SPY2 TRIAL with respect to our mBC NDA, but we cannot assure you that those discussions will be more successful than the NDA for which we received the CRL.

If we fail to become profitable, we may be unable to continue our operations at planned levels and be forced to further reduce our operations or cease operations. Failure to become profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations. A decline in the value of our company could cause you to lose all or part of your investment.

**We will need to obtain additional financing to fund our operations, and if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our drug candidates or continue to operate our business.** 

To date, we have financed our operations with the proceeds from debt financings, public and private securities offerings, public-private partnerships, the issuance of convertible notes and public grants, If we are unable to monetize assets or raise additional capital, we believe that the existing cash and cash equivalents, restricted cash, and short-term investments will fund operations into the second quarter of 2023 and will not be sufficient to fund our operations through the next twelve months beyond the date of the issuance of our consolidated financial statements. Our drug candidates require substantial investment for clinical studies and regulatory review before they can provide us with any product sales revenue, if any. Our operations have consumed substantial amounts of cash since inception. The net cash used for our operating activities from continuing operations was $64.3 million, and $129.8 million for the years ended December 31, 2022 and 2021, respectively. We expect to continue to spend substantial amounts on advancing the clinical development of our proprietary drug candidates. Moreover, our research and development expenses and other contractual commitments are substantial and may increase in the future.

If we are unable to raise additional capital, we would not have sufficient cash on hand or available liquidity that can be utilized to repay our outstanding debt if Oaktree Fund Administration, LLC as an administrative agent, and the lenders party thereto (collectively, "Oaktree") declares the amounts due under the senior secured loan agreement and related security agreements, as amended, (the "Senior Credit Agreement") immediately due and payable. We do not have access to additional capital under the Senior Credit Agreement. We could spend our available financial resources much faster than expected and may need to raise additional funds sooner than anticipated. If we are unable to monetize assets or raise capital when needed or on attractive terms, we will be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Our inability to obtain additional funding when needed could seriously harm our business or make it impossible for us to continue to operate our business, and may cause us to seek bankruptcy protection.

**We may not be able to repay, refinance, or restructure our substantial indebtedness owed to our senior secured lender, which would have a material adverse effect on our financial condition and may cause us to seek bankruptcy protection.**

We anticipate that we will need to raise a significant amount of debt or equity capital in the future in order to repay our outstanding debt obligations owed under the Senior Credit Agreement and to continue to fund our operations. We are required to make quarterly amortizing payments until the maturity date of June 19, 2026, when then the remaining balance of the principal plus accrued and unpaid interest will be due. If we are unable to raise sufficient capital to repay these obligations and we are otherwise unable to extend the maturity dates or refinance these obligations, we would be in default. On March 7 and March 13, 2023, we received notices of certain alleged defaults and reservations of rights from Oaktree related to the Senior Credit Agreement. The alleged defaults relate to (i) the Company exceeding the $10.0 million threshold for incurring additional indebtedness by having accounts payable owed to counterparties overdue by more than 90 days, (ii) the Company's obligation to provide notice to Oaktree related to the foregoing, and (iii) the Company's obligation to provide notice to Oaktree regarding the recent reverse stock split. Upon the occurrence of an Event of Default, Oaktree has the right to accelerate all amounts outstanding under the Senior Credit Agreement, in addition to other remedies available to it as a secured creditor of ours. If Oaktree accelerates the maturity of the indebtedness under the Senior Credit Agreement, we do not have sufficient capital available to pay the amounts due on a timely basis, if at all, and there is no guarantee that we would be able to repay, refinance or restructure the payments due under the Senior Credit Agreement. In addition, an Event of Default under the Senior Credit Agreement may trigger cross-default under our other agreements, , which could increase our obligations or reduce our rights under those agreements of the Company. The Company responded to Oaktree, including grounds upon which the Company disputes each of the alleged defaults. The Company has not reached a mutual agreement with Oaktree on this matter.

We cannot provide any assurances that we will be able to raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise refinance these obligations. If we are unable to monetize assets or raise additional capital, we may breach additional financial covenants under the Senior Credit Agreement. The outstanding principal balance under the Senior Credit Agreement was $44.7 million as of December 31, 2022. If we are unable to monetize assets or raise additional capital, we would not have sufficient cash on hand or available liquidity that can be utilized to repay the outstanding debt if

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Oaktree accelerated the maturity of all amounts outstanding under the Senior Credit Agreement. Oaktree has the right to exercise its rights and remedies to collect, which includes foreclosing on our assets if we are unable to pay the amounts due. Accordingly, a default leading to Oaktree accelerating the maturity of the indebtedness under the Senior Credit Agreement would have a material adverse effect on our business and, if Oaktree exercises its rights and remedies, we would likely be forced to seek bankruptcy protection.

**Covenants in the agreements governing our existing debt agreements restrict the manner in which we conduct our business.**

The Senior Credit Agreement contains various covenants that limit, subject to certain exemptions, our ability and/or our certain of our subsidiaries' ability to, among other things, incur additional indebtedness or liens; make investments; consummate business combinations such as mergers and dispositions; prepay other indebtedness; apply the funds raised by monetizing non-core assets to our operations without restrictions; and to declare dividends and other distributions, subject to certain exceptions, including specific exceptions with respect to product commercialization and development activities. For example, when we have been able to monetize our non-core assets, we have been required to make mandatory prepayments of principal, accrued and unpaid interest, and certain fees to Oaktree in addition to the quarterly amortization payments due under the terms of the Senior Credit Agreement. In addition, we received a notice of default and reservation of rights from Oaktree related to incurring additional indebtedness by having accounts payable owed to counterparties and overdue by more than 90 days in excess of the threshold in the Senior Credit Agreement. Oaktree has the right to accelerate all amounts outstanding under the Senior Credit Agreement, in addition to other remedies available to it as a secured creditor of ours.

The Senior Credit Agreement contains certain financial covenants, including, among other things, maintenance of minimum liquidity and a minimum revenue test, measured quarterly until the last day of the second consecutive fiscal quarter where the consolidated leverage ratio does not exceed 4.5 to 1, provided that thereafter we cannot allow our consolidated leverage ratio to exceed 4.5 to 1, measured quarterly. The Senior Credit Agreement requires that we maintain a minimum liquidity amount in cash or permitted cash equivalent investments of $10.0 million. Our obligations under the Senior Credit Agreement are guaranteed by certain of our existing domestic subsidiaries and subsequently acquired or organized subsidiaries subject to certain exceptions. Our obligations under the Senior Credit Agreement and the related guarantees thereunder are secured, subject to customary permitted liens and other agreed upon exceptions, by (i) a pledge of all of the equity interests of our direct subsidiaries, and (ii) a perfected security interest in all of our tangible and intangible assets.

The restrictions contained in our Senior Credit Agreement governing our debt could adversely affect our ability to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•finance our operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•make needed capital expenditures;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•dispose of certain of our assets without consent of the lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•make strategic acquisitions or investments or enter into alliances;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•withstand a future downturn in our business or the economy in general;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•engage in business activities, including future opportunities, that may be in our interest; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•plan for or react to market conditions or otherwise execute our business strategies.

A breach of any of these covenants, subject to certain cure rights of the Company, could result in an additional default under the agreements governing our debt. Further, additional indebtedness that we incur in the future may subject us to further covenants. If a default under any such debt agreement is not cured or waived, the default could result in the acceleration of debt, which could require us to repay debt prior to the date it is otherwise due and that could adversely affect our financial condition. If Oaktree accelerates the maturity of indebtedness under the Senior Credit Agreement, the lenders may seek repayment through our subsidiary guarantors or by executing on the security interest granted pursuant to the Senior Credit Agreement and related security agreements. If we are unable to monetize assets or raise additional capital, we may breach additional financial covenants under the Senior Credit Agreement. The outstanding principal balance under the Senior Credit Agreement was $44.7 million as of December 31, 2022. If we are unable to monetize assets or raise additional capital, we would not have sufficient cash on hand or available liquidity that can be utilized to repay the outstanding debt in the event Oaktree accelerates its maturity. Accordingly, if Oaktree exercises its rights and remedies by accelerating the maturity of the indebtedness under the Senior Credit Agreement, it would have a material adverse effect on our business and we would likely be forced to seek bankruptcy protection.

Our ability to comply with the covenants, restrictions and specified financial ratios contained in the Senior Credit Agreement may be affected by events beyond our control, including prevailing economic, financial, and industry conditions. Even if we are able to comply with all of the applicable covenants, the restrictions on our ability to manage our business in our sole discretion could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions, and other corporate opportunities that we believe would be beneficial to us.

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**An impairment of long-lived assets could have a material adverse effect on our results of operations.**

We review the recoverability of our long-lived assets at least annually or more frequently when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. Changes in market conditions, including further increases in interest rates, exchange rate fluctuations, or other changes in the future outlook of value may lead to an impairment of our long-lived assets in the future. The sale of assets, exit of a business, or change in our business strategy may lead to additional impairment charges. Any significant impairment could have a material adverse effect on our results of operations. We cannot accurately predict the amount and timing of any future impairment of assets, and we may be required to take additional charges relating to certain of our reporting units. Any such charges would have an adverse effect on our financial results.

**We are a party to ongoing legal proceedings and, while we cannot predict the outcome of those proceedings and other contingencies with certainty, if we settle these claims or the proceedings are not decided in our favor, our business and financial condition could be materially adversely affected.**

We have been, and may in the future be, subject to various legal and regulatory proceedings, including class action litigation. It is inherently difficult to assess the outcome of these matters, and there can be no assurance that we will prevail in any proceeding or litigation. Legal and regulatory matters of any degree of significance could result in substantial cost and diversion of our efforts, which by itself could have a material adverse effect on our financial condition and operating results.

As disclosed in Part I, Item 3, "Legal Proceedings," following our receipt of the CRL in February 2021 and the subsequent decline of the market price of our common stock, two purported class action lawsuits were filed against the Company and certain members of its management team, along with a related shareholder derivative lawsuit. In addition, we are subject to a breach of contract claim brought by Exyte U.S., Inc. against us and ImmunityBio, Inc., in connection with the design and build of the Dunkirk Facility by Exyte for the Company. If we settle these claims or the litigation is not resolved in our favor, we may suffer reputational damage and incur legal costs, settlements or judgments that exceed the amounts covered by our existing insurance policies. We can provide no assurances that our insurer will insure the legal costs, settlements or judgements we incur in excess of our deductible. If we are not successful in defending ourselves from these claims, or if our insurer does not insure us against legal costs we incur in excess of our deductible, the result may materially adversely affect our business, results of operations and financial condition. Defending against these and any future lawsuits and legal proceedings, regardless of their merit, may involve significant expense, be disruptive to our business operations and divert our management's attention and resources. Negative publicity surrounding these legal proceedings may also harm our reputation, our stock price, and adversely impact our business and financial condition.

**Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or drug candidates.** 

We may seek additional funding through a combination of equity offerings, debt financings, collaborations, licensing arrangements, and selling our non-core assets. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of our common stock. The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, issuance of additional equity securities, or the possibility of such issuance, may cause the market price of our common stock to decline. In the event that we enter into collaborations or licensing arrangements or sell non-core assets in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to technologies or proprietary drug candidates that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential arrangements when we might be able to achieve more favorable terms.

**Risks Related to Clinical Development of Our Proprietary Drug Candidates** 

**Our clinical candidates are still in the development stage and have not yet received regulatory approval, which may make it difficult to evaluate our current business and predict our future performance.** 

Our operations to date have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting preclinical studies and clinical trials of our drug candidates. Other than Klisyri, which is being commercialized primarily by out-license partners, we have not obtained regulatory approval for our drug candidates. We do not have and, in the near term, do not expect to develop sales and marketing activities necessary for successful commercialization of the drug candidates we intend to commercialize. Consequently, any predictions you make about our future success or viability may not be accurate. Because we are changing our focus from our Orascovery platform to our cell therapy platform, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown challenges.

We are focused on the discovery and development of innovative drugs for the treatment of cancers. The fact that we have not yet, among other things, demonstrated our ability to initiate or complete large-scale clinical trials, particularly in light of the rapidly

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evolving cancer treatment field, may make it difficult to evaluate our current business and predict our future performance. These constraints make any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving fields as we seek to transition to a cell therapy company. If we do not address these risks and difficulties successfully, our business will suffer. We depend substantially on the success of our proprietary drug candidates, which are in pre-clinical and clinical development.

Our business and the ability to generate revenue related to product sales from our proprietary drug candidates will depend on the successful development, regulatory approval and commercialization for the treatment of patients with our drug candidates, which are still in development, and other drugs we may develop. Clinical development is a lengthy and expensive process with an uncertain outcome. We have invested a significant portion of our efforts and financial resources in the development of our existing drug candidates and drug candidates for which we have suspended development. Our investment in our drug candidates may not be successful. The success of our proprietary drug candidates will depend on several factors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•successful enrollment in, and completion of, clinical studies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•receipt of regulatory approvals from the FDA and other regulatory authorities for our drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•establishing commercial manufacturing capabilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•conducting our clinical trials compliantly and efficiently, and in many cases, relying on third parties to do so;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•obtaining, maintaining and protecting our intellectual property rights, including patent, trade secrets, know-how and regulatory exclusivity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•ensuring we do not infringe, misappropriate or otherwise violate the patent, trade secret or other intellectual property rights of third parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•competition with other drug candidates and drugs; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•continued acceptable safety profile for our drug candidates following regulatory approval, if received.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, including genetic differences, patient adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. In the case of any trials we conduct, results may differ from early trials due to the larger number of patients, clinical trial sites and additional countries and populations involved in such trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be favorable as previous trials with the same compound, even with the same indication.

Because most of our clinical candidates are in the development stage and have not yet received regulatory approval, we may never be able to generate sufficient revenues and cash flows to continue our operations.

**We may not be successful in our efforts to identify or discover additional drug candidates. Due to our limited resources and access to capital, we must and have in the past decided to prioritize development of certain product candidates; these decisions may prove to have been wrong and may adversely affect our business.** 

Historically, we have focused our drug discovery efforts on developing our cancer platform, particularly our Orascovery product candidates. Following our receipt of the CRL for Oral Paclitaxel, we paused pursuing regulatory approval for Oral Paclitaxel monotherapy for the treatment of mBC in the U.S. and paused development on our other Orascovery product candidates. While we now plan to discuss the I-SPY 2 TRIAL data with the FDA with respect to our mBC NDA for Oral Paclitaxel, we have redeployed our resources to developing our cell therapy platform. If our platform fails to identify potential drug candidates, our business could be materially harmed. Additionally, our management, at the direction of our board of directors, has discretion in prioritizing which product candidates to develop.

Research programs to pursue the development of our drug candidates for additional indications and to identify new drug candidates and disease targets require substantial technical, financial and human resources whether or not we ultimately are successful. Our research programs may initially show promise in identifying potential indications and/or drug candidates, yet fail to yield results for clinical development for a number of reasons, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the research methodology used may not be successful in identifying potential indications and/or drug candidates;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•potential drug candidates may, after further study, be shown to lack efficacy, have harmful adverse effects, pose a safety risk to patients as compared to existing drugs, or other characteristics that indicate they are unlikely to be effective drugs; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•it may take greater human and financial resources to identify additional therapeutic opportunities for our drug candidates or to develop suitable potential drug candidates through internal research programs than we possess, thereby limiting our ability to diversify and expand our drug portfolio.

Because we have limited financial and managerial resources, we focus on research programs and drug candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

Accordingly, there can be no assurance that we will be able to identify therapeutic opportunities for our drug candidates or to develop suitable potential drug candidates through internal research programs, which could materially adversely affect our future growth and prospects. We may focus our efforts and resources on potential drug candidates or other potential programs that ultimately prove to be unsuccessful.

**If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.** 

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion. We and our research partners have from time to time and may in the future experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the availability of a sizeable population of eligible patients;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the design of the trial;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to recruit clinical trial investigators with the appropriate competencies and experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•competing clinical trials for similar therapies or other new therapeutics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•clinicians' and patients' perceptions as to the potential advantages and side effects of the drug candidate being studied in relation to other available therapies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to obtain and maintain patient consents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the failure of patients to complete a clinical trial; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the availability of approved therapies that are similar in mechanism to our drug candidates.

In addition, our clinical trials will compete with other clinical trials for drug candidates that are in the same therapeutic areas as our drug candidates, and this competition will reduce the number and types of patients available to us because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we may conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which would reduce the number of patients who are available for our clinical trials at such clinical trial sites.

Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our drug candidates.

**Our drug candidates represent a novel approach to cancer treatment, which could result in delays in clinical development, heightened regulatory scrutiny, and delays in our ability to achieve regulatory approval or commercialization, or market acceptance by physicians and patients of our drug candidates.** 

Our drug candidates, particularly those developed through our cell therapy platform, represent a departure from more commonly used methods for cancer treatment, and therefore represent a novel approach that carries inherent development risks. Although there is some previous clinical experience with nonengineered NKT cells, given that this is a novel approach, it is possible that we may encounter unexpected clinical trial results, which may delay our development programs. For example, the FDA imposed a clinical hold on the KUR-501 IND after a heavily pretreated young male patient died during the trial. While we intend to work with BCM to help address the FDA's questions and target to reopen the clinical trial during the year, BCM may not resume GINAKIT2 study patient enrollment unless and until the FDA lifts their clinical hold of the KUR-501 IND. If the FDA lifts the clinical hold, the clinical trial may only resume under the terms authorized by the FDA. There can be no assurance that BCM will be able to resume the Phase 1 clinical trial of KUR-501. In addition, our Orascovery platform intends to facilitate the delivery of chemotherapy agents orally, as opposed to IV. Because of this, unexpected safety and tolerability concerns may arise during the development process. The need to

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further develop or modify in any way the protocols related to our drug candidates to demonstrate safety or efficacy may delay the clinical program, regulatory approval or commercialization, if approved.

In addition, potential patients and their doctors may be inclined to use conventional standard-of-care treatments rather than enroll patients in a clinical trial or to use our product candidates commercially, if approved. This may have a material impact on our ability to generate revenues from our drug candidates. Further, given the novelty of the administration of our drug candidates, hospitals and physicians may prefer traditional treatment methods, may be reluctant to adopt the use of our products or may require a substantial amount of education and training, any of which could delay or prevent acceptance of our products by physicians and patients and materially hinder successful commercialization of our drug candidates.

**Our products and product candidates may cause undesirable, or an increase in the frequency of, side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.** 

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other regulatory authorities, as indicated by the FDA in its CRL with respect to our NDA for Oral Paclitaxel, that indicated a need for an additional study to examine safety and dosing. In addition, the FDA imposed a clinical hold on the Phase 1 clinical trial of KUR-501 after a heavily pretreated young male patient died during the trial. Unless and until the FDA authorizes resumption of the clinical trial, BCM cannot continue the trial. If the FDA authorizes the trial to reopen, the clinical trial may only continue under the terms authorized by the FDA. While we intend to work with BCM to help address the FDA's questions and target to reopen the clinical trial during the year, BCM may not resume GINAKIT2 study patient enrollment unless and until the FDA lifts their clinical hold on the KUR-501 IND. There can be no assurance that BCM will be able to resume the Phase 1 clinical trial of KUR-501.

Further, once a product candidate receives marketing approval and we or others identify undesirable side effects caused by the product after the approval, or if drug abuse is determined to be a significant problem with an approved product, a number of potentially significant negative consequences could result, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulatory authorities may withdraw or limit their approval of the product;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulatory authorities may require the addition of labeling statements, such as a "Black Box warning" or a contraindication;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may be required to change the way the product is distributed or administered, conduct additional clinical trials or change the labeling of the product;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may decide to remove the product from the marketplace;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we could be sued and held liable for injury caused to individuals exposed to or taking the product; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase the costs of commercializing an affected product or product candidate and significantly impact our ability to successfully commercialize or maintain sales of our product or product candidates and generate revenues.

**If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA or other regulatory authorities, as the FDA indicated in its CRL with respect to our NDA for Oral Paclitaxel, or do not otherwise produce positive results, we will incur costs and experience delays in completing, and may ultimately be unable to complete, the development and commercialization of our drug candidates.** 

We may experience various unexpected events during, or as a result of, clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize our drug candidates, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulators, IRBs or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•clinical trials of our drug candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the number of patients required for clinical trials of our drug candidates may be larger than we anticipate, enrollment may be insufficient or slower than we anticipate or patients may drop out at a higher rate than we anticipate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we might have to suspend or terminate clinical trials of our drug candidates for various reasons, including a finding of a lack of clinical response or a finding that participants are being exposed to unacceptable health risks, such as the suspension of the KUR-501 GINAKIT2 trial following the FDA's imposition of a clinical hold;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulators, IRBs or ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the cost of clinical trials of our drug candidates may be greater than we anticipate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the supply or quality of our drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be insufficient or inadequate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our drug candidates may cause adverse events, have undesirable side effects or other unexpected characteristics, causing us or our investigators to suspend or terminate the trials.

If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if they raise safety concerns, we may:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•incur greater costs in seeking regulatory approval for our drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•be delayed in obtaining regulatory approval for our drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•not obtain regulatory approval at all;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•obtain approval for indications that are not as broad as intended;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•have the drug removed from the market after obtaining regulatory approval;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•be subject to additional post-marketing testing requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•be subject to restrictions on how the drug is distributed or used; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•be unable to obtain reimbursement for use of the drug.

Delays in testing or approvals may result in increases in our drug development costs. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.

Significant clinical trial delays also could shorten any periods during which we have the exclusive right to commercialize our drug candidates or allow our competitors to bring drugs to market before we do and impair our ability to commercialize our drug candidates and may harm our business and results of operations.

**Risks Related to Development, Regulatory Approval and Commercialization**

**The regulatory approval processes of the FDA and other regulatory authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.** 

The time required to obtain approval by the FDA and other regulatory authorities in jurisdictions where we seek such approval is unpredictable but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. We cannot provide any assurances with respect to the timing for any regulatory approval or if our studies will be considered to be sufficient by regulators, as we experienced with our NDA for Oral Paclitaxel. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a drug candidate's clinical development and may vary among jurisdictions. It is possible that none of our other existing drug candidates or any drug candidates we may discover, in-license or acquire and seek to develop in the future will ever obtain regulatory approval.

Our drug candidates could fail to receive regulatory approval from the FDA or another regulatory authority for many reasons, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•disagreement with the design or implementation of our clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•failure to demonstrate that a drug candidate is safe and effective for its proposed indication;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•failure of clinical trial results to meet the level of statistical significance required for approval;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•failure to demonstrate that a drug candidate's clinical and other benefits outweigh its safety risks;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•disagreement with our interpretation of data from preclinical studies or clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the insufficiency of data collected from clinical trials of our drug candidates to support the submission and filing of an NDA, BLA or other submission or to obtain regulatory approval;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the FDA or another regulatory authority's finding of deficiencies related to the product, manufacturing processes or facilities of ours or of third-party manufacturers with whom we contract for clinical and commercial supplies; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in approval policies or regulations that render our preclinical and clinical data insufficient for approval.

The FDA or a regulatory authority in another jurisdiction may require more information, including additional preclinical or clinical data, to support approval, which may delay or prevent approval in those territories and our commercialization plans, or we may decide to abandon the development program. If we were to obtain approval, regulatory authorities may approve any of our drug candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a drug candidate with a label that is not desirable for the successful commercialization of that drug candidate. In addition, if our drug candidate produces undesirable side effects or safety issues, the FDA may require additional clinical or preclinical studies or the establishment of REMS, or a regulatory authority may require the establishment of a similar strategy, that may, for instance, significantly restrict distribution of our drug candidates and impose burdensome implementation requirements on us. Any of the foregoing scenarios could materially harm the commercial prospects of our drug candidates.

**The approval process for pharmaceutical products outside the U.S. varies among countries and may limit our ability to develop, manufacture and sell our products internationally. Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.** 

In order to market and sell our products internationally, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and may involve additional testing. We may conduct clinical trials for, and seek regulatory approval to market, our product candidates in countries other than the U.S. Depending on the results of clinical trials and the process for obtaining regulatory approvals in other countries, we may decide to first seek regulatory approvals of a product candidate in the U.S. or in countries other than the U.S., or we may simultaneously seek regulatory approvals in the U.S. and other countries. If we seek marketing approval for a product candidate outside the U.S., we will be subject to the regulatory requirements of health authorities in each country in which we seek approval. With respect to marketing authorizations in China, we will be required to seek regulatory approval from the NMPA. For marketing approval in Europe, we will seek to obtain marketing approval from the European Medicines Agency (the "EMA"). The approval procedure varies among regions and countries and may involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval.

Obtaining regulatory approvals from health authorities in countries outside the U.S. is likely to subject us to all of the risks associated with obtaining FDA approval described above. In addition, marketing approval by the FDA does not ensure approval by the health authorities of any other country, and marketing approvals by foreign health authorities do not ensure a similar approval by the FDA.

**We are conducting, and may in the future conduct, clinical trials for our product candidates in sites outside the U.S. and the FDA may not accept data from trials conducted in such locations.** 

We have conducted, and may in the future conduct, certain of our clinical trials outside of the U.S., including in the U.K., China, Taiwan and Latin America. Although the FDA may accept data from clinical trials conducted outside the U.S., acceptance of this data is subject to certain conditions imposed by the FDA. There can be no assurance the FDA will accept data from any clinical trials we conduct outside of the U.S. For example, in the CRL we received regarding the NDA for Oral Paclitaxel, the FDA indicated that the participants in a new clinical trial they are recommending should be reflective of the U.S. population. If the FDA does not accept the data from any of our other clinical trials conducted outside the U.S., it would likely result in the need for additional clinical trials, which would be costly and time-consuming and could delay or prevent the commercialization of any of our product candidates.

**Regulatory approval may be substantially delayed or may not be obtained for one or all of our drug candidates for a variety of reasons.** 

We may be unable to complete development of our drug candidates on schedule, if at all. The completion of the studies for our drug candidates will require funding beyond our current resources. In addition, if regulatory authorities require additional time or studies to assess the safety or efficacy of our drug candidates, we may not have or be able to obtain adequate funding to complete the necessary steps for approval for any or all of our drug candidates. Preclinical studies and clinical trials required to demonstrate the safety and efficacy of our drug candidates are time consuming and expensive and together take several years or more to complete. For example, one of our product candidates, Oral Paclitaxel, for which we received a CRL in February 2021, has been in development since 2011. Delays in clinical trials, regulatory approvals or rejections of applications for regulatory approval in the U.S., United Kingdom, Taiwan, New Zealand, China, Latin America, or other jurisdictions may result from many factors, including:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our inability to obtain sufficient funds required for a clinical trial;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulatory requests for, or the requirement of, additional analyses, reports, data, non-clinical and preclinical studies and clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulatory questions regarding interpretations of data and results and the emergence of new information regarding our drug candidates or other products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•clinical holds, like the clinical hold on the KUR-501 IND imposed by the FDA after the death of a heavily pretreated young male patient in the Phase 1 trial, other regulatory objections to commencing or continuing a clinical trial or the inability to obtain regulatory approval to commence a clinical trial in countries that require such approvals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•failure to reach agreement with the FDA or other regulators regarding the scope or design of our clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our inability to enroll and retain a sufficient number of patients who meet the inclusion and exclusion criteria in a clinical trial;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our inability to conduct a clinical trial in accordance with regulatory requirements or our clinical protocols;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•withdrawal of clinical trial sites from our clinical trials as a result of changing standards of care or the ineligibility of a site to participate in our clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•failure of our third-party clinical trial managers to satisfy their contractual duties or meet expected deadlines;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•delay or failure in adding new clinical trial sites;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•ambiguous or negative interim results, or results that are inconsistent with earlier results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•unfavorable or inconclusive results of clinical trials and supportive non-clinical studies, including unfavorable results regarding safety or effectiveness of drug candidates during clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•feedback from the FDA, IRB, the Data and Safety Monitoring Board ("DSMB") or comparable entities, or results from earlier stage or concurrent preclinical studies and clinical trials, that might require modification to the protocol;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•unacceptable risk-benefit profile or unforeseen safety issues or adverse side effects;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•decision by the FDA, IRB, comparable entities or the Company, or recommendation by a DSMB or comparable entity, to suspend or terminate clinical trials at any time for safety issues or for any other reason;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•failure to demonstrate a benefit from using a drug candidate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•lack of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our inability to reach agreements on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our inability to obtain approval from IRBs or ethics committees to conduct clinical trials at their respective sites;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•manufacturing issues, including problems with manufacturing or timely obtaining from third parties sufficient quantities of a drug candidate for use in a clinical trial; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•difficulty in maintaining contact with patients during the study or after treatment, resulting in incomplete data.

Changes in regulatory requirements and guidance may also occur, and we may need to amend clinical trial protocols submitted to applicable regulatory authorities to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs or ethics committees for re-examination, which may impact the costs, timing or successful completion of a clinical trial. For example, the Oncology Center of Excellence within the FDA has recently advanced Project Optimus, which is an initiative to reform the dose optimization and dose selection paradigm in oncology drug development to emphasize selection of an optimal dose, which is a dose or doses that maximizes not only the efficacy of a drug but the safety and tolerability as well. This shift from the prior approach, which generally determined the maximum tolerated dose, may require sponsors to spend additional time and resources to further explore a

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product candidate's dose-response relationship to facilitate optimum dose selection in a target population. Other recent Oncology Center of Excellence initiatives have included Project FrontRunner, a new initiative with a goal of developing a framework for identifying candidate drugs for initial clinical development in the earlier advanced setting rather than for treatment of patients who have received numerous prior lines of therapies or have exhausted available treatment options, and Project Equity, which is an initiative to ensure that the data submitted to the FDA for approval of oncology medical products adequately reflects the demographic representation of patients for whom the medical products are intended. We are considering these and other policy changes as they relate to our programs.

If we experience delays in the completion of, or the termination of, a clinical trial, of any of our drug candidates, the commercial prospects of our drug candidates will be harmed, and our ability to generate revenues from the sale of any of those drug candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our drug candidate development and approval process, and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our drug candidates.

**Our approved drug and drug candidates have caused and may cause undesirable adverse events or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following any regulatory approval.** 

Undesirable adverse events related to our approved drugs or drug candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials that would preclude approval of our drug candidates by the FDA or another regulatory authority or, if approved, could result in a more restrictive label. Results of our trials could reveal a high and unacceptable severity or prevalence of adverse events. In such an event, our trials could be suspended or terminated and the FDA or other regulatory authorities could order us to cease further development of, or deny approval of, our drug candidates for any or all targeted indications. For example, in the CRL we received from the FDA, the FDA indicated that it had determined that our Oral Paclitaxel Phase III study demonstrated an unacceptable increase in neutropenia-related sequelae and has determined that additional risk mitigation strategies to improve toxicity, which may involve dose optimization and / or exclusion of the patients deemed to be at a higher risk of toxicity, are required to support potential approval of the NDA. Drug-related adverse events could affect patient recruitment or the ability of enrolled subjects to complete the trial, and could result in potential product liability claims. Any of these occurrences may significantly harm our reputation, business, financial condition and prospects.

For Klisyri® (tirbanibulin), adverse events reported during clinical trials and identified in the approved prescribing information included erythema, flaking/ scaling, crusting, swelling, vesiculation/pustulation, erosion/ ulceration, application site pruritus, and application site pain, which included pain, tenderness, stinging, and burning sensation at the application site.

In our clinical studies to date, we have observed the following SAEs that were deemed at least possibly related to Oral Paclitaxel: neutropenia, febrile neutropenia, pneumonia, septic shock, sepsis and other infections, dehydration gastroenteritis, anemia, pneumonitis, diarrhea, mucositis, gastrointestinal bleeding, vomiting and nausea, rectal bleeding, altered state of consciousness, hypokalemia, cardiac arrest, tachycardia, atrial fibrillation, cardiogenic shock, hypotension, pancytopenia, multiorgan failure, renal failure, atrial fibrillation, pleural effusion, supraventricular tachycardia, respiratory failure, malnutrition, dyspnea, cardiac failure, pulmonary tuberculosis, fatigue, upper abdominal pain, decreased appetite, and peripheral sensory neuropathy.

For the CAR-NKT cell therapy program, we have observed the following adverse events judged by investigators to be at least possibly related to investigational product or its preconditioning lymphodepletion chemotherapy: cytokine release syndrome, cytopenia (anemia, white blood cell count decreased, lymphocyte count decreased, neutrophil count decreased, platelet count decreased), fever, chills, febrile neutropenia, vaginal infection, epistaxis, headache, cough, dyspnea, fatigue, anorexia, nausea, vomiting, diarrhea, dehydration, hypotension, sinus tachycardia, hyponatremia, hypokalemia, hypomagnesemia, hypophosphatemia, hypocalcemia, hyperglycemia, hypoalbuminemia, abdominal pain, abdominal distention, aspartate aminotransferase increased, gamma-glutamyl transpeptidase increased, international normalized ratio increased, activated partial thromboplastin time increased, creatinine increased, hematuria, and proteinuria.

Following the death of a heavily pretreated young male patient in the Phase 1 clinical trial of KUR-501, the FDA imposed a clinical hold on the KUR-501 IND. Unless and until the FDA authorizes resumption of the clinical trial, BCM cannot recruit new patients to the study and administer the investigational product. If the FDA authorizes the trial to reopen, the clinical trial may only continue under the terms authorized by the FDA. While we intend to work with BCM to help address the FDA's questions and target to reopen the clinical trial during the year, BCM may not resume GINAKIT2 study patient enrollment unless and until the FDA lifts their clinical hold on the KUR-501 IND. There can be no assurance that BCM will be able to resume the Phase 1 clinical trial of KUR-501.

Additionally, if we or others later identify undesirable side effects caused by Klisyri® or one or more of our drug candidates, if approved, a number of potentially significant negative consequences could result, including:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may suspend marketing of the drug;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulatory authorities may withdraw approvals of the drug;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•regulatory authorities may require additional warnings in the labeling;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may be required to develop a REMS for the drug or, if a REMS is already in place, to incorporate additional requirements under the REMS, or to develop a similar strategy as required by a regulatory authority;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may be required to conduct post-marketing studies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we could be sued and held liable for harm caused to subjects or patients; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular drug or drug candidate, if approved, and could significantly harm our business, results of operations and prospects.

**The commercialization of Klisyri® and of any of our drug candidates, if approved, subjects us to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expenses and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our drug candidates.** 

Klisyri® and our drug candidates, if any are approved, are subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy and other post-marketing information, including both federal and state requirements in the U.S. and requirements of foreign regulatory authorities.

Manufacturers and manufacturers' facilities are required to comply with extensive requirements of the FDA and regulatory authorities, including, in the U.S., ensuring that quality control and manufacturing procedures conform to current cGMP regulations. As such, our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any NDA, BLA or other marketing application, and previous responses to inspection observations. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

Any regulatory approvals that we receive for our drug candidates may be subject to conditions of approval or limitations on the approved indicated uses for which the drug may be marketed, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the drug candidate. The FDA may also require a REMS program as a condition of approval of one or more of our drug candidates, which could entail requirements for long-term patient follow-up, a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a regulatory authority approves our drug candidates, we will have to comply with requirements including, for example, submissions of safety and other post-marketing information and reports, registration, and continued compliance with cGMP and GCP for any clinical trials that we conduct post-approval.

The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the drug reaches the market. Later discovery of previously unknown problems with our drugs, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-marketing studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•restrictions on the marketing or manufacturing of our drugs, withdrawal of the product from the market, or voluntary or mandatory product recalls;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•fines, untitled or warning letters, or holds on clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•refusal by the FDA to approve pending applications or supplements to approved applications submitted by us or suspension or revocation of license approvals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•product seizure or detention, or refusal to permit the import or export of our drug candidates; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for their approved indications and in a manner consistent with the provisions of the approved prescribing information. The FDA and other regulatory authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. The policies of

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the FDA and of other regulatory authorities may change. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any regulatory approval that we may have obtained, and we may not achieve or sustain profitability.

**Risks Related to Commercialization of Our Drug Candidates**

**We are dependent on the efforts of Almirall and our other out-license partners for the commercialization of Klisyri and expected future revenue from Klisyri's commercialization.**

We have entered into collaborations with Almirall and other out-license partners described in "Business—Recent Strategic Actions and Transactions—Monetization of Klisyri (tirbanibulin)" and are dependent on the efforts of these third parties for the commercialization of Klisyri. The success of these arrangements will depend heavily on the efforts and activities of our license partners. In some situations, we may not be able to influence their decisions regarding the commercialization of Klisyri or their level of effort in marketing and selling Klisyri. Our ability to realize revenue from royalties or milestone payments depends significantly upon Almirall's and our other out-license partners' ability to commercialize, market and sell Klisyri, particularly because under the RIPA we are only entitled to these milestones and royalties if net sales of Klisyri exceed a certain dollar amount. If these partners are unsuccessful, we may not receive royalties or milestone payments from sales of Klisyri.

**If we are not able to obtain, or experience delays in obtaining, required regulatory approvals for our drug candidates, we will not be able to commercialize these drug candidates, and our ability to generate revenue will be materially impaired.** 

Our business is substantially dependent on our ability to complete the development of, obtain regulatory approval for and successfully commercialize drug candidates in a timely manner. We cannot commercialize drug candidates without first obtaining regulatory approval to market each drug from the FDA or regulatory authorities in the relevant jurisdictions. Some of our proprietary drug candidates are currently undergoing various phases of FDA clinical trials. We cannot predict whether these trials and future trials will be successful or whether regulators will agree with our conclusions regarding the preclinical studies and clinical trials we have conducted to date. We have experienced this uncertainty with the receipt of a CRL for our NDA for Oral Paclitaxel, and the FDA recommended an additional clinical trial be completed and additional risk mitigation strategies to improve toxicity, which may involve dose optimization and/or exclusion of the patients deemed to be at a higher risk of toxicity, to support potential approval of the NDA. Before obtaining regulatory approvals for the commercial sale of any drug candidate for a target indication, we must demonstrate in preclinical studies and well-controlled clinical trials, and, with respect to approval in the U.S., to the satisfaction of the FDA, that the drug candidate is safe and effective for use for that target indication and that the manufacturing facilities, processes and controls are adequate. An NDA must include extensive preclinical and clinical data and supporting information to establish the drug candidate's safety and effectiveness. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the drug. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. If we submit an NDA to the FDA, the FDA decides whether to accept or reject the submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA.

Regulatory authorities outside of the U.S. also have requirements for approval of drugs for commercial sale with which we must comply prior to marketing in those areas. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our drug candidates. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking non-U.S. regulatory approval could require additional non-clinical studies or clinical trials, which could be costly and time-consuming. The non-U.S. regulatory approval process may include all of the risks associated with obtaining FDA approval and other risks specific to the relevant jurisdiction. For all of these reasons, we may not obtain non-U.S. regulatory approvals on a timely basis, if at all.

If we are unable to obtain regulatory approval for our drug candidates in one or more jurisdictions, or any approval contains significant limitations, our target market will be reduced and our ability to realize the full market potential of our drug candidates will be harmed. Furthermore, if we are not able to obtain, or experience delays in obtaining, required regulatory approvals, we will not be able to commercialize our drug candidates, and our ability to generate revenue will be materially impaired.

**If the FDA does not approve our planned amendment to the NDA for Oral Paclitaxel, our business, financial performance, and prospects could suffer.** 

In February 2021, we received a CRL from the FDA regarding our NDA for Oral Paclitaxel. In the CRL, the FDA indicated its concern of safety risk to patients in terms of an increase in neutropenia-related sequelae on the Oral Paclitaxel arm compared with the IV paclitaxel arm in the Phase III study. The FDA also expressed concerns regarding the uncertainty over the results of the primary endpoint of ORR at week 19 conducted by blinded independent central review ("BICR"). The agency stated that the BICR reconciliation and re-read process may have introduced unmeasured bias and influence on the BICR. Additionally, the FDA

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recommended that we conduct a new adequate and well-conducted clinical trial in a patient population with mBC representative of the population in the U.S. The agency determined that additional risk mitigation strategies to improve toxicity, which may involve dose optimization and/or exclusion of patients deemed to be at higher risk of toxicity, are required to support potential approval of the NDA. We held two Type A meetings with the FDA to discuss the deficiencies raised in the CRL, review a proposed design for a new clinical trial intended to address the deficiencies raised in the CRL, and discuss the potential regulatory path forward for Oral Paclitaxel in mBC in the U.S. After those meetings, we paused pursuing regulatory approval for Oral Paclitaxel monotherapy for the treatment of mBC in the U.S. We plan to discuss the I-SPY 2 TRIAL data with the FDA and we may amend our mBC NDA to include the I-SPY2 data. The FDA may not be receptive to further discussions of the NDA or approve our planned amendment to the NDA for Oral Paclitaxel. If we fail to obtain approval or experience additional delays in obtaining approval, any such decision or delays would have a material impact on our ability to generate revenue from the potential sales of Oral Paclitaxel, which would have a material negative effect on our business, financial performance and prospects.

**Any fast track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process, nor will it assure FDA approval of our product candidates.** 

We previously received priority review for Oral Paclitaxel in the U.S. and may seek fast track designation or priority review of applications for approval of our product candidate for future indications. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA fast track designation. If a product candidate offers major advances in treatment, the FDA may designate it eligible for priority review. A priority review designation means that the FDA's goal to review an application is six months, rather than the standard review period of ten months. The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular product candidate is eligible for these designations, we cannot assure you that the FDA would decide to grant them. Even if we do receive fast track designation or priority review, we may not experience a faster development process, review or approval compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee approval within the six-month review cycle or thereafter.

**Even if our drug candidates receive regulatory approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.** 

Even if our drug candidates receive regulatory approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well established in the medical community, and doctors may continue to rely on these treatments to the exclusion of our drug candidates. In addition, physicians, patients and third-party payors may prefer other novel products to ours, and we may experience difficulties gaining acceptance for our cell therapy products or orally administered drug candidates. We are also subject to regulatory restrictions on how we market our drug candidates. If our drug candidates do not achieve an adequate level of acceptance, we may not generate significant product sales revenues, and we may not become profitable. The degree of market acceptance of our drug candidates, if approved for commercial sale, will depend on a number of factors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the clinical indications for which our drugs are approved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•physicians, hospitals, cancer treatment centers and patients considering our drugs as a safe and effective treatment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the potential and perceived advantages of our drugs over alternative treatments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the prevalence and severity of any side effects;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•product labeling or product insert requirements of the FDA or other regulatory authorities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•limitations or warnings contained in the labeling approved by the FDA or other regulatory authorities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the timing of market introduction of our drugs and competitive drugs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the cost of treatment in relation to alternative treatments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the amount of upfront costs or training required for physicians to administer our drugs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•obtaining optimal pricing for products in key global markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities (including U.S. federal healthcare programs);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the willingness of patients to pay out-of-pocket in the absence of coverage and reimbursement by third-party payors and government authorities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the effectiveness of our sales and marketing efforts, or the efforts of our collaboration partners.

If our drug candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical community, we will not be able to generate significant revenue. Even if our drugs achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our drugs, are more cost effective or render our drugs obsolete.

**We may seek Orphan Drug Designation for some of our drug candidates, and we may be unsuccessful.** 

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States. Similarly, the European Commission may designate a product as an orphan drug under certain circumstances.

Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same drug for the same disease for that time period. The applicable period is seven years in the United States and ten years in the European Union. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. In the United States, a second drug may be approved for the orphan indication despite a product's orphan drug exclusivity if the FDA determines that the later drug is safer, more effective or makes a major contribution to patient care. In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

If we obtained orphan drug exclusivity for a product, we would likely need to capture significant market share to achieve meaningful returns while establishing relatively higher prices, as is typical of drugs for rare conditions, in order to generate a return on investment and achieve meaningful gross margins. There can be no assurance that we will be successful in commercializing our orphan drug product candidates, if at all, or that we will be able to generate sufficient revenues from their sales to produce a meaningful return due to the limited market size.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition or a drug with the same active moiety can be approved for a different indication. Orphan drug designation by FDA or EMA neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, even if we intend to seek orphan drug designation for product candidates or indications, we may never receive such designations or obtain orphan drug exclusivity.

Moreover, there can be no assurance that the designation and/or exclusivity provisions currently in the law may not be changed in the future and the impact of any such changes, if made, on us. The orphan drug exclusivity provisions have been the subject of scrutiny from the press, from some members of Congress and from some in the medical community. Furthermore, the FDA's interpretations of the Orphan Drug Act have been successfully challenged in court and future court decisions could continue that trend. There can be no assurance that the exclusivity granted to orphan drugs approved by the FDA will not be modified in the future, and how any such change might affect our products, if approved.

**We have limited experience in marketing proprietary drug products. If we are unable to establish such marketing and sales capabilities or enter into agreements with third parties to market and sell our proprietary drug candidates, we may not be able to generate sales revenue from such products.** 

We have limited sales, marketing and commercial product experience. For the product candidates and/or territories where we do not have existing partnerships pursuant to which our partners will be responsible for the marketing and sales of such products, we may be required to develop an in-house commercial organization and sales force for such products, which will require significant capital expenditures, management resources and time. We would have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.

If we are unable to establish sufficient internal sales, marketing and commercial distribution capabilities for these proprietary drug candidates, we will need to pursue additional collaborative arrangements for the sales and marketing of our proprietary drugs. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have less control over the marketing and sales efforts of such third parties which may present fraud and abuse and other regulatory considerations, and our revenue from product sales may be lower than if we had commercialized our proprietary drug candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our proprietary drug candidates.

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There can be no assurance that we will be able to develop these marketing capabilities to successfully commercialize any proprietary product, and as a result, we may not be able to generate sales revenue from such products.

**We face substantial competition, and our competitors may discover, develop or commercialize competing drugs before or more successfully than we do.** 

The development and commercialization of new drugs is highly competitive. We face competition with respect to any drug candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell drugs or are pursuing the development of drugs for the treatment of the types of cancer for which we are developing and commercializing our drug candidates and drugs. Some of these competitive drugs and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drugs that we may develop. Our competitors also may obtain approval from the FDA or other regulatory authorities for their drugs more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market and/or slow our regulatory approval.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

If our competitors market products that are more effective, safer, have fewer side effects or are less expensive than our products or that reach the market sooner than any of our current or future product candidates, we may not achieve commercial success.

**Our drug candidates, if approved, may become subject to unfavorable pricing regulations, third party reimbursement practices or healthcare reform initiatives, which could harm our business.** 

Successful sales of Klisyri® and any of our drug candidates, if approved, depend on the availability of adequate coverage and reimbursement from third-party payors. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the U.S., and commercial payors are critical to new drug acceptance.

The regulations that govern regulatory approvals, pricing and reimbursement for new therapeutic products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a drug in a particular country but be subject to price regulations that delay our commercial launch of the drug and negatively impact the revenues we are able to generate from the sale of the drug in that country.

Our ability to commercialize any drugs successfully also will depend in part on the extent to which coverage and reimbursement for these drugs and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor's determination that use of a drug is:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a covered benefit under its health plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•safe, effective and medically necessary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•appropriate for the specific patient;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•cost-effective and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•neither experimental nor investigational.

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We cannot be sure that reimbursement will be available for our drugs, if and once approved, and, if coverage and reimbursement are available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any drug for which we obtain regulatory approval. Obtaining reimbursement for our drugs may be particularly difficult because of the higher prices often associated with branded drugs and drugs administered under the supervision of a physician. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any drug candidate that we successfully develop. If we or our partners fail to obtain and sustain an adequate level of coverage and reimbursement for any current or future product candidates, if approved, by third-party payers, potential future sales would be materially adversely affected. There will be no commercially viable market for any current or future product candidates, if approved, without adequate coverage and reimbursement from third-party payers, and any reimbursement policy may be affected by future healthcare reform measures. Further, we cannot be certain that adequate coverage and reimbursement will be available for either of our products in jurisdictions outside the U.S. or for any current or future product candidates, if approved. Additionally, even if there is a commercially viable market, if the level of coverage or reimbursement is below our expectations, our anticipated revenue and gross margins will be adversely affected.

In the U.S., no uniform policy of coverage and reimbursement for drugs exists among third-party payors. As a result, obtaining coverage and reimbursement approval of a drug from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our drugs on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for a given drug, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our drugs. However, under Medicare Part D—Medicare's outpatient prescription drug benefit—there are protections in place to ensure coverage and reimbursement for oncology products and all Part D prescription drug plans are required to cover substantially all anti-cancer agents. In some non-U.S. countries, the pricing of drugs and biologics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining regulatory approval of a drug candidate. In addition, market acceptance and sales of our drug candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our drug candidates and may be affected by existing and future health care reform measures.

**We have collaborations with third parties in international markets to commercialize and market Klisyri, and we intend to test and market any other approved drugs in a variety of international markets, which exposes us to the risks of conducting business in additional international markets.** 

We conduct business operations in regions, including the U.S., Hong Kong and Latin America, and other non-U.S. markets are an important component of our growth strategy. If we fail to obtain licenses or enter into collaboration arrangements with third parties in these markets, or if these parties are not successful, our revenue-generating growth potential will be adversely affected.

Moreover, international business relationships subject us to additional risks that may materially adversely affect our ability to attain or sustain profitable operations, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•efforts to enter into collaboration or licensing arrangements with third parties in international markets may increase our expenses or divert our management's attention from the development of drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in a specific country's or region's laws, regulations or political and cultural climate or economic condition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•differing regulatory requirements for drug approvals and marketing internationally;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•difficulty of effective enforcement of contractual provisions and intellectual property rights in local jurisdictions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•potentially reduced protection for intellectual property rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•potential conflicting third-party patent or other intellectual property rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•unexpected changes in tariffs, trade barriers and regulatory requirements, such as Export Administration Regulations promulgated by the U.S. Department of Commerce and fines, penalties or suspension or revocation of export privileges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•economic weakness, including inflation or political instability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•compliance with tax, employment, immigration and labor laws for employees traveling or working abroad;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the effects of applicable non-U.S. tax structures and potentially adverse tax consequences;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incidental to doing business in another country;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•workforce uncertainty and labor unrest, particularly in non-U.S. countries where labor unrest is more common than in the U.S.;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•failure of our employees and contracted third parties to comply with Office of Foreign Asset Control rules and regulations and the Foreign Corrupt Practices Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires.

These and other risks may materially adversely affect our ability to obtain or sustain revenue from international markets.

**The use of legal, regulatory, and legislative strategies by both brand and generic competitors, including but not limited to "authorized generics" and regulatory petitions, may increase costs associated with the introduction or marketing of our generic products, could delay or prevent such introduction, and could adversely affect our results of operations.** 

Our competitors, both branded and generic, often pursue strategies to prevent, delay, or eliminate competition from generic alternatives to branded products. These strategies include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•entering into agreements whereby other generic companies will begin to market an authorized generic, a generic equivalent of a branded product, to compete with other generic products in the market;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•launching a generic version of their own branded product to compete with other generic products in the market;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•filing petitions with the FDA or other regulatory bodies seeking to prevent or delay approvals, including timing the filings so as to thwart generic competition by causing delays of our product approvals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate bioequivalence or to meet other requirements for approval, and/or to prevent regulatory agency review of applications, such as through the establishment of patent linkage (laws and regulations barring the issuance of regulatory approvals prior to patent expiration);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•initiating legislative or other efforts to limit the substitution of generic versions of brand pharmaceuticals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•filing suits for patent infringement and other claims that may delay or prevent regulatory approval, manufacture, and/or scale of generic products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•introducing "next-generation" products prior to the expiration of market exclusivity for the reference product, which often materially reduces the demand for the generic or the reference product for which we seek regulatory approval;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•persuading regulatory bodies to withdraw the approval of brand name drugs for which the patents are about to expire and converting the market to another product of the brand company on which longer patent protection exists;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•obtaining extensions of market exclusivity by conducting clinical trials of brand drugs in pediatric populations or by other methods; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•seeking to obtain new patents on particular formulations of drugs or methods of administering drugs for which patent protection on the drug itself is about to expire.

If any other actions by our competitors and other third parties to prevent or delay activities necessary to the approval, manufacture, or distribution of our products are successful, our entry into the market and our ability to generate revenues associated with new products may be delayed, reduced, or eliminated, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or share price.

**Risks Related to Our Intellectual Property** 

**A significant portion of our intellectual property portfolio currently comprises pending patent applications that have not yet been issued as granted patents, and if our pending patent applications fail to issue our business will be adversely affected. If we are unable to obtain and maintain patent protection for our technology and drugs, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and drugs may be adversely affected.** 

Our success depends in large part on our ability to obtain and maintain patent protection in the U.S. and other countries with respect to our proprietary technology and drug candidates. We have sought to protect our proprietary position by filing patent applications in the U.S., Europe and other countries related to novel technologies and drug candidates that we consider important to our business. The process of obtaining patent protection is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. There can be no

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assurance that our pending patent applications will result in issued patents. Moreover, even our issued patents do not guarantee us the right to practice our technology in relation to the commercialization of our platforms' product candidates. Third parties may have blocking patents that could be used to prevent us from commercializing our patented technologies, platforms and product candidates and practicing our proprietary technology. There can also be no assurance that a third party will not challenge the validity of our patents or that we will obtain sufficient claim scope in those patents, in view of prior art, to prevent a third party from competing successfully with our drug candidates. We may become involved in interference, inter partes review, post grant review, ex parte reexamination, derivation, opposition or similar other proceedings challenging our patent rights or the patent rights of others. Such challenges may result in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and drug candidates, or limit the duration of the patent protection of our technology and drug candidates. Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing drug candidates similar or identical to ours.

The patent position of biotechnology and pharmaceutical companies is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Changes in patent laws or the interpretation of patent laws in the U.S. and other countries may diminish the value of our patents or narrow the scope of our patent protection. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until eighteen months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

**We may not be able to protect our intellectual property rights throughout the world.** 

The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions, due to inconsistent policies regarding the scope of claims allowable in patents. Changes in patent laws and rules, either by legislation, judicial decisions, or regulatory interpretation in the U.S. and other countries may diminish our ability to protect our inventions and enforce our intellectual property rights, and more generally could affect the value of our intellectual property.

In addition, the laws of certain non-U.S. countries do not protect intellectual property rights to the same extent as U.S. federal and state laws do. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing drugs made using our inventions in and into the U.S. or non-U.S. jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own drugs and further, may export otherwise infringing drugs to non-U.S. jurisdictions where we have patent protection but where enforcement rights are not as strong as those in the U.S. These drugs may compete with our drug candidates and our patent or other intellectual property rights may not be effective or adequate to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in certain jurisdictions, including Latin America and China. The legal systems of some countries do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to biopharmaceutical products, which could make it difficult in those jurisdictions for us to stop the infringement or misappropriation of our patents or other intellectual property rights, or the marketing of competing drugs in violation of our proprietary rights. Proceedings to enforce our patent and other intellectual property rights in non-U.S. jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business.

Furthermore, such proceedings could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims of infringement or misappropriation against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.

**We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful and our patent rights relating to our drug candidates could be found invalid or unenforceable if challenged in court or before the U.S. Patent and Trademark Office or comparable non-U.S. authority.** 

Competitors may infringe our patent rights or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our own intellectual property rights or the proprietary rights of others. Such litigation can be expensive and time-consuming. Our current and potential competitors may have the ability to dedicate substantially greater resources to enforce and/or defend their intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that patent or other intellectual property rights owned by us are invalid or unenforceable, or may

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refuse to stop the other party from using the technology at issue on the grounds that our patent or other intellectual property rights do not cover the technology in question. An adverse result in any litigation proceeding could put our patent, as well as any patents that may issue in the future from our pending patent applications, at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure.

If we initiate legal proceedings against a third party to enforce any patent, or any patents that may issue in the future from our patent applications, that relates to one of our drug candidates, the defendant could counterclaim that such patent rights are invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the U.S. or abroad, even outside the context of litigation. Such mechanisms include ex parte re-examination, inter partes review, post-grant review, derivation and equivalent proceedings in non-U.S. jurisdictions, such as opposition proceedings. Although any party alleging invalidity or unenforceability of our patents has a high burden of proof, nonetheless such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our drug candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware of during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain drug candidates. Such a loss of patent protection could have a material adverse impact on our business.

**We may be subject to claims challenging the inventorship of our patents and ownership of other intellectual property.** 

Although we are not currently experiencing any claims challenging the inventorship of our patents or ownership of our intellectual property, we may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as inventors or co-inventors. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our drug candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, we may lose rights such as exclusive ownership of, or right to use, our patent or other intellectual property rights. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

**If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time-consuming and could prevent or delay us from developing or commercializing our drug candidates.** 

Our commercial success depends in part on our avoiding infringement of the patents and other intellectual property rights of third parties. There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including litigation in the U.S. courts, inter partes review, post grant review, interference and ex parte reexamination proceedings before the USPTO or oppositions and other comparable proceedings in non-U.S. jurisdictions. Numerous issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing or commercializing drug candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our drug candidates or manufacturing processes may give rise to claims of infringement of the patent rights of others.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents of which we are currently unaware with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our drug candidates. Because patent applications can take many years to issue, patent applications that are currently pending may later result in issued patents that our drug candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies that are first publicized or commercialized after the filing date of those patents infringes upon them. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our drug candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to prevent us from commercializing such drug candidate unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent is held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop and commercialize the applicable drug candidate unless we obtain a license, limit our uses, or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all.

Third parties who bring successful claims against us for infringement of their intellectual property rights may obtain injunctive or other equitable relief, which could prevent us from developing and commercializing one or more of our drug candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and employee resources from our business. In the event of a successful claim of infringement or misappropriation against us, we may have to pay substantial damages, including treble damages and attorneys' fees in the case of willful infringement, obtain

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one or more licenses from third parties, pay royalties or redesign our infringing drug candidates, which may be impossible or require substantial time and monetary expenditure and undertaking additional preclinical studies, clinical trials or regulatory review. In the event of an adverse result in any such litigation, or even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our drug candidates. We cannot predict whether any required license would be available on commercially reasonable terms, or at all, and we may fail to obtain any of these licenses on commercially reasonable terms, if at all. In the event that we are unable to obtain such a license, we would be unable to further develop and commercialize one or more of our drug candidates, which could harm our business significantly. We may also elect to enter into license agreements in order to settle patent infringement claims or to resolve disputes prior to litigation and any such license agreements may require us to pay royalties and other fees that could significantly harm our business.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical personnel, management personnel, or both from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities and our operations. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

**If our products conflict with the intellectual property rights of third parties, we may incur substantial liabilities and we may be unable to commercialize products in a profitable manner or at all.** 

We seek to launch generic pharmaceutical products either where patent protection or other regulatory exclusivity of equivalent branded products has expired, where patents have been declared invalid or where products do not infringe the patents of others. However, at times, we may seek approval to market generic products before the expiration of patents relating to the branded versions of those products, based upon our belief that such patents are invalid or otherwise unenforceable or would not be infringed by our products. Our success depends in part on our ability to operate without infringing the patents and proprietary rights of third parties. The manufacture use and sale of generic versions of products has been subject to substantial litigation in the pharmaceutical industry. These lawsuits relate to the validity and infringement of patents or proprietary rights of third parties. If our products were found to be infringing the intellectual property rights of a third-party, we could be required to cease selling the infringing products, causing us to lose future sales revenue from such products and face substantial liabilities for patent infringement, in the form of payment for the innovator's lost profits or a royalty on our sales of the infringing product. These damages may be significant and could materially adversely affect our business. Any litigation, regardless of the merits or eventual outcome, would be costly and time consuming and we could incur significant costs and/or a significant reduction in revenue in defending the action and from the resulting delays in manufacturing, marketing or selling any of our products subject to such claims.

**Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.** 

The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. Periodic maintenance fees on any issued patent are due to be paid to the USPTO and other patent agencies in several stages over the lifetime of the patent. Although an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment of a patent application or lapse of a patent include failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

**The terms of our patents may not be sufficient to effectively protect our drug candidates and business.** 

In most countries in which we file patent applications, including the U.S., the term of an issued patent is twenty years from the earliest claimed filing date of a non-provisional patent application in the applicable country. With respect to any issued patents in the U.S., we may be entitled to obtain a patent term extension or extend the patent expiration date provided we meet the applicable requirements for obtaining such patent term extensions. Although such extensions may be available, the life of a patent and the protection it affords is by definition limited. Even if patents covering our drug candidates are obtained, we may be open to competition from other companies as well as generic medications once the patent life has expired for a drug. If patents are issued on our currently pending patent applications, the resulting patents will be expected to expire on dates ranging approximately from 2024 to 2040, excluding any potential patent term extension or adjustment. Upon the expiration of our issued patents, we will not be able to assert such patent rights against potential competitors and our business and results of operations may be adversely affected.

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In addition, the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our technologies, platforms and product candidates. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that a related patent may expire before any particular product candidate can be commercialized or that such patent will remain in force for only a short period following commercialization, thereby reducing any significant advantage of the patent.

**If we do not obtain additional protection under the Hatch-Waxman Amendments and similar legislation in other countries extending the terms of our patents, if issued, relating to our drug candidates, our business may be materially harmed.** 

Depending upon the timing, duration and specifics of FDA regulatory approval for our drug candidates, one or more of our U.S. patents, if issued, may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent term extension of up to five years as compensation for patent term lost during drug development and the FDA regulatory review process. Patent term extensions, however, cannot extend the remaining term of a patent beyond a total of fourteen years from the date of drug approval by the FDA, and only one patent can be extended for a particular drug.

The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. We may not be granted an extension due to, for example, failure to apply within applicable deadlines, failure to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain a patent term extension for a given patent or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our drug will be shortened and our competitors may obtain earlier approval of competing drugs. As a result, our ability to generate revenues could be materially adversely affected.

**Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our drug candidates.** 

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patent rights. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity, and is therefore costly, time-consuming, and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to naturally-occurring substances are not patentable. Although we do not believe that our issued patents or any patents that may issue from our pending patent applications directed to our drug candidates if issued in their currently pending forms, as well as patent rights licensed by us, will be found invalid based on this decision, we cannot predict how future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our patent rights. There could be similar changes in the laws of foreign jurisdictions that may impact the value of our patent or our other intellectual property rights.

**If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. We may also be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.** 

In addition to our issued patents and pending patent applications, we rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position and to protect our drug candidates. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties that have access to them, such as our employees, corporate collaborators, outside scientific collaborators, sponsored researchers, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. In many cases our confidentiality and other agreements with consultants, outside scientific collaborators, sponsored researchers and other advisors require them to assign to us or grant us licenses to inventions they invent as a result of the work or services they render under such agreements or grant us an option to negotiate a license to use such inventions. However, any of these parties may breach such agreements and disclose our proprietary information, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we

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would have no right to prevent them from using that technology or information to compete with us and our competitive position would be harmed.

Furthermore, many of our employees, including our executive officers, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, including each member of our executive officers, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. We are not aware of any threatened or pending claims related to these matters or concerning the agreements with our executive officers, but litigation may be necessary in the future to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel. Further, to the extent that our employees, contractors, consultants, collaborators and advisors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems. Although we have confidence in the security of our systems, security measures may be breached, and we may not have adequate remedies for any such breach.

**We may not be successful in obtaining or maintaining necessary rights for our development pipeline through acquisitions and in-licenses.** 

Because our programs may involve additional drug candidates that require the use of proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire and maintain licenses or other rights to use these proprietary rights. We may be unable to acquire or in-license any compositions, methods of use, or other third-party intellectual property rights from third parties that we identify. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license intellectual property rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition and prospects for growth could suffer.

**If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could be required to pay monetary damages or could lose license rights that are important to our business.** 

We have entered into license agreements with third parties providing us with rights under various third-party patents and patent applications, including the rights to prosecute patent applications and to enforce patents. Certain of these license agreements impose and, for a variety of purposes, we may enter into additional licensing and funding arrangements with third parties that also may impose diligence, development or commercialization timelines and milestone payment, royalty, insurance and other obligations on us. Under our license agreements for the cell therapy platform, we are obligated to pay royalties on net sales of drug products, if commercialized, and milestone payments related to the development and commercialization of any drug candidates developed from the licensed platform. We may be obligated to make other specified payments relating to our drug candidates and/or pay license maintenance and other fees. In our agreements with BCM, we are also required to meet our co-development obligations with BCM, and if we fail to do so, BCM may terminate our agreements relating to the cell therapy platform. Certain of the license agreements relating to our Orascovery platform provide us with the exclusive right to practice technologies in major markets including North America, South America, the EU, Australia, New Zealand, Eastern Europe, China, Taiwan, Hong Kong, Macau and parts of Southeast Asia, although the right to practice the technologies and any inventions arising out of such technologies outside of these territories may be reserved to the licensing company. We also have clinical development obligations under certain of these agreements that we are required to satisfy. If we fail to comply with our obligations under our current or future license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market any drug or drug candidate that is covered by the licenses or we may face claims for monetary damages or other penalties under these agreements. Such

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an occurrence could diminish the value of these products and our company. Termination of the licenses provided in these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology.

In particular, our ability to stop third parties from making, using, selling, offering to sell or importing any of our patented inventions, either directly or indirectly, will depend in part on our success in obtaining, defending, and enforcing patent claims that cover our technology, inventions and improvements. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our platforms and product candidates and the methods used to manufacture those platforms and product candidates. Our issued patents and those that may issue in the future may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related platforms or product candidates or limit the length of the term of patent protection that we may have for our technologies, platforms and product candidates.

**If our licensing and sublicensing activities result in non-compliance with our licensing agreements, our business relationships with our licensing partners may suffer and we may be required to pay monetary damages or rescind or amend existing agreements which are important to our business.** 

We have entered into agreements with third parties under which we have granted licenses to use certain of our patents and patent applications, including the rights to develop, seek regulatory approval for and sell products using our tirbanibulin 1% ointment. We have also entered into similar agreements sublicensing the intellectual property for the Orascovery platform, which we have licensed from Hanmi. We have granted exclusive patent rights to certain of these partners and have granted them certain additional rights with respect to the intellectual property we have licensed to them. From time to time we may engage in other licensing transactions in which we acquire licenses to certain intellectual property or sublicense intellectual property rights. If we fail to comply with or are found to have violated the terms of any of our licenses, we may be required to rescind or amend our license agreements or pay damages to license counterparties or other rightsholders. This may also negatively impact our relationships with our licensing and sublicensing partners for our candidate platforms. For further information regarding the terms of our licenses, please see "Business—Our R&D Programs".

**We depend on our agreements with Hanmi to provide rights to the intellectual property relating to certain of our product candidates. Any termination or loss of significant rights under those agreements would adversely affect our development or commercialization of our lead product candidates.** 

We have licensed the intellectual property rights related to encequidar, an integral part of our current Orascovery product candidates, from Hanmi pursuant to two license agreements. If, for any reason, our license agreements are terminated or we otherwise lose those rights, it would adversely affect our business. Our license agreements with Hanmi impose on us obligations relating to exclusivity, territorial rights, development, commercialization, funding, payment, diligence, sublicensing, insurance, intellectual property protection and other matters. If we breach any material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages to Hanmi, and Hanmi may have the right to terminate our license, which could result in us being unable to develop, manufacture and sell our product candidates that incorporate encequidar.

In addition, under our 2013 license agreement with Hanmi, we have granted Hanmi a one-time right of first negotiation that, at Hanmi's discretion, requires us to negotiate in good faith the sale of our rights in Oral Paclitaxel under such agreement to Hanmi at a purchase price determined by an internationally-recognized investment banking firm with an office in Hong Kong at any time prior to the earlier of (1) our first commercial sale of products using such technology or (2) receipt by Hanmi of written notice from our company of the sublicense of the rights in an applicable product to a third party. If Hanmi exercises this right of first negotiation and we reach an agreement to sell our rights under that licensing agreement, our ability to continue to develop certain of our product candidates would be significantly impaired and would adversely affect our business and results of operations.

Each of our license agreements with Hanmi expires on the earlier of (1) expiration of the last of Hanmi's patent rights licensed under the agreement or (2) invalidation of Hanmi's patent rights which are the subject of the agreement, provided that the term will automatically be extended for consecutive one year periods unless either party gives notice to the other at least ninety days prior to expiration of the patent rights licensed under the agreement or before the then current annual expiration date of the agreement. The patent rights licensed to us under the agreements with Hanmi have expiry dates ranging from 2023 to 2033, unless the terms of such licensed patents are extended in accordance with applicable laws and regulations. Subject to certain conditions, Hanmi may also terminate the license agreements if we fail to comply with certain development milestones set out in each of the agreements. The agreements also contain customary termination rights for either party, such as in the event of a breach of the agreement or the initiation of bankruptcy proceedings by the other party or by mutual agreement. For further information regarding the license terms, right of first negotiation and termination provisions of the Hanmi in-license agreements, please see "Business—Our R&D Programs—Orascovery Platform—Orascovery License Agreements."

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**Risks Related to Our Reliance on Third Parties** 

**We may rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, perform satisfactorily or operate in compliance with laws and regulations, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business could be substantially harmed.**

We have relied upon and may, in the future, rely upon third-party CROs to monitor and manage data for our ongoing preclinical and clinical programs. We rely on these parties for execution of our preclinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, and regulatory requirements and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We and our CROs are required to comply with GCPs, which are regulations and guidelines enforced by the FDA and other regulatory authorities for all of our drugs in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical, non-clinical and preclinical programs. In the event that any of our foreign CROs are impacted by political, social or financial instability, they may be unable to maintain production capacity or compliance with regulatory requirements. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements, environmental, health and safety laws and regulations, or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our drug candidates. As a result, our results of operations and the commercial prospects for our drug candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

**Our total revenue is highly dependent on a limited number of pharmaceutical wholesalers, and the loss of, or any significant decrease in business from, any one or more of our major pharmaceutical wholesalers could adversely affect our financial condition and results of operations.** 

We have derived a significant portion of our revenue from a limited number of customers, as is typical in the pharmaceutical industry. During the years ended December 31, 2022 and 2021 we generated 63% and 62% of our total revenue, respectively, from the three largest wholesalers in the U.S. market. If we are unable to maintain our business relationships with these major pharmaceutical wholesalers on commercially acceptable terms, it could have a material adverse effect on our financial condition and results of operations. Even if we are able to maintain our relationships with customers, a change in the mix of products those customers purchase and which we are able to produce or supply may affect our gross margin and results of operations.

**We rely on third parties to manufacture our drug candidate supplies and our business could be harmed if those third parties fail to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.** 

We rely on outside vendors to manufacture supplies and process our drug candidates. Our capacity to manufacture and process drugs on a commercial scale is limited. We have limited experience in managing the manufacturing process, and our process may be more difficult or expensive than the approaches currently in use. Accordingly, we primarily rely on third parties for manufacturing capabilities. Our reliance on third-party manufacturers exposes us to the following risks:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and regulatory authorities must approve any manufacturers. This approval would require new testing and cGMP-compliance inspections by the regulatory authorities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our manufacturers may have little or no experience with manufacturing our drug candidates and, therefore, may experience production delays, quality issues or require a significant amount of support from us in order to implement and maintain the infrastructure and processes required to manufacture our drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our third-party manufacturers might be unable to timely manufacture our drug or produce the quantity and quality required to meet our clinical and commercial needs, if any;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our future contract manufacturers may not perform as agreed, may not devote sufficient resources to our drugs, or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our drugs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our drugs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our third-party manufacturers could breach or terminate their agreement with us;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our contract manufacturers and critical reagent suppliers may experience supply chain difficulties or other business continuity issues related to events beyond their control such as fires, floods, earthquakes, hurricanes, epidemics, quarantines, wars, civil unrest, strikes or governmental action; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our contract manufacturers may have unacceptable or inconsistent product quality success rates and yields.

Each of these risks could delay or prevent the completion of our trials or the approval of any of our drug candidates by the FDA or other regulatory authorities, result in higher costs or adversely impact development of our drug candidates. In addition, we will rely on third parties to perform certain specification tests on our drug candidates prior to delivery to patients. If these tests are not conducted appropriately and test data are not reliable, patients could be put at risk of serious harm and the FDA or other regulatory authorities could place significant restrictions on our company until deficiencies are remedied.

**The manufacture of drug and biological products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.** 

Manufacturers of drug and biological products often encounter difficulties in production, particularly in scaling up or out, validating the production process, and assuring high reliability of the manufacturing process (including the absence of contamination). These problems include logistics and shipping, difficulties with production costs and yields, quality control, including stability of the product, product testing, operator error, availability of qualified personnel, as well as compliance with strictly enforced federal, state and non-U.S. regulations. Furthermore, if contaminants are discovered in our supply of our drug candidates or in manufacturing facilities, those manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our drug candidates will not occur in the future. Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our drug candidate to patients in clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to begin new clinical trials at additional expense or terminate clinical trials completely.

**If third-party manufacturers fail to comply with pharmaceutical manufacturing regulations, our financial results and financial condition will be adversely affected.** 

Before a third party can begin commercial manufacture of our drug candidates and potential drugs, contract manufacturers are subject to regulatory inspections of their manufacturing facilities, processes and quality systems. Due to the complexity of the processes used to manufacture drug and biological products and our drug candidates, any potential third-party manufacturer may be unable to initially pass federal, state or international regulatory inspections in a cost-effective manner in order for us to obtain regulatory approval of our drug candidates. If our contract manufacturers do not pass their inspections by the FDA or other regulatory authorities, our commercial supply of drug product or substance will be significantly delayed and may result in significant additional costs, including the delay or denial of any marketing application for our drug candidates. In addition, drug and biological manufacturing facilities are continuously subject to inspection by the FDA and other regulatory authorities, before and after drug approval, and must comply with cGMPs. Our contract manufacturers may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. In addition, contract manufacturers' failure to achieve and maintain high manufacturing standards in accordance with applicable regulatory requirements, or the incidence of manufacturing errors, could result in patient injury, product liability claims, product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously harm our business, reputation or corporate image. If a third-party manufacturer with whom we contract is unable to comply with manufacturing regulations, we may also be subject to fines, unanticipated compliance expenses, recall or seizure of our drugs, product liability claims, total or partial suspension of production and/or enforcement actions, including injunctions and criminal or civil prosecution. These possible sanctions could materially adversely affect our financial results and financial condition.

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Furthermore, changes in the manufacturing process or procedure, including a change in the location where the product is manufactured or a change of a third-party manufacturer, could require prior review by the FDA or other regulatory authorities and/or approval of the manufacturing process and procedures in accordance with the FDA's regulations, or comparable requirements. This review may be costly and time consuming and could delay or prevent the launch of a product. The new facility will also be subject to pre-approval inspection. In addition, we have to demonstrate that the product made at the new facility is equivalent to the product made at the former facility by physical and chemical methods, which are costly and time consuming. It is also possible that the FDA or other regulatory authorities may require clinical testing as a way to prove equivalency, which would result in additional costs and delay.

**We have entered into collaborations and may form or seek collaborations or strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.** 

We have partnered with companies such as BCM, Hanmi, Almirall, and Gland and may form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties, subject to any restrictions imposed by our financing arrangements and other agreements, that we believe will complement or augment our development and commercialization efforts with respect to our drug candidates and any future drug candidates that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business.

In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our early stage drug candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our drug candidates as having the requisite potential to demonstrate safety and efficacy. If and when we collaborate with a third party for development and commercialization of a drug candidate, we can expect to relinquish some or all of the control over the future success of that drug candidate to the third party.

Further, collaborations involving our drug candidates are subject to numerous risks, which may include the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collaborators may not pursue development and commercialization of our drug candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive drugs, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a drug candidate, repeat or conduct new clinical trials or require a new formulation of a drug candidate for clinical testing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collaborators could independently develop, or develop with third parties, drugs that compete directly or indirectly with our drugs or drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a collaborator with marketing and distribution rights to one or more drugs may not commit sufficient resources to their marketing and distribution;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•disputes may arise between us and a collaborator, including disputes over amounts payable under the agreements, that cause the delay or termination of the research, development or commercialization of our drug candidates, or that result in costly litigation or arbitration that diverts management attention and resources;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable drug candidates; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collaborators may own or co-own intellectual property covering our drugs that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property.

As a result, if we enter into collaboration agreements and strategic partnerships or license our drugs, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a drug candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or

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commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our drug candidates or bring them to market and generate product sales revenue, which would harm our business prospects, financial condition and results of operations.

**We have engaged and will continue to rely on a single vendor to manage our order to cash cycle and our distribution activities in the U.S., and the loss or disruption of service from this vendor could adversely affect our operations and financial condition.** 

Our U.S. customer management, order processing, invoicing, cash application, chargeback and rebate processing and distribution and logistics activities are managed by Eversana Life Science Services ("Eversana"), a managed services provider with a focus on life sciences companies. If we were to lose the availability of Eversana's services due to a dispute, termination of or inability to renew the contract, or business continuity issues due to events beyond their control such as fires, floods, earthquakes, hurricanes, epidemics, quarantines, wars, civil unrest, strikes or governmental action, such loss could have a material adverse effect on our operations. Although multiple providers of such services exist, there can be no assurance that we could secure another source to handle these transactions on acceptable terms or otherwise to our specifications in the event of a disruption of services at operational centers.

**Risks Related to Our Industry, Business and Operations**

**We are dependent on our key personnel, and if we are not successful in attracting and retaining qualified personnel, we may not be able to successfully implement our business strategy.** 

We are highly dependent on Johnson Lau, our Chief Executive Officer; Jeffrey Yordon, our Chief Operating Officer; Daniel Lang, the President of Athenex Cell Therapy; Joe Annoni, our Chief Financial Officer; Rudolf Kwan, our Chief Medical Officer of Small Molecules; and Darrel Cohen, our Chief Medical Officer of Cell Therapy, and the other principal members of our management and scientific teams. We do not maintain "key person" insurance for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided equity awards that vest over time. The value to employees of these equity awards that vest over time may be significantly affected by changes in the price of our common stock that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements with our key employees, any of our employees could leave our employment at any time, with or without notice. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel or consultants will also be critical to our success. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our discovery and preclinical development and commercialization strategy. The loss of the services of our executive officers or other key employees and consultants could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.

The loss of any member of the Company's management, either permanently or for an indeterminate period of time, and/or failure to successfully implement our succession plan to enable the effective transfer of knowledge or to facilitate smooth transitions in leadership could significantly disrupt the management of the Company's business and impair the Company's ability to execute its business strategies. We have experienced significant changes in our management team and business in recent years, and more changes could occur. Replacing executive officers and key employees or consultants may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel or consultants on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. Management transition periods, including adding new personnel, could be difficult as new employees gain an understanding of our business and strategy. If we are unable to successfully integrate new employees, we may have difficulty maintaining compliance with our internal control over financial reporting, disclosure controls and procedures, and executing our business strategy, which could have an adverse effect on our overall financial condition.

**Certain members of our leadership may engage in other business ventures that may have interests in conflict with ours.** 

In order to recruit and retain qualified personnel, we may choose to hire part-time employees, use consultants, or permit personnel to pursue other professional opportunities. As a result, certain of our employees, officers, directors and consultants may not devote all of their time to our business, and may from time to time serve as officers, directors and consultants of other companies. These other companies may have interests in conflict with ours. For instance, Dr. Johnson Lau, who serves as our Chief Executive Officer and Chairman, and Dr. Manson Fok, who serves on our board of directors, are also directors of Avalon, a stockholder of ours and one of our license partners. Dr. Lau also serves as the Chief Executive Officer of Axis, a joint venture that we majority own. As a

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result, these individuals owe duties to each of these entities, which duties may conflict with the duties that they owe to us and our stockholders. We also face competition for the hiring of scientific and clinical personnel from universities and research institutions. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

**We may have conflicts of interest with our affiliates and related parties, and in the past, we have engaged in transactions and entered into agreements with affiliates that were not negotiated at arms' length.**

We have engaged, and may in the future engage, in transactions with affiliates and other related parties. These transactions may not have been, and may not be, on terms as favorable to us as they could have been if obtained from non-affiliated persons. While an effort has been made and will continue to be made to obtain services from affiliated persons and other related parties at rates and on terms as favorable as would be charged by others, there will always be an inherent conflict of interest between our interests and those of our affiliates and related parties. Our affiliates may economically benefit from our arrangements with related parties. If we engage in related party transactions on unfavorable terms, our operating results will be negatively impacted.

**Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.** 

We are exposed to the risk of fraud, misconduct or other illegal activity by our executive officers, employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with the laws of the U.S., including regulations of the FDA and other similar non-U.S. regulatory authorities; provide true, complete and accurate information to the FDA and other similar non-U.S. regulatory authorities; comply with healthcare fraud and abuse and privacy laws in the U.S. and similar non-U.S. fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us. In addition to Klisyri, which was approved by the FDA in December 2020, if we obtain FDA approval of additional drug candidates and begin commercializing those drugs in the U.S., our potential exposure under U.S. laws will continue to increase significantly and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

**We have engaged, and may engage in future, acquisitions or strategic partnerships that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.** 

Subject to any limitations imposed by our financing arrangements, we may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. For example, in May 2021, we acquired Kuur and its Cell Therapy technology. To realize the anticipated benefits of the Kuur acquisition, we must successfully integrate Kuur's business with ours. The integration of Kuur's business and any potential acquisition or strategic partnership entails numerous risks, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•increased operating expenses and cash requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the assumption of indebtedness or contingent liabilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•dilution of our stockholders due to the issuance of additional equity securities upon the achievement of milestones, including those provided for in the merger agreement with Kuur;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•conducting R&D activities in new therapeutic areas or treatment modalities in which we have little experience;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•integrating operations and expanding the geographies where we conduct our business, each with its own legal system and regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the diversion of our management's attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

**Our internal computer systems, or those used by our CROs, collaboration partners, third-party service providers or other contractors or consultants, may fail or suffer security breaches.** 

Despite the implementation of cybersecurity measures, our information technology and Internet-based systems, including those of our current and future CROs, collaboration partners, third-party service providers and other contractors and consultants, are vulnerable to damage, interruption, or failure from computer viruses, unauthorized access, intrusion, and other cybersecurity incidents, and we have experienced a security breach in the past. As the majority of our workforce has the ability to work remotely, we face heightened risks related to remote work, including strain on our information technology systems, coordination issues and the threat of cyber-security incidents related to unauthorized system access, aggressive social engineering tactics, and attacks on our information technology systems used to conduct our business. This could result in the exposure of sensitive data including the loss of trade secrets, intellectual property, personal identifiable or sensitive information of employees, customers, partners, clinical trial patients and others, leading to a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we partially rely on our third-party research institution collaborators for research and development of our drug candidates and other third parties for the manufacture of our drug candidates and to conduct clinical trials, and similar cybersecurity incidents relating to their computer systems could also have a material adverse effect on our business. Certain data security breaches must be reported to affected individuals and the government, and in some cases to the media, under provisions of HIPAA, other U.S. federal and state law, and requirements of non-U.S. jurisdictions, and financial penalties may also apply. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our drug candidates could be delayed. To help mitigate future incidents, we have put in place enhanced security measures required for access by consultants. Notwithstanding such measures, we cannot be certain that no future security breaches will occur or that future breaches will not result in a material disruption of our development programs and our business operations.

**Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.** 

Our operations, and those of our third-party research institution collaborators, CROs, suppliers and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics or pandemics, acts of war or terrorism, and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. In addition, we partially rely on our third-party research collaborators for conducting research and development of our drug candidates, and they may be affected by government shutdowns or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. Our ability to obtain clinical supplies of our drug candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. Damage or extended periods of interruption to our corporate, development or research facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our drug candidates. Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.

**If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our drug candidates.** 

We face an inherent risk of product liability as a result of the clinical testing of our drug candidates and will face an even greater risk if we are able to commercialize our clinical candidates. For example, we may be sued if drugs that we plan to manufacture cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, as applicable, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the drug, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be

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required to limit commercialization of our drug candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•decreased demand for our drugs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•injury to our reputation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•withdrawal of clinical trial participants and inability to continue clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•initiation of investigations by regulators;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•costs to defend the related litigation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a diversion of management's time and our resources;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•substantial monetary awards to trial participants or patients;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•product recalls, withdrawals or labeling, marketing or promotional restrictions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•loss of revenue;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•exhaustion of any available insurance and our capital resources;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the inability to commercialize any drug candidate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a decline in the price of our common stock.

Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of drugs we develop, alone or with collaborators. Although we currently carry clinical trial insurance, which we believe to be adequate for our current operations, the amount of such insurance coverage may not be adequate now, or in the future, and we may be unable to maintain such insurance, or we may not be able to obtain additional or replacement insurance at a reasonable cost, if at all. Our insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

Additionally, we may be sued if the products that we commercialize, market or distribute for our partners cause or are perceived to cause injury or are found to be otherwise unsuitable, and may result in:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•decreased demand for those products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•damage to our reputation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•costs incurred related to product recalls;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•limiting our opportunities to enter into future commercial partnership; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a decline in the price of our common stock.

**We have limited insurance coverage, and any claims beyond our insurance coverage may result in us incurring substantial costs and a diversion of resources.** 

We maintain property insurance policies covering physical damage to, or loss of, our buildings and their improvements, equipment, office furniture and inventory as well as business interruption insurance covering loss of income & extra expenses associated with physical damage to our property. We maintain workers' compensation/employer's liability insurance covering death or work-related injury of employees. We purchase general liability insurance covering certain incidents involving third parties that occur on or in the premises of the company, and products liability insurance covering certain incidents involving third parties resulting from our products. We purchase directors' and officers' liability insurance and employment practices liability insurance. We do not maintain key-man life insurance on any of our senior management or key personnel. Our insurance coverage may be insufficient to cover any claim for product liability, damage to our fixed assets or employee injuries. Any liability or damage to, or caused by, our facilities or our personnel beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.

**We may increasingly become a target for public scrutiny, including complaints to regulatory agencies, negative media coverage, including social media and malicious reports, all of which could severely damage our reputation and materially and adversely affect our business and prospects.** 

We focus on the development of drugs used in the treatment of cancers, and such drugs may be the subject of regulatory, watchdog and media scrutiny and coverage, which also creates the possibility of heightened attention from the public, the media and

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our participants. In addition, members of our management and board include high-profile public figures who may be the subject of media and negative publicity and attention. From time to time, these objections or allegations, regardless of their veracity, may result in public protests or negative publicity, which could result in government inquiry or harm our reputation. Corporate transactions we or related parties undertake may also subject us to increased media exposure and public scrutiny. There is no assurance that we would not become a target for public scrutiny in the future or such scrutiny and public exposure would not severely damage our reputation as well as our business and prospects.

In addition, our directors and management have been in the past, and may continue to be, subject to scrutiny by the media and the public regarding their activities in and outside our company, which may result in unverified, inaccurate or misleading information about them being reported by the press. Negative publicity about our directors or management, even if untrue or inaccurate, may harm our reputation.

**Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.** 

We have incurred net operating losses ("NOLs") for U.S. federal income tax purposes. Unused NOLs will carry forward to offset future taxable income, if any, until such unused NOLs expire (if ever). NOLs generated after December 31, 2017 are not subject to expiration, but the yearly utilization of such NOLs is limited to 80 percent of taxable income. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an ownership change (generally defined as a greater than 50 percentage points change (by value) in the equity ownership of one or more stockholders or groups of stockholders who own at least 5% of a corporation's stock over any three-year period), the corporation's ability to use its pre-change NOLs and other pre-change tax attributes to offset its post-change income may be limited. We believe that we have experienced such a change in 2021 and may experience more in the future, which may affect our ability to utilize our NOLs. As of December 31, 2022 and 2021, we had federal NOLs of approximately $69.3 million and $93.7 million, respectively, that could be limited by our past and any future ownership change, which could have an adverse effect on our future results of operations. The change in 2021 is a result in a reduction of $108.9 million from a Section 382 limitation that occurred in 2021, less an increase in potentially limited NOLs of $17.8 million as a result of the Kuur acquisition. Similar limitations will apply to our ability to carry forward any unused tax credits to offset future taxable income.

**Risks Related to Government Regulation**

**Recently enacted and future legislation may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our drug candidates and affect the prices we may obtain.** 

In the U.S., China and certain other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any additional drug candidates for which we obtain regulatory approval.

In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the "MMA"), changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products. While the MMA only applies to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

The ACA included provisions to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Among other things, the ACA increased manufacturers' rebate liability under the Medicaid Drug Rebate Program, imposed a significant annual fee on companies that manufacture or import branded prescription drug products and required manufacturers to provide a discount off the negotiated price of prescriptions filled by beneficiaries in the Medicare Part D coverage gap, referred to as the "donut hole," which is now 70% of the negotiated price. There have been efforts to repeal or overturn the ACA. On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the "individual mandate" was repealed by Congress. Thus, the ACA will remain in effect in its current form. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is uncertain how any such challenges and the healthcare measures of the Biden administration will impact the ACA and our business.

In addition, other legislative changes have been proposed and adopted in the U.S. since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, starting in 2013 and, due to subsequent legislative amendments to the statute will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. The Medicare reductions phased back in starting with a 1% reduction

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in effect from April 1, 2022 to June 30, 2022 before increasing to the full 2% reduction. There may be additional reductions in Medicare and other healthcare funding as a result of future legislation.

We expect that the ACA, as well as other healthcare reform legislative measures that have been since adopted or may be adopted in the future, may result in more rigorous coverage criteria and an additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.

For example, on November 20, 2020, the United States Department of Health and Human Services ("HHS") finalized a regulation removing safe harbor protection under the Federal Anti-Kickback Statute for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law or unless it is passed through to the dispensing pharmacy and reflected in the price to the patient. The implementation of the rule was delayed by the Biden administration to January 1, 2023 in response to ongoing litigation and subsequently delayed by the IRA until January 1, 2032. In addition, effective January 1, 2024, a provision capping the rebate amount under the Medicaid Drug Rebate program at 100% of AMP will be eliminated, which means that a manufacturer could pay a rebate amount on a unit of the drug that is greater than the price the manufacturer receives for the drug. Further, on December 31, 2020, CMS published a new rule, effective January 1, 2023, effective January 1, 2023, requiring manufacturers to ensure the full value of co-pay assistance is passed on to the patient or these dollars will count toward the Average Manufacturer Price and Best Price calculation of the drug. On May 21, 2021, PhRMA sued the HHS in the U.S. District Court for the District of Columbia, to stop the implementation of the rule claiming that the rule contradicts federal law surrounding Medicaid rebates, and on May 17, 2022, the court vacated the rule.

In addition, on September 9, 2021, the Biden administration published a wide-ranging list of policy proposals, most of which would need to be carried out by Congress, to reduce drug prices and drug payment. The HHS plan includes, among other reform measures, proposals to lower prescription drug prices, including by allowing Medicare to negotiate prices and disincentivizing price increases, and to support market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase price transparency. These healthcare reform initiatives recently culminated in the enactment of the IRA in August 2022, which will, among other things, allow the HHS to negotiate the selling price of certain drugs and biologics that CMS reimburses under Medicare Part B and Part D, although only high-expenditure single-source drugs that have been approved for at least 7 years (11 years for biologics) can be selected by CMS for negotiation, with the negotiated price taking effect two years after the selection year. The negotiated prices, which will first become effective in 2026, will be capped at a statutory ceiling price. Beginning in October 2022 for Medicare Part D and January 2023 for Medicare Part B, the IRA will also penalize drug manufacturers that increase prices of Medicare Part D and Part B drugs at a rate greater than the rate of inflation. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties. The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. These provisions will take effect progressively starting in 2023, although they may be subject to legal challenges.

Other legislative and regulatory proposals have been made to expand post-approval requirements and restrict coverage and reimbursement and sales and promotional activities, for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether agencies such as the FDA or the Centers for Medicare & Medicaid Services will issue new regulations, guidance or interpretations that may impact our drug candidates. In addition, increased scrutiny by the U.S. Congress of the FDA's approval process may significantly delay or prevent regulatory approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

**We are subject, directly or indirectly, to applicable U.S. federal and state anti-kickback, false claims laws, physician payment transparency laws, fraud and abuse laws or similar healthcare and privacy and security laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.** 

Healthcare providers, physicians and others play a primary role in the recommendation and prescription of our products and any of our product candidates for which we obtain regulatory approval. Our operations are subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act and physician payment transparency laws and regulations. These laws may impact, among other things, our proposed sales and marketing programs as well as any patient support programs we may consider offering. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•federal civil and criminal false claims laws and civil monetary penalty laws, such as the federal False Claims Act which imposes criminal and civil penalties, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment or approval from Medicare, Medicaid or other third-party payors that are false or fraudulent, including failure to timely return an overpayment received from the federal government or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•provisions of HIPAA, which created new federal criminal statutes referred to as the "HIPAA All-Payor Fraud Prohibition," prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the federal transparency requirements under the ACA, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to all payments or other transfers of value made to physicians, physician assistants, certain types of advance practice nurses, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members unless a specific exclusion applies; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.

Additionally, we are subject to state and non-U.S. equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the Federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental payors, including private insurers. In addition, some states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America's Code on Interactions with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an applicable state law requirement, we could be subject to penalties.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the ACA, among other things, amends the intent requirement of the federal Anti-Kickback and criminal healthcare fraud statutes. As a result of such amendment, a person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation. Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability to bring civil whistleblower or qui tam actions on behalf of the U.S. government under the Federal False Claims Act as well as under the false claims laws of several states.

Law enforcement authorities are increasingly focused on enforcing these laws, and it is possible that some of our practices may be challenged under these laws. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the

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approval and commercialization of any of our drug candidates outside the U.S. will also likely subject us to non-U.S. equivalents of the healthcare laws mentioned above, among other non-U.S. laws.

If any of the physicians or other providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Lastly, political, economic and regulatory influences are subjecting the health care industry in the U.S. to fundamental change. Initiatives to reduce the federal budget and debt and to reform health care coverage are increasing cost-containment efforts. We anticipate that federal agencies, Congress, state legislatures, and the private sector will continue to review and assess alternative health care benefits, controls on health care spending, and other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit coverage for or the amounts that federal and state governments will pay for health care products and services, which could also result in reduced demand for our products or additional pricing pressures, and limit or eliminate our spending on development projects and affect our ultimate profitability.

**Our business is subject to applicable laws and regulations relating to sanctions, anti-money laundering and anti-bribery practices, the violation of which could adversely affect our operations.** 

We must comply with all applicable economic sanctions, anti-money laundering and anti-bribery laws and regulations of the U.S. and other foreign jurisdictions where we operate, including China. U.S. laws and regulations applicable to us include the economic trade sanctions laws and regulations administered by the U.S. Department of the Treasury's Office of Foreign Assets Control, or OFAC, as well as certain laws administered by the U.S. Department of State. Our business is also subject to anti-money laundering laws and regulations, including the Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Money Laundering Regulations 2007 in the U.K., the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986 and the USA PATRIOT Act of 2001 in the U.S. and equivalent or similar legislation in the other countries where we do business. In addition, we are subject to the FCPA and other anti-bribery laws such as the U.K. Bribery Act 2010 that generally prohibit the corrupt provision of anything of value to foreign governments and their officials and political parties for the purpose of influencing official conduct or obtaining or retaining an undue business advantage. Applicable anti-bribery laws also may prohibit commercial bribery.

We have operations, conduct clinical trials, deal with government entities, including hospitals and public health regulators, and have contracts in countries known to experience corruption and commercial bribery. Our activities in these countries, particularly China and countries in Latin America, create the risk of unauthorized payments or offers of payments by our employees, brokers or agents that could be in violation of various laws, including the FCPA, even though these parties are not always subject to our control and supervision. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in China, where we conduct business. There is no assurance that our existing safeguards and procedures will be completely effective in ensuring compliance with such laws, and our employees, brokers or agents may engage in conduct for which we may be held responsible. Violations of the FCPA or other anti-bribery laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our reputation, business, operating results, and financial condition.

Regulations administered by OFAC govern transactions with countries and persons subject to U.S. trade sanctions. We are also subject to U.S. Government restrictions on transactions with specific entities and individuals, including, without limitation, those set forth on the Entity List, the Specially Designated Nationals List, the Denied Persons List, the Unverified List, and the U.S. State Department's lists of debarred parties and sanctioned entities, and we may also be subject to restrictions on transactions with specific entities and individuals subject to the sanctions administered by the United Nations Security Council, the EU, Her Majesty's Treasury, or other relevant sanctions authority. These regulations prohibit us from entering into or facilitating unlicensed transactions with, for the benefit of, or in some cases involving the property and property interests of such persons, governments, or countries designated by the relevant sanctions authority under one or more sanctions regimes. Failure to comply with these sanctions and embargoes may result in material fines, sanctions or other penalties being imposed on us or other governmental investigations. In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business involving sanctioned countries or entities.

International economic and trade sanctions are complex and subject to frequent change, including jurisdictional reach and the lists of countries, entities, and individuals subject to the sanctions. Current or future economic and trade sanctions regulations or developments might have a negative impact on our business or reputation, and we may incur significant costs related to current, new, or changing sanctions programs, as well as investigations, fines, fees or settlements, which may be difficult to predict. In addition, companies subject to SEC reporting obligations are required under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or transactions involving Iran or other individuals and entities targeted by certain sanctions promulgated by OFAC that the reporting company or any of its affiliates engaged in during the period covered by the relevant periodic report. In some cases, Section 13 requires companies to disclose transactions even if they are permissible under U.S. law. The SEC is required to post this notice of disclosure pursuant to Section 13 on its website and report to the President and certain congressional committees regarding such filings.

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Although we have policies and controls in place that are designed to ensure compliance with these laws and regulations, it is possible that an employee or intermediary could fail to comply with applicable laws and regulations. In such event, we could be exposed to civil penalties, criminal penalties and other sanctions, including fines or other punitive actions, and the government may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries, and modifications to compliance programs, which may increase compliance costs. In addition, such violations could damage our business and/or our reputation. Such criminal or civil sanctions, penalties, other sanctions, and damage to our business and/or reputation could have a material adverse effect on our financial condition and results of operations.

**Any failure to comply with applicable regulations and industry standards or obtain various licenses and permits could harm our reputation and our business, results of operations and prospects.** 

A number of governmental agencies or industry regulatory bodies in the U.S., and in non-U.S. jurisdictions including China and countries in Latin America, impose strict rules, regulations and industry standards governing pharmaceutical and biotechnology research and development and manufacturing and marketing activities, which apply to us. Our failure to comply with such regulations could result in the termination of ongoing research or manufacturing and marketing, administrative penalties imposed by regulatory bodies or the disqualification of data for submission to regulatory authorities. This could harm our reputation, prospects for future work and operating results. For example, if we were to treat research animals inhumanely or in violation of international standards set out by the Association for Assessment and Accreditation of Laboratory Animal Care, it could revoke any such accreditation and the accuracy of our animal research data could be questioned.

**If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.** 

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers' compensation insurance to cover us for costs and expenses, we may incur due to injuries to our employees resulting from the use of or exposure to hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage, use or disposal of biological or hazardous materials.

In addition, we may be required to incur substantial costs to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

**If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and our drugs could be subject to restrictions or withdrawal from the market.** 

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from our drugs. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate revenues from our product sales, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.

**Risks Related to Doing Business Internationally**

**Tensions between the U.S. and China may materially and adversely affect our business, financial condition and results of operations.**

We have operations in Hong Kong and expect that a portion of our future revenue will be sourced from licensing partnerships in China. Accordingly, our operations, financial condition and results of operations are affected by economic, political and legal developments between the U.S. and China. For example, raw material costs are impacted by governmental actions, such as tariffs and trade sanctions. The imposition by the U.S. government of tariffs on products imported from certain countries and trade sanctions against certain countries have introduced greater uncertainty with respect to policies affecting trade between the United States and other countries and have impacted the cost of certain raw materials. Major developments in trade relations, including the imposition of new or increased tariffs by the United States and/or other countries, could have a material adverse effect on our business, financial condition and results of operations.

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Political tensions between the U.S. and China create uncertainties for doing business in China, including compliance risks that may arise from retaliatory regulations, restrictions on technology transfers between the countries or measures enacted that further impede our ability to repatriate capital from our subsidiaries in China. The uncertainties caused by continued tensions, together with the risk of escalating retaliatory policies could increase our cost of doing business, adversely affect our business, financial condition and results of operations and may result in our inability to sustain our operations, and growth and expansion strategies with respect to China.

**Fluctuations in exchange rates could result in foreign currency exchange losses, which may adversely affect our financial condition, results of operations and cash flows.**

We incur portions of our expenses, and may in the future derive revenues, in currencies other than U.S. dollars, in particular, the RMB. As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. For example, we sold our interest in our API manufacturing business in China during 2022, and the consideration payable in tranches through the first half of 2023 is denominated in RMB. We are exposed to fluctuations in currency exchange rates through this agreement, and we are subject to the risk that the U.S. dollar is reduced in value relative to the RMB. We currently do not engage in hedging transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the U.S. dollar. An increase in the value of the U.S. dollar against currencies in countries in which we conduct business could have a negative impact on our research and development costs.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by China and other non-U.S. governments. Generally, to the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive. Conversely, if we decide to convert our RMB into U.S. dollars for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount we would receive. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of operations and cash flows.

**Scrutiny of companies with operations in China may result in increased regulatory review of us and negatively impact the trading price of our common stock and could have a material adverse effect upon our business, including our results of operations, financial condition, cash flows and prospects.** 

We believe that the implementation of the Holding Foreign Companies Accountable Act (the "HFCAA"), the delistings of China-based business from U.S. stock exchanges, and the general negative publicity surrounding companies with operations in China, including concerning the directors and officers of such companies, that are listed in the U.S. have negatively impacted stock prices for such companies and the HFCAA may result in additional delistings of companies with significant China operations from U.S. securities exchanges. Various equity-based research organizations have published reports on China-based companies after examining, among other things, their corporate governance practices, related party transactions, sales practices and financial statements that have led to special investigations and stock suspensions on national exchanges, including as a result of purported whistle-blowing or leaking by employees or former employees. Any similar scrutiny of us, regardless of its lack of merit, could result in a diversion of management resources and energy, potential costs to defend ourselves against rumors, decreases and volatility in the trading price of our common stock, and increased directors and officers insurance premiums and could have a material adverse effect upon our business, including our results of operations, financial condition, cash flows and prospects.

**Risks Related to Our Common Stock** 

**If we fail to comply with the continued listing standards of the Nasdaq Global Market, our common stock may be delisted from the exchange.**

Our common stock is listed on Nasdaq under the symbol "ATNX." The continued listing of our common stock on Nasdaq is subject to our compliance with a number of listing standards. In particular, during 2022, our common stock failed to maintain a minimum bid price of at least $1.00 per share. In February 2023, we effected a reverse stock split to increase the per share price of our common stock to regain compliance with the Nasdaq listing standards. There can be no assurance that this reverse stock split will be sufficient for our stock price to maintain a minimum bid price of at least $1.00 per share for the foreseeable future.

If we fail to satisfy the Nasdaq continued listing requirements, such as the corporate governance requirements, the stockholder's equity requirement or maintaining the minimum bid price requirement, Nasdaq may take steps to delist our common stock. Such a delisting or another notification of failure to comply with such requirements would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. We and our stockholders could be materially adversely impacted if our common stock were to be delisted from Nasdaq. In particular:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may be unable to raise equity capital on acceptable terms or at all;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may lose the confidence of our current or prospective third-party providers and collaboration partners, which could jeopardize our ability to enter into licensing and collaboration agreements and continue our business as currently conducted;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the price of our common stock would likely decrease;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•stockholders may be unable to sell or purchase our common stock when they wish to do so;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may lose the interest of institutional investors in our common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we may lose media and analyst coverage;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our common stock could be considered a "penny stock," which would likely limit the level of trading activity in the secondary market for our common stock; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we would likely lose the active trading market for our common stock, as it may only be traded on one of the over-the-counter markets, if at all.

In the event of a delisting, we would take actions to restore our compliance with Nasdaq's listing requirements, but we can provide no assurance that any such action would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future noncompliance with Nasdaq's listing requirements.

**Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our common stock for return on your investment, if any.** 

We intend to retain most, if not all, of our available funds and earnings to fund our business operations and the development of our business. In addition, our Senior Credit Agreement restricts our and our restricted subsidiaries' ability to pay dividends. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our common stock as a source for any future dividend income.

Our board of directors has significant discretion as to whether to distribute dividends, subject to the restrictions contained in our financing agreements. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, restrictions on the form and amount of such dividends in our debt agreements, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on an investment in our common stock will likely depend entirely upon any future price appreciation of our common stock. There is no guarantee that our common stock will appreciate in value or even maintain its current market price. You may not realize a return on your investment in our common stock and you may even lose your entire investment in our common stock.

**Concentration of ownership among our directors, executive officers and principal stockholders could limit your ability to influence the outcome of key transactions, including a change of control.** 

Our executive officers and directors beneficially own approximately 8.8% of our outstanding common stock in the aggregate, based on the number of shares outstanding as of December 31, 2022. Perceptive Advisors LLC and its affiliates own approximately 14.6% and IP Group PLC owns approximately 5.9% of our outstanding common stock, based on the number of shares outstanding as of December 31, 2022. As a result, these stockholders, if acting together, will be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. In addition, these stockholders, acting together, would have the ability to control the management and affairs of our company. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock. Our directors and executive officers' investment in and position in our company could also discourage others from pursuing any potential acquisition of us, which could have the effect of depriving the holders of our common stock of the opportunity to sell their shares at a premium over the prevailing market price.

**Anti-takeover provisions in our charter documents may discourage our acquisition by a third party, which could limit our stockholders' opportunity to sell their shares at a premium.** 

Our amended and restated certificate of incorporation and bylaws include provisions that could limit the ability of others to acquire control of our company, modify our structure or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our stockholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control in a tender offer or similar transaction.

**The trading price of our common stock has been and is likely to continue to be volatile, which could result in substantial losses to you.** 

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The trading price of our common stock has been and is likely to continue to be volatile and could fluctuate widely in response to a variety of factors, many of which are beyond our control. In addition to market and industry factors, the price and trading volume for our common stock may be highly volatile for specific business reasons, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•announcements of regulatory approval or a complete response letter, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•announcements of therapeutic innovations or new products by us or our competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•any adverse changes to our relationship with manufacturers or suppliers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the results of our testing and clinical trials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the results of our efforts to acquire or license additional drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•variations in the level of expenses related to our existing drug candidates or preclinical and clinical development programs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•any intellectual property infringement actions in which we may become involved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•announcements concerning our competitors or the pharmaceutical industry in general;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•achievement of expected product sales and profitability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•supply or distribution shortages;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•variations in our results of operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•publication of operating or industry metrics by third parties, including government statistical agencies, that differ from expectations of industry or financial analysts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in financial estimates by securities research analysts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•announcements made by us or our competitors of acquisitions, strategic relationships, joint ventures or capital commitments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•press reports or other negative publicity, whether or not true, about our business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes to our acting management team, including as a result of additions, departures and health-related leaves of absence;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•release or expiry of lock-up or other transfer restrictions on our outstanding common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•sales or perceived potential sales of additional common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•sales of our common stock by us, our executive officers and directors or our stockholders in the future;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•general economic and market conditions and overall fluctuations in the U.S. equity markets, including due to the war in Ukraine; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in accounting principles.

Any of these factors may result in large and sudden changes in the volume and trading price of our common stock. We could be subject to additional securities class action litigation against us following a future period of volatility in the market price of our shares.

In addition, the stock market, in general, and small pharmaceutical and biotechnology companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors, including the war in Ukraine, COVID-19 pandemic, supply chain disruptions, limited supply of natural resources, and acts of war, may negatively affect the market price of our common stock, regardless of our actual operating performance. Further, the current decline in the financial markets and related factors beyond our control may cause our common stock price to decline rapidly and unexpectedly.

**General Risk Factors**

**Our business is subject to macroeconomic factors, like inflation, supply chain disruptions that began during the COVID-19 pandemic, and the war in Ukraine, that may have an adverse impact on our business and clinical development activities.**

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Economic conditions across the world face continued uncertainty due to, among other things, high and rising inflation, higher interest rates, and increased geopolitical risk in multiple regions including Ukraine. Continued economic uncertainty may have an adverse impact on our business and financial condition.

As a result of the COVID-19 pandemic, we experienced supply chain disruptions and, in line with the industry overall, slowed enrollment or suspensions of ongoing clinical trials for our earlier stage product candidates as healthcare resources are diverted to address the pandemic. We could face similar risks if the pandemic worsens or in the event of a new public health emergency. Similarly, if the war in Ukraine or other external events cause a significant macroeconomic downturn, we may experience a multitude of additional disruptions that could severely impact our business, operations and development activities, including the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•temporary or long-term disruptions in our supply chains and resulting delays in the delivery of products, services or other materials necessary for our operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•interruptions in FDA operations or the operations of comparable foreign regulatory agencies, which may in turn impact our timelines for receiving regulatory approvals and feedback;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•inability of our collaboration and license partners to continue development or commercialization of our product candidates in certain geographies for certain indications;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our potential inability to collect on receivables, including milestone payments, due to us;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•disruptions, including data breaches and data loss, due to the increased cybersecurity vulnerabilities caused by remote work and a distributed workforce on the one hand, and potential cyberattacks from state actors on the other hand;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the imposition of government regulations that may restrict the movement of supplies in the global supply chain and divert resources that are necessary to continue our development activities or review future product candidates; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•interruption or delays in our and our partners' ability to meet expected clinical development deadlines or to comply with contractual commitments with respect to the same, including timelines around preclinical studies and planned clinical trials which could in turn delay overall developmental timelines.

If our partners experience significant or extended disruptions to their business due to these macroeconomic factors, including the war in Ukraine, it could result in substantial supply shortages that could harm our specialty drug business and our overall financial condition and results of operations. These disruptions could adversely impact our ability to conduct clinical development activities, planned clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.

**If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our consolidated financial results.**

We cannot assure you that there will not be material weaknesses and significant deficiencies that our independent registered public accounting firm or we will identify in the future. Under standards established by the Public Company Accounting Oversight Board, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected and corrected on a timely basis. As a public company, we must maintain effective disclosure and financial controls and implement those controls in our corporate governance practices including our board and committee practices. If we identify such issues or if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected, and we may be unable to maintain compliance with applicable listing requirements.

**Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.** 

We are subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected, which would cause us to be unable to produce accurate financial statements and may adversely affect our business.

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**There are limitations on the liability of our officers and directors, and we may have to indemnify our officers and directors in certain instances.**

Our amended and restated certificate of incorporation limits, to the maximum extent permitted under Delaware law, the personal liability of our directors for monetary damages for breach of their fiduciary duties as directors. The indemnification provisions may require us, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers (other than liabilities arising from willful misconduct of a culpable nature), to advance their expenses incurred as a result of certain proceedings against them as to which they could be indemnified. Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify a director, officer, employee or agent made or threatened to be made a party to an action by reason of the fact that he or she was a director, officer, employee or agent of the corporation or was serving at the request of the corporation, against expenses actually and reasonably incurred in connection with such action if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Delaware law does not permit a corporation to eliminate a director's duty of care and the provisions of our certificate of incorporation have no effect on the availability of equitable remedies, such as injunction or rescission, for a director's breach of the duty of care.

We believe that our limitation of officer and director liability assists us to attract and retain qualified employees and directors. However, in the event an officer, a director or the board of directors commits an act that may legally be indemnified under Delaware law, we will be responsible to pay for such officer(s) or director(s) legal defense and potentially any resulting damages. Furthermore, the limitation on director liability may reduce the likelihood of derivative litigation against directors and may discourage or deter stockholders from instituting litigation against directors for breach of their fiduciary duties, even though such an action, if successful, might benefit our stockholders and us. Limitations of director liability may be viewed as limiting the rights of stockholders, and the broad scope of the indemnification provisions contained in our certificate of incorporation could result in increased expenses.

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**Item 1B. Unresolved Staff Comments.**

None.

**Item 2. Properties.**

Our Oncology Innovation Platform operates in several facilities globally: Our corporate headquarters is located in Buffalo, New York, where we occupy approximately 51,000 square feet of the Conventus Center for Collaborative Medicine, which includes approximately 16,000 square feet of a formulation testing and chemistry lab under a lease that expires in July 2025 and is renewable for an additional 10 years. We occupy approximately 26,500 square feet in Clarence, New York under a lease that expires in January 2026, which provides our manufacturing of Tirbanibulin. We occupy approximately 1,300 square feet of office space in Cranford, New Jersey under a lease that expires in April 2024 that serves as our clinical research headquarters. We also occupy approximately 400 square feet of office space in Hong Kong under a lease which expires in November 2023. The office space serves as our Hong Kong headquarters. In addition, we occupy approximately 9,900 square feet of office space in multiple locations across Latin America under lease agreements which expire at various dates through October 2022, which serve as clinical research facilities.

Our Commercial Platform is headquartered and operates in approximately 15,000 square feet of office space in the Woodfield Preserve Office Center in Schaumberg, Illinois under a lease that expires in March 2027.

We believe that these facilities will be sufficient to meet our current needs.

**Item 3. Legal Proceedings.**

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Regardless of the outcome, litigation can have an adverse impact on us because of prosecution, defense and settlement costs, unfavorable awards, diversion of management resources and other factors.

<u>Securities Litigation</u>

Following our receipt of the CRL in February 2021 and the subsequent decline of the market price of the Company's common stock, two purported securities class action lawsuits were filed in the U.S. District Court for the Western District of New York on March 3, 2021 and March 22, 2021, respectively, against the Company and certain members of its management team seeking to recover damages for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

The complaints generally allege that between August 7, 2019 and February 26, 2021 (the purported class period), the Company and the individual defendants made materially false and misleading statements regarding the Company's business in connection with the Company's development of Oral Paclitaxel for the treatment of metastatic breast cancer and the likelihood of FDA approval, and that the plaintiffs suffered losses when the Company's stock price dropped after its announcement on February 26, 2021 regarding receipt of the CRL. The complaints seek class certification, damages, fees, costs, and expenses. On August 5, 2021, the Court consolidated the two actions and appointed a lead plaintiff and lead counsel. Pursuant to a stipulated scheduling order, the lead plaintiff filed an amended complaint on November 19, 2021. Defendants filed their motion to dismiss on January 25, 2022. Plaintiffs filed their opposition to that motion on March 28, 2022 and the defendants filed their reply brief on May 20, 2022. The motion to dismiss is now fully briefed and awaits the Court's decision. The Company and the individual defendants believe that the claims in the consolidated lawsuits are without merit, and the Company has not recorded a liability related to these shareholder class actions as the risk of loss is remote. The Company and the individual defendants intend to vigorously defend against these claims but there can be no assurances as to the outcome.

<u>Shareholder Derivative Lawsuit</u>

On June 3, 2021, a shareholder derivative lawsuit was filed in the United States District Court for the District of Delaware by Timothy J. Wonnell, allegedly on behalf of the Company, that piggy-backs on the securities class actions referenced above. The complaint names Johnson Lau, Rudolf Kwan, Timothy Cook, and members of the Board as defendants, and generally alleges that they caused or failed to prevent the securities law violations asserted in the securities class actions. On September 13, 2021, the Court (i) granted the defendants' motion to stay the derivative action until after resolution of the motion to dismiss the consolidated securities class actions, and (ii) administratively closed the derivative litigation, directing the parties to promptly notify the Court when the related securities class action has been resolved so the derivative action can be reopened. The Company and the individual defendants believe the claims in the shareholder derivative action are without merit, and the Company has not recorded a liability related to this lawsuit as the risk of loss is remote. The Company and the individual defendants intend to vigorously defend against these claims should the case be reopened, but there can be no assurances as to the outcome.

<u>Dunkirk Facility Litigation</u>

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On October 5, 2022, Exyte U.S., Inc. ("Exyte") filed a complaint in the Supreme Court of the State of New York in Erie County against the Company and ImmunityBio, Inc. ("ImmunityBio"), alleging breach of contract and related claims in connection with the design and build of a manufacturing facility in Dunkirk, New York, by Exyte for the Company. On February 14, 2022, ImmunityBio closed on the purchase of the Company's interest in the Dunkirk facility. The complaint alleges that the Company and/or ImmunityBio breached the agreement between the Company and Exyte by not paying amounts allegedly owed to Exyte under the agreement. The complaint seeks damages in excess of approximately $8.5 million. The Company has and will continue to vigorously defend itself against Exyte's claims in the complaint and has asserted counterclaims against Exyte in the action seeking damages in excess of $10 million based on Exyte's failure to meet its contractual obligations. This case is in its very early stages. The Company has not recorded a liability related to these claims as the risk of loss is remote, but there can be no assurance as to the outcome.

From time to time, the Company may become subject to other legal proceedings, claims and litigation arising in the ordinary course of business. In addition, the Company may receive letters alleging infringement of patent or other intellectual property rights. The Company is not currently a party to any other material legal proceedings, nor is it aware of any pending or threatened litigation that, in the Company's opinion, would have a material adverse effect on the business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.

**Item 4. Mine Safety Disclosures.**

Not applicable.

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**PART II**

**Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**

**Market for our Common Stock**

Our common stock is listed on the Nasdaq Global Select Market under the symbol "ATNX."

As of February 15, 2023, there were 121 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street by brokers and other nominees.

**Stock Price Performance Graph**

The graph below shows a comparison of the cumulative total return on an assumed investment of $100.00 in cash in our common stock as compared to the same investment in the NASDAQ Composite Index and the NASDAQ Biotechnology Index, from December 31, 2017 to December 31, 2022. Such returns are based on historical results and are not intended to suggest future performance.

![img103648461_3.jpg](img103648461_3.jpg)

**Cumulative Total Return Comparison**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2017** | **2018** | **2019** | **2020** | **2021** | **2022** |
| Athenex, Inc. | $100.00 | $79.81 | $96.04 | $69.56 | $8.55 | $0.93 |
| NASDAQ Composite | $100.00 | $96.12 | $129.97 | $186.70 | $226.63 | $151.61 |
| NASDAQ Biotechnology Index | $100.00 | $90.68 | $112.81 | $141.78 | $140.88 | $125.52 |

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This performance graph is not deemed to be "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our filings under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference to such filing.

**Dividend Policy**

We have never declared or paid cash or stock dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operations of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination to declare dividends on common stock will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions, any contractual restrictions on dividends, and other factors that our board of directors may deem relevant.

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**Recent Sales of Unregistered Securities**

Under Salary Deduction and Stock Purchase Agreements with certain of our executive officers and directors, we issued an aggregate of 42,827 shares to those executive officers and directors during the quarter ended December 31, 2022. We issued these shares in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended, and Nasdaq Listing Rule 5635(c)(2). These shares were issued in exchange for after-tax payroll deductions of approximately $0.2 million from the executive officers and directors, using the Nasdaq Official Closing Price on the applicable payroll date. Any proceeds from the issuance of these shares were used for our working capital and general corporate purposes.

**Item 6. [Reserved]**

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**Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.**

The following discussion contains management's discussion and analysis of our financial condition and results of operations and should be read together with the historical consolidated financial statements and the notes thereto included in Part II, Item 8 "Financial Statements and Supplementary Data." This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the "Risk Factors" section of this Annual Report. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read "Special Note About Forward-Looking Statements" and Part I, Item 1A, "Risk Factors."

**Overview and Recent Developments** 

We are a biopharmaceutical company dedicated to becoming a leader in the discovery, development, and commercialization of next-generation products for the treatment of cancer.

Our mission is to become a leader in bringing innovative cancer treatments to the market and to improve patient health outcomes. In pursuit of this mission, Athenex leverages years of experience in research and development, clinical trials, regulatory standards, and manufacturing. For more information about our mission, please see the section titled "Overview" in Part I, Item 1. "Business" of this Annual Report on Form 10-K.

We are organized around two operating segments: (1) our Oncology Innovation Platform, dedicated to the research and development of our proprietary drugs; and (2) our Commercial Platform, focused on the sales and marketing of our specialty drugs and the market development of our proprietary drugs. Our current clinical pipeline in the Oncology Innovation Platform is derived mainly from the following technologies: (a) Cell Therapy, based on natural killer T ("NKT") cells, and (b) Orascovery, based on a P-glycoprotein pump inhibitor.

For more information about recent developments in our Oncology Innovation Platform, please see the section titled "Our R&D Programs" in Part I, Item 1. "Business" of this Annual Report on Form 10-K. We previously had a third operating segment, the Global Supply Chain Platform, focused on the current Good Manufacturing Practices ("cGMP") manufacturing and supply of active pharmaceutical ingredients and 503B sterile compounded pharmaceutical products. The components within this operating segment were sold or otherwise discontinued during 2022.

<u>Oncology Innovation Platform Developments</u>

Cell Therapy Platform

Through our acquisition of Kuur Therapeutics, Inc. (formerly known as Cell Medica, "Kuur") in 2021, we acquired rights to intellectual property to further the development of autologous and allogeneic, or "off-the-shelf", NKT cell immunotherapies for the treatment of solid and hematological malignancies. We are advancing the following product candidates: KUR-501, KUR-502, and KUR-503.

KUR-501 is an autologous product in which NKT cells are engineered with a CAR targeting disialoganglioside ("GD2"). GD2 is expressed on almost all neuroblastoma tumors and certain other malignancies. Neuroblastoma is a rare pediatric cancer and patients with relapsed or refractory ("R/R") high-risk neuroblastoma ("HRNB") have very poor outcomes. Therefore, we believe there is a significant unmet medical need for better treatment options. KUR-501 is currently being evaluated in a Phase 1 dose-escalation clinical trial ("GINAKIT2") treating children with R/R HRNB. Updated clinical data from this trial was presented at the American Society of Gene & Cell Therapy Annual Meeting in May 2022. The data demonstrated expansion of CAR-NKT cells post-transfer in all patients and objective responses in patients with R/R HRNB, including patients previously treated with anti-GD2 monoclonal antibody. Overall Response Rate ("ORR") was 25%, or three responses out of 12 patients, and Disease Control Rate was 58% with four stable disease, two partial responses ("PR"), and one complete response ("CR"). Two of these responses occurred at the highest dose level tested so far of 100 million cells/m2, and the CR lasted for nearly 14 months. KUR-501 has been well-tolerated without dose limiting toxicity ("DLT"), as the majority of adverse events observed were cytopenias related to the preconditioning nonmyeloablative lymphodepletion chemotherapy regimen. There was no evidence of ICANS in any of the patients at the first four dose levels, and there was one case of Grade 2 CRS. The GINAKIT2 study is supported by Athenex and is being conducted by Athenex's collaborator, the Baylor College of Medicine ("BCM"). BCM temporarily suspended patient enrollment on this study after a young heavily pretreated male patient with R/R HRNB treated at the fifth dose level of 300 million cells/m2 died within three weeks of CAR-NKT cell therapy product administration. He was found to have human metapneumovirus infection, then Grade 1 CRS that was treated with immunosuppressants, and he later developed polyclonal hyperleukocytosis complicated by multiorgan dysfunction without evidence of sepsis. This was followed by a recent FDA-imposed clinical hold on the KUR-501 Investigational New Drug ("IND") while BCM completes their investigation of the etiology and pathogenesis of this event and devises a safety risk mitigation plan to reopen the clinical trial, one that could include excluding patients with concomitant viral infections. No patients are receiving or scheduled to receive additional treatment with KUR-501. While we intend to work with BCM to help address the FDA's questions

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and target to reopen the clinical trial during the year, BCM may not resume GINAKIT2 study patient enrollment unless and until the FDA lifts their clinical hold on the KUR-501 IND. There can be no assurance that BCM will be able to resume the Phase 1 clinical trial of KUR-501.

KUR-502 is an allogeneic ("off-the-shelf") product in which NKT cells isolated from healthy donors are engineered with a CAR targeting CD19, which is widely expressed on both normal and malignant B cells. In addition to the CAR, KUR-502 is genetically engineered to downregulate surface expression of HLA class I and class II proteins, resulting in reduced recognition and elimination by the host immune system following infusion. KUR-502 is currently being evaluated in a single-center, BCM-sponsored, Phase 1 clinical trial (ANCHOR) treating adults with R/R CD19-positive malignancies, including B cell non-Hodgkin lymphoma ("NHL"), acute lymphoblastic leukemia ("ALL"), and chronic lymphocytic leukemia. An interim data update on seven evaluable patients was presented at the Tandem Meetings of the American Society of Transplantation and Cellular Therapy and the Center for International Blood & Marrow Transplant Research in April 2022. Five patients were enrolled and treated at the first two dose levels in the NHL cohort, and there were two CRs and one PR for an ORR of 60%, including responses in two patients who were previously treated with CD19-directed CAR-T cell therapy. Both CRs were durable and persisted for more than six months. Two patients were enrolled at the first dose level of the ALL cohort, and there was one CR and one progressive disease ("PD") for an ORR of 50%. KUR-502 has been well tolerated without DLT, as the majority of adverse events observed were cytopenias related to the preconditioning nonmyeloablative lymphodepletion chemotherapy regimen. There have been three cases of Grade 1 CRS, all observed in the ALL cohort, but there have not been any cases of ICANS or GvHD attributable to CAR-NKT cells. In March 2022, the Company's IND application to expand the ANCHOR study to a multicenter, Athenex-sponsored Phase 1 study (ANCHOR2) was allowed to proceed by the FDA, which began enrolling patients in Q4 2022.

KUR-503 is an allogeneic ("off-the-shelf") product in which NKT cells are engineered with a CAR targeting glypican-3 ("GPC3"). GPC3 is a molecule that is highly expressed on most hepatocellular carcinomas but not on normal liver or other non-neoplastic tissue. KUR-503 is currently in preclinical development, and we are planning to submit an IND application to the FDA in 2024.

The cell therapy program also includes TCR-NKT cell therapy products, including ones targeting p53 and KRAS, which are the most commonly altered genes in epithelial cancers. These HLA class I- or class II-restricted cell therapy products are presently undergoing preclinical screening to identify those candidates with the best TCR-NKT cell isolation efficiency, transduction efficiency, and functional activity. We plan to engineer the TCRs into the NKT cell therapy platform to develop an allogeneic "off-the-shelf" approach for solid tumor treatment.

Orascovery Platform

We are also continuing certain studies of oral paclitaxel and encequidar ("Oral Paclitaxel"), the currently active product candidate using our Orascovery technology, based on a P-glycoprotein ("P-gp") pump inhibitor.

On February 26, 2021, we received a Complete Response Letter ("CRL") from the FDA regarding our New Drug Application ("NDA") for Oral Paclitaxel for the treatment of metastatic breast cancer ("mBC"). Following the CRL, we held two Type A meetings with the FDA to discuss the deficiencies raised in the CRL, review a proposed design for a new clinical trial intended to address the deficiencies raised in the CRL, and discuss the potential regulatory path forward for Oral Paclitaxel in mBC in the U.S. In October 2021, after careful consideration of the FDA feedback, we determined to redeploy our resources to focus on our Cell Therapy platform and other ongoing studies of Oral Paclitaxel. On November 29, 2021, we announced the U.K. Medicines and Healthcare products Regulatory Agency ("MHRA") validation of the Marketing Authorization Application ("MAA") for Oral Paclitaxel, for review. The Phase 3 study of Oral Paclitaxel in mBC (KX-ORAX-001) served as the basis of the MAA. On January 3, 2023, we announced that the Oral Paclitaxel formulation did not receive regulatory approval from the MHRA for mBC based on CMC issues. The MHRA application was not rejected based on any clinical efficacy or safety concerns expressed by the MHRA. MHRA regulations allow an applicant to request a re-examination of an opinion by an independent board which the Company plans to pursue. The Company views the identified Chemistry, Manufacturing, and Controls ("CMC") issues as addressable. The MHRA application was supplemented with safety data from the I-SPY 2 TRIAL and no major clinical efficacy or safety concerns were expressed.

Oral Paclitaxel is being evaluated in combination with dostarlimab (a checkpoint inhibitor) +/- carboplatin in the neoadjuvant treatment of breast cancer, as part of the I-SPY 2 TRIAL (Investigation of Serial studies to Predict Your Therapeutic Response with Imaging And moLecular analysis 2). On December 20, 2022, we announced that collaborators at the Quantum Leap Healthcare Collaborative ("QLHC") reported that Oral Paclitaxel in combination with a PD-1 inhibitor and carboplatin graduated in the triple-negative subgroup of high-risk early-stage breast cancer. Oral Paclitaxel, relative to IV paclitaxel, was associated with less neuropathy and was not associated with an increase in febrile neutropenia. The study has been completed and QLHC anticipates presenting these results at upcoming national meetings in the second quarter of 2023. We plan to discuss the I-SPY 2 TRIAL data with the FDA with respect to our metastatic breast cancer New Drug Application ("NDA").

In the United States, we plan to discuss the I-SPY 2 TRIAL data with the FDA with respect to our NDA for Oral Paclitaxel for the treatment of mBC. We received a CRL from the FDA in February 2021 regarding our NDA for Oral Paclitaxel. We then held two

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Type A meetings with the FDA to discuss the deficiencies raised in the CRL, review a proposed design for a new clinical trial intended to address the deficiencies raised in the CRL, and discuss the potential regulatory path forward for Oral Paclitaxel in mBC in the U.S. We believe the data from the I-SPY 2 TRIAL may address some of the deficiencies raised by the FDA in the CRL, but no assurance can be given that we will be successful in pursuing this path forward with the NDA.

In May 2022, we announced a clinical trial collaboration and supply agreement with Merck (known as MSD outside the U.S. and Canada). The agreement applies to the expansion phase of the Phase 1 clinical trial evaluating Oral Paclitaxel in combination with Merck's anti-PD-1 therapy KEYTRUDA® (pembrolizumab) for certain non-small cell lung cancer ("NSCLC") patients. Recruitment for the expansion phase of this clinical trial is currently ongoing.

<u>Non-core Asset Developments</u>

During 2022, we made significant progress on our strategy to dispose of non-core assets intended to extend our cash runway in 2023 as we pivoted to focusing on our cell therapy platform.

In June 2022, the Company and ATNX SPV, LLC, its newly-formed subsidiary (the "SPV" or "Subsidiary"), entered into a Revenue Interest Purchase Agreement (the "RIPA") with affiliates of Sagard Healthcare Partners ("Sagard") and funds managed by Oaktree Capital Management, L.P. ("Oaktree" and together with Sagard, the "Purchasers"), for the sale of revenues from U.S. and European royalty and milestone interests in Klisyri® (tirbanibulin) for an aggregate purchase price of $85.0 million ("Purchase Price"). On June 29, 2022, the Purchasers paid the Company the Purchase Price. Of the total Purchase Price, $5.0 million was placed into escrow to be paid to the Company upon the satisfaction of certain manufacture and supply milestones for Klisyri prior to December 31, 2025, $5.0 million was used to pay for transaction expenses, $56.6 million was used to pay down the Company's senior secured loan agreement and related security agreements (the "Senior Credit Agreement") with Oaktree, and $7.5 million was deposited and held in a segregated account of the Company (the "Segregated Funds"). The Purchasers released the $7.5 million of Segregated Funds to the Company in August 2022, and $1.5 million of the amount placed in escrow was released to the Company upon completion of an escrow release trigger milestone in September 2022. The remaining proceeds were available for the Company's operations. Refer to Part II, Item 8, Note 1 - Company and Nature of Business and Note 12 - Debt and Lease Obligations for additional information.

In connection with this transaction, the Company formed the Subsidiary and contributed its interest in the License and Development Agreement with Almirall S.A. ("Almirall") relating to Klisyri (the "Almirall License Agreement") and certain related assets to the Subsidiary. Oaktree and Sagard each own a 10% equity interest in the Subsidiary. Pursuant to the RIPA, the Subsidiary sold its right to the cash received in respect of certain royalties and certain milestone interests under the Almirall License Agreement to the Purchasers. The Subsidiary retained the right to receive 50% of certain of the milestone interests under the Almirall License Agreement, equal to $155.0 million in the aggregate if those milestones are achieved, and 50% of the royalties paid under the Almirall License Agreement for sales of Klisyri once net sales of Klisyri exceed a certain dollar amount.

In February 2022, we completed the sale of our leasehold interest in the 409,000 square feet, newly constructed cGMP ISO Class 5 high potency pharmaceutical manufacturing facility located in Dunkirk, NY (the "Dunkirk Transaction"). We sold our interest in the Dunkirk Facility and certain other assets to ImmunityBio, Inc. for approximately $40.0 million. Of these proceeds, we used approximately $27.4 million to make a mandatory prepayment of $25.0 million in principal, accrued and unpaid interest, and associated fees to the lenders under our Senior Credit Agreement with Oaktree. See "Liquidity and Capital Resources" below for more information about the Senior Credit Agreement.

In November 2022, we completed the sale of our equity interests in our China subsidiaries, including Chongqing Taihao Pharmaceutical Co. Ltd. ("Taihao") and Athenex Pharmaceuticals (Chongqing) Limited (together, the "Chongqing Companies") to Chongqing Comfort Pharmaceutical Inc. as assignee of TiHe Capital (Beijing) Co. Ltd. (the "API Buyer") in November 2022. The Chongqing Companies had operated a cGMP high potency oncology API plant based in Chongqing, China, and completed construction of a new facility in Chongqing (the "China API Operations"). The aggregate purchase price of this sale was RMB129.4 million, or approximately $18 million. At closing, we received approximately $11 million, representing 70% of the sale proceeds in cash, net of PRC withholding tax and stamp duty. The remaining proceeds are expected to be received in the first half of 2023. At closing, we entered into a supply agreement ("Supply Agreement") with affiliates of the API Buyer (the "Supplier"). Under the Supply Agreement, we and the Supplier agreed to pricing and other supply terms for certain API ("API Products"), including those used in Klisyri® (tirbanibulin) and Oral Paclitaxel, to be manufactured at certain manufacturing sites by the Supplier.

In December 2022, we began the wind-down of our 503B sterile compounding business operated out of our facility in Clarence, NY and ceased production of our 503B products in the first quarter of 2023. We have committed to a plan to sell our related assets in our efforts to monetize non-core assets, and consequently, such business is presented as discontinued in the Company's consolidated financial statements.

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<u>Other Corporate Developments</u>

On March 16, 2023, we received notice from The Nasdaq Stock Market LLC indicating that we had regained compliance with the minimum bid price requirement under Nasdaq Rule 5550(a)(2). On February 15, 2023, we effected a 20:1 reverse stock split of our common stock in order to regain compliance with this standard. All share and per share amounts, and exercise prices of stock options, warrants, and pre-funded warrants, if applicable, in this Annual Report on Form 10-K have been retroactively adjusted for all periods presented to give effect to this reverse stock split.

In August 2022, the Company completed an underwritten public offering in which it sold 1,766,667 shares of common stock, common warrants to purchase up to 2,000,000 shares of common stock at a price of $20.00 per share, and pre-funded warrants to purchase up to 233,334 shares of common stock at a price of $0.02 per share. The shares of common stock, together with the common warrants, were sold at $15.00 per share and accompanying common warrant, and the pre-funded warrants, together with the common warrants, were sold at $14.98 per pre-funded warrant and accompanying common warrant. The common and pre-funded warrants were exercisable immediately and will expire five years from the date of issuance. The Company received net proceeds of $28.1 million, after deducting discounts, commissions, and offering expenses. The Company intends to use the net proceeds from the proposed offering to fund ongoing clinical development for its product candidates and for working capital and other general corporate purposes.

In August 20, 2021, the Company entered into a sales agreement (the "Sales Agreement") with SVB Leerink LLC, in connection with the offer and sale of up to $100,000,000 of shares of the Company's common stock, par value $0.001 per share ("ATM Shares"). The ATM Shares to be offered and sold under the Sales Agreement will be issued and sold pursuant to a registration statement on Form S-3 (File No. 333-258185) that became effective on August 12, 2021. During the year ended December 31, 2022, we raised net proceeds of $9.4 million by selling 1,263,251 shares of our common stock for an average price of $7.40 per share under the Sales Agreement. During the year ended December 31, 2021, we raised net proceeds of $1.1 million by selling 38,142 shares of our common stock for an average price of $29.80 per share under the Sales Agreement.

<u>Going Concern Considerations</u> 

We have two operating segments: our Oncology Innovation Platform and Commercial Platform. Since inception, we have devoted a substantial amount of our resources to research and development of our lead product candidates under our Orascovery and Cell Therapy platforms, while building up our commercial infrastructure. We have incurred significant net losses since inception.

We have incurred operating losses since inception and, as a result, as of December 31, 2022 and 2021, we had an accumulated deficit of $1,016.8 million and $913.4 million, respectively. We expect to incur significant expenses and operating losses for the foreseeable future. We project insufficient liquidity to fund our operations through the next twelve months beyond the date of this report. In addition to the alleged events of default described below in Liquidity and Capital Resources, we project that we will be in violation of financial covenants included within the Senior Credit Agreement during the twelve-month period subsequent to the date of this filing. This projection does not reflect management's plans that are outside of the Company's control, pursuant to ASC 205. These conditions raise substantial doubt about our ability to continue as a going concern. See Part II, Item 8, Note 1—Company and Nature of Business for further information regarding our ability to continue as a going concern.

We have funded our operations to date primarily from the issuance and sale of our common stock through public offerings, senior secured loans, private placements, and to a lesser extent, from convertible bond financing, revenue, and grant funding. As of December 31, 2022, we had cash and cash equivalents of $30.4 million, restricted cash of $5.2 million, and short-term investments of $1.1 million.

**Results of Operations**

Since inception, we have devoted a substantial amount of our resources to research and development of our lead product candidates under our R&D programs, to sales and general administrative costs associated with our operations, and to the development of our specialty drug operations in our Commercial Platform. We have incurred significant net losses since inception. Our net losses were $104.4 million, and $202.0 million for the years ended December 31, 2022 and 2021 respectively. As of December 31, 2022 and 2021, we had an accumulated deficit of approximately $1,016.8 million and $913.4 million, respectively.

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We have funded our operations to date primarily from the issuance and sale of our common stock through public offerings, private placements, debt and convertible bonds, and to a lesser extent, through revenue generated from our Commercial Platform. Our operating activities from continuing operations used $64.3 million and $129.8 million of cash during the years ended December 31, 2022, and 2021, respectively. As of December 31, 2022, we had cash and cash equivalents of $30.4 million, restricted cash of $5.2 million, and short-term investments of $1.1 million.

**Key Components of Results of Operations** 

**Revenue** 

We derive our consolidated revenue primarily from (i) the sales of generic injectable products by our Commercial Platform; and (ii) licensing and collaboration projects conducted by our Oncology Innovation Platform, which generates revenue in the form of upfront payments, milestone payments, and payments received for providing research and development services for our collaboration projects and for other third parties.

The following table sets forth the components of our consolidated revenue and the amount as a percentage of total revenue for the periods indicated.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2022** | **2022** | **2021** | **2021** |
|  | **(in thousands)** | **%** | **(in thousands)** | **%** |
| Product sales, net | $90884 | 88% | $68505 | 72% |
| License and other revenue | 11937 | 12% | 26864 | 28% |
|  | $102821 |  | $95369 |  |

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**Cost of Sales** 

Along with sourcing from third-party manufacturers, we manufacture clinical and proprietary commercial products in our U.S. cGMP facility in New York. Cost of sales primarily includes the cost of finished products, raw materials, labor costs, manufacturing overhead expenses and reserves for expected scrap, as well as transportation costs. Cost of sales also includes depreciation expense for production equipment, changes to our excess and obsolete inventory reserves, certain direct costs such as shipping costs, net of costs charged to customers, and sublicense fees related to in-license agreements.

**Research and Development Expenses** 

R&D expenses primarily consist of the costs associated with conducting clinical trials, in-licensing of product candidates, milestone payments, conducting preclinical studies, activities related to regulatory filings and other R&D activities. The following table sets forth the components of our R&D expenses and the amount as a percentage of total R&D expenses for the periods indicated.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2022** | **2021** | **2021** |
|  | **(in thousands)** | **%** | **(in thousands)** | **%** |
| Wages, benefits, and related costs | $17327 | 33% | $21779 | 28% |
| Clinical trial costs for Orascovery program | 14044 | 27% | 22745 | 29% |
| Clinical trial costs for cell therapy program | 11841 | 23% | 7937 | 10% |
| Drug licensing costs | 5265 | 10% | 8559 | 11% |
| Preclinical research costs | 1224 | 2% | 2393 | 3% |
| Other research and development<br> costs | 2057 | 4% | 14255 | 18% |
| &nbsp;&nbsp;&nbsp;Total research and development<br> costs | $51758 |  | $77668 |  |

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Our current R&D activities mainly relate to the clinical development of our Oncology Innovation Platform.

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We expense R&D costs as incurred. We record costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment or clinical site activations. We do not allocate employee-related costs, depreciation, rental and other indirect costs to specific R&D programs because these costs are deployed across multiple product programs under R&D. For 2021, other research and development costs include the cost of manufacturing Oral Paclitaxel in advance of the potential product launch in 2021, which did not continue in 2022. Other research and development costs in 2022 included process optimization for Tirbanibulin.

We cannot determine with certainty the duration, costs and timing of the current or future preclinical or clinical studies of our drug candidates. The duration, costs, and timing of clinical studies and development of our drug candidates will depend on a variety of factors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The scope, rate of progress, and costs of our ongoing, as well as any additional, clinical studies and other R&D activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Future clinical study results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Uncertainties in clinical study enrollment rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Significant and changing government regulation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate.

R&D activities are central to our business model. We expect our R&D expenses to decrease overall, as the development of most non-Cell Therapy technologies has been suspended. R&D expenses related to our Cell Therapy platform are expected to continue to increase as we prepare for additional clinical and preclinical studies for our Cell Therapy programs. There are numerous factors associated with the successful commercialization of any of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial, regulatory and public health factors beyond our control will likely impact our clinical development programs and plans.

**Selling, General and Administrative Expenses** 

Selling, general and administrative, ("SG&A"), expenses primarily consist of compensation, including salary, employee benefits and stock-based compensation expenses for sales and marketing personnel, and for administrative personnel that support our general operations such as executive management, legal counsel, financial accounting, information technology, and human resources personnel. SG&A expenses also include professional fees for legal, patent, consulting, auditing and tax services, as well as other direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies used in the selling, marketing, general and administrative activities. SG&A expenses also include costs associated with our commercialization efforts for our proprietary drugs, such as market research, brand strategy and development work on market access, scientific publication, product distribution, and patient support.

We anticipate that our SG&A costs associated with the commercialization of the Orascovery platform will decrease in future periods. Meanwhile, we anticipate that cost related to legal, compliance, accounting and investor and public relations expenses associated with being a public company will remain consistent.

**Impairments** 

Impairments are recognized when the carrying value of goodwill, intangible assets, and other long-lived assets are in excess of their fair value. Long-lived assets are tested for impairment annually, or more frequently if a triggering event occurs.

**Interest Expense and Interest Income**

Interest expense consists of stated interest payments and amortization of debt discount on our Senior Credit Agreement with Oaktree and interest expense recognized from amortizing our Royalty Financing Liability. We expect interest expense related to our Senior Credit Agreement with Oaktree to decrease as additional principal payments are made. Interest income consists primarily of interest generated from our cash and short-term investments in U.S. Treasury securities, U.S. agency securities, high rated commercial papers and corporate bonds.

**Loss on Extinguishment of Debt**

The loss on extinguishment of debt is the result of the amendments to and prepayments on the Senior Credit Agreement with Oaktree. The amendments to the Senior Credit Agreement resulted in exit and prepayment fees and the recognition of the unamortized debt discount as a loss on extinguishment of debt in the consolidated statements of operations and comprehensive loss.

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**Results of Operations** 

**Year Ended December 31, 2022 Compared to Year Ended December 31, 2021**

The following table sets forth a summary of our consolidated results of operations for the years ended December 31, 2022 and 2021, together with the changes in those items in dollars and as a percentage. This information should be read together with our consolidated financial statements and related notes included elsewhere in this report. Our operating results in any period are not necessarily indicative of the results that may be expected for any future period.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2022** | **2021** | **Change** | **Change** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** | **%** |
| Revenue |  |  |  |  |
| &nbsp;&nbsp;Product sales, net | $90884 | $68505 | $22379 | 33% |
| &nbsp;&nbsp;License and other revenue | 11937 | 26864 | (14927) | -56% |
| &nbsp;&nbsp;&nbsp;Total revenue | $102821 | $95369 | 7452 |  |
| Cost of sales | (76118) | (62892) | (13226) | 21% |
| Gross profit | 26703 | 32477 | (5774) |  |
| Research and development expenses | (51758) | (77668) | 25910 | -33% |
| Selling, general, and administrative expenses | (44880) | (64230) | 19350 | -30% |
| Impairments | (79) | (41011) | 40932 | 100% |
| Interest income | 363 | 128 | 235 | 184% |
| Interest expense | (25843) | (20654) | (5189) | 25% |
| Loss on extinguishment of debt | (3134) |  | (3134) | -100% |
| Income tax benefit (expense) | (347) | 10604 | (10951) | NM |
| Net loss from continuing operations | (98975) | (160354) | 61379 |  |
| Loss from discontinued operations | (5448) | (41682) | 36234 | -87% |
| Net loss | (104423) | (202036) | 97613 |  |
| Less: net loss attributable to non-controlling interests | (996) | (2268) | 1272 | 56% |
| Net loss attributable to Athenex, Inc. | $(103427) | $(199768) | $96341 |  |

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\*NM used to indicate a percentage change that is not meaningful

**Revenue** 

Product sales for the year ended December 31, 2022 was $90.9 million, an increase of $22.4 million, or 33%, as compared to $68.5 million for the year ended December 31, 2021. This increase was primarily attributable to the launch of two additional APD products, contributing $11.6 million in net product sales, and increased demand for three products on the FDA shortage list, contributing $12.0 million in net product sales.

License fees and other revenue decreased to $11.9 million for the year ended December 31, 2022, from $26.9 million for the year ended December 31, 2021, a decrease of $14.9 million, or 56%. During the year ended December 31, 2022, we recorded $2.5 million and $5.0 million of license revenue pursuant to our license agreement with Almirall upon the completion of a line extension milestone and upon the launch of Klisyri in three major European countries, respectively, and $1.6 million related to the approval of Tirbanibulin in Taiwan under the 2011 PharmaEssentia Agreement. During the year ended December 31, 2021, we recorded $20.0 million and $5.0 million of license revenue pursuant to our license agreement with Almirall upon the launch of Klisyri in the U.S. in February 2021 and in Europe in September 2021, respectively, and $0.5 million related to the upfront fee pursuant to the Second Amendment to the PharmaEssentia Agreement, for the license of Tirbanibulin in Japan and South Korea. Further, we received royalties from the sales of Klisyri of $2.3 million during the year ended December 31, 2022, an increase of $1.3 million from the $1.0 million in royalties received in 2021.

**Cost of Sales** 

Cost of sales totaled $76.1 million for the year ended December 31, 2022, an increase of $13.2 million, or 21%, as compared to $62.9 million for the year ended December 31, 2021. Gross profit as a percentage of product sales was 16.2% for the year ended December 31, 2022, and 8.2% for the year ended December 31, 2021. The increase in gross profit as a percentage of product sales was due primarily to the increased contribution from the sales of three FDA shortage products during 2022.

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**Research and Development Expenses** 

R&D expenses totaled $51.8 million for the year ended December 31, 2022, a decrease of $25.9 million, or 33%, as compared to $77.7 million for the year ended December 31, 2021. This was primarily due to a decrease in costs related to Oral Paclitaxel, costs for clinical operations for the Orascovery platform, compensation, and drug licensing costs, and included the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•$13.5 million decrease in Oral Paclitaxel product development, API, and medical affairs costs associated with the potential product launch in 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•$8.7 million decrease in costs of clinical operations and regulatory affairs related to the Orascovery platform after the slow down of clinical and regulatory activities following receipt of the CRL in 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•$4.5 million decrease in R&D related compensation expenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•$3.3 million decrease in drug licensing costs, due to a license milestone payment related to Arginine deprivation therapy and the repurchase of Orascovery rights from Xiangxue in 2021; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•$1.2 million decrease in costs of preclinical operations, primarily related to the Orascovery platform.

The decrease in these R&D expenses was partially offset by a $3.9 million increase in costs to develop the NKT cell therapies and a $1.4 million increase in process optimization costs related to Tirbanibulin.

**Selling, General and Administrative Expenses** 

Selling, general, and administrative expenses totaled $44.9 million for the year ended December 31, 2022, a decrease of $19.4 million, or 30%, as compared to $64.2 million for the year ended December 31, 2021. This was primarily due to a $11.5 million decrease in pre-launch costs for Oral Paclitaxel that significantly slowed upon receipt of the Complete Response Letter in 2021. In addition, we recorded a $4.2 million gain on the change in fair value of contingent consideration during 2022 related to the probability of milestones associated with one of the cell therapy pipeline programs, as opposed to a $4.2 million loss on the change in fair value of contingent consideration during 2021. Operating costs, including insurance costs, IT costs, and other professional fees decreased in 2022 by $2.4 million. These decreases were partially offset by an increase in compensation related costs of $2.9 million in 2022.

**Impairments**

During the year ended December 31, 2021, we recognized goodwill impairment expense of $41.0 million. This impairment was related to the Oncology Innovation Platform reporting unit, representing a full impairment of the goodwill allocated to that reporting unit. Goodwill impairment is the excess of a reporting unit's carrying amount over its fair value. The decrease in our estimation of the reporting unit's fair value was related to the Company's decision to no longer pursue regulatory approval for Oral Paclitaxel monotherapy for the treatment of mBC in the U.S. Impairment in the year ended December 31, 2022 was the result of the discontinuation of a project within Comprehensive Drug Enterprises' ("CDE") in-process research and development ("IPR&D").

**Interest Income and Interest Expense**

Interest income consisted of interest earned on our short-term investments and increased by $0.2 million, or 184%, from 2021 to 2022 due to increases in market rates for commercial paper, corporate bonds, and U.S. Treasury securities. Interest expense for the year ended December 31, 2022 totaled $25.8 million, an increase of $5.2 million, or 25%, as compared to $20.7 million for the year ended December 31, 2021. This increase was primarily due to $11.2 million of interest recognized on our Royalty Financing Liability during 2022. This was partially offset by a $6.0 million decrease in interest expense recorded on borrowings under the Senior Credit Agreement with Oaktree as the result of principal payments made during the year.

**Loss on Extinguishment of Debt**

We recognized a $3.1 million loss on the extinguishment of debt related to the prepayments we made to Oaktree during 2022 under the amendment to the Senior Credit Agreement related to the sale of our leasehold interest in the Dunkirk Facility, the RIPA, and the sale of our equity interests in the China API Operations. We did not incur a loss on the extinguishment of debt during the year ended December 31, 2021.

**Income Tax (Expense) Benefit**

Income tax expense for the year ended December 31, 2022 was primarily the result of foreign tax withholdings on license revenue. For the year ended December 31, 2021, income tax benefit amounted to $10.6 million, which is the result of taxable temporary difference due to the deferred tax liability recognized for the indefinite lived intangible assets acquired in connection with the acquisition of Kuur's IPR&D. This taxable temporary difference is considered a source of taxable income to support the realization of deferred tax assets from the acquirer which resulted in a reversal of our valuation allowance.

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**Loss from discontinued operations**

Loss from discontinued operations is comprised of operating results of the activities related to the Dunkirk Facility, China API Operations, and 503B Operations. The operations related to the Dunkirk Facility recorded a gain of $12.5 million in 2022 and a loss of $7.8 million in 2021. This was primarily due to the gain on the sale of the Dunkirk Facility of $14.5 million and a decrease in general and administrative expenses of $8.3 million during the year ended December 31, 2022. The China API Operations recorded a loss of $12.3 million in 2022 and a loss of $28.9 million in 2021. This was primarily due to impairment of goodwill and other long-lived assets of $23.8 million during the year ended December 31, 2021, and the reserve of excess inventory of $7.1 million and sale of pilot products of $3.1 million during the year ended December 31, 2022. Lastly, the 503B operations recorded a loss of $5.7 million in 2022 and a loss of $5.0 million in 2021. In 2022, the 503B operations experienced a decrease in gross margin due to increases in material, labor, and overhead costs and recorded impairment of long-lived assets of $1.5 million related to the operations being classified as held-for-sale. In 2021, the primary cause of the loss was the goodwill impairment of $4.6 million recorded during the year ended December 31, 2021.

**Liquidity and Capital Resources**

**Capital Resources** 

Since our inception, we have incurred net losses and negative cash flows from our operations. Our cash requirement was primarily cash used for our R&D programs, SG&A costs associated with our operations, the development of our specialty drug operations in our Commercial Platform, and 503B operations and the investment we made in our pre-launch activities in anticipation of commercializing our proprietary drugs. We incurred net losses of $104.4 million and $202.0 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $1,016.8 million. Our operating activities from continuing operations used $64.3 million and $129.8 million of cash during the years ended December 31, 2022 and 2021, respectively. We intend to continue to advance our various clinical and pre-clinical programs which could lead to increased cash outflow of R&D costs. While we expect our R&D expenses to remain at a decreased level from prior periods, as the development of most non-Cell Therapy technologies has been suspended, R&D expenses related to our Cell Therapy platform are expected to increase as we prepare for additional clinical and preclinical studies for our Cell Therapy programs. We can provide no assurance that the funding requirements to diversify the product portfolio for specialty drug products in the Commercial Platform will decline in the future. Our principal sources of liquidity as of December 31, 2022 were cash and cash equivalents totaling $30.4 million, restricted cash of $5.2 million, held in a controlled bank account in connection with the Senior Credit Agreement with Oaktree, and short-term investments totaling $1.1 million, which are generally high-quality investment grade corporate debt securities.

ATM Financing

On August 20, 2021, we entered into a sales agreement with SVB Leerink LLC, in connection with the offer and sale of up to $100,000,000 of shares of our common stock, par value $0.001 per share, in an at-the-market offering (the "ATM Offering"). During the year ended December 31, 2022, we raised net proceeds of $9.4 million by selling 1,263,251 shares of our common stock for an average price of $7.40 per share under the Sales Agreement. During the year ended December 31, 2021, we raised net proceeds of $1.1 million by selling 38,142 shares of our common stock for an average price of $29.80 per share under the Sales Agreement. While we intend to continue selling shares of common stock in the ATM Offering, there can be no assurance that the ATM Offering will be available to us, that we will be able to sell shares of common stock at a price that is acceptable to our Board of Directors, or that we will be successful in raising significant capital in the offering.

Public Offering of Stock

In August 2022, we completed an underwritten public offering in which we sold 1,766,667 shares of common stock, common warrants to purchase up to 2,000,000 shares of common stock at a price of $20.00 per share, and pre-funded warrants to purchase up to 233,334 shares of common stock at a price of $0.02 per share. The shares of common stock, together with the common warrants, were sold at $15.00 per share and accompanying common warrant, and the pre-funded warrants, together with the common warrants, were sold at $14.98 per pre-funded warrant and accompanying common warrant. The common and pre-funded warrants were exercisable immediately and will expire five years from the date of issuance. We received net proceeds of $28.1 million, after deducting discounts, commissions, and offering expenses. We are using the net proceeds from this offering to fund ongoing clinical development for our product candidates and for working capital and other general corporate purposes.

Indebtedness

We had $129.1 million and $148.7 million of debt as of December 31, 2022 and 2021, respectively. As of December 31, 2022, this consisted of the $86.7 million royalty financing liability under the RIPA, the Senior Credit Agreement with Oaktree of $37.0 million, and finance and operating lease obligations of $5.4 million. As of December 31, 2021, this consisted of the Senior Credit Agreement with Oaktree of $141.3 million and finance and operating lease obligations of $7.3 million.

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The sale of the interest in U.S. and European royalties and milestones to Sagard and Oaktree in connection with the Revenue Interest Purchase Agreement was recorded as a royalty financing liability due to our significant continued involvement in the cash flows due to the Purchasers. The RIPA contains various representations and warranties, information rights, non-financial covenants, and indemnification obligations, however, this liability is not guaranteed by the Company. During the year ended December 31, 2022, the Company received Klisyri royalties of $0.9 million, which were remitted to the Purchasers.

<u>Oaktree Senior Credit Agreement</u>

On June 19, 2020 (the "Closing Date"), we entered into the Senior Credit Agreement to borrow up to $225.0 million in five tranches with a maturity date of June 19, 2026, bearing interest at a fixed annual rate of 11.0%, payable quarterly. We are required to make quarterly interest-only payments until June 19, 2022, after which we are required to make quarterly amortizing payments, with the remaining balance of the principal plus accrued and unpaid interest due at maturity. Between September 2020 and February 2022, we were required to pay a commitment fee on any undrawn commitments equal to 0.6% per annum, payable on each subsequent funding date and the commitment termination date. We are also required to pay an exit fee at maturity equal to 2.0% of the aggregate principal amount of the loans funded under the Senior Credit Agreement. Three tranches in the aggregate amount of $150.0 million were drawn prior to December 31, 2020. Our ability to draw the remaining tranches of the Senior Credit Agreement was associated with the marketing approval and future sales of Oral Paclitaxel. These tranches were reduced to zero in connection with the Third Amendment described below and are not available for future borrowing.

We are required to make mandatory prepayments of the senior secured loans with net cash proceeds from certain asset sales or insurance proceeds or condemnation awards, in each case, subject to certain exceptions and reinvestment rights. In connection with the sale of the Dunkirk Facility in February 2022, we entered into an amendment to the Senior Credit Agreement (the "Third Amendment") whereby we were required to repay $25.0 million, or 62.5% of the proceeds from the sale, of the outstanding principal of the loan. In addition, on the date of closing the Dunkirk Transaction, we were required to pay (i) accrued and unpaid interest and (ii) a 7.0% fee, allocated as a 2.0% Exit Fee and a 5.0% Prepayment Fee (each as defined in the Senior Credit Agreement), on the principal amount being repaid. We were required to pay Oaktree an amendment fee of $0.3 million and certain related expenses. Further, the Third Amendment required us to make an additional prepayment of $12.5 million in principal plus the costs and fees described above on June 14, 2022. In June 2022, the Company entered into two additional amendments to the Senior Credit Agreement with Oaktree (the "Fourth Amendment" and the "Fifth Amendment"). In connection with the Fourth Amendment and the Fifth Amendment to the Senior Credit Agreement, effective in connection with the execution of the RIPA, we were required to repay $52.5 million of the loan, along with (i) accrued and unpaid interest and (ii) a 5.0% fee, allocated as a 2.0% Exit Fee and a 3.0% Prepayment Fee on the principal amount being repaid. Under the Sixth Amendment to the Senior Agreement, entered into in connection with the sale of the China API Operations in August 2022 (the "Sixth Amendment"), we were required to repay $6.8 million of the loan, along with (i) accrued and unpaid interest and (ii) a 5.0% fee, allocated as a 2.0% Exit Fee and a 3.0% Prepayment Fee on the principal amount being repaid. We made payments, inclusive of principal, interest, and fees, to Oaktree in the aggregate amount of $121.3 million during the year ended December 31, 2022. These payments include our scheduled repayments under the Credit Agreement and prepayments under the Third Amendment, Fourth Amendment, Fifth Amendment, and Sixth Amendment.

We may voluntarily prepay the Senior Credit Agreement at any time subject to a prepayment premium which equals 3.0% of the principal amount of the senior secured loans being repaid and is reduced over time until June 19, 2024, after which no prepayment premium is required.

Our obligations under the Senior Credit Agreement are guaranteed by us and certain of our existing domestic subsidiaries and subsequently acquired or organized subsidiaries subject to certain exceptions. Our obligations under the Senior Credit Agreement and the related guarantees thereunder are secured, subject to customary permitted liens and other agreed upon exceptions, by (i) a pledge of all of the equity interests of our direct subsidiaries, and (ii) a perfected security interest in all of our tangible and intangible assets.

The Senior Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions, including specific exceptions with respect to product commercialization and development activities. In addition, the Senior Credit Agreement contains certain financial covenants, including, among other things, maintenance of minimum liquidity and a minimum revenue test, measured quarterly until the last day of the second consecutive fiscal quarter where the consolidated leverage ratio does not exceed 4.5 to 1, provided that thereafter we cannot allow our consolidated leverage ratio to exceed 4.5 to 1, measured quarterly. Failure of the Company to comply with the financial covenants will result in an event of default, subject to certain cure rights of the Company. At December 31, 2022, we were in compliance with all applicable covenants.

On March 7 and March 13, 2023, we received notices of certain alleged defaults and reservations of rights from Oaktree. The alleged defaults relate to (i) the Company exceeding the $10.0 million threshold for incurring additional indebtedness by having accounts payable owed to counterparties overdue by more than 90 days, (ii) the Company's obligation to provide notice to Oaktree related to the foregoing, and (iii) the Company's obligation to provide notice to Oaktree regarding the recent reverse stock split. Upon the occurrence of an Event of Default, Oaktree has the right to accelerate all amounts outstanding under the Senior Credit Agreement, in addition to other remedies available to it as a secured creditor of ours. If Oaktree accelerates the maturity of the indebtedness under the Senior Credit Agreement, we do not have sufficient capital available to pay the amounts due on a timely basis, if at all, and there is

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no guarantee that we would be able to repay, refinance or restructure the payments due under the Senior Credit Agreement. The Company responded to Oaktree, which included grounds upon which the Company disputes each of the alleged defaults. The Company has not reached a mutual agreement with Oaktree on this matter, and given the Company is in receipt of the notices of default and reservation of rights, which could result in payment to Oaktree on demand, the amounts due and outstanding to Oaktree are presented as a current obligation of the Company.

The Senior Credit Agreement contains events of default which are customary for financings of this type, in certain circumstances subject to customary cure periods. Oaktree has the right upon notice to accelerate all amounts outstanding under the Senior Credit Agreement, in addition to other remedies available to it as a secured creditor of the Company.

In connection with our entry into the Senior Credit Agreement, we granted warrants to Oaktree to purchase up to an aggregate of 45,420 shares of our common stock at a purchase price of $252.60 per share. Under the Third Amendment, the exercise price for 50% of the shares underlying the warrants was amended to be $22.00 per share. Under the Fourth Amendment, the exercise price for all of the shares underlying the warrants was amended to be $10.00 per share.

**Outlook**

We expect to explore and review a broad range of strategic alternatives with a goal of improving our balance sheet and supporting our development efforts and operations during 2023. We may also seek to access the capital markets to fund our operations. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration or partnering arrangements or by monetizing non-core assets, we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certain geographies, grant licenses on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders. In addition, we have borrowed and, in the future, may borrow additional capital from institutional and commercial banking sources to fund future growth. We may borrow additional funds on terms that may include restrictive covenants, including covenants that further restrict the operation of our business, liens on assets, high effective interest rates, financial performance covenants and repayment provisions that reduce cash resources and limit future access to capital markets.

As of December 31, 2022, we had cash and cash equivalents of $30.4 million, restricted cash of $5.2 million, and short-term investments of $1.1 million. We are implementing cost savings programs and plan to monetize non-core assets and raise capital in order to extend our cash runway in 2023. If we are unable to monetize assets or raise additional capital, we believe that the existing cash and cash equivalents, restricted cash, and short-term investments will fund operations into the second quarter of 2023 and will not be sufficient to fund our operations through the next twelve months beyond the date of the issuance of our consolidated financial statements. We have concluded that this, the notice of alleged defaults referenced above, and a forecasted violation of covenants on the Company's Senior Credit Agreement, raise substantial doubt about our ability to continue as a going concern. See Part II, Item 8. Note 1—Company and Nature of Business for further information regarding our ability to continue as a going concern. We have based these estimates on assumptions that may prove to be wrong, and we could spend the available financial resources much faster than expected and need to raise additional funds sooner than anticipated. Although we plan to raise additional funds though the sale of non-core assets and selling equity securities, these plans are subject to market conditions which are outside of our control, and therefore cannot be deemed to be probable. There can be no assurance that additional financing, if available, can be obtained on terms acceptable to us. If we are unable to obtain such additional financing, we would need to reevaluate our future operating plans.

We anticipate that our expenses will cover the following activities as we:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Advance the preclinical and clinical research program and development activities of our Cell Therapy technology platform;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Continue our preclinical and clinical research program and development activities related to our Mission;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Seek to identify additional research programs and product candidates within existing Cell Therapy platform; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Maintain, expand and protect our intellectual property ("IP") portfolio.

While we made significant progress on our strategy to dispose of non-core assets, as discussed above in "—Non-core Asset Developments," our expenses could increase as we continue to fund clinical and preclinical development of our research programs by advancing our Cell Therapy programs, certain candidates in our pipeline, our specialty drug products, working capital and other general corporate purposes. We have based our estimates on assumptions that might prove to be wrong and we might use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates, we are unable to accurately estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development and commercialization of our drug candidates.

Our future capital requirements will depend on many factors, including:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our ability to generate revenue and profits from our Commercial Platform or otherwise;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The costs, timing and outcome of regulatory reviews and approvals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Progress of our drug candidates to progress through clinical development successfully;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The initiation, progress, timing, costs and results of nonclinical studies and clinical trials for our other programs and potential drug candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The number and characteristics of the drug candidates we pursue;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our IP rights and defending IP related claims;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The extent to which we acquire or in-license other products and technologies; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our ability to maintain and establish collaboration arrangements on favorable terms, if at all.

**Cash Flows**

The following table provides information regarding our cash flows from continuing and discontinued operations for the years ended December 31, 2022, and 2021:

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| | | |
|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** |
|  | **2022** | **2021** |
|  | **(in thousands)** | **(in thousands)** |
| Net cash used in operating activities from continuing operations | $(64348) | $(129796) |
| Net cash provided by investing activities from continuing operations | 7536 | 127851 |
| Net cash provided by financing activities from continuing operations | 2371 | 2737 |
| Net cash provided by (used in) discontinued operations | 38893 | (35725) |
| Net effect of foreign exchange rate changes | (534) | 548 |
| Net decrease in cash, cash equivalents, and restricted cash | $(16082) | $(34385) |

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**Net Cash Used in Operating Activities** 

The use of cash in all periods presented resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. The primary use of our cash in all periods presented was to fund our R&D, regulatory and other clinical trial costs, drug licensing costs, inventory purchases, pre-launch commercialization activities, build-out of our manufacturing facilities, and other expenditures related to sales, marketing and administration.

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During the year ended December 31, 2022, operating activities from continuing operations used $64.3 million of cash, which resulted principally from our net loss from continuing operations of $99.0 million, adjusted for non-cash charges of $22.8 million, and cash provided by our operating assets and liabilities of $11.8 million. Our prepaid expenses and other current assets, accounts payable and accrued expense balances in all periods presented were affected by the timing of vendor invoicing and payments. Our net non-cash charges during the year ended December 31, 2022 consisted of $14.6 million of amortization of debt discount and royalty financing liability, $6.3 million of stock-based compensation expense, $3.1 million of loss on extinguishment of debt, $2.3 million depreciation and amortization expense, partially offset by a $4.2 million change in fair value of contingent consideration. Our operating assets increased $5.2 million for accounts receivable mainly related to the timing of revenues, and increased $19.6 million for inventory of specialty drug products to service the demand for our shortage products and products launched during the year. Our operating liabilities increased by $35.9 million mainly due to an increase in accounts payable, accrued clinical expenses related to Cell Therapy, accrued wages and benefits, and accrued selling fees and rebates associated with increased sales of specialty drug products. Net cash used in operating activities from discontinued operations in 2022 was $10.7 million, primarily related to the operating expenses incurred by the activities at the Dunkirk Facility and China API Operations.

During the year ended December 31, 2021, operating activities from continuing operations used $129.8 million of cash, which resulted principally from our net loss from continuing operations of $160.4 million, adjusted for non-cash charges of $60.4 million, non-cash income tax benefit of $10.8 million related to the reversal of our valuation allowance on our deferred tax assets to offset the deferred tax liability assumed in connection with the acquisition of Kuur's IPR&D, and cash used by our operating assets and liabilities of $19.0 million. Our net non-cash charges during the year ended December 31, 2021 consisted of $41.0 million of impairment of goodwill and intangible assets, $9.2 million of stock-based compensation expense, $3.1 million depreciation and amortization expense, $4.2 million change in fair value of contingent consideration, $2.9 million amortization of debt discount, and $0.6 million write-off of deferred debt issuance costs related to the revenue interest financing with Sagard in 2020. Net cash used in operating activities from discontinued operations in 2021 was $12.6 million, related to operations of the Dunkirk Facility, China API Operations, and 503B operations.

**Net Cash Provided by Investing Activities** 

In 2022, cash provided by investing activities of continuing operations of $7.5 million was primarily attributable to $9.6 million in the sale and maturity of short-term investments, net of purchases. This was partially offset by $1.6 million in payments for licenses and $0.4 million in purchases of property and equipment. Net cash provided by investing activities of discontinued operations in 2022 was $50.4 million, primarily due to the proceeds of $40.0 million and $12.5 million from the sales of the Dunkirk Facility and China API Operations, respectively, partially offset by purchases of property and equipment at the discontinued operations of $2.2 million.

In 2021, cash provided by investing activities of continuing operations of $127.8 million was primarily attributable to $128.9 million in the sale and maturity of short-term investments, net of purchases, and $1.4 million cash received from the acquisition of Kuur, partially offset by $2.1 million in payments for licenses and $0.5 million purchases of property and equipment. Net cash used in investing activities of discontinued operations in 2021 was $22.8 million, related to purchasing property and equipment at the Dunkirk Facility and China API Operations.

**Net Cash Provided by Financing Activities** 

In 2022, cash provided by financing activities of continuing operations was $2.4 million and was primarily comprised of $76.5 million in net proceeds from the issuance of the royalty financing liability, $27.7 million in net proceeds from the sale of common stock under the ATM Offering, public stock offering, and 2017 Employee Stock Purchase Plan, and $10.4 million from the issuance of pre-funded and common warrants, partially offset by the $105.4 million repayment of long-term debt and $6.5 million in costs related to the repayment of such debt. Net cash used by financing activities of discontinued operations in 2022 was $0.8 million which was related to the repayment of the Chongqing Maliu debt at our China API Operations.

In 2021, cash provided by financing activities of continuing operations was $2.7 million, which primarily consisted of the proceeds from the exercise of stock options of $1.6 million, proceeds from the sale of shares in the ATM Offering of $1.3 million in December, partially offset by the repayment of finance lease obligations of $0.1 million. Net cash used in financing activities of discontinued operations in 2021 was $0.3 million, related to the repayment of finance lease obligations.

**Capital Expenditures** 

Our liquidity position and capital requirements are subject to a number of factors. For example, our cash inflow and outflow may be impacted by the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our ability to generate revenue;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our ability to improve margins on our commercial products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Fluctuations in working capital; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Our ability to raise additional funds.

Our primary short-term capital needs, which are subject to change, include expenditures related to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Repayment of indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Continuous support of the development and research of our proprietary drug products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•New research and product development efforts; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Support of our commercialization efforts related to our current and future products.

Although we believe the foregoing items reflect our most likely uses of cash in the short term, we cannot predict with certainty all of our short-term cash uses or the timing or amounts of cash used. If cash generated from operations is insufficient to satisfy our working capital and capital expenditure requirements, we may be required to sell additional equity or debt securities or obtain credit financing. This capital may not be available on satisfactory terms, if at all. Furthermore, any additional equity financing may be dilutive to our stockholders, and debt financing, if available, may include restrictive covenants.

**Contractual Obligations** 

A summary of our contractual obligations as of December 31, 2022 is as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** | **Total** |
|  | **Less than 1<br>year** | **1 to 3 years** | **3 to 5 years** | **More than<br>5 years** | **Amounts<br>Committed** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Operating leases | $2238 | $3506 | $479 | $— | $6223 |
| Long-term debt | 56027 |  |  |  | 56027 |
| Finance lease obligations | 147 | 110 |  |  | 257 |
| License fees | 1167 |  |  |  | 1167 |
|  | $59579 | $3616 | $479 | $— | $63674 |

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Our operating and finance leases are principally for facilities and equipment. We currently lease office space in the U.S. and foreign countries to support our operations as a global organization. The operating leases in the above table include our several locations with the amounts committed by each location: (1) the rental of our global headquarters in the Conventus Center for Collaborative Medicine in Buffalo, NY; (2) the rental of the Commercial Platform headquarters in Chicago, IL; (3) the rental of our clinical research headquarters in Cranford, NJ; (4) the rental of our contract research organization throughout Latin America; (5) the rental of our office in Houston, TX; and (6) the rental of other facilities and equipment located mainly in Buffalo, NY. These locations represent $3.3 million, $1.4 million, $0.1 million, less than $0.1 million, $0.1 million, and $1.3 million, respectively, of the total amounts committed. In addition to the minimum rental commitments on our operating leases we may also be required to pay amounts for taxes, insurance, maintenance and other operating expenses.

The long-term debt includes our indebtedness under the Senior Credit Agreement with Oaktree. The finance lease obligations represent leases of equipment in our office in Buffalo, NY. The license fees in the above table represent the amount committed and accrued under in-license agreements for specialty drug products by the Commercial platform.

The Company is obligated to remit funds collected from certain Klisyri royalties and milestones under the License Agreement with Almirall to the Purchasers under the RIPA. The Company retained the right to receive 50% of certain of the milestone interests under the License Agreement, equal to $155.0 million in the aggregate if those milestones are achieved, and 50% of the royalties paid under the License Agreement for sales of Klisyri once net sales of Klisyri exceed a certain dollar amount. The estimates of these cash flows are excluded from the above table.

In addition, we have certain obligations under licensing arrangements with third parties contingent upon achieving various development, regulatory, and commercial milestones. Pursuant to our purchase agreement of Kuur Therapeutics, we may be required to make payments worth up to $115.0 million, payable in cash of shares of our common stock, upon the occurrence of certain development and regulatory milestones related to our NKT cell therapy. Pursuant to our license agreement with Baylor College of Medicine, we may be required to pay up to $128.5 million upon the occurrence of certain development and sales milestones. Pursuant to the license agreement with XLifeSc, our 55% owned joint venture Axis Therapeutics Limited, we may be required to make cash payments worth up to $108.0 million upon the occurrence of certain regulatory milestones related to XLifeSc's proprietary TCR-T technology, and make royalty payments representing a percentage of aggregate net income generated by sales of licensed products. Pursuant to our license agreements with Hanmi, we may be required to make equity payments of $24.0 million upon regulatory approval of a product within the Orascovery platform and make tiered royalty payments based on net sales of any product using the licensed intellectual property. These amounts are not included in the table above.

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**Critical Accounting Policies and Significant Judgments and Estimates** 

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the periods. We evaluate our estimates and judgments on an ongoing basis, including but not limited to, estimating the useful lives of long-lived assets, assessing the impairment of long-lived assets, stock-based compensation expenses, and the realizability of deferred income tax assets. We base our estimates on historical experience, known trends and events, contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Changes in the accounting estimates are likely to occur from period to period. Actual results could be significantly different from these estimates. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgment and estimates.

**Revenue Recognition** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.Oncology Innovation Platform

The Company out-licenses certain of its IP to other pharmaceutical companies in specific territories that allow the customer to use, develop, commercialize, or otherwise exploit the licensed IP. In accordance with ASC 606, Revenue from Contracts with Customers ("Topic 606"), the Company analyzes the contracts to identify its performance obligations within the contract. Most of the Company's out-license arrangements contain multiple performance obligations and variable pricing. After the performance obligations are identified, the Company determines the transaction price, which generally includes upfront fees, milestone payments related to the achievement of developmental, regulatory, or commercial goals, and royalty payments on net sales of licensed products. The Company considers whether the transaction price is fixed or variable, and whether such consideration is subject to return. Variable consideration is only included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If any portion of the transaction price is constrained, it is excluded from the transaction price until the constraint no longer exists. The Company then allocates the transaction price to the performance obligation to which the consideration is related. Where a portion of the transaction price is received and allocated to continuing performance obligations under the terms of the arrangement, it is recorded as deferred revenue and recognized as revenue when (or as) the underlying performance obligation is satisfied.

The Company's contracts may contain one or multiple promises, including the license of IP and development services. The licensed IP related to the Company's approved and late-stage drug candidates is capable of being distinct from the other performance obligations identified in the contract and is distinct within the context of the contract, as upon transfer of the IP, the customer is able to use and benefit from it, and the customer could obtain the development services from other parties. The Company also considers the economic and regulatory characteristics of the licensed IP and other promises in the contract to determine if it is a distinct performance obligation. The Company considers if the IP is modified or enhanced by other performance obligations through the life of the agreement and whether the customer is contractually or practically required to use updated IP. The IP licensed by the Company has been determined to be functional IP. The IP is not modified during the license period and therefore, the Company recognizes revenues from any portion of the transaction price allocated to the licensed IP when the license is transferred to the customer and they can benefit from the right to use the IP. The Company recognized $9.2 million and $0.5 million in license revenue from out-license arrangements for the years ended December 31, 2022 and 2021, respectively. During the year ended December 31, 2021, the Company received $2.0 million in upfront fees for a license of TCR-T technology, which was deemed not to be distinct, as the IP is in an early stage and is dependent on development activities to be performed by the Company, and $0.7 million for licenses of Klisyri in territories in which it is not yet approved and further development activities are required to be performed by the Company. Therefore these licenses of IP and the development services were considered a bundled performance obligation. As of December 31, 2022, this bundle of performance obligations was not satisfied and the corresponding $2.7 million was recorded as deferred revenue on the Company's consolidated balance sheet.

Other performance obligations included in most of the Company's out-licensing agreements include performing development services to reach clinical and regulatory milestone events. The Company satisfies these performance obligations at a point-in-time, because the customer does not simultaneously receive and consume the benefits as the development occurs, the development does not create or enhance an asset controlled by the customer, and the development does not create an asset with no alternative use. The Company considers milestone payments to be variable consideration measured using the most likely amount method, as the entitlement to the consideration is contingent on the occurrence or nonoccurrence of future events. The Company allocates each variable milestone payment to the associated milestone performance obligation, as the variable payment relates directly to the Company's efforts to satisfy the performance obligation and such allocation depicts the amount of consideration to which the Company expects to be entitled for satisfying the corresponding performance obligation. The Company re-evaluates the probability of achievement of such performance obligations and any related constraint and adjusts its estimate of the transaction price as appropriate.

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To date, no amounts have been constrained in the initial or subsequent assessments of the transaction price. The Company did not recognize revenue from other performance obligations included in the Company's out-licensing agreements during the years ended December 31, 2022 or 2021.

Certain out-license agreements include performance obligations to manufacture and provide drug product in the future for commercial sale when the licensed product is approved. For the commercial, sales-based royalties, the consideration is predominantly related to the licensed IP and is contingent on the customer's subsequent sales to another commercial customer. Consequently, the sales- or usage-based royalty exception would apply. Revenue will be recognized for the commercial, sales-based milestones as the underlying sales occur. The Company recognized $2.5 million and $25.0 million in commercial milestones during the years ended December 31, 2022 and 2021, respectively. The Company recorded $2.3 million and $0.7 million of royalty revenue related to sales of Tirbanibulin during the years ended December 31, 2022 and 2021, respectively.

The Company exercises significant judgment when identifying distinct performance obligations within its out-license arrangements, determining the transaction price, which often includes both fixed and variable considerations, and allocating the transaction price to the proper performance obligation. The Company did not use any other significant judgments related to out-licensing revenue during the years ended December 31, 2022 and 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Commercial Platform

The Company's Commercial Platform generates revenue by distributing specialty products through independent pharmaceutical wholesalers. The wholesalers then sell to an end-user, normally a hospital, alternative healthcare facility, or an independent pharmacy, at a lower price previously established by the end-user and the Company. Upon the sale by the wholesaler to the end-user, the wholesaler will chargeback the difference, if any, between the original list price and price at which the product was sold to the end-user. The Company also offers cash discounts, which approximate 2.3% of the gross sales price, as an incentive for prompt customer payment, and, consistent with industry practice, the Company's return policy permits customers to return products within a window of time before and after the expiration of product dating. Further, the Company offers contractual allowances, generally in the form of rebates or administrative fees, to certain wholesale customers, group purchasing organizations ("GPOs"), and end-user customers, consistent with pharmaceutical industry practices. Revenues are recorded net of provisions for variable consideration, including discounts, rebates, GPO allowances, price adjustments, returns, chargebacks, promotional programs and other sales allowances. Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash). As of December 31, 2022 and 2021, the Company's total provision for chargebacks and other deductions included as a reduction of accounts receivable totaled $29.5 million and $22.9 million, respectively. The Company's total provision for chargebacks and other revenue deductions was $179.9 million and $129.0 million for the years ended December 31, 2022 and 2021, respectively.

The Company exercises significant judgment in its estimates of the variable transaction price at the time of the sale and recognizes revenue when the performance obligation is satisfied. Factors that determine the final net transaction price include chargebacks, fees for service, cash discounts, rebates, returns, warranties, and other factors. The Company estimates all of these variables based on historical data obtained from previous sales finalized with the end-user customer on a product-by-product basis. At the time of sale, revenue is recorded net of each of these deductions. Through the normal course of business, the wholesaler will sell the product to the end-user, determining the actual chargeback, return products, and take advantage of cash discounts, charge fees for services, and claim warranties on products. The final transaction price per product is compared to the initial estimated net sale price and reviewed for accuracy. The final prices and other factors are immediately included in the Company's historical data from which it will estimate the transaction price for future sales. The underlying contracts for these sales are generally purchase orders including a single performance obligation, generally the shipment or delivery of products and the Company recognizes this revenue at a point-in-time.

**Research and Development Expenses** 

Research and development expenses represent costs associated with developing our proprietary drug candidates, our collaboration agreements for such drugs, and our ongoing clinical studies.

Clinical trial costs are a significant component of our research and development expenses. We have a history of contracting with third parties that perform various clinical trial activities on our behalf in the ongoing development of our drug candidates. Expenses related to clinical trials are accrued based on our estimates of the actual services performed by the third parties for the respective period. If the contracted amounts are revised or the scope of a contract is revised, we will modify the accruals accordingly on a prospective basis and will do so in the period in which the facts that give rise to the revision become reasonably certain.

**Intangible Assets, net** 

Intangible assets arising from a business acquisition are recognized at fair value as of the acquisition date. The Company amortizes intangible assets using the straight-line method. When the straight-line method of amortization is utilized, the estimated

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useful life of the intangible asset is shortened to assure the recognition of amortization expense corresponds with the expected cash flows. Other purchased intangibles, including certain licenses, are capitalized at cost and amortized on a straight-line basis over the license life, when a future economic benefit is probable and measurable. If a future economic benefit is not probable or measurable, the license costs are expensed as incurred within research and development expenses. In-process research and development ("IPR&D") intangible assets are not amortized, but rather are reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party.

**Impairment of Long-Lived Assets** 

The Company reviews the recoverability of its long-lived assets, excluding goodwill, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the assets from the expected future cash flows (undiscounted and without interest expense) of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss for the difference between the estimated fair value and carrying value is recorded. The Company determined that impairment indicators occurred during the first and fourth quarters of 2021 and concluded that there was impairment of intangible assets other than goodwill amounting to $1.7 million for the year ended December 31, 2021. See Part II, Item 8, Note 8 – Goodwill and Intangible Assets, net for additional details.

**Contingent Consideration**

Contingent consideration arising from a business acquisition is included as part of the purchase price and is recorded at fair value as of the acquisition date. Subsequent to the acquisition date, the Company remeasures contingent consideration arrangements at fair value at each reporting period until the contingency is resolved. The changes in fair value are recognized within selling, general, and administrative expenses in the Company's consolidated statement of operations and comprehensive loss. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time.

**Liability related to the sale of future royalties**

The Company treats the liability related to the sale of future royalties, as discussed further in Part II, Item 8. Note 12 - Debt and Lease Obligations, as a debt instrument, amortized under the effective interest rate method over the estimated life of the revenue streams. The Company recognizes interest expense thereon using the effective interest rate, which is based on its current estimates of future revenues over the life of the arrangement. The Company periodically assesses its expected revenues using internal projections, imputes interest on the carrying value of the deferred royalty obligation, and records interest expense using the imputed effective interest rate. To the extent its estimates of future revenues are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will account for any such changes by adjusting the effective interest rate on a prospective basis, with a corresponding impact to the reclassification of the deferred royalty obligation. The assumptions used in determining the expected repayment term of the royalty financing liability and amortization period of the issuance costs require that the Company makes significant estimates that could impact the short-term and long-term classification of the royalty financing liability, interest recorded on such liability, as well as the period over which such costs will be amortized.

**Recent Accounting Pronouncements**

In the normal course of business, we evaluate all new accounting pronouncements issued by the Financial Accounting Standards Board, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Consolidated Financial Statements. Refer to Note 2 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in Item 8 of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.

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**Item 7A. Quantitative and Qualitative Disclosures about Market Risk.**

As a smaller reporting company, we are not required to provide the information required by this Item.

**Item 8. Financial Statements and Supplementary Data.**

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**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS** 

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| | |
|:---|:---|
|  | **Page**  |
| **Athenex, Inc.** |  |
| [<u>Report of Independent Registered Public Accounting Firm (PCAOB ID No.</u> 34<u>)</u>](#report_independent_registered_public_acc) | F-1 |
| [<u>Consolidated Balance Sheets</u>](#consolidated_balance_sheets) | F-4 |
| [<u>Consolidated Statements of Operations and Comprehensive Loss</u>](#consolidated_statements_operations_compr) | F-5 |
| [<u>Consolidated Statements of Stockholders' Equity</u>](#consolidated_statements_stockholders_equ) | F-6 |
| [<u>Consolidated Statements of Cash Flows</u>](#consolidated_statements_cash_flows) | F-7 |
| [<u>Notes to Consolidated Financial Statements</u>](#notes_to_consolidated_financial_statemen) | F-8 |

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** 

To the stockholders and the Board of Directors of Athenex, Inc.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Athenex, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the consolidated financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

**Going Concern**

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, negative cash flows from operations, and does not have sufficient cash on hand or available liquidity to fund its operations or repay its outstanding debt. Further, the Company is forecasting noncompliance with its debt covenants, and has received notices of defaults under its Senior Credit Agreement. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

**Revenue Chargebacks – Refer to Note 19 (Commercial Platform) to the consolidated financial statements**

Critical Audit Matter Description

The Company has revenue agreements with certain independent pharmaceutical wholesalers to sell and distribute specialty products. These wholesalers then sell these specialty drug products to an end-user (Hospital, alternative healthcare facility, etc.). In such case, sales are initially recorded at the price sold to the wholesaler. Because these prices will be reduced for the end-user, the Company records a contra asset in accounts receivable and a reduction to revenue at the time of the sale, using the difference between the list price and the estimated end-user contract price. Upon the sale by the wholesaler to the end-user, the wholesaler will chargeback the difference between the original list price and price at which the product was sold to the end-user and such chargeback is offset against the initial estimated contra asset. The provision for chargebacks as of December 31, 2022 was $29.5 million, included as a reduction of accounts receivable.

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We identified the accrual for chargebacks at the balance sheet date as a critical audit matter because of the judgments necessary for management to estimate the accrual based on estimates of wholesaler inventory stocking levels and of differences between list price and price at which the product was sold to the end-user. Given the volume of transactions subject to potential chargeback at the balance sheet date and the level of uncertainty involved in the estimation of the quantity and mix of products in wholesaler inventory, this matter required a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to revenue chargebacks included the following, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We evaluated the reasonableness of the methodology and assumptions applied by management when developing their chargeback estimate. We tested the accuracy and completeness of amounts in the accrual computations, inquired of management, and reviewed source documentation – including wholesaler agreements and inventory schedules to assess that management's methodology included relevant data and assumptions to arrive at a reasonable estimation process in material respects.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We evaluated whether the methodology and assumptions have been consistently applied, throughout the estimation process, during the course of the year and in a manner consistent with the estimation process in the prior years presented.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We selected a sample of activity of the chargeback accrual at the balance sheet date and performed audit procedures on such sample. Such procedures included: obtaining wholesaler agreements for the samples and recalculating the year-end accrual for the selected transactions; verifying quantities-on-hand with wholesalers for the sample transactions; and performing a retrospective review of payments received subsequent to the balance sheet date to evaluate reasonableness of the Company's estimate of the chargebacks contra asset at the year-end balance sheet date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Additionally, we also performed procedures over the historical accuracy of the chargeback accrual through comparison of initial estimates to actual chargebacks incurred.

**Accounting for Kuur In-Process Research and Development and Contingent Consideration – Refer to Note 8 (Kuur IPR&D) and Note 13 (Contingent Consideration) to the consolidated financial statements**

Critical Audit Matter Description

The Company entered into an Agreement and Plan of Merger with Kuur Therapeutics, Inc. ("Kuur") in May 2021, where the Company acquired 100 percent of the outstanding shares of Kuur (the "Merger"). The Company estimated fair values on May 4, 2021 for the allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the Merger. Included in the allocation of consideration, the Company recognized in-process research and development ("IPR&D") indefinite-lived intangible assets, in addition to a contingent consideration liability. Subsequent to the acquisition date, IPR&D intangible assets are not amortized, but rather are tested annually for impairment on May 1, or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party. The Company remeasures contingent consideration arrangements at fair value at each reporting period until the contingency is resolved. The Kuur IPR&D indefinite-lived intangible assets and contingent consideration liability were $64.9 million and $19.9 million, respectively, as of December 31, 2022.

We identified the Company's subsequent accounting of the acquired Kuur IPR&D indefinite-lived intangible assets, in addition to the ongoing contingent consideration liability recognized as a critical audit matter because of the judgments necessary for management to estimate the fair values of such balances. The significant assumptions used to estimate the fair value of the Kuur IPR&D and contingent consideration liability included discount rates, as well as certain other business-related assumptions that form the basis of forecasted financial results, including probability of success factors, revenue forecasts and anticipated market penetration rates. Given the complexity of these assumptions, as well as the use of both business-related and market-related valuation techniques, this matter required a high degree of auditor judgment, and an increased extent of effort including involvement of fair value specialists, when performing audit procedures and evaluating the results of those procedures.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company's subsequent accounting for acquired IPR&D, as well as the contingent consideration liability recognized in connection with the Merger, included the following, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We assessed the reasonableness of management's key estimates and assumptions used in these valuation models. We met with the key individuals from the senior leadership team and key personnel involved in the forecasting process to discuss and evaluate management's evidence to support the probability of success factors, revenue forecasts and anticipated market penetration rates. We tested the completeness and accuracy of the underlying data. For example, to evaluate probability of success with a potential drug candidate, we compared the Company's probability of success factors associated with Kuur IPR&D to market studies for similar products. We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodologies used to determine the fair value of the Kuur IPR&D as of the annual measurement date and measurement of the contingent considerations liability, including testing the mathematical accuracy of the calculation, the discount rate and company specific risks.

**Revenue Interest Purchase Agreement – Refer to Note 12 (Royalty Financing Liability) to the consolidated financial statements**

Critical Audit Matter Description

The Company entered into a Revenue Interest Purchase Agreement (the "RIPA") for the sale of revenues from U.S. and European royalty and milestone interests in Klisyri® (tirbanibulin) for an aggregate purchase price of $85.0 million. The Company evaluated the terms of the RIPA and concluded that the features of the transaction, namely the Company's significant involvement in the cash flows due to the purchasers, are similar to those of a debt instrument. The Company recorded $86.7 million as long-term debt related to the royalty financing liability as of December 31, 2022.

We identified the royalty financing liability as a critical audit matter given the Company applied significant judgment in determining the appropriate accounting treatment for the transaction in addition to the judgments necessary for management to estimate the fair values of such balances. The royalty financing liability related to the sale of future revenue and the related interest expense are based on the Company's current estimates of future royalties expected to be paid over the life of the arrangement, as well as the period over which such costs will be amortized. Given the complexity of the judgments applied by management in determining the appropriate accounting treatment as well as the complexity of these assumptions, this matter required a high degree of auditor judgment, and an increased extent of effort when performing audit procedures and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company's accounting for the royalty financing liability included the following, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We evaluated whether the transaction had been properly accounted for in accordance with the relevant accounting principles generally accepted in the United States of America.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•We assessed the reasonableness of management's process for determining the valuation of the royalty financing liability. We met with the key individuals from the senior leadership team and key personnel involved in the forecasting process to discuss and evaluate management's evidence for projected royalty revenue, which included an evaluation of consistency with external market and industry data, and consistency with evidence obtained in other areas of the audit. We tested the completeness and accuracy of underlying data used in determining the valuation of the liability.

/s/ Deloitte & Touche LLP

Williamsville, New York

March 20, 2023

We have served as the Company's auditor since 2015.

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**ATHENEX, INC. AND SUBSIDIARIES** 

**CONSOLIDATED BALANCE SHEETS** 

**(In thousands, except share and per share data)** 

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $30437 | $35202 |
| &nbsp;&nbsp;&nbsp;Restricted cash | 5183 | 16500 |
| &nbsp;&nbsp;&nbsp;Short-term investments | 1071 | 10207 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net of chargebacks and other deductions of $29,470<br> and $22,869, respectively, and provision for credit losses of $9,676 and<br> $9,069, respectively | 27865 | 22778 |
| &nbsp;&nbsp;&nbsp;Inventories | 42654 | 23068 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 10578 | 5337 |
| &nbsp;&nbsp;&nbsp;Discontinued operations, current portion | 7141 | 20303 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 124929 | 133395 |
| Property and equipment, net | 1824 | 3191 |
| Intangible assets, net | 72112 | 71896 |
| Operating lease right-of-use assets, net | 4219 | 5670 |
| Other assets | 804 | 1071 |
| Discontinued operations, non-current portion | 167 | 52225 |
| Total assets | $204055 | $267448 |
| **Liabilities and stockholders' equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $33682 | $12485 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 35365 | 23678 |
| &nbsp;&nbsp;&nbsp;Current portion of operating lease liabilities | 2087 | 2478 |
| &nbsp;&nbsp;&nbsp;Current portion of long-term debt and finance lease obligations | 37127 | 46076 |
| &nbsp;&nbsp;&nbsp;Current portion of contingent consideration | 900 |  |
| &nbsp;&nbsp;&nbsp;Discontinued operations, current portion | 5718 | 11331 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 114879 | 96048 |
| Long-term liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Long-term operating lease liabilities | 3051 | 4494 |
| &nbsp;&nbsp;&nbsp;Long-term debt and finance lease obligations | 93 | 95607 |
| &nbsp;&nbsp;&nbsp;Royalty financing liability | 86745 |  |
| &nbsp;&nbsp;&nbsp;Deferred tax liabilities | 1751 | 1751 |
| &nbsp;&nbsp;&nbsp;Contingent consideration | 18986 | 24076 |
| &nbsp;&nbsp;&nbsp;Other long-term liabilities | 2731 | 3046 |
| &nbsp;&nbsp;&nbsp;Discontinued operations, non-current portion |  | 7974 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 228236 | 232996 |
| Commitments and contingencies (Note 20) |  |  |
| Stockholders' equity: |  |  |
| Common stock, par value $0.001 per share, 25,000,000 and 12,500,000 shares authorized at December 31, 2022 and 2021, respectively; 8,711,696 and 5,590,149 shares issued at December 31, 2022 and 2021, respectively; 8,626,769 and 5,506,503 shares outstanding at December 31, 2022 and 2021, respectively | 9 | 6 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 1017194 | 972509 |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive income (loss) | 887 | (487) |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (1016839) | (913412) |
| &nbsp;&nbsp;&nbsp;Less: treasury stock, at cost; 84,928 and 83,646 shares at December 31, 2022 and 2021, respectively | (7757) | (7485) |
| &nbsp;&nbsp;&nbsp;Total Athenex, Inc. stockholders' (deficit) equity | (6506) | 51131 |
| Non-controlling interests | (17675) | (16679) |
| &nbsp;&nbsp;&nbsp;Total stockholders' (deficit) equity | (24181) | 34452 |
| &nbsp;&nbsp;&nbsp;Total liabilities and stockholders' (deficit) equity | $204055 | $267448 |

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

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**ATHENEX, INC. AND SUBSIDIARIES** 

**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS** 

**(In thousands, except share and per share data)** 

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Product sales, net | $90884 | $68505 |
| &nbsp;&nbsp;&nbsp;License and other revenue | 11937 | 26864 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue | 102821 | 95369 |
| Cost of sales | 76118 | 62892 |
| Gross profit | 26703 | 32477 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;Research and development expenses | 51758 | 77668 |
| &nbsp;&nbsp;&nbsp;Selling, general, and administrative expenses | 44880 | 64230 |
| &nbsp;&nbsp;&nbsp;Impairments | 79 | 41011 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 96717 | 182909 |
| Operating loss | (70014) | (150432) |
| &nbsp;&nbsp;&nbsp;Interest and other income | (363) | (128) |
| &nbsp;&nbsp;&nbsp;Interest expense | 25843 | 20654 |
| &nbsp;&nbsp;&nbsp;Loss on extinguishment of debt | 3134 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from continuing operations before income tax expense (benefit) | (98628) | (170958) |
| Income tax expense (benefit) | 347 | (10604) |
| Net loss from continuing operations | (98975) | (160354) |
| Loss from discontinued operations (Note 3) | 5448 | 41682 |
| Net loss | (104423) | (202036) |
| Less: net loss attributable to non-controlling interests | (996) | (2268) |
| Net loss attributable to Athenex, Inc. | $(103427) | $(199768) |
| Unrealized gain on investment, net of income taxes | 465 | 506 |
| Foreign currency translation adjustment, net of income taxes | 909 | 141 |
| Comprehensive loss | $(102053) | $(199121) |
| Basic and diluted loss per Athenex, Inc. common share (Note 16): |  |  |
| &nbsp;&nbsp;&nbsp;Net loss from continuing operations | $(14.98) | $(30.42) |
| &nbsp;&nbsp;&nbsp;Net loss from discontinued operations | (0.83) | (8.02) |
| &nbsp;&nbsp;&nbsp;Net loss per share attributable to Athenex, Inc. common stockholders | $(15.81) | $(38.44) |
| Weighted-average shares used in computing net loss per share attributable<br> to Athenex, Inc. common stockholders, basic and diluted (Note 16) | 6541068 | 5196923 |

---

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

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**ATHENEX, INC. AND SUBSIDIARIES** 

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY** 

**(In thousands, except share data)** 

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  | **Accumulated** |  |  | **Total** |  |  |
|  |  |  | **Additional** |  | **other** |  |  | **Athenex, Inc.** | **Non-** | **Total** |
|  | **Common Stock** | **Common Stock** | **paid-in** | **Accumulated** | **comprehensive** | **Treasury Stock** | **Treasury Stock** | **stockholders'** | **controlling** | **stockholders'** |
|  | **Shares** | **Amount** | **capital** | **deficit** | **(loss) income** | **Shares** | **Amount** | **equity (deficit)** | **interests** | **equity (deficit)** |
| **Balance at January 1, 2021** | 4753310 | $5 | $901954 | $(713644) | $(1134) | (83646) | $(7406) | $179775 | $(14427) | $165348 |
| &nbsp;&nbsp;&nbsp;Sale of common stock through ATM and ESPP, net of costs of $35 | 42220 |  | 1342 |  |  |  |  | 1342 |  | 1342 |
| &nbsp;&nbsp;&nbsp;&nbsp;Issuance of stock in connection with acquisition of Kuur | 780083 | 1 | 58426 |  |  |  |  | 58427 |  | 58427 |
| &nbsp;&nbsp;&nbsp;&nbsp;Issuance of common stock in connection with Cidal contingent consideration | 565 |  | 1 |  |  |  |  | 1 |  | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation cost |  |  | 8591 |  |  |  |  | 8591 |  | 8591 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted stock expense |  |  | 616 |  |  |  |  | 616 |  | 616 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock options exercised | 13971 |  | 1579 |  |  |  |  | 1579 |  | 1579 |
| &nbsp;&nbsp;&nbsp;&nbsp;Treasury stock repurchase |  |  |  |  |  |  | (79) | (79) |  | (79) |
| &nbsp;&nbsp;&nbsp;&nbsp;Disposal of non-controlling interest |  |  |  |  |  |  |  |  | 16 | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss |  |  |  | (199768) |  |  |  | (199768) | (2268) | (202036) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive gain, net of tax |  |  |  |  | 647 |  |  | 647 |  | 647 |
| **Balance at December 31, 2021** | 5590149 | 6 | 972509 | (913412) | (487) | (83646) | (7485) | 51131 | (16679) | 34452 |
| &nbsp;&nbsp;&nbsp;Sale of common stock through ATM, net of costs of $291 | 1263251 | 1 | 9394 |  |  |  |  | 9395 |  | 9395 |
| &nbsp;&nbsp;&nbsp;&nbsp;Sale of common stock through ESPP | 84571 |  | 545 |  |  |  |  | 545 |  | 545 |
| &nbsp;&nbsp;&nbsp;Sale of common stock through public offering, net of costs of $1,173 | 1766667 | 2 | 17771 |  |  |  |  | 17773 |  | 17773 |
| &nbsp;&nbsp;&nbsp;Issuance and modification of warrants, net of costs of $529 |  |  | 8306 |  |  |  |  | 8306 |  | 8306 |
| &nbsp;&nbsp;&nbsp;Issuance of pre-funded warrants, net of costs of $155 |  |  | 2343 |  |  |  |  | 2343 |  | 2343 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation cost |  |  | 5576 |  |  |  |  | 5576 |  | 5576 |
| &nbsp;&nbsp;&nbsp;&nbsp;Vesting of restricted stock units | 7058 |  | 750 |  |  |  |  | 750 |  | 750 |
| &nbsp;&nbsp;&nbsp;&nbsp;Treasury stock repurchase |  |  |  |  |  | (1282) | (272) | (272) |  | (272) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss |  |  |  | (103427) |  |  |  | (103427) | (996) | (104423) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive gain, net of tax |  |  |  |  | 1374 |  |  | 1374 |  | 1374 |
| **Balance at December 31, 2022** | 8711696 | $9 | $1017194 | $(1016839) | $887 | (84928) | $(7757) | $(6506) | $(17675) | $(24181) |

---

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

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**ATHENEX, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands)**

---

| | | |
|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** |
|  | **2022** | **2021** |
| **Cash flows from operating activities:** |  |  |
| Net loss from continuing operations | $(98975) | $(160354) |
| Net loss from discontinued operations | (5448) | (41682) |
| Adjustments to reconcile net loss to net cash used in operating activities of continuing operations: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2322 | 3138 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 6326 | 9207 |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill and intangible assets | 79 | 41011 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of contingent consideration | (4190) | 4237 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 134 | (456) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt discount | 4362 | 2939 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of royalty financing liability | 10240 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on disposal of assets | 442 | (331) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on extinguishment of debt and write-off of deferred issuance costs | 3134 | 648 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes |  | (10848) |
| Changes in operating assets and liabilities, net of effect of acquisition and disposals: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Receivables, net | (5221) | (2752) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | 656 | 3272 |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventories | (19586) | (122) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | 35929 | (19385) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used in operating activities of continuing operations** | (64348) | (129796) |
| **Cash flows from investing activities of continuing operations:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase of property and equipment | (417) | (474) |
| &nbsp;&nbsp;&nbsp;&nbsp;Payments for licenses | (1643) | (2137) |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisition activity |  | 1425 |
| &nbsp;&nbsp;&nbsp;&nbsp;Disposal activity |  | 101 |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of short-term investments | (9087) | (68672) |
| &nbsp;&nbsp;&nbsp;&nbsp;Sale of short-term investments | 18683 | 197608 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by investing activities of continuing operations** | 7536 | 127851 |
| **Cash flows from financing activities of continuing operations:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of stock | 29177 | 1343 |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from issuance of royalty financing liability | 81500 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from issuance of warrants and pre-funded warrants | 11050 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Costs incurred related to the sale of stock | (1464) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Costs incurred related to the issuance warrants and pre-funded warrants | (684) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Costs incurred related to the issuance of royalty financing liability | (4982) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Costs incurred related to the prepayment of debt | (6515) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options |  | 1579 |
| &nbsp;&nbsp;&nbsp;&nbsp;Repurchase of treasury stock | (272) | (79) |
| &nbsp;&nbsp;&nbsp;&nbsp;Repayment of finance lease obligations and long-term debt and royalty financing liability | (105439) | (106) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by financing activities of continuing operations** | 2371 | 2737 |
| **Net (decrease) increase in cash, cash equivalents, and restricted cash from continuing operations** | (54441) | 792 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities of discontinued operations | (10666) | (12585) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) investing activities of discontinued operations | 50366 | (22866) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities of discontinued operations | (807) | (274) |
| **Net increase (decrease) in cash and cash equivalents from discontinued operations** | 38893 | (35725) |
| **Cash, cash equivalents, and restricted cash beginning of period** | 51702 | 86087 |
| **Effect of exchange rate changes on cash, cash equivalents, and restricted cash** | (534) | 548 |
| **Cash, cash equivalents, and restricted cash, end of period (See Note 5)** | $35620 | $51702 |
| **Supplemental cash flow disclosures** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest paid | $11088 | $20336 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income taxes paid | $586 | $108 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Non-cash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued purchases of property and equipment from continuing operations | $21 | $246 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued purchases of property and equipment from discontinued operations | $— | $1679 |
| &nbsp;&nbsp;&nbsp;&nbsp;Modification of warrants | $283 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued purchases of licenses | $1138 | $1250 |
| &nbsp;&nbsp;&nbsp;&nbsp;ROU assets recognized in exchange for new lease obligations | $146 | $203 |
| &nbsp;&nbsp;&nbsp;&nbsp;ROU assets derecognized from modification of operating lease obligations | $(128) | $(114) |
| &nbsp;&nbsp;&nbsp;&nbsp;Equity consideration in connection with acquisition | $— | $52786 |

---

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

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**ATHENEX, INC. AND SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS** 

**1.** **COMPANY AND NATURE OF BUSINESS** 

**Description of Business** 

Athenex, Inc. (the "Company" or "Athenex"), originally under the name Kinex Pharmaceuticals LLC ("Kinex"), formed in November 2003, commenced operations on February 5, 2004, and operated as a limited liability company until it was incorporated in the State of Delaware under the name Kinex Pharmaceuticals, Inc. on December 31, 2012. The Company changed its name to Athenex, Inc. on August 26, 2015.

Athenex is a biopharmaceutical company dedicated to becoming a leader in the discovery, development, and commercialization of next generation drugs for the treatment of cancer. The Company's mission is to improve the lives of cancer patients by creating more effective, safer, and accessible treatments. The Company has assembled a strong and experienced leadership team and has established operations across the pharmaceutical value chain to execute our goal of becoming a leader in bringing innovative cancer treatments to the market and improving health outcomes.

The Company is organized around two operating segments: (1) its Oncology Innovation Platform, dedicated to the research and development of our proprietary drugs; and (2) its Commercial Platform, focused on the sales and marketing of our specialty drugs and the market development of our proprietary drugs. The Company's current clinical pipeline in the Oncology Innovation Platform is derived mainly from the following core technologies: (a) Cell Therapy, based on natural killer T ("NKT") cells, and (b) Orascovery, based on a P-glycoprotein pump inhibitor. The Company previously had a third operating segment, the Global Supply Chain Platform, focused on the current Good Manufacturing Practices ("cGMP") manufacturing and supply of active pharmaceutical ingredients and 503B sterile compounded pharmaceutical products. The components within this operating segment were discontinued during 2022 and are reported as discontinued operations. Refer to Note 3 – Discontinued Operations for additional information.

The Company is primarily engaged in conducting research and development activities through corporate collaborators, in-licensing and out-licensing pharmaceutical compounds and technology, conducting preclinical and clinical testing, identifying and evaluating additional drug candidates for potential in-licensing or acquisition, and raising capital to support development and commercialization activities. The Company also conducts commercial sales of specialty products through its wholly owned subsidiary, Athenex Pharmaceutical Division ("APD").

**Going Concern**

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has incurred operating losses since its inception and, as a result, as of December 31, 2022 and 2021 had an accumulated deficit of $1,016.8 million and $913.4 million, respectively. As of December 31, 2022, the Company had cash and cash equivalents of $30.4 million, restricted cash of $5.2 million, and short-term investments of $1.1 million. The Company projects insufficient liquidity to fund its operations through the next twelve months beyond the date of the issuance of these consolidated financial statements. This condition raises substantial doubt about the Company's ability to continue as a going concern.

The Company is in compliance with the minimum liquidity and minimum revenue financial covenants in the Senior Credit Agreement as of December 31, 2022. However, the Company received notices of certain alleged defaults and reservations of rights related to the Senior Credit Agreement, as described in Note 12 - Debt and Lease Obligations, and is forecasting noncompliance with the minimum liquidity covenant and minimum revenue covenant included within the Senior Credit Agreement during the twelve month period subsequent to the date of this filing. Pursuant to ASC 205-40-50, the Company's forecast and analysis herein does not reflect management's plans that are outside of the Company's control as described below. Violation of any covenant under the Senior Credit Agreement provides the lenders with the option to accelerate the maturity of the amounts due under the Senior Credit Agreement, which was $44.7 million as of December 31, 2022. Should the lenders accelerate the maturity of the amounts due under the Senior Credit Agreement, the Company would not have sufficient cash on hand or available liquidity to repay the outstanding debt. These conditions and events raise substantial doubt about the Company's ability to continue as a going concern.

In response to these conditions, management's plans include seeking additional funding through asset monetization, seeking funding through alternative means, and raising capital. There can be no assurances, however, that the Company will be able to monetize assets or obtain additional funding on favorable terms, or at all. Because management's plans have not yet been finalized and

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are not within the Company's control, such plans cannot be considered probable of being achieved. As a result, the Company has concluded that management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern.

These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

**Other Significant Risks and Uncertainties**

In February 2021, the Company received a Complete Response Letter ("CRL") from the U.S. Food and Drug Administration ("FDA") regarding the Company's New Drug Application ("NDA") for oral paclitaxel and encequidar ("Oral Paclitaxel") for the treatment of metastatic breast cancer ("mBC"), indicating that the application is not ready for approval in its present form. In the CRL, the FDA indicated its concern of safety risk to patients in terms of an increase in neutropenia-related sequelae on the Oral Paclitaxel arm compared with the IV paclitaxel arm in the Phase III study. The FDA also expressed concerns regarding the uncertainty over the results of the primary endpoint of objective response rate at week 19 conducted by blinded independent central review. During the second quarter of 2021, the Company held a Type A meeting with the FDA, where it provided additional analyses, including overall survival data on patient subgroups, to provide a more comprehensive summary of the risk/benefit assessment. In October 2021, after careful consideration of the FDA's feedback, the Company determined to redeploy its resources to focus on the cell therapy platform and ongoing studies of Oral Paclitaxel.

The Company is subject to a number of risks, including, but not limited to, the lack of available capital; the possible delisting of our common stock from Nasdaq; possible failure of preclinical testing or clinical trials; inability to obtain regulatory approval of product candidates; competitors developing new technological innovations; potential interruptions in the manufacturing and commercial supply operations; unsuccessful commercialization strategy and launch plans for its proprietary drug candidates; risks inherent in litigation, including purported class actions; market acceptance of the Company's products; and protection of proprietary technology. If the Company or its partners do not successfully commercialize any of the Company's product candidates, it will be unable to generate sufficient revenue and might not, if ever, achieve profitability and positive cash flow.

**Recent Financing Activity**

**Public Offering of Common Stock and Warrants**

In August 2022, the Company completed an underwritten public offering in which it sold 1,766,667 shares of common stock, common warrants to purchase up to 2,000,000 shares of common stock at a price of $20.00 per share, and pre-funded warrants to purchase up to 233,334 shares of common stock at a price of $0.02 per share. The shares of common stock, together with the common warrants, were sold at $15.00 per share and accompanying common warrant, and the pre-funded warrants, together with the common warrants, were sold at $14.98 per pre-funded warrant and accompanying common warrant. The common and pre-funded warrants were exercisable immediately and will expire five years from the date of issuance. The Company received net proceeds of $28.1 million, after deducting discounts, commissions, and offering expenses.

**At-the-market offering**

On August 20, 2021, the Company entered into a sales agreement (the "Sales Agreement") with SVB Leerink LLC, in connection with the offer and sale of up to $100,000,000 of shares of the Company's common stock, par value $0.001 per share ("ATM Shares"). The ATM Shares to be offered and sold under the Sales Agreement will be issued and sold pursuant to a registration statement on Form S-3 (File No. 333-258185) that became effective on August 12, 2021. During the year ended December 31, 2022, the Company sold 1,263,251 shares of its common stock for an average price of $7.40 per share under the Sales Agreement. During the year ended December 31, 2021, the Company sold 38,142 shares of its common stock for an average price of $29.80 per share under the Sales Agreement.

**Sale of U.S. and European tirbanibulin royalty and milestone interests**

On June 21, 2022, the Company and ATNX SPV, LLC, its newly-formed subsidiary (the "SPV"), entered into a Revenue Interest Purchase Agreement (the "RIPA") with affiliates of Sagard Healthcare Partners ("Sagard") and funds managed by Oaktree (together with Sagard, the "Purchasers"), for the sale of revenues from U.S. and European royalty and milestone interests in Klisyri® (tirbanibulin) for an aggregate purchase price of $85.0 million ("Purchase Price"). On June 29, 2022, the Purchasers paid the Company the Purchase Price. Of the total Purchase Price, $5.0 million was placed into escrow to be paid to the Company upon the satisfaction of certain manufacture and supply milestones for Klisyri prior to December 31, 2025, $5.0 million was used to pay for transaction expenses, $56.6 million was used to pay down principal, interest, and fees on the Company's Senior Credit Agreement with Oaktree, and $7.5 million was deposited and held in a segregated account of the Company (the "Segregated Funds"). The Segregated Funds were released to the Company upon the underwritten public offering in August 2022 and $1.5 million of the amount placed in escrow was released to the Company upon completion of an escrow release trigger milestone in September 2022. The $7.5

------

million of Segregated Funds and the remaining proceeds of $10.9 million were available for the Company's operations. Refer to Note 12 - Debt and Lease Obligations for additional information.

In connection with this transaction, the Company formed the SPV and contributed its interest in the License and Development Agreement with Almirall S.A. relating to Klisyri (the "License Agreement") and certain related assets to the SPV. Oaktree and Sagard each own a 10% equity interest in the SPV. Pursuant to the RIPA, the SPV will sell its right to the cash received in respect of certain royalties and certain milestone interests under the License Agreement to the Purchasers. The SPV will retain the right to receive 50% of certain of the milestone interests under the License Agreement, equal to $155.0 million in the aggregate if those milestones are achieved, and 50% of the royalties paid under the License Agreement for sales of Klisyri once net sales of Klisyri exceed a certain dollar amount. Under its operating agreement, the SPV will be governed by a five-member board of directors to which the Company will appoint three directors, Oaktree will appoint one director, and Sagard will appoint one director.

**Senior Secured Loan Agreement and Detachable Warrants**

On June 19, 2020, the Company entered into a senior secured loan agreement and related security agreements (the "Senior Credit Agreement") with Oaktree to borrow up to $225.0 million in five tranches with a maturity date of June 19, 2026, bearing interest at a fixed annual rate of 11.0%. The first tranche of $100.0 million was drawn by the Company prior to June 30, 2020, with the proceeds used in part to repay in full the outstanding loan and fees under the credit agreement with Perceptive Advisors LLC and its affiliates. The second and third tranches of $25.0 million each were drawn by the Company prior to December 31, 2020. The additional debt tranches amounting to an aggregate of $75.0 million were subject to the approval Oral Paclitaxel in the treatment of mBC, and therefore, became unavailable to the Company when it decided to no longer pursue regulatory approval in the U.S. The Company was required to make quarterly interest-only payments until June 19, 2022, after which the Company is required to make quarterly amortizing payments, with the remaining balance of the principal plus accrued and unpaid interest due at maturity. The loan agreement contains specified financial maintenance covenants. The Company was in compliance with such covenants as of December 31, 2022.

In connection with the Senior Credit Agreement, the Company granted warrants to Oaktree to purchase an aggregate of up to 45,420 shares of the Company's common stock at an initial purchase price of $252.60 per share. This transaction was accounted for as a detachable warrant at its fair value, using the relative fair value method, which is based on a number of unobservable inputs, and is recorded as an increase to additional paid-in-capital on the consolidated statement of stockholders' equity. The fair value of the warrants was reflected as a discount to the term loan and amortized over the life of the term loan.

On January 19, 2022, the Company entered into an amendment to the Senior Credit Agreement with Oaktree (the "Third Amendment"). The Third Amendment also amended the warrants held by Oaktree and Sagard that were issued on June 19, 2020 and August 4, 2020. The Third Amendment became effective on February 14, 2022, upon the closing of the Company's sale of its leasehold interest in the manufacturing facility in Dunkirk, New York and certain other related assets (the "Dunkirk Transaction," see Note 3 - Discontinued Operations). The Third Amendment required the Company to make a mandatory prepayment of principal to Oaktree equal to 62.5% of the cash proceeds of the Dunkirk Transaction. The Company was also required to pay (i) accrued and unpaid interest and (ii) a 7.0% fee, allocated as a 2.0% Exit Fee and a 5.0% Prepayment Fee (each as defined in the Senior Credit Agreement), on the principal amount being repaid. The Company was required to pay Oaktree an amendment fee of $0.3 million and certain related expenses upon the closing of the Dunkirk Transaction. The Third Amendment required the Company to make an additional mandatory prepayment of $12.5 million in principal plus the costs and fees described above by June 14, 2022, within 120 days of the closing of the Dunkirk Transaction. Consistent with the Company's decision to not pursue regulatory approval for Oral Paclitaxel monotherapy for the treatment of mBC in the United States, the Third Amendment reduced to zero the amount of the last two tranches of borrowing that had been available under the Senior Credit Agreement upon the achievement of commercial milestones. The warrants were amended to change the exercise price to be paid per share upon exercise of the warrants. The original exercise price of the warrants was $252.60 per share; 50% of the shares underlying the warrants were repriced to $22.00 per share under the Third Amendment. The Dunkirk Transaction closed on February 14, 2022. The Company received proceeds of $40.0 million and used these proceeds to repay $27.4 million, inclusive of principal, fees, and accrued interest, of the Senior Credit Agreement with Oaktree according to the terms of the Third Amendment. During June 2022, the Company made the additional prepayment under the Third Amendment in the aggregate amount of $13.7 million, inclusive of principal, fees, and accrued interest, as provided in the Fourth Amendment, described below.

In June 2022, the Company entered into additional amendments to the Senior Credit Agreement with Oaktree (the "Fourth Amendment" and the "Fifth Amendment" or the "Amendments"), in connection with the execution of the RIPA with Sagard and Oaktree. Under the Fourth Amendment, Oaktree permitted the Company to pay $7.5 million in principal amount due pursuant to the Third Amendment on the closing date of the RIPA. Under the Fifth Amendment, the Company agreed to make an additional prepayment of principal to Oaktree of $10.0 million on or before July 1, 2022. The Company was also required to pay (i) accrued and unpaid interest and (ii) a 5.0% fee, allocated as a 2.0% Exit Fee and a 3.0% Prepayment Fee (each as defined in the Senior Credit Agreement), on the principal amount being repaid pursuant to the Amendments.

The Fourth Amendment also amended the warrants held by Oaktree and Sagard that were issued on June 19, 2020 and August 4, 2020, as previously amended on January 19, 2022. The warrants were amended to change the exercise price to be paid per share upon exercise of the warrants. The original exercise price of the warrants was $252.60 per share. The Third Amendment had reduced the

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exercise price of 50% of the shares underlying the Warrants to $22.00 per share, with the remaining 50% exercisable at $252.60 per share. The Fourth Amendment reduced the exercise price of all of the warrants to $10.00 per share.

In August 2022, the Company entered into the Sixth Amendment to the Senior Credit Agreement with Oaktree (the "Sixth Amendment"). The Sixth Amendment released the $7.5 million of Segregated Funds to the Company and required the Company to prepay an additional $6.9 million of the Senior Credit Agreement. The Company was also required to pay (i) accrued and unpaid interest and (ii) a 5.0% fee, allocated as a 2.0% Exit Fee and a 3.0% Prepayment Fee (each as defined in the Senior Credit Agreement), on the principal amount being repaid.

In early March 2023, the Company received notices of certain alleged defaults and reservations of rights from Oaktree. The alleged defaults relate to (i) the Company exceeding the $10.0 million threshold for incurring additional indebtedness by having accounts payable owed to counterparties overdue by more than 90 days, (ii) the Company's obligation to provide notice to Oaktree related to the foregoing, and (iii) the Company's obligation to provide notice to Oaktree regarding the recent reverse stock split. Upon the occurrence of an Event of Default, Oaktree has the right to accelerate all amounts outstanding under the Senior Credit Agreement, in addition to other remedies available to it as a secured creditor of ours. If Oaktree accelerates the maturity of the indebtedness under the Senior Credit Agreement, the Company does not have sufficient capital available to pay the amounts due on a timely basis, if at all, and there is no guarantee that the Company would be able to repay, refinance or restructure the payments due under the Senior Credit Agreement. The Company responded to Oaktree, which included grounds upon which the Company disputes each of the alleged defaults. The Company has not reached a mutual agreement with Oaktree on this matter, and given the Company is in receipt of the notices of default and reservation of rights, which could result in payment to Oaktree on demand, the amounts due and outstanding to Oaktree are presented as a current obligation of the Company.

As of December 31, 2022 and 2021, the Company's outstanding principal on the Senior Credit Agreement with Oaktree amounted to $44.7 million, and $150.0 million, respectively. Refer to Note 12 - Debt and Lease Obligations for additional information.

**Reverse Stock Split**

On February 15, 2023, the Company effected a 20:1 reverse stock split of its common stock in order to regain compliance with Nasdaq's continued listing requirements. All share and per share amounts, and exercise prices of stock options, warrants, and pre-funded warrants, if applicable, in the consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split. Refer to Note 21 - Subsequent Events for additional information.

**2.** **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** 

**Basis of Presentation and Principles of Consolidation** 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The accompanying consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. Intercompany transactions and balances have been eliminated.

The Company has consolidated its newly-formed subsidiary, ATNX SPV, LLC into the accompanying consolidated financial statements under the variable interest model.

**Discontinued Operations** 

The Company reports components or groups of components as discontinued operations when such component or components are sold, disposed of other than by sale, or classified as held for sale, and the disposal of such component or components represents a strategic shift that will have a major effect on the Company's operations. Assets or asset groups classified as held-for-sale or discontinued operations are recorded at the lower of cost or fair value less cost to sell.

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**Use of Estimates** 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of revenue and expenses during the reporting period. Such management estimates include those relating to assumptions used in clinical research accruals, chargebacks, measurement of acquired assets and assumed liabilities in business combinations, provision for credit losses, inventory reserves, deferred income taxes, the estimated useful life and recoverability of long-lived assets, contingent consideration, accounting for debt extinguishment and the royalty financing liability, and the valuation of stock-based awards and other items as appropriate. Actual results could differ from those estimates.

**Functional Currency** 

Assets and liabilities of subsidiaries that prepare financial statements in currencies other than the U.S. dollar are translated using rates of exchange as of the balance sheet date and the statements of operations and comprehensive loss are translated at the average rates of exchange for each reporting period. The Company recorded a foreign currency translation gain in accumulated other comprehensive income of $0.9 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively.

**Cash, Cash Equivalents, Restricted Cash, and Short-term Investments** 

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company deposits its cash primarily in checking and money market accounts, as well as short-term investments including certificates of deposit. Funds held in foreign accounts that are subject to regulations governing transfers oversees are included within cash and cash equivalents. As of December 31, 2022 and 2021, the Company had $0 and $4.6 million , respectively, at its Chinese subsidiaries, which were subject to Chinese funds transfer limitations, but available for the Company's general use. Restricted cash consists of deposits that are restricted as to their withdrawal or use. Restricted cash includes amounts held in a controlled bank account equal to one year of interest related to obligations under the Senior Credit Agreement and cash held at the SPV that will be remitted to the Purchasers. The Company generally does not enter into investments for trading or speculative purposes, rather to preserve its capital for the purpose of funding operations.

**Accounts Receivable, net** 

Accounts receivable are recorded at the invoiced amount. On a periodic basis, the Company evaluates its accounts receivable and establishes a provision for credit losses, based upon a history of past write-offs, the age of the receivables, and current credit conditions.

**Credit Losses**

The Company estimates and records a provision for its expected credit losses related to its financial instruments, including its trade receivables and contract assets recorded under Financial Accounting Standards Board ("FASB") ASC 606, Revenue from Contracts with Customers ("Topic 606"). The Company considers historical collection rates, current financial status of its customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected credit losses. However, because of the short time to the expected receipt of accounts receivable and contract assets, the Company believes that the carrying value, net of excepted losses, approximates fair value and therefore, relies more on historical and current analysis of such financial instruments.

To determine the provision for credit losses for accounts receivable, the Company has disaggregated its accounts receivable by class of customer, as the Company determined that risk profile of its customers is consistent based on the type and industry in which they operate. These customer classes include pharmaceutical wholesalers for specialty product sales, drug manufacturers for active pharmaceutical ingredient (API) attributable to discontinued operations, and hospitals and end-users for 503B sales attributable to discontinued operations. Each class of customer is analyzed for estimated credit losses individually. In doing so, the Company establishes a historical loss matrix, based on the previous collections of accounts receivable by the age of such receivables, and evaluates the current and forecasted financial position of its customers, as available. Further, the Company considers macroeconomic factors and the status of the pharmaceutical industry, including unemployment rates, industry indices, and other factors, to estimate if there are current expected credit losses within its trade receivables based on the trends and the Company's expectation of the future status of such economic and industry-specific factors. The Company believes that its customers, the majority of which are in the pharmaceutical industries with sound financial condition, and therefore, the Company's evaluation of macroeconomic and industry-specific factors did not have a significant impact on the provision for credit losses. As of December 31, 2022 and 2021, the Company recorded a provision for credit losses of $0.1 million and recovery of $0.5 million, respectively, for accounts receivable related to the customer classes of pharmaceutical wholesalers, drug manufacturers, and hospitals and end users.

Expected credit losses related to contract assets are evaluated on an individual basis. The Company's contract assets relate to upfront fees or milestone payments due from licensees for which the underlying performance obligations have been satisfied. The Company evaluates the financial status of the licensee and any historical payment activity from them. Macroeconomic and

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industry-specific factors are considered when estimated current expected credit losses related to contract assets. Contract assets are generally classified as short-term, and the Company is in frequent communication with licensees to establish timely payment terms. If the Company expects that credit losses exist for license-related contract assets, it will record provision for such losses against the contract asset. In the third quarter of 2020, pursuant to the Xiangxue License, the Company recognized $9.4 million in license revenue, net of $0.6 million value added tax, for a milestone achievement. During 2021, the Company received $1.5 million of the $10.0 million milestone achievement. After consideration of historical collection rates, the current financial status of the counterparty, and other macroeconomic factors, the Company recorded a provision for its expected credit losses for the outstanding balance of $8.5 million and $0.4 million related to currency conversion in its consolidated financial statements for the year ended December 31, 2020, respectively. No additional provision for credit losses was recorded for contract assets during the year ended December 31, 2022.

**Business Acquisitions**

The Company accounts for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date. Identifiable amortizing intangible assets are recorded on the consolidated balance sheet at fair value and amortized over their estimated useful lives. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the net assets acquired is recorded as goodwill.

**Contingent Consideration**

Contingent consideration arising from a business acquisition is included as part of the purchase price and is recorded at fair value as of the acquisition date. Subsequent to the acquisition date, the Company remeasures contingent consideration arrangements at fair value at each reporting period until the contingency is resolved. The changes in fair value are recognized within selling, general, and administrative expenses in the Company's consolidated statement of operations and comprehensive loss. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time.

**Inventories** 

Prior to the regulatory approval of product candidates, the Company may incur expenses for the manufacture of drug product to support the commercial launch of those products. Until the date at which regulatory approval has been received or is otherwise considered probable, all such costs are recorded as research and development expenses as incurred. Inventories for special products and 503B products are stated at the lower of cost and net realizable value, with approximate cost being determined on a first-in-first-out basis. API inventory is stated at the lower of cost and net realizable value, with approximate cost being determined on a weighted average basis.

The Company provides inventory write-downs based on excess and obsolete inventories determined primarily by future demand forecasts. The write-down is measured as the difference between the cost of the inventory and market, based upon assumptions about future demand, and is charged to the provision for inventory, which is a component of cost of sales. At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Reserves for inventory amounted to $2.9 million and $6.0 million as of December 31, 2022 and 2021, respectively.

**Property and Equipment, net** 

Property and equipment are recorded at cost or acquisition date fair value in a business acquisition. Depreciation is recorded over the estimated useful lives of the related assets using the straight-line method. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life or term of the lease. Upon retirement or disposal, the cost and related accumulated depreciation are removed from the consolidated balance sheets and the resulting gain or loss is recorded to general and administrative expense in the consolidated statements of operations and comprehensive loss. Routine expenditures for maintenance and repairs are expensed as incurred.

Estimated useful lives for property and equipment are as follows:

---

| | |
|:---|:---|
| **Property and Equipment** | **Estimated Useful Life** |
| Land | Not depreciated |
| Equipment | 5 - 8 years |
| Furniture and fixtures | 5 years |
| Computer hardware | 3 years |
| Leasehold improvements | Lesser of estimated useful life or remaining lease term |
| Construction in process | Not depreciated |

---

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**Leases**

The Company recognizes operating leases with terms greater than one year as right-of-use ("ROU") assets and lease liabilities on its consolidated balance sheet. A majority of the Company's operating leases are for real estate properties used in operations located in the U.S. and Asia. The Company's finance leases are included in property and equipment, net and long-term debt and finance lease obligations on the consolidated balance sheet. The Company's finance leases are for manufacturing equipment in the U.S.

The lease liabilities are determined as the present value of future fixed minimum lease payments. In determining the discount rate, the Company uses rates implicit in the lease, or if not readily available, the Company uses an estimated incremental borrowing rate based on yield trends in the biotechnology and healthcare industry and debt instruments held by the Company with stated interest rates. The Company uses the stated rate per lease agreement in determining the finance lease liabilities. The lease term is determined at the commencement date and considers whether it is reasonably certain that the Company will exercise renewal options or termination options. The lease liabilities and ROU asset are amortized over the term of the lease with operating lease expenses being recognized on a straight-line basis over the lease terms.

Leases with an initial lease term of 12 months or less are not recorded on the consolidated balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

**Fair Value of Financial Instruments** 

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements. Financial instruments consist of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, other current assets, accounts payable, accrued expenses, contingent consideration, debt, and royalty financing liability. These financial instruments are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts.

**Goodwill** 

The Company tests goodwill for impairment annually on October 1<sup>st</sup>, the Company's annual goodwill impairment measurement date, or more frequently if a triggering event occurs and it updates its test with information that becomes available through the end of the period reported. The Company previously had three operating segments, each of which represents a separate reporting unit: Oncology Innovation Platform, Commercial Platform, and Global Supply Chain Platform. Each of the three reporting units had discrete financial information that was reviewed by segment managers. Goodwill was assigned to two reporting units: Oncology Innovation Platform and Global Supply Chain Platform. Goodwill impairment exists when the fair value of goodwill is less than its carrying value. The Company tested its goodwill for impairment during the year ended December 31, 2021 and concluded that goodwill impairment in the amount of $67.7 million existed. The Company recorded a goodwill impairment charge during the year ended December 31, 2021. No goodwill remained as of December 31, 2022 and 2021. See Note 8 - Goodwill and Intangible Assets, Net, and Note 9 - Fair Value Measurements, for additional information.

**Intangible Assets, net** 

Intangible assets arising from a business acquisition are recognized at fair value as of the acquisition date. The Company amortizes intangible assets using the straight-line method. When the straight-line method of amortization is utilized, the estimated useful life of the intangible asset is shortened to assure the recognition of amortization expense corresponds with the expected cash flows. Other purchased intangibles, including certain licenses, are capitalized at cost and amortized on a straight-line basis over the license life, when a future economic benefit is probable and measurable. If a future economic benefit is not probable or measurable, the license costs are expensed as incurred within research and development expenses. In-process research and development ("IPR&D") intangible assets are not amortized, but rather are tested annually for impairment on May 1, or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party.

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**Impairment of Long-Lived Assets** 

The Company reviews the recoverability of its long-lived assets, excluding goodwill, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the assets from the expected future cash flows (undiscounted and without interest expense) of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss for the difference between the estimated fair value and carrying value is recorded. The Company determined that impairment indicators occurred during 2021 and concluded that there were impairments of long-lived assets other than goodwill to $1.7 million attributable to discontinued operations. During 2022, the Company recorded impairments of long-lived assets other than goodwill of $1.8 million, of which $0.1 million was attributable to continuing operations and $1.7 million was attributable to discontinued operations. See Note 3 - Discontinued Operations for additional details.

**Liability related to the sale of future royalties**

The Company treats the liability related to the sale of future royalties, as discussed further in Note 12 - Debt and Lease Obligations, as a debt instrument, amortized under the effective interest rate method over the estimated life of the revenue streams. The Company recognizes interest expense thereon using the effective rate, which is based on its current estimates of future revenues over the life of the arrangement. The Company periodically assesses its expected revenues using internal projections, imputes interest on the carrying value of the deferred royalty obligation, and records interest expense using the imputed effective interest rate. To the extent its estimates of future revenues are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will account for any such changes by adjusting the effective interest rate on a prospective basis, with a corresponding impact to the reclassification of the royalty financing liability. The assumptions used in determining the expected repayment term of the royalty financing liability and amortization period of the issuance costs require that the Company makes significant estimates that could impact the short-term and long-term classification of the royalty financing liability, interest recorded on such liability, as well as the period over which such costs will be amortized.

**Treasury Stock** 

**Revenue Recognition** 

Under Topic 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identifies the contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract to identify the performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for product sales, license fees and consulting revenue, and grant revenue, see Note 19 – Revenue Recognition. The Company did not record an adjustment to revenue upon adoption.

**Research and Development Expenses** 

Costs for research and development ("R&D") of products, including payroll, contractor expenses, and supplies, are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development arrangements, the obligations are recorded when the milestone results are probable of being achieved.

**Comprehensive Income (Loss)** 

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Changes in unrealized gains and losses on investments and foreign currency translation adjustments represent the differences between the Company's net loss and comprehensive loss.

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**Stock-Based Compensation** 

<u>Awards granted to employees</u> 

The Company recognizes stock-based compensation based on the grant date fair value of stock options granted to employees, officers, and directors. The Company used the Black-Scholes option pricing model to calculate the grant date fair value of stock options. The Black-Scholes option pricing model requires inputs for risk-free interest rate, dividend yield, volatility, fair value of common stock, and expected lives of the stock options. The risk-free rate for periods within the expected life of the stock option is based on the U.S. Treasury yield curve in effect at the time of the grant. No dividend yield is used, consistent with the Company's history. Expected volatility is based on historical volatilities of the stock prices of peer biopharmaceutical companies. The fair value of common stock is based on the quoted market price of the Company's common stock on grant date. The Company uses the simplified method for determining the expected lives of stock options. The Company recognizes compensation expenses based on the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting period.

<u>Stock grants and restricted stock awards</u> 

The Company grants common stock and restricted stock awards to employees, officers, and directors and records the fair value of these grants, based on the fair value of the common stock on the grant date, as compensation expense throughout the requisite service period.

**Income Taxes** 

The Company uses the asset and liability method of accounting for income taxes. Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax expense or benefit is the result of changes in the deferred income tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred income tax assets where, based upon the available evidence, management concludes that it is more-likely-than not that the deferred income tax assets will not be realized. In evaluating its ability to recover deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Because of the uncertainty of the realization of the deferred income tax assets, the Company has recorded a valuation allowance against its deferred income tax assets.

Reserves are provided for tax benefits for which realization is uncertain. Such benefits are only recognized when the underlying tax position is considered more likely than not to be sustained on examination by a taxing authority, assuming they possess full knowledge of the position and facts. Interest and penalties related to uncertain tax positions are recognized in income tax expense; however, the Company currently has no interest or penalties related to income taxes.

**Segment and Geographic Information** 

The Company's chief operating decision-maker, its Chief Executive Officer, reviews its operating results on an aggregate basis and at the operating segment level for purposes of allocating resources and evaluating financial performance. The Company has two continuing business platforms which are the operating segments: (1) Oncology Innovation Platform, for the discovery and development of cancer supportive therapies, and (2) Commercial Platform, the manufacturing and selling of commercial pharmaceutical products. Each operating segment has a segment manager who is held accountable for operations and operating results. Accordingly, the Company operates in two reportable segments. The Company previously had a third operating segment, the Global Supply Chain Platform, focused on the cGMP manufacturing and supply of active pharmaceutical ingredients and 503B sterile compounded pharmaceutical products. The components within this operating segment were sold or discontinued during 2022 and are reported as discontinued operations. Refer to Note 3 – Discontinued Operations for additional information.

**Concentration of Credit Risk, Other Risks and Uncertainties** 

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, and short-term investments. The Company deposits its cash equivalents in interest-bearing money market accounts and certificates of deposit and invests in highly liquid U.S. Treasury notes, commercial paper, and corporate bonds. The Company deposits its cash with multiple financial institutions. Cash balances exceed federally insured limits. The primary focus of the Company's investment strategy is to preserve capital and meet liquidity requirements. The Company's investment policy addresses the level of credit exposure by limiting the concentration in any one corporate issuer and establishing a minimum allowable credit rating. The Company also has significant assets and liabilities held in its overseas manufacturing facility, and research and development facility in China, and therefore is subject to foreign currency fluctuation and regulatory uncertainties.

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**3. Discontinued operations**

On January 7, 2022, the Company entered into a definitive agreement (the "Dunkirk Agreement") with ImmunityBio, Inc. (the "Dunkirk Buyer") whereby the Company agreed to sell to the Dunkirk Buyer its leasehold interest in a manufacturing facility in Dunkirk, New York (the "Dunkirk Facility") and certain other related assets, as described below, in exchange for reimbursement of certain expenditures that the Company made in the Dunkirk Facility totaling $40.0 million. The transaction closed on February 14, 2022 and was subject to approval from the Company's lender, Oaktree. The provisions of this approval included prepayment of the senior secured loans, as described in Note 12 - Debt and Lease Obligations.

In addition to the leasehold interest in the Dunkirk Facility, the Dunkirk Buyer purchased the Company's interests in certain leased manufacturing equipment and personal property, and owned personal property and inventory at the Dunkirk Facility, along with the Company's rights in and obligations under its agreements relating to the Dunkirk Facility with Empire State Development ("ESD"), Fort Schuyler Management Corporation ("FSMC"), and County of Chautauqua Industrial Development Agency ("CCIDA") and other parties (collectively, the "Dunkirk Operations"). The Dunkirk Buyer assumed all capital expenditure and hiring obligations of the Company related to the Dunkirk Operations pursuant to the Company's existing agreements with ESD and FSMC. The Company did not assign any of its rights to its corporate headquarters in Buffalo, New York, under the Dunkirk Agreement and retained all of its rights and obligations with respect to its corporate headquarters.

The Dunkirk Operations have met all conditions required to be classified as discontinued operations. Therefore, the operating results of the Dunkirk Operations are reported within loss from discontinued operations in the accompanying consolidated statements of operations and comprehensive loss for all periods presented. The assets and liabilities related to the Dunkirk Operations are reported as assets and liabilities of discontinued operations in the accompanying balance sheets as of December 31, 2021. These assets are recorded at the lesser of cost or fair value less cost to sell. The Dunkirk Operations historically were included within the Global Supply Chain Platform on the Company's consolidated financial statements. All components within this operating segment are presented as a discontinued operation for all periods presented.

Additionally, on July 7, 2022, the Company entered into an Equity Purchase Agreement with TiHe Capital (Beijing) Co. Ltd. (the "API Buyer") pursuant to which the Company agreed to sell 100% of the equity interests in Chongqing Taihao Pharmaceutical Co., Ltd. and Athenex Pharmaceuticals (Chongqing) Limited (the "Equity Interests") for RMB129.4 million, or approximately $18 million ("EPA Purchase Price"). The Equity Interests primarily represent the Company's ownership of its active pharmaceutical ingredient ("API") manufacturing business in China, including the right to operate the Taihao API facility in Chongqing, China, and its lease for the Sintaho API facility in Chongqing, China, with Chongqing Maliu Riverside Development and Investment Co., LTD ("CQ"), (collectively "China API Operations"). This transaction closed on November 16, 2022, (the "Closing Date"), upon which date the Buyer paid 70% of the EPA Purchase Price to the Company in cash. The remainder of the EPA Purchase Price will be paid in cash, with 20% of the EPA Purchase Price to be paid within three months after the Closing Date and the remaining balance of the EPA Purchase Price to be paid within six months after the Closing Date. Such amounts are included within prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2022.

The China API Operations met all conditions required to be classified as discontinued operations. Therefore, the operating results of the China API Operations are reported within loss from discontinued operations in the accompanying consolidated statements of operations and comprehensive loss. The assets and liabilities related to the China API Operations are reported as assets and liabilities of discontinued operations in the accompanying balance sheets as of December 31, 2022 and 2021. These assets are recorded at the lesser of cost or fair value less cost to sell. The China API Operations historically were included within the Global Supply Chain Platform on the Company's consolidated financial statements. All components within this operating segment are presented as a discontinued operation for all periods presented.

Further, on December 16, 2022, the Company announced that it is exiting the 503B sterile compounding business operated out of its facility in Clarence, NY. The Company will cease production of its 503B products in the first quarter of 2023. The 503B operations met all conditions required to be classified as a discontinued operation. Therefore, the operating results of the 503B operations are reported within loss from discontinued operations in the accompanying consolidated statements of operations and comprehensive loss. The assets and liabilities related to the 503B Operations are reported as assets and liabilities of discontinued operations in the accompanying balance sheets as of December 31, 2022 and 2021. These assets are recorded at the lesser of cost or fair value less cost to sell. The 503B Operations have historically been included within the Global Supply Chain Platform on the Company's consolidated financial statements and are presented as a discontinued operation for all periods presented.

The following table presents the financial results of the discontinued operations (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Discontinued Dunkirk operations: |  |  |
| &nbsp;&nbsp;&nbsp;Selling, general, and administrative expenses | $(1922) | $(10183) |
| &nbsp;&nbsp;&nbsp;Gain on sale of discontinued operation | 14464 |  |
| &nbsp;&nbsp;&nbsp;Income from government grant |  | 2459 |
| &nbsp;&nbsp;&nbsp;Interest expense | (2) | (32) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss) gain from discontinued Dunkirk operations | $12540 | $(7756) |
| Discontinued China API operations: |  |  |
| &nbsp;&nbsp;&nbsp;Revenue | $1916 | $5060 |
| &nbsp;&nbsp;&nbsp;Cost of sales | (8212) | (2707) |
| &nbsp;&nbsp;&nbsp;Research and development expenses | (1324) | (1239) |
| &nbsp;&nbsp;&nbsp;Selling, general, and administrative expenses | (7074) | (6273) |
| &nbsp;&nbsp;&nbsp;Gain on sale of discontinued operation | 724 |  |
| &nbsp;&nbsp;&nbsp;Impairments | (224) | (23823) |
| &nbsp;&nbsp;&nbsp;Other income | 3118 | 102 |
| &nbsp;&nbsp;&nbsp;Interest expense | (12) | (53) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-tax loss from discontinued China API operations | (11088) | (28933) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense | (1194) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from discontinued China API operations | $(12282) | $(28933) |
| Discontinued 503B operations: |  |  |
| &nbsp;&nbsp;&nbsp;Revenue | $23315 | $19753 |
| &nbsp;&nbsp;&nbsp;Cost of sales | (22929) | (16813) |
| &nbsp;&nbsp;&nbsp;Research and development expenses | (1249) | (1290) |
| &nbsp;&nbsp;&nbsp;Selling, general, and administrative expenses | (3354) | (2050) |
| &nbsp;&nbsp;&nbsp;Impairments | (1488) | (4585) |
| &nbsp;&nbsp;&nbsp;Interest expense | (1) | (8) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from discontinued 503B operations | $(5706) | $(4993) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from discontinued operations | $(5448) | $(41682) |

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The Dunkirk operations selling, general, and administrative costs during the periods presented was comprised primarily of compensation and consultant expenses, as well as operating expenses needed to prepare the facility. The gain on sale of the Dunkirk discontinued operation was the result of the $40.0 million cash proceeds from the sale, less the net book value of assets and liabilities transferred to the Dunkirk Buyer, including property and equipment of $27.1 million, accounts payable and accrued expenses of $1.3 million and current and long-term finance lease obligations of $0.2 million.

The revenue and cost of sales of the China API discontinued operation arose from the sales of API. Cost of sales of the China API discontinued operation includes a write-off of excess and obsolete inventory of $7.1 million for the year ended December 31, 2022. Research and development costs of the China API discontinued operation represent development of API manufacturing methods and API product development for the Company's Orascovery platform. Other income of the China API discontinued operation includes the sale of pilot product which was previously developed at the facility and included within research and development expense. The impairment expense recognized during 2021 was related to the impairment of goodwill and other intangible assets.

The revenue and cost of sales of the 503B operations arose from the sales of 503B products to hospitals and end users. Research and development costs represented the development of manufacturing methods and products for the 503B operations. The selling, general, and administrative costs during the years presented was comprised primarily of compensation expenses and operating expenses needed to operate the facility.

The consolidated statements of cash flows include cash flows related to the discontinued operations due to the Company's centralized treasury and cash management processes. The following table presents additional cash flow information for the discontinued operations (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Supplemental information for discontinued Dunkirk operations: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation expense | $185 | $321 |
| &nbsp;&nbsp;&nbsp;Gain on sale of discontinued operation | (14464) |  |
| &nbsp;&nbsp;&nbsp;Cash paid for capital expenditures | (1949) | (14943) |
| &nbsp;&nbsp;&nbsp;Repayment of finance lease obligations | (7) | (77) |
| Supplemental information for discontinued China API operations: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | $1384 | $913 |
| &nbsp;&nbsp;&nbsp;Impairments | 224 | 23823 |
| &nbsp;&nbsp;&nbsp;Gain on sale of discontinued operation | (724) |  |
| &nbsp;&nbsp;&nbsp;Write-off of inventory | 7120 |  |
| &nbsp;&nbsp;&nbsp;Cash paid for capital expenditures | (107) | (7607) |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of debt |  | 783 |
| &nbsp;&nbsp;&nbsp;Repayment of long-term debt | (785) | (775) |
| &nbsp;&nbsp;&nbsp;Non-cash settlement of debt transferred to China API buyer | (6831) |  |
| Supplemental information for discontinued 503B operations: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation expense | $577 | $631 |
| &nbsp;&nbsp;&nbsp;Impairments | 1488 | 4585 |
| &nbsp;&nbsp;&nbsp;Provision for credit losses | 482 | 141 |
| &nbsp;&nbsp;&nbsp;Cash paid for capital expenditures | (110) | (316) |
| &nbsp;&nbsp;&nbsp;Repayment of finance lease obligations | (16) | (206) |

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The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations (in thousands):

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Discontinued Dunkirk operations: |  |  |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | $— | $1280 |
| &nbsp;&nbsp;&nbsp;Property and equipment, net |  | 26841 |
| Discontinued China API operations: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net of provision for credit losses of $0 and $110, respectively | $— | $351 |
| &nbsp;&nbsp;&nbsp;Inventories |  | 7636 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets |  | 3563 |
| &nbsp;&nbsp;&nbsp;Property and equipment, net |  | 22797 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets, net |  | 575 |
| Discontinued 503B operations: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net of provision for credit losses of $137 and $127, respectively | $4775 | $3507 |
| &nbsp;&nbsp;&nbsp;Inventories | 2366 | 3981 |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | 167 | 1997 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets attributable to discontinued operations | $7308 | $72528 |
| Discontinued Dunkirk operations: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $— | $3763 |
| &nbsp;&nbsp;&nbsp;Accrued expenses |  | 1198 |
| &nbsp;&nbsp;&nbsp;Current portion of finance lease obligation |  | 101 |
| &nbsp;&nbsp;&nbsp;Long-term finance lease obligation |  | 125 |
| Discontinued China API operations: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $— | $2224 |
| &nbsp;&nbsp;&nbsp;Accrued expenses |  | 568 |
| &nbsp;&nbsp;&nbsp;Current portion of operating lease liabilities |  | 431 |
| &nbsp;&nbsp;&nbsp;Current portion of long-term debt |  | 784 |
| &nbsp;&nbsp;&nbsp;Long-term debt and lease obligations |  | 7849 |
| Discontinued 503B operations: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $5074 | $2033 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 644 | 208 |
| &nbsp;&nbsp;&nbsp;Current portion of finance lease obligation |  | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities attributable to discontinued operations | $5718 | $19305 |

---

**4. Business Combination**

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On May 4, 2021, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Kuur Therapeutics, Inc., a Delaware corporation ("Kuur") whereby it acquired 100% of the outstanding shares of Kuur (the "Merger"). Under the terms of the Merger Agreement, the Company's wholly owned subsidiary, Athenex Pharmaceuticals LLC, a Delaware limited liability company, merged with and into Kuur, with Kuur surviving as a wholly owned subsidiary of the Company. Kuur is a leading developer of off-the-shelf CAR-NKT cell immunotherapies for the treatment of solid and hematological malignancies.

Pursuant to the Merger Agreement, an upfront fee of $70.0 million was paid to Kuur shareholders and its former employees and directors, comprised primarily of equity in the Company's common stock. Additionally, Kuur shareholders and its former employees and directors are eligible to receive up to $115.0 million of milestone payments, which may be paid, at the Company's sole discretion, in either cash or additional common stock of the Company (or a combination of both).

The Company identified the Merger as a business combination pursuant to ASC 805 and used the acquisition method of accounting to account for the transaction. The purchase price, after adjusted for closing conditions, consisted of 711,404 shares of the Company's common stock issued at $74.20 per share with a fair value of $52.8 million, plus the fair value of the future milestone payments amounting to $19.8 million, recorded as contingent consideration. The Company recorded the fair value of this contingent consideration as a liability based on the probabilities of Kuur achieving the milestones and the present value of such payments. These inputs are not observable in the market and therefore are considered Level 3 inputs.

The Company estimated fair values on May 4, 2021 for the allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the Merger. During the measurement period, the Company continued to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed. Measurement period adjustments were applied in the reporting period in which the adjustments were determined. During the year ended December 31, 2021, the Company recorded a measurement period adjustment to reflect the estimated fair value of IPR&D, as a result of changes in the underlying assumptions, including projected expenses and the estimated discount rate. This measurement period adjustment resulted in the increase of IPR&D of $1.4 million, a decrease in the deferred tax liability assumed of $0.2 million, and a decrease in goodwill of $1.6 million from the initial measurement reported as of June 30, 2021. To estimate the fair value of the identifiable intangible assets acquired, the Company used projected discounted cash flow method, which requires assumptions of projected revenues and expenses and an estimated discount rate, among other inputs, each of which is not observable in the market and thus are considered Level 3 inputs. The Company assumed $8.9 million of transaction incentive liability to Kuur's key employees and independent company directors, of which $3.3 million was paid in cash and $5.6 million was paid in 68,681 shares of the Company's common stock at $82.20 per share. The following table summarizes the final purchase price allocation to the fair value of assets and liabilities acquired at the date of acquisition (in thousands):

---

| | |
|:---|:---|
| **Allocation of Consideration:** |  |
| &nbsp;&nbsp;Stock issued (711,404 shares at $74.20) | $52786 |
| &nbsp;&nbsp;Contingent consideration | 19839 |
| &nbsp;&nbsp;&nbsp;Purchase price: | $72625 |
| **Net assets acquired:** |  |
| &nbsp;&nbsp;Cash and cash equivalents | $1425 |
| &nbsp;&nbsp;Prepaid expenses and other current assets | 133 |
| &nbsp;&nbsp;In-process research & development | 64900 |
| &nbsp;&nbsp;Accounts payable | (39) |
| &nbsp;&nbsp;Accrued expenses | (1037) |
| &nbsp;&nbsp;Deferred income tax liability | (12543) |
| &nbsp;&nbsp;Transaction incentive liability | (8925) |
| &nbsp;&nbsp;&nbsp;Total identifiable net assets | 43914 |
| &nbsp;&nbsp;Goodwill | 28711 |
| &nbsp;&nbsp;&nbsp;Total purchase price allocation | $72625 |

---

Goodwill in the amount of $28.7 million was recorded for the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The goodwill recorded in connection with this acquisition is not deductible for income tax purposes. A deferred tax liability in the amount of $12.5 million was recorded related to the future taxable income as a result of the book to tax basis difference arising from the IPR&D.

The fair value of the acquired IPR&D relates to two products, including (a) an allogenic product in which NKT cells are engineered with a CAR targeting CD19, and (b) an allogenic product in which NKT cells are engineered with a CAR targeting GPC3. These IPR&D projects were valued using an income approach, specifically a projected discounted cash flow method, adjusted for the probability of technical success (PTS). The projected discounted cash flow models used to estimate the Company's IPR&D reflect significant assumptions regarding the estimates a market participant would make in order to evaluate a drug development asset including the following:

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Estimates of potential cash flows to be generated by the project and resulting asset, which was developed utilizing estimates of total patient population, market penetration rates, demand risk adjustment factors, and product pricing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Estimates regarding the timing of and the expected cost of goods sold, research and development expenses, selling, general, and administrative expenses to advance the clinical programs to commercialization;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Estimates of profit sharing and cash flow adjustments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The projected cash flows were then adjusted using PTS factors that were selected considering both the current state of development and the nature of the proposed indication; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Finally, the resulting probability-adjusted cash flows were discounted to present value using a risk-adjusted discount rate, developed considering the market risk present in the forecast and the size of the asset.

This acquisition is included in the Oncology Innovation Platform. The operating results of Kuur have been included within the Company's Oncology Innovation Platform operating segment from the date of acquisition. Kuur added revenue of $0.1 million and $0 for the years ended December 31, 2022 and 2021, respectively, and contributed a net loss of $15.0 million for the year ended December 31, 2022 and $34.9 million for the year ended December 31, 2021, $28.7 million of which was related to the goodwill impairment for the Oncology Innovation Platform reporting unit.

Acquisition-related costs, including legal, regulatory, and consulting costs, amounted to $3.5 million, and are included within selling, general, and administrative expenses in the Company's consolidated statement of operations and comprehensive loss for the year ended December 31, 2021.

<u>Unaudited Pro Forma Financial Results</u>

The following table presents supplemental unaudited pro forma information for the acquisition as if it had occurred on January 1, 2020. The unaudited pro forma financial results for the year ended December 31, 2022 include the following adjustments: (1) removal of direct acquisition-related costs which would not have been incurred had the businesses been owned on the beginning of the prior reporting period, (2) the deferred tax effect if the intangible assets and purchase accounting were recorded as of the beginning of the prior reporting period, and (3) the removal of the change in fair value of Kuur convertible debt which was converted prior to the consummation of the acquisition. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisitions. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of either future results of operations of the combined entity or results that might have been achieved had the acquisitions been consummated as of the beginning of the prior reporting period. The following table presents the unaudited pro forma consolidated financial information for the year ended December 31, 2021 (in thousands):

---

| | |
|:---|:---|
| **Unaudited pro forma financial information** | **Year ended December 31,** |
| **(Athenex and Kuur Consolidated)** | **2021** |
| Consolidated revenue | $95369 |
| Consolidated net loss | $(198641) |

---

**5. RESTRICTED Cash**

The Company has a restricted cash balance of $5.2 million and $16.5 million as of December 31, 2022 and 2021, respectively. As of December 31, 2022, $4.9 million of this amount was held in a controlled bank account in connection with the Senior Credit Agreement and the RIPA and $0.3 million was cash held at the SPV which is to be remitted to the Purchasers. The Senior Credit Agreement requires the Company to maintain, in a debt service reserve account, a minimum cash balance equal to twelve months of interest on the outstanding loans under the Senior Credit Agreement.

**6. Inventories** 

Inventories consist of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Raw materials and purchased parts | $5703 | $2959 |
| Work in progress | 69 | 12 |
| Finished goods | 36882 | 20097 |
| &nbsp;&nbsp;&nbsp;Total inventories | $42654 | $23068 |

---

------

**7. PROPERTY AND EQUIPMENT, net** 

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

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Equipment | $2685 | $2636 |
| Furniture and fixtures | 75 | 223 |
| Computer hardware | 2589 | 3714 |
| Leasehold improvements | 690 | 1192 |
| Construction in process | 238 | 147 |
| &nbsp;&nbsp;&nbsp;Property and equipment, gross | 6277 | 7912 |
| Less: accumulated depreciation | (4453) | (4721) |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | $1824 | $3191 |

---

Depreciation expense amounted to $1.1 million and $1.4 million for the years ended December 31, 2022 and 2021, respectively.

**8. goodwill and Intangible Assets, net** 

<u>Goodwill</u> 

The changes in the carrying amount of goodwill for each reporting unit to which goodwill is assigned for the periods indicated are as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **Global Supply Chain** | **Oncology<br>Innovation<br>Platform** | **Total** |
| Balance as of January 1, 2021 | $26496 | $12395 | $38891 |
| Goodwill acquired in connection with acquisition of Kuur |  | 28711 | 28711 |
| Effect of currency translation adjustment | 142 | (65) | 77 |
| Impairment | (26638) | (41041) | (67679) |
| Balance as of December 31, 2021 and 2022 | $— | $— | $— |

---

<u>Intangible Assets, Net</u> 

The Company's identifiable intangible assets, net, consist of the following (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Cost/Fair<br>Value** | **Accumulated<br>Amortization** | **Impairments** | **Net** |
| Amortizable intangible assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Licenses | $14184 | $7612 | $— | $6572 |
| Indefinite-lived intangible assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;CDE in-process research and development (IPR&D) | 728 |  | 78 | 650 |
| &nbsp;&nbsp;&nbsp;Kuur IPR&D | 64900 |  |  | 64900 |
| Effect of currency translation adjustment | (10) |  |  | (10) |
| Total intangibles, net | $79802 | $7612 | $78 | $72112 |

---

------

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Cost/Fair<br>Value** | **Accumulated<br>Amortization** | **Impairments** | **Net** |
| Amortizable intangible assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Licenses | $12654 | $6376 | $— | $6278 |
| &nbsp;&nbsp;&nbsp;Polymed customer list | 1593 | 1581 | 12 |  |
| &nbsp;&nbsp;&nbsp;Polymed technology | 3712 | 1984 | 1728 |  |
| Indefinite-lived intangible assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;CDE in-process research and development (IPR&D) | 728 |  |  | 728 |
| &nbsp;&nbsp;&nbsp;Kuur IPR&D | 64900 |  |  | 64900 |
| Effect of currency translation adjustment | (10) |  |  | (10) |
| Total intangibles, net | $83577 | $9941 | $1740 | $71896 |

---

In connection with the acquisition of Kuur, the Company identified three drug candidate projects and two were classified as IPR&D and recorded at their fair value on the acquisition date. Included in the IPR&D is the historical know-how, cell treatment protocols, and procedures expected to be needed to complete the related phase of testing. The fair value of IPR&D was determined for each project, or unit of account, using unobservable, level 3 inputs (see Note 4—Business Combination). IPR&D intangible assets are not amortized, but rather are reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party.

As of December 31, 2022, licenses at cost include an Orascovery license of $0.4 million, licenses purchased from Gland Pharma Limited ("Gland") of $3.8 million, a license purchased from MAIA Pharmaceuticals, Inc. ("MAIA") for $4.0 million, licenses purchased from Ingenus Pharmaceuticals, LLC ("Ingenus") for $3.0 million, and licenses of other specialty products with various licensors of $3.0 million. The Orascovery license with Hanmi Pharmaceuticals Co. Ltd. ("Hanmi") was purchased directly from Hanmi and is being amortized on a straight-line basis over a period of 12.75 years, the remaining life of the license agreement at the time of purchase. The licenses purchased from Gland are being amortized on a straight-line basis over a period of 5 years, the remaining life of the license agreement at the time of purchase. The license purchased from MAIA is being amortized over a period of 7 years, the remaining life of the license agreement at the time of purchase. Of the $3.0 million licenses purchased from Ingenus, a $2.0 million license is being amortized over a period of 5 years, the estimated useful life of the license agreement and a $1.0 million license purchased from Ingenus is being amortized over a period of 3 years, the remaining life of the license agreement at the time of purchase.

The remaining intangible assets were acquired in connection with the acquisitions of Polymed Therapeutics, Inc. ("Polymed") and Comprehensive Drug Enterprises ("CDE"). Intangible assets are amortized using the straight-line method over their useful lives. The Polymed customer list and technology are amortized on a straight-line basis over 6 and 12 years, respectively. These were evaluated for impairment during 2021, as discussed below. The CDE IPR&D will not be amortized until the related projects are completed. IPR&D is tested annually for impairment, unless conditions exist causing an earlier impairment test (e.g., abandonment of project). During year ended December 31, 2022, the Company abandoned a project within IPR&D and therefore, the related balances of $0.1 million was written-off as impaired and was included within impairments in the consolidated statement of operations and comprehensive loss. The Company recorded no impairments of IPR&D during the year ended December 31, 2021. The weighted-average useful life for all intangible assets was 6.02 years as of December 31, 2022.

The Company recorded $1.2 million and $1.8 million of amortization expense for the years ended December 31, 2022 and 2021, respectively.

The Company expects amortization expense related to its finite-lived intangible assets for the next 5 years and thereafter to be as follows as of December 31, 2022 (in thousands):

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| | |
|:---|:---|
| **Year ending December 31:** | **Estimated<br>Amortization<br>Expense** |
| 2023 | $1803 |
| 2024 | 1476 |
| 2025 | 1410 |
| 2026 | 822 |
| 2027 | 627 |
| Thereafter | 434 |
|  | $6572 |

---

------

During the year ended December 31, 2021, as a result of the significant decrease in the Company's market capitalization from the impact of the CRL and the Company's decision to no longer pursue oral paclitaxel for mBC, the Company evaluated the impact on each of its reporting units to assess whether there was an impairment triggering event requiring it to perform a goodwill impairment test (ASC 350-20-35). The Company determined that impairment triggering events occurred during the first quarter of 2021 and, consistent with our annual policy, performed a test as of our annual goodwill impairment evaluation date, October 1, 2021, subsequently updating that analysis to December 31, 2021 using new information that became available regarding conditions that existed as of December 31, 2021. As part of this impairment test, the Company considered certain qualitative factors, such as the Company's performance, business forecasts, and expansion plans. It reviewed key assumptions, including projected cash flows and future revenue for reporting units. Using both the income approach and the market approach for its Global Supply Chain Platform and Oncology Innovation Platform, with the discount rate selected considering and capturing the related risk associated with the forecast, the Company compared the fair value of the two reporting units to carrying value. Based on the results, the carrying value of each of our reporting units exceeded their fair value and the goodwill was determined to be impaired. $26.6 million, representing the full amount of goodwill allocated to the Global Supply Chain Platform, was written off as impaired during the fourth quarter of 2021, and included within loss from discontinued operations. Additionally, $41.1 million, representing the full amount of goodwill allocated to the Oncology Innovation Platform was written off as impaired during the fourth quarter of 2021. These impairment charges were the result of the Company's Step-1 goodwill impairment test, which reflected a decrease in the future expected cash flows related to oral paclitaxel, along with increases in discount rates to reflect the uncertainty of future cash flows. Additionally, in the market approaches used, including the guideline company and guideline transaction methods, the Company utilized greater size & risk discounts to reflect the additional risk associated with the Company's performance. Estimating the fair value of goodwill requires the use of estimates and significant judgments that are based on a number of factors, including unobservable level 3 inputs. These estimates and judgments may not be within the control of the Company and accordingly it is reasonably possible that the judgments and estimates could change in future periods.

In connection with the impairment triggering event identified above, the Company evaluated the recoverability of its long-lived assets to determine whether any assets or asset groups were impaired. The Company compared the undiscounted cash flows to the carrying value of each asset group, and if the undiscounted cash flows were less than its carrying value, the asset or asset group was impaired by the excess of its carrying value over its fair value. During the fourth quarter of 2021, the Company determined that the carrying value of the Polymed technology and customer list were greater than their fair value, as these intangible assets related to the Chongqing Taihao manufacturing facility, which is being phased-out with the addition of the new API manufacturing facility in Chongqing, China. Therefore, the corresponding values of $1.7 million and less than $0.1 million, respectively, were written off as impaired and included within loss from discontinued operations. The evaluation of the long-lived assets requires the use of estimates and significant judgments that are based on a number of factors, including unobservable level 3 inputs. These estimates and judgments may not be within the control of the Company and accordingly it is reasonably possible that the judgments or estimates could change in future periods.

**9. fair value measurements** 

Financial instruments consist of cash and cash equivalents, restricted cash, short-term investments, an equity investment, accounts receivable, accounts payable, accrued expenses, contingent consideration, and debt. Short-term investments and the equity investment are stated at fair value. Cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, debt, and royalty financing liability, are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts. The Company believes that the carrying value of its long-term debt approximates fair value based on current interest rates.

ASC 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the ASC 820 are described as follows:

Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.

Level 2—Inputs to the valuation methodology include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Quoted prices for similar assets or liabilities in active markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Quoted prices for identical or similar assets or liabilities in inactive markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Inputs other than quoted prices that are observable for the asset or liability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3—Inputs to the valuation methodology are unobservable, supported by little or no market activity, and that are significant to the fair value measurement.

Transfers between levels, if any, are recorded as of the beginning of the reporting period in which the transfer occurs; there were no transfers between Levels 1, 2 or 3 of any financial assets or liabilities during the years ended December 31, 2022 or 2021.

The following tables represent the fair value hierarchy for those assets and liabilities that the Company measures at fair value on a recurring basis (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Fair Value Measurements at December 31, 2022 Using:** | **Fair Value Measurements at December 31, 2022 Using:** | **Fair Value Measurements at December 31, 2022 Using:** | **Fair Value Measurements at December 31, 2022 Using:** |
|  | **Total** | **Quoted Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;Financial assets included within cash and cash equivalents |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Money market funds | $18794 | $18794 | $— | $— |
| &nbsp;&nbsp;&nbsp;Short-term investments - certificates of deposit | 407 |  | 407 |  |
| &nbsp;&nbsp;Available-for-sale investment | 1071 | 1071 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $20272 | $19865 | $407 | $— |
| Liabilities: |  |  |  |  |
| &nbsp;&nbsp;Contingent consideration - Kuur | $19886 | $— | $— | $19886 |
| &nbsp;&nbsp;Royalty financing liability | 86745 |  |  | 86745 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | $106631 | $— | $— | $106631 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Fair Value Measurements at December 31, 2021 Using:** | **Fair Value Measurements at December 31, 2021 Using:** | **Fair Value Measurements at December 31, 2021 Using:** | **Fair Value Measurements at December 31, 2021 Using:** |
|  | **Total** | **Quoted Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;Financial assets included within cash and cash equivalents |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Money market funds | $7937 | $7937 | $— | $— |
| &nbsp;&nbsp;&nbsp;Short-term investments - certificates of deposit | 2000 |  | 2000 |  |
| &nbsp;&nbsp;&nbsp;Short-term investments - commercial paper | 10446 |  | 10446 |  |
| &nbsp;&nbsp;Financial assets included within short-term investments |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Short-term investments - certificates of deposit | 9488 |  | 9488 |  |
| &nbsp;&nbsp;Available-for-sale investment | 719 | 719 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $30590 | $8656 | $21934 | $— |
| Liabilities: |  |  |  |  |
| &nbsp;&nbsp;Contingent consideration - Kuur | $24076 | $— | $— | $24076 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | $24076 | $— | $— | $24076 |

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The Company classifies its money market funds within Level 1 because it uses quoted market prices to determine their fair value. The Company classifies its commercial paper, corporate notes, certificates of deposit, and U.S. government bonds within Level 2 because it uses quoted prices for similar assets or liabilities in active markets and each has a specified term and all level 2 inputs are observable for substantially the full term of each instrument.

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The Company owns 68,000 shares of PharmaEssentia Corp. ("PharmaEssentia"), a company publicly traded on the Taiwan OTC Exchange. As of December 31, 2022 and 2021, the Company's investment in PharmaEssentia is valued at the reported closing price. This investment is classified as a level 1 investment and is recorded as an available-for-sale investment within short-term investments on the Company's consolidated balance sheet.

The Company accounted for the acquisition of Kuur as business combinations under the acquisition method of accounting. All assets and liabilities were measured at fair value as of the acquisition date. As a result of the purchases, the Company became liable for contingent consideration payable to certain previous owners of Kuur. This contingent consideration is measured at fair value using unobservable level 3 inputs, including (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the regulatory events on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases (decreases) in any of those inputs could result in a lower or higher fair value measurement, and such changes in fair value measurement could have an impact on future earnings. The total undiscounted amount of the milestone payments underlying this liability is $115.0 million. These payments are contingent on the achievement of various regulatory milestones which are expected to occur between 2023 and 2027, and may be paid, at the Company's sole discretion, in either cash or common stock (or a combination of both). As of December 31, 2022, the valuation of the contingent consideration has been adjusted based on a weighted average probability of occurrence of 34.8%, and the discount rates used to calculate the present value of future payments were based on risk-free rates plus risk-adjusted spreads based on the Company's estimated incremental borrowing rate and was between 22.7% and 23.4%. As of December 31, 2021, the valuation of the contingent consideration was adjusted based on a weighted average probability of occurrence of 40.4%, and the discount rates used to calculate the present value of future payments were based on risk-free rates plus risk-adjusted spreads based on the Company's estimated incremental borrowing rate and was between 17.6% and 18.7%. The acquisition of Kuur is described in Note 4 – Business Combination and the fair value of the contingent consideration is discussed further in Note 13 – Contingent Consideration.

**10. Accrued Expenses**

Accrued expenses consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Accrued selling fees, rebates, and royalties | $11290 | $6890 |
| Accrued clinical expenses | 8581 | 3116 |
| Accrued wages and benefits | 5868 | 1827 |
| Accrued inventory purchases | 3555 | 4218 |
| Deferred revenue | 2823 | 2798 |
| Accrued tax withholdings | 1750 | 1800 |
| Accrued operating expenses | 1469 | 2647 |
| Accrued R&D licensing fees | 29 | 116 |
| Accrued interest |  | 266 |
| &nbsp;&nbsp;&nbsp;Total accrued expenses | $35365 | $23678 |

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**11. INCOME TAXES**

The Company recorded income tax expense from continuing operations of $0.3 million during the year ended December 31, 2022 and income tax benefit from continuing operations of $10.6 million during the year ended December 31, 2021. The current year income tax expense is primarily the result of foreign income tax withholding on royalties received. The prior year income tax benefit is primarily the result of the taxable temporary difference due to the deferred tax liability recognized for the indefinite lived intangible assets acquired in connection with the acquisition of Kuur's IPR&D. This taxable temporary difference is considered a source of taxable income to support the realization of deferred tax assets from the acquirer which resulted in a reversal of the Company's valuation allowance. The Company and its other subsidiaries were in a cumulative loss position as of December 31, 2022.

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The components of loss before income tax expense (benefit) from continuing operations consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Domestic | $(93979) | $(153505) |
| Foreign | (4649) | (17453) |
|  | $(98628) | $(170958) |

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The components of loss before income tax expense (benefit) from discontinued operations consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Domestic | $8922 | $(30094) |
| Foreign | (13176) | (11588) |
|  | $(4254) | $(41682) |

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The components of the income tax expense (benefit) from continuing operations consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Current: |  |  |
| &nbsp;&nbsp;&nbsp;Federal | $— | $— |
| &nbsp;&nbsp;&nbsp;State | 3 | 13 |
| &nbsp;&nbsp;&nbsp;Foreign | 344 | 234 |
|  | 347 | 247 |
| Deferred: |  |  |
| &nbsp;&nbsp;&nbsp;Federal | (33522) | 8917 |
| &nbsp;&nbsp;&nbsp;State | (452) | (246) |
| &nbsp;&nbsp;&nbsp;Foreign | (211) | 229 |
|  | (34185) | 8900 |
| Change in valuation allowance | 34185 | (19751) |
|  | $347 | $(10604) |

---

The components of the income tax (benefit) expense from discontinued operations consist of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Current: |  |  |
| &nbsp;&nbsp;&nbsp;Federal | $— | $— |
| &nbsp;&nbsp;&nbsp;State |  |  |
| &nbsp;&nbsp;&nbsp;Foreign | 1194 |  |
|  | 1194 |  |
| Deferred: |  |  |
| &nbsp;&nbsp;&nbsp;Federal | (356) | (2818) |
| &nbsp;&nbsp;&nbsp;State | 34 | (88) |
| &nbsp;&nbsp;&nbsp;Foreign | 3303 | 29 |
|  | 2981 | (2877) |
| Change in valuation allowance | (2981) | 2877 |
|  | $1194 | $— |

---

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The income tax expense (benefit) from continuing operations differs from the federal statutory rate due to the following:

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Statutory rate | 21.0% | 21.0% |
| State taxes, net of federal benefit | 0.4 | 0.4 |
| Foreign rate differential |  | (0.1) |
| Valuation allowance | (34.7) | 11.6 |
| Stock-based compensation | (0.7) | (0.6) |
| Goodwill impairment |  | (5.1) |
| Section 382 limitation | 7.8 | (13.4) |
| Tax credits | 0.2 | (6.2) |
| Foreign tax withholdings | (0.3) |  |
| Sale of China API operations | 6.4 |  |
| Other | (0.5) | (1.4) |
|  | (0.4)% | 6.2% |

---

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Net deferred income tax liabilities consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Intangible assets | $12042 | $11675 |
| Section 174 | 8993 |  |
| Property and equipment | 39 | 39 |
| Stock-based compensation | 7935 | 7743 |
| Net operating loss carryforwards | 102909 | 106017 |
| Capital loss | 6000 |  |
| Interest expense | 12739 | 10580 |
| Royalty monetization | 17964 |  |
| Tax credit carryforwards | 1129 | 956 |
| Research and development deduction |  |  |
| Reserves and accruals | 10509 | 9411 |
| &nbsp;&nbsp;&nbsp;Gross deferred income tax assets | 180259 | 146421 |
| Less: valuation allowance | (168622) | (134439) |
| &nbsp;&nbsp;&nbsp;Net deferred income tax assets | 11637 | 11982 |
| Intangible assets | (13388) | (13341) |
| Property and equipment |  | (392) |
| &nbsp;&nbsp;&nbsp;Gross deferred income tax liabilities | (13388) | (13733) |
| &nbsp;&nbsp;&nbsp;Net deferred income tax liabilities | $(1751) | $(1751) |

---

As of December 31, 2022, there exists $438.9 million federal net operating losses and $94.6 million of state net operating losses. Of the federal net operating losses, $62.2 million expire beginning in 2033 and $376.7 million have an indefinite life. In addition, there exists $28.2 million of foreign net operating losses as of December 31, 2022 which may be carried forward with various years of expiration.

The valuation allowance for deferred tax assets increased by $34.2 million for the year ended December 31, 2022 and decreased by $13.1 million for the year ended December 31, 2021. The increase in the current year was due to an increase of deferred tax assets mainly for the capitalization of research and experimental expenditures, non-deductible capital losses on the sale of China and the accelerated inclusion into income of the sale of a royalty and milestone interests, offset partially by a decrease in net operating losses. The decrease in the valuation allowance in the prior year was primarily due to a reversal of a valuation allowance in connection with the acquisition of Kuur and the reduction of reported net operating losses in the U.S. as a result of a Section 382 and 383 limitation, offset by an increase in the valuation allowance for current year activity for additional net operating losses and tax credit carryforwards and an increase recorded though purchase accounting for net operating losses acquired as part of the Kuur acquisition. The Company has provided a full valuation allowance against its remaining deferred tax assets as it has determined that it is not more likely than not that recognition of such deferred tax assets will be utilized in the foreseeable future.

The Company considers whether any positions taken on the Company's income tax returns would be considered uncertain tax positions that may require the recognition of a liability. The Company has concluded that there are no material uncertain tax positions as of December 31, 2022 and 2021. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax benefit in the consolidated statement of operations and comprehensive loss. There were no amounts recognized for interest and penalties related to unrecognized tax benefits during the years ended December 31, 2022 and 2021. The income tax returns for the taxable years 2011 to 2021 in the U.S., China, and Hong Kong remain open and subject to income tax audits.

Provision has not been made for U.S. taxes on undistributed earnings of foreign subsidiaries. Those earnings, if any, have been and will continue to be indefinitely reinvested.

Under the provisions of Section 382 and Section 383 of the Internal Revenue Code ("IRC"), net operating loss and credit carryforwards and other tax attributes may be subject to limitation if there has been a significant change in ownership of the Company, as defined by the IRC. Changes in ownership of our common stock could result in limitations on net operating loss carryforwards. For the year ended December 31, 2021, ownership changes triggered a limitation of our net operating losses and research and development credits in the amount of $72.2 million and $9.3 million, respectively. The reduction of these net operating losses created a reduction in the deferred tax asset and related valuation allowance, as reflected in the table above.

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**12. debt AND LEASE OBLIGATIONS** 

<u>Debt</u>

The Company's debt as of December 31, 2022 and 2021, consists of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Current portion of senior secured loan, net of debt discount and financing fees of $7,698 and $0, respectively | $36989 | $45938 |
| Current portion of finance lease obligations | 138 | 138 |
| Current portion of operating lease obligations | 2087 | 2478 |
| Long-term portion of finance lease obligations | 93 | 207 |
| Long-term portion of operating lease obligations | 3051 | 4494 |
| Senior secured loan, net of debt discount and financing fees<br> of $0 and $8,663, respectively |  | 95400 |
| Royalty financing liability, long-term, net of financing fees of $4,982 | 86745 |  |
| Total | $129103 | $148655 |

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**Senior Credit Agreement**

On June 19, 2020, the Company entered into the Senior Credit Agreement with Oaktree to borrow up to $225.0 million in five tranches, with a maturity date of June 19, 2026. Three tranches ("Tranche A", "Tranche B", and "Tranche D") of the term loans with an aggregate principal amount of $150.0 million were drawn by the Company in 2020. The last two tranches ("Tranche C" and "Tranche E"), amounting to an aggregate of $75.0 million, were dependent on the approval of oral paclitaxel for the treatment of mBC. Under the Third Amendment on January 19, 2022, the amount of these tranches was reduced to $0 and are no longer available to the Company. The loan bears interest at a fixed annual rate of 11.0%. The Company allocated the proceeds of the drawn tranches between liability and equity components and the fair value of such equity components, along with the direct costs related to the issuance of the debt were recorded as an offset to long-term debt on the consolidated balance sheets. The debt discount and financing fees are amortized on a straight-line basis, which approximates the effective interest method, over the remaining maturity of the Senior Credit Agreement. The effective interest rate of Tranches A, B and D, including the amortization of debt discount and financing fees amounts to 13.3% annually. The Company is required to make quarterly interest-only payments until June 19, 2022, after which the Company is required to make quarterly amortizing payments of $2.8 million, with the remaining balance of the principal plus accrued and unpaid interest due at maturity. Beginning on September 17, 2020, the Company was required to pay a commitment fee on any undrawn commitments equal to 0.6% per annum, payable on each subsequent funding date or the commitment termination date. These commitments were terminated pursuant to the Third Amendment.

Under the Third Amendment, the Company was required to make a mandatory prepayment of principal to Oaktree equal to 62.5% of the cash proceeds of the Dunkirk Transaction. The Company was also required to pay (i) accrued and unpaid interest and (ii) a 7.0% fee, allocated as a 2.0% Exit Fee and a 5.0% Prepayment Fee, on the principal amount being repaid. The Company was required to pay Oaktree an amendment fee of $0.3 million and certain related expenses upon the closing of the Dunkirk Transaction. The Third Amendment required the Company to make an additional mandatory prepayment of $12.5 million in principal plus the costs and fees described above by June 14, 2022, of which $5.0 million in principal was paid on June 14, 2022 and $7.5 million was paid on the closing date of the RIPA pursuant to the terms of the Fourth Amendment. Using proceeds from the RIPA, in connection with the Fourth Amendment and Fifth Amendment, the Company made additional prepayments of principal to Oaktree of $52.5 million. The Company was also required to pay (i) accrued and unpaid interest and (ii) a 5.0% fee, allocated as a 2.0% Exit Fee and a 3.0% Prepayment Fee, on the principal amounts being repaid. In connection with the Sixth Amendment to the Senior Agreement, entered into in connection with the sale of the China API operations, the Company was required to repay $6.8 million of the loan, along with (i) accrued and unpaid interest and (ii) a 5.0% fee, allocated as a 2.0% Exit Fee and a 3.0% Prepayment Fee on the principal amount being repaid. The Company made payments, inclusive of principal, interest, and fees, to Oaktree in the aggregate amount of $121.3 million during the year ended December 31, 2022. These payments include scheduled repayments under the Credit Agreement and prepayments under the Third Amendment, Fourth Amendment, Fifth Amendment, and Sixth Amendment.

Additional prepayments of the loan, in whole or in part, will be subject to early prepayment fee which declines each year until June 2024, after which no prepayment fee is required. Upon the final payment, the Company must also pay an exit fee calculated based on a percentage of the aggregate principal amount of all tranches advanced to the Company, and as of December 31, 2022, the Company has reflected an exit fee liability of $1.1 million. As of December 31, 2022, the Company has classified $16.9 million of the senior secured loan as current portion of long-term debt, comprised of four quarterly payments of $2.8 million each, due within 12 months of December 31, 2022, and $5.6 million expected to be due from funds received in connection with the sale of the China API operations (see Note 3 - Discontinued Operations). The Company has classified $20.1 million of the senior secured loan as long-term

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debt on the consolidated balance sheet, comprised of the remaining principal due, less debt discount and financing fees of $7.7 million.

The Senior Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that were customarily required for similar financings. The Company is subject to certain financial covenants under the Senior Credit Agreement, including (1) a minimum liquidity amount in cash or permitted cash equivalent investments, which initially was $20.0 million from the closing date until the date on which the aggregate principal amount of loans outstanding is greater than or equal to $150.0 million (the "First Step-Up Date"), $25.0 million from the First Step-Up Date until the date on which the aggregate principal amount of loans outstanding balance is equal to $225.0 million (the "Second Step-Up Date"), and $30.0 million from the Second Step-up Date until the maturity date; (2) minimum revenue no less than 50% of target revenue beginning with the fiscal quarter ended on December 31, 2020 and with respect to each such subsequent fiscal quarter prior to the revenue covenant termination date; (3) leverage ratio covenant not to exceed 4.50 to 1.00 as of the last day of any fiscal quarter beginning with the first fiscal quarter following the revenue covenant termination date. The minimum liquidity amount was decreased to $10.0 million under the Fifth Amendment. The minimum revenue targets were modified in the Fourth Amendment to reflect the Company's current business, and the minimum revenue covenant was similarly modified to require the Company to have minimum revenue of no less than 70% of target revenue at the end of any fiscal quarter in which the leverage ratio exceeds 4.50 to 1.00. As of December 31, 2022, the Company was in compliance with all applicable debt covenants.

In early March 2023, the Company received notices of certain alleged defaults and reservations of rights from Oaktree. The alleged defaults relate to (i) the Company exceeding the $10.0 million threshold for incurring additional indebtedness by having accounts payable owed to counterparties overdue by more than 90 days, (ii) the Company's obligation to provide notice to Oaktree related to the foregoing, and (iii) the Company's obligation to provide notice to Oaktree regarding the recent reverse stock split. Upon the occurrence of an Event of Default, Oaktree has the right to accelerate all amounts outstanding under the Senior Credit Agreement, in addition to other remedies available to it as a secured creditor. The Company responded to Oaktree, which included grounds upon which the Company disputes each of the alleged defaults. The Company has not reached a mutual agreement with Oaktree on this matter, and given the Company is in receipt of the notices of default and reservation of rights, which could result in payment to Oaktree on demand, the amounts due and outstanding to Oaktree are presented as a current obligation of the Company.

**Royalty Financing Liability**

On June 21, 2022, the Company and the SPV entered into the RIPA with the Purchasers for the sale of revenues from U.S. and European royalty and milestone interests in Klisyri® (tirbanibulin) for an aggregate Purchase Price of $85.0 million. Of the total Purchase Price $5.0 million was placed into escrow to be paid to the Company upon the satisfaction of certain manufacture and supply milestones for Klisyri prior to December 31, 2025, $5.0 million was used to pay for transaction expenses, $52.5 million was used to pay down the Company's Senior Credit Agreement with Oaktree, and $7.5 million in Segregated Funds was deposited and held in a segregated account of the Company. The Purchasers released the $7.5 million of Segregated Funds to the Company in August 2022, in connection with the Sixth Amendment to the Senior Credit Agreement, and $1.5 million of the amount placed in escrow was released to the Company upon completion of an escrow release trigger milestone in September 2022. The remaining proceeds were available for the Company's operations.

In connection with this transaction, the Company formed the SPV and contributed its interest in the License Agreement with Almirall S.A. relating to Klisyri and certain related assets to the SPV. Oaktree and Sagard each own a 10% equity interest in the SPV. Pursuant to the RIPA, the SPV sold its right to the cash received in respect of certain royalties and certain milestone interests under the License Agreement to the Purchasers. The SPV retained the right to receive 50% of certain of the milestone interests under the License Agreement, equal to $155.0 million in the aggregate if those milestones are achieved, and 50% of the royalties paid under the License Agreement for sales of Klisyri once net sales of Klisyri exceed a certain dollar amount.

The Company has evaluated the terms of the RIPA and concluded that the features of the transaction, namely the Company's significant involvement in the cash flows due to the Purchasers, are similar to those of a debt instrument. The Company received funds of $75.0 million, net of transaction costs of $5.0 million, during June 2022, and the Company recorded such amount as long-term debt as of December 31, 2022. This purchase price of this transaction reflected its fair value. The $3.5 million which is held in escrow represents a loan commitment which the Company may be entitled to in the event that certain manufacturing and supply milestones are met.

The Company amortizes the royalty financing liability using the effective interest rate method over the estimated life of the revenue streams. The Company recognizes interest expense thereon using the effective rate, which is based on its current estimates of future revenues over the life of the arrangement. The Company periodically assesses its expected revenues using internal projections, imputes interest on the carrying value of the deferred royalty obligation, and records interest expense using the imputed effective interest rate. To the extent its estimates of future revenues are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will account for any such changes by adjusting the effective interest rate on a prospective basis, with a corresponding impact to the reclassification of the deferred royalty obligation. The

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assumptions used in determining the expected repayment term of the royalty financing liability and amortization period of the issuance costs require that the Company makes significant estimates that could impact the short-term and long-term classification of the royalty financing liability, interest recorded on such liability, as well as the period over which such costs will be amortized. As of December 31, 2022, the Company's estimated royalty cash flows extend through 2035 and imply an effective annual interest rate of 27.15%. Changes to these estimates may have a material effect on the Company's financial statements. During the year ended December 31, 2022, the Company received Klisyri royalties of $0.9 million, which were remitted to the Purchasers.

The following table summarizes the royalty financing liability activity during the year ended December 31, 2022 (in thousands):

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| | |
|:---|:---|
| Proceeds from the sale of future royalties, gross | $81500 |
| Less: initial issuance costs, recorded as a discount | (4982) |
| Interest expense recognized | 11158 |
| Less: Royalty financing payments | (931) |
| Royalty financing liability at December 31, 2022 | $86745 |

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**Loss on Extinguishment of Debt**

The Company records proportionate amounts of its unamortized debt discount as a loss on extinguishment of debt when prepayments are made to the Senior Credit Agreement. The Company considered the combined effect of the RIPA, and the Fourth Amendment and the Fifth Amendment to the Senior Credit Agreement, both of which are held with Sagard and Oaktree under ASC 470. The Company performed a cash flow test on a lender-by-lender basis and concluded that these transactions represented an extinguishment of debt. The Company extinguished the previous balance of its Senior Credit Agreement commensurate with the prepayments under the Fourth Amendment and Fifth Amendment and recorded the surviving debt at its fair value. To determine the fair value of the remaining debt, the Company utilized an estimate of its incremental borrowing rate. At the time of debt modification, the Company's incremental borrowing rate was 20.1%, which was utilized as the effective interest rate of the balance outstanding on the Senior Credit Agreement. Accordingly, the Company recorded a liability of $45.7 million, net of debt discount of $11.8 million. The extinguishment of debt and recording the surviving debt at its fair value resulted in a gain on extinguishment of debt of $2.1 million. This, together with a combined $5.2 million loss on partial extinguishment of debt recorded in connection with the Third and Sixth Amendments, resulted in a loss on extinguishment of debt of $3.1 million during the year ended December 31, 2022.

<u>Lease Obligations</u>

The Company has operating leases for office facilities in several locations in the U.S., Hong Kong, and Latin America, and has finance leases for equipment used in its facilities in Buffalo, NY (see Note 20 – Commitments and Contingencies). The components of lease expense are as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31, 2022** | **Year Ended December 31, 2021** |
| Operating lease cost | $2232 | $2498 |
| Finance lease cost: |  |  |
| &nbsp;&nbsp;Amortization of assets | 114 | 114 |
| &nbsp;&nbsp;Interest on lease liabilities | 34 | 46 |
| &nbsp;&nbsp;&nbsp;Total net lease cost | $2380 | $2658 |

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The Company has elected to exclude short-term leases from its operating lease ROU assets and lease liabilities. Lease costs for short-term leases were not material to the financial statements for the years ended December 31, 2022 and 2021. Variable lease costs for the years ended December 31, 2022 and 2021 were not material to the financial statements.

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Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
| Finance leases: |  |  |
| &nbsp;&nbsp;Property and equipment, at cost | $515 | $515 |
| &nbsp;&nbsp;Accumulated amortization, net | (315) | (200) |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | $200 | $315 |
| &nbsp;&nbsp;Current obligations of finance leases | $138 | $138 |
| &nbsp;&nbsp;Long-term portion of finance leases | 93 | 207 |
| &nbsp;&nbsp;&nbsp;Total finance lease obligations | $231 | $345 |
| Weighted average remaining lease term (in years): |  |  |
| &nbsp;&nbsp;Operating leases | 2.96 | 3.75 |
| &nbsp;&nbsp;Finance leases | 1.21 | 1.36 |
| Weighted average discount rate: |  |  |
| &nbsp;&nbsp;Operating leases | 13.1% | 13.0% |
| &nbsp;&nbsp;Finance leases | 7.9% | 5.6% |

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Supplemental cash flow information related to leases is as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31, 2022** | **Year Ended December 31, 2021** |
| Cash paid for amount included in the measurements of lease<br> liabilities: |  |  |
| &nbsp;&nbsp;Operating cash flows from operating leases | $(2623) | $(2830) |
| &nbsp;&nbsp;Operating cash flows from finance leases | (113) | (101) |
| &nbsp;&nbsp;Financing cash flows from finance leases | (34) | (46) |
| ROU assets recognized in exchange for new operating lease<br> obligations | $18 | $89 |

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Future minimum payments and maturities of leases is as follows (in thousands):

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| | | |
|:---|:---|:---|
| **Year ending December 31:** | **Operating Leases** | **Finance Leases** |
| 2023 | $2238 | $147 |
| 2024 | 2034 | 110 |
| 2025 | 1472 |  |
| 2026 | 347 |  |
| 2027 | 131 |  |
| &nbsp;&nbsp;Total lease payments | 6222 | 257 |
| Less: Imputed interest | (1084) | (26) |
| &nbsp;&nbsp;Total lease obligations | 5138 | 231 |
| Less: Current obligations | (2087) | (138) |
| &nbsp;&nbsp;Long-term lease obligations | $3051 | $93 |

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On January 5, 2021, Chongqing Sintaho Pharmaceuticals Co., Ltd. ("CQ Sintaho"), a subsidiary of the Company in China, entered into a lease agreement with Chongqing International Biological City Development & Investment Co., Ltd ("CQ D&I"). Under the lease agreement, the provisions of which are consistent with those agreed upon in the 2015 Agreement, CQ Sintaho leased the newly constructed API facility, or Sintaho API Facility, of 34,517 square meters rent-free, for the first 10-year term, with an option to extend the lease for an additional 10-year term, during which, if CQ Sintaho is profitable, it will pay a monthly rent of 5 RMB per

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square meter of space occupied. This operating lease was transferred to the China API buyer upon the execution of the sale of the China API Operations in November 2022 (see Note 3 - Discontinued Operations).

On October 1, 2021, the Company entered into a lease agreement with FSMC, a not-for-profit corporation affiliated with the State of New York, to lease the 409,000 square feet, newly constructed cGMP ISO Class 5 high potency pharmaceutical manufacturing facility located in Dunkirk, NY. The lease agreement called for annual rent payments of $2 for an initial 10-year term, with the option for the Company to renew under the same terms and conditions for an additional 10-year term. This operating lease was transferred to ImmunityBio, Inc. upon execution of the sale of the Dunkirk Operations in February 2022 (see Note 3 - Discontinued Operations).

The Company exercises judgment in determining the discount rate used to measure the lease liabilities. When rates are not implicit within an operating lease, the Company uses its incremental borrowing rate as its discount rate, which is based on yield trends in the biotechnology and healthcare industry and debt instruments held by the Company with stated interest rates. The Company re-assesses its incremental borrowing rate when new leases arise, or existing leases are modified.

**13. Contingent Consideration**

The fair value measurements of contingent consideration liabilities are determined using unobservable Level 3 inputs. These inputs include (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases (decreases) in any of those inputs could result in a lower or higher fair value measurement. The Company expects that these milestones will be achieved at varying times between 2023 and 2028.

The following table represents a reconciliation of the contingent consideration liability related to the acquisition of Kuur measured on a recurring basis using level 3 inputs as of December 31, 2022 (in thousands):

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| | |
|:---|:---|
| Balance as of May 4, 2021 | $19839 |
| &nbsp;&nbsp;Adjustment to fair value | 4237 |
| Balance as of December 31, 2021 | 24076 |
| &nbsp;&nbsp;Adjustment to fair value | (4190) |
| Balance as of December 31, 2022, inclusive of current and non-current portion | $19886 |

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The increase of the contingent consideration during 2021 was due to the time value of money from the initial measurement date (Kuur acquisition date) to December 31, 2021, as well as updated probabilities of future cash flows related to milestones from KUR-502, after positive response rate data was obtained. The decrease of the contingent consideration during 2022 was due to a decrease in the probability in achieving the milestones for the TCRT-ESO-A2 therapy, as that clinical program was discontinued, as well as the time value of money for the remaining R&D milestones. The discount rate used in measuring the fair value of this liability is the Company's incremental borrowing rate, which is updated on a quarterly basis. The probabilities of the R&D milestones represent the probability of technical success for each therapy to which the milestones are related, and these probabilities are updated on a quarterly basis, based on the clinical stage of the therapy, along with consideration of any additional clinical data obtained during each quarter. The adjustment to the contingent consideration liability is included within selling, general, and administrative expenses in the Company's consolidated statements of operations and comprehensive loss. Refer to Note 9 - Fair Value Measurements for additional information on the inputs used in the measurement of contingent consideration.

**14. RELATED PARTY TRANSACTIONS**

During the years ended December 31, 2022 and 2021 the Company entered into transactions with individuals and other companies that have financial interests in the Company. Related party transactions included the following:

a) In June 2018, the Company entered into two in-licensing agreements with Avalon BioMedical (Management) Limited ("Avalon") wherein the Company obtained certain IP from Avalon to develop and commercialize the underlying products. Under these agreements the Company is required to pay upfront fees and future milestone payments and sales-based royalties. During the year ended December 31, 2022 and 2021, the Company recorded $0 and $2.0 million milestone fees paid to Avalon, respectively, as research and development expenses on its consolidated statement of operations and comprehensive loss. Certain members of the Company's board and management collectively have a controlling interest in Avalon. The Company does not hold any interest in Avalon and does not have any obligations to absorb losses or any rights to receive benefits from Avalon. As of December 31, 2022 and 2021, Avalon held 39,304 shares of the Company's common stock, which represented less than 1% of the Company's total issued shares for both periods. Balances due from Avalon recorded on the consolidated balance sheets were not significant.

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In June 2019, the Company entered into an agreement whereby Avalon would hold a 90% ownership interest and the Company would hold a 10% ownership interest of the newly formed entity under the name Nuwagen Limited ("Nuwagen"), incorporated under the laws of Hong Kong. Nuwagen is principally engaged in the development and commercialization of herbal medicine products for metabolic, endocrine, and other related indications. The Company contributed nonmonetary assets in exchange for the 10% ownership interest.

b) The Company earns licensing revenue from PharmaEssentia, an entity in which the Company has an investment classified as available-for-sale (see Note 9 – Fair Value Measurements). Funds paid to PharmaEssentia under the license and cost-sharing agreements amounted to $0 and $0.1 million in the years ended December 31, 2022 and 2021, respectively. Pursuant to out-license agreements, the Company received $1.6 million and $3.0 million for the years ended December 31, 2022 and 2021, respectively. The Company recorded the $1.6 million in 2022 as revenue and, of the $3.0 million in milestone payments received in 2021, $0.5 million was recognized as revenue and $2.5 million was recognized as deferred revenue (refer to Note 19 - Revenue Recognition).

c) Certain family members of our executive officers work as employees or consultants of the Company. Such services were not significant to the consolidated financial statements.

**15. STOCK-Based Compensation** 

<u>Common Stock Option Plans</u>

The Company has four equity compensation plans, adopted in 2017, 2013, 2007 and 2004 (the "Plans") which, taken together, authorize the grant of up to 800,000 shares of common stock to employees, directors, and consultants. On June 5, 2020, the 2017 Omnibus Incentive Plan (the "2017 Plan") was amended and restated, which increased the number of shares available for issuance under the plan by up to 25,000 shares. This became effective, and was further amended as of June 18, 2021 to increase the number of shares available for issuance under the plan by up to an additional 250,000 shares. On November 22, 2022, the 2017 Plan was further amended and restated, increasing the number of shares available for issuance under the plan by an additional 625,000 shares. Additionally, on June 14, 2017, the Company adopted its 2017 Employee Stock Purchase Plan (the "ESPP"), which authorizes the issuance of up to 50,000 shares of common stock for future issuances to eligible employees.

During 2022, the Company entered into Salary Deduction and Stock Purchase Agreements (the "Purchase Agreements") with certain of its directors and executive officers. Under the Purchase Agreements, on each payroll date, the Company is authorized by the director or executive officer, in advance, to deduct a certain amount of the individual's after-tax base salary. This deducted amount is used to purchase a number of shares of the Company's common stock determined using the Nasdaq Official Closing Price per share on the applicable payroll date. During the year ended December 31, 2022, directors and executive officers purchased a total of 73,030 shares of common stock at an average price of $6.60 per share.

<u>Stock Options</u>

The total fair value of stock options vested and recorded as compensation expense during the years ended December 31, 2022 and 2021 was $5.5 million and $8.4 million, respectively. As of December 31, 2022, $5.4 million of unrecognized cost related to non-vested stock options was expected to be recognized over a weighted-average period of approximately 1.50 years. The total intrinsic value of options exercised was approximately $0 and $0.2 million for the years ended December 31, 2022 and 2021, respectively.

The following table summarizes the status of the Company's stock option activity granted under the Plans and 2017 Plan to employees, directors, and consultants (in thousands, except stock option amounts and exercise price): Stock options granted have a contractual term of 10 years and vest over a 2-4 year period. The following table summarizes the status of the Company's stock option activity granted under the Plans and 2017 Plan to employees, directors, and consultants (in thousands, except stock option amounts):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Stock Options** | **Weighted-<br>Average<br>Exercise Price** | **Weighted-<br>Average<br>Remaining<br>Contractual<br>Term** | **Aggregate<br>Intrinsic<br>Value** |
| Outstanding at December 31, 2021 | 632912 | $179.00 | 4.88 | $— |
| &nbsp;&nbsp;&nbsp;Granted | 106395 | 13.00 |  |  |
| &nbsp;&nbsp;&nbsp;Forfeited and expired | (102536) | 195.80 |  |  |
| Outstanding at December 31, 2022 | 636771 | $148.80 | 4.67 | $— |
| Vested and exercisable at December 31, 2022 | 468834 | $174.40 | 4.74 | $— |

---

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The Company determines the fair value of stock option awards on the grant date using the Black-Scholes option pricing model, which is impacted by assumptions regarding a number of highly subjective variables. The following table summarizes the weighted-average assumptions used as inputs to the Black-Scholes option pricing model during the periods indicated:

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Weighted average grant date fair value | $13.00 | $75.40 |
| Expected dividend yield | —% | —% |
| Expected stock price volatility | 68% | 68% |
| Risk-free interest rate | 3.01% | 1.29% |
| Expected life of options (in years) | 6.2 | 6.2 |

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<u>Restricted Stock Awards</u> 

The total fair value of restricted stock awards vested and recorded as compensation expense during the years ended December 31, 2022 and 2021 was $0.8 million and $0.6 million respectively. Restricted stock awards cliff vest on the anniversaries of their grant date. As of December 31, 2022, $1.5 million of unrecognized cost related to non-vested restricted stock awards were expected to be recognized over a weighted-average period of approximately 2.67 years.

The following table summarizes the status of the Company's restricted stock awards.

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| | | |
|:---|:---|:---|
|  | **Shares of Restricted Stock** | **Weighted Average Fair Value** |
| Nonvested at December 31, 2021 | 47055 | $77.20 |
| &nbsp;&nbsp;Granted | 2500 | 16.60 |
| &nbsp;&nbsp;Forfeited | (15224) | 75.80 |
| &nbsp;&nbsp;Vested | (10619) | 73.60 |
| Nonvested at December 31, 2022 | 23712 | $66.40 |

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<u>Employee Stock Purchase Plan</u>

The Employee Stock Purchase Plan (the "ESPP") is available to eligible employees (as defined in the plan document). Under the ESPP, shares of the Company's common stock may be purchased at a discount (15%) of the lesser of the closing price of the Company's common stock on the first trading or the last trading day of the offering period. The current offering period extends from December 1, 2022 to May 31, 2023. The Company expects to offer six-month offering periods after the current period. The 2017 Plan reserved 50,000 shares of common stock for issuance under the ESPP. Stock-based compensation related to the ESPP amounted to $0.1 million and $0.2 million for the years ended December 31, 2022 and 2021, respectively. The Company issued 11,542 and 4,078 shares of common stock to participants during the years ended December 31, 2022 and 2021, respectively.

<u>Stock-Based Compensation Cost</u>

The components of stock-based compensation and the amounts recorded within research and development expenses and selling, general, and administrative expenses in the Company's consolidated statements of operations and comprehensive loss consisted of the following for the years ended December 31, 2022 and 2021, (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Stock options | $5516 | $8441 |
| Restricted stock expense | 750 | 616 |
| Stock awarded to directors and officers |  |  |
| Employee stock purchase plan | 60 | 150 |
| &nbsp;&nbsp;Total stock-based compensation expense | $6326 | $9207 |
| Cost of sales | $111 | $208 |
| Research and development expenses | 1629 | 2700 |
| Selling, general, and administrative expenses | 4586 | 6299 |
| &nbsp;&nbsp;Total stock-based compensation expense | $6326 | $9207 |

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**16. NET LOSS PER SHARE ATTRIBUTABLE TO ATHENEX, INC. COMMON STOCKHOLDERS** 

Basic net loss per share is calculated by dividing net loss attributable to Athenex, Inc. common stockholders by the weighted-average number of common shares issued, outstanding, and vested during the period. Net loss from continuing operations per share is calculated by dividing the net loss from continuing operations, less, net loss attributable to non-controlling interests, by the weighted-average number of common shares issued, outstanding, and vested during the period. Net loss from discontinued operations per share is calculated by dividing the loss from discontinued operations by the weighted-average number of common shares issued, outstanding, and vested during the period. Diluted net loss per share is computed by dividing net loss attributable to Athenex, Inc. common stockholders by the weighted-average number of common share and common shares equivalents for the period using the treasury-stock method. For the purposes of this calculation, warrants and pre-funded warrants for common stock and stock options are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following weighted average outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable Athenex, Inc. to common stockholders for the periods presented because including them would have been antidilutive:

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Stock options and other common stock equivalents | 1501661 | 681202 |
| Unvested restricted common shares | 36695 | 17658 |
| Total potential dilutive common shares | 1538356 | 698860 |

---

**17. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME** 

The components and changes of accumulated other comprehensive (loss) income, net of related income tax effects, are as follows (in thousands):

---

| | |
|:---|:---|
| Balance as of January 1, 2021 | $(1134) |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment | 141 |
| &nbsp;&nbsp;&nbsp;Unrealized gain on investment | 506 |
| Balance as of December 31, 2021 | (487) |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment | 2597 |
| &nbsp;&nbsp;&nbsp;Unrealized gain on investment | 465 |
| &nbsp;&nbsp;&nbsp;Reclassification of foreign currency translation included in net loss | (1688) |
| Balance as of December 31, 2022 | $887 |

---

**18. BUSINESS SEGMENT, GEOGRAPHIC, AND CONCENTRATION RISK INFORMATION** 

The Company has two operating segments, which are organized based mainly on the nature of the business activities performed and regulatory environments in which they operate. The Company also considers the types of products from which the reportable segments derive their revenue. Each operating segment has a segment manager who is held accountable for operations and has discrete financial information that is regularly reviewed by the Company's chief operating decision-maker. Consequently, the Company has concluded each operating segment to be a reportable segment. The Company's operating segments are as follows:

Oncology Innovation Platform— This operating segment performs research and development on certain of the Company's proprietary drugs, from the preclinical development of its chemical compounds, to the execution and analysis of its several clinical trials. It focuses specifically on Cell Therapy and Orascovery research platforms. This segment operates in the U.S., Hong Kong, the United Kingdom, and Latin America.

Commercial Platform— This operating segment includes APD, which focuses on the distribution, and sales of specialty pharmaceuticals. This segment provides services and products to external customers based mainly in the U.S.

The Company's Oncology Innovation Platform segment operates and holds long-lived assets located in the U.S., Hong Kong, the United Kingdom, and Latin America. The Commercial Platform segment operates and holds long-lived assets located in the U.S. For geographic segment reporting, product sales have been attributed to countries based on the location of the customer.

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Segment information is as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Total revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Oncology Innovation Platform | $14844 | $28377 |
| &nbsp;&nbsp;&nbsp;Commercial Platform | 87977 | 66992 |
| Total consolidated revenue | $102821 | $95369 |

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---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Total revenue by product group: |  |  |
| &nbsp;&nbsp;&nbsp;Commercial product sales | $87977 | $66993 |
| &nbsp;&nbsp;&nbsp;License fees | 11910 | 26832 |
| &nbsp;&nbsp;&nbsp;Contract manufacturing revenue | 2906 | 1512 |
| &nbsp;&nbsp;&nbsp;Other revenue | 28 | 32 |
| Total consolidated revenue | $102821 | $95369 |

---

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Net loss attributable to Athenex, Inc.: |  |  |
| &nbsp;&nbsp;&nbsp;Oncology Innovation Platform | $(96670) | $(122704) |
| &nbsp;&nbsp;&nbsp;Commercial Platform | (1309) | (35382) |
| Segment total | (97979) | (158086) |
| &nbsp;&nbsp;&nbsp;Discontinued operations | (5448) | (41682) |
| Total consolidated net loss attributable to Athenex, Inc. | $(103427) | $(199768) |

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---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Total depreciation and amortization |  |  |
| &nbsp;&nbsp;&nbsp;Oncology Innovation Platform | $1064 | $1317 |
| &nbsp;&nbsp;&nbsp;Commercial Platform | 1258 | 1821 |
| Segment total | 2322 | 3138 |
| &nbsp;&nbsp;&nbsp;Discontinued operations | 2146 | 1865 |
| Total depreciation and amortization | $4468 | $5003 |

---

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Total assets: |  |  |
| &nbsp;&nbsp;&nbsp;Oncology Innovation Platform | $120206 | $141808 |
| &nbsp;&nbsp;&nbsp;Commercial Platform | 76541 | 53112 |
| Segment total | 196747 | 194920 |
| &nbsp;&nbsp;&nbsp;Discontinued operations | 7308 | 72528 |
| Total assets | $204055 | $267448 |

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---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Total revenue |  |  |
| &nbsp;&nbsp;&nbsp;United States | $96076 | $89198 |
| &nbsp;&nbsp;&nbsp;Spain | 4735 | 5289 |
| &nbsp;&nbsp;&nbsp;Other foreign countries | 2010 | 882 |
| Total consolidated revenue | $102821 | $95369 |

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Customer revenue and accounts receivable concentration amounted to the following for the identified periods:

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Percentage of total revenue by customer: |  |  |
| &nbsp;&nbsp;&nbsp;Customer A | 23% | 20% |
| &nbsp;&nbsp;&nbsp;Customer B | 20% | 22% |
| &nbsp;&nbsp;&nbsp;Customer C | 20% | 20% |
| &nbsp;&nbsp;&nbsp;Customer D | 10% | 29% |

---

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Percentage of total accounts receivable by customer: |  |  |
| &nbsp;&nbsp;&nbsp;Customer A | 34% | 34% |
| &nbsp;&nbsp;&nbsp;Customer B | 23% | 41% |
| &nbsp;&nbsp;&nbsp;Customer C | 13% | 3% |

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**19. Revenue Recognition**

The Company records revenue in accordance with ASC, Topic 606, Revenue from Contracts with Customers. Under Topic 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of Topic 606, the entity performs the following five steps: (i) identifies the contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Below is a description of principal activities – separated by reportable segments – from which the Company generates its revenue (See Note 18 – Business Segment, Geographic, and Concentration Risk Information).

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1. Oncology Innovation Platform

The Company out-licenses certain of its IP to other pharmaceutical companies in specific territories that allow the customer to use, develop, commercialize, or otherwise exploit the licensed IP. In accordance with Topic 606, the Company analyzes the contracts to identify its performance obligations within the contract. Most of the Company's out-license arrangements contain multiple performance obligations and variable pricing. After the performance obligations are identified, the Company determines the transaction price, which generally includes upfront fees, milestone payments related to the achievement of developmental, regulatory, or commercial goals, and royalty payments on net sales of licensed products. The Company considers whether the transaction price is fixed or variable, and whether such consideration is subject to return. Variable consideration is only included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If any portion of the transaction price is constrained, it is excluded from the transaction price until the constraint no longer exists. The Company then allocates the transaction price to the performance obligation to which the consideration is related. Where a portion of the transaction price is received and allocated to continuing performance obligations under the terms of the arrangement, it is recorded as deferred revenue and recognized as revenue when (or as) the underlying performance obligation is satisfied.

The Company's contracts may contain one or multiple promises, including the license of IP and development services. The licensed IP related to the Company's approved and late-stage drug candidates is capable of being distinct from the other performance obligations identified in the contract and is distinct within the context of the contract, as upon transfer of the IP, the customer is able to use and benefit from it, and the customer could obtain the development services from other parties. The Company also considers the economic and regulatory characteristics of the licensed IP and other promises in the contract to determine if it is a distinct performance obligation. The Company considers if the IP is modified or enhanced by other performance obligations through the life of the agreement and whether the customer is contractually or practically required to use updated IP. The IP licensed by the Company has been determined to be functional IP. The IP is not modified during the license period and therefore, the Company recognizes revenues from any portion of the transaction price allocated to the licensed IP when the license is transferred to the customer and they can benefit from the right to use the IP. The Company recognized $9.2 million and $0.5 million in license revenue from out-license arrangements for the year ended December 31, 2022 and 2021, respectively. During the year ended December 31, 2021, the Company received $2.0 million in upfront fees for a license of TCR-T technology, which was deemed not to be distinct, as the IP is in an early stage and is dependent on development activities to be performed by the Company, and $0.7 million for licenses of Klisyri in territories in which it is not yet approved and further development activities are required to be performed by the Company. Therefore these licenses of IP and the development services were considered a bundled performance obligation. As of December 31, 2022 and 2021, this bundle of performance obligations was not satisfied and the corresponding $2.7 million was recorded as deferred revenue on the Company's consolidated balance sheet.

Other performance obligations included in most of the Company's out-licensing agreements include performing development services to reach clinical and regulatory milestone events. The Company satisfies these performance obligations at a point-in-time, because the customer does not simultaneously receive and consume the benefits as the development occurs, the development does not create or enhance an asset controlled by the customer, and the development does not create an asset with no alternative use. The Company considers milestone payments to be variable consideration measured using the most likely amount method, as the entitlement to the consideration is contingent on the occurrence or nonoccurrence of future events. The Company allocates each variable milestone payment to the associated milestone performance obligation, as the variable payment relates directly to the Company's efforts to satisfy the performance obligation and such allocation depicts the amount of consideration to which the Company expects to be entitled for satisfying the corresponding performance obligation. The Company re-evaluates the probability of achievement of such performance obligations and any related constraint and adjusts its estimate of the transaction price as appropriate. To date, no amounts have been constrained in the initial or subsequent assessments of the transaction price. The Company did not recognize revenue from other performance obligations included in the Company's out-licensing agreements during the years ended December 31, 2022 or 2021.

Certain out-license agreements include performance obligations to manufacture and provide drug product in the future for commercial sale when the licensed product is approved. For the commercial, sales-based royalties, the consideration is predominantly related to the licensed IP and is contingent on the customer's subsequent sales to another commercial customer. Consequently, the sales- or usage-based royalty exception would apply. Revenue will be recognized for the commercial, sales-based milestones as the underlying sales occur. The Company recognized $2.5 million and $25.0 million in commercial milestones during the years ended December 31, 2022 and 2021, respectively. The Company recorded $2.3 million and $1.0 million of royalty revenue related to sales of Tirbanibulin during the years ended December 31, 2022 and 2021, respectively.

The Company exercises significant judgment when identifying distinct performance obligations within its out-license arrangements, determining the transaction price, which often includes both fixed and variable considerations, and allocating the transaction price to the proper performance obligation. The Company did not use any other significant judgments related to out-licensing revenue during the years ended December 31, 2022 and 2021.

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2. Commercial Platform

The Company's Commercial Platform generates revenue by distributing specialty products through independent pharmaceutical wholesalers. The wholesalers then sell to an end-user, normally a hospital, alternative healthcare facility, or an independent pharmacy, at a lower price previously established by the end-user and the Company. Upon the sale by the wholesaler to the end-user, the wholesaler will chargeback the difference, if any, between the original list price and price at which the product was sold to the end-user. The Company also offers cash discounts, which approximate 2.3% of the gross sales price, as an incentive for prompt customer payment, and, consistent with industry practice, the Company's return policy permits customers to return products within a window of time before and after the expiration of product dating. Further, the Company offers contractual allowances, generally in the form of rebates or administrative fees, to certain wholesale customers, group purchasing organizations ("GPOs"), and end-user customers, consistent with pharmaceutical industry practices. Revenues are recorded net of provisions for variable consideration, including discounts, rebates, GPO allowances, price adjustments, returns, chargebacks, promotional programs and other sales allowances. Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash). As of December 31, 2022 and 2021, the Company's total provision for chargebacks and other deductions included as a reduction of accounts receivable totaled $29.5 million and $22.9 million, respectively. The Company's total provision for chargebacks and other revenue deductions was $179.9 million and $129.0 million for the years ended December 31, 2022 and 2021, respectively.

The Company exercises significant judgment in its estimates of the variable transaction price at the time of the sale and recognizes revenue when the performance obligation is satisfied. Factors that determine the final net transaction price include chargebacks, fees for service, cash discounts, rebates, returns, warranties, and other factors. The Company estimates all of these variables based on historical data obtained from previous sales finalized with the end-user customer on a product-by-product basis. At the time of sale, revenue is recorded net of each of these deductions. Through the normal course of business, the wholesaler will sell the product to the end-user, determining the actual chargeback, return products, and take advantage of cash discounts, charge fees for services, and claim warranties on products. The final transaction price per product is compared to the initial estimated net sale price and reviewed for accuracy. The final prices and other factors are immediately included in the Company's historical data from which it will estimate the transaction price for future sales. The underlying contracts for these sales are generally purchase orders including a single performance obligation, generally the shipment or delivery of products and the Company recognizes this revenue at a point-in-time.

**Disaggregation of revenue** 

The following represents the Company's revenue for its reportable segment by country, based on the locations of the customer (in thousands).

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** |
|  | **Oncology<br>Innovation<br>Platform** | **Commercial<br>Platform** | **Consolidated<br>Total** |
| United States | $8099 | $87977 | $96076 |
| Spain | 4735 |  | 4735 |
| Other Foreign Countries | 2010 |  | 2010 |
| &nbsp;&nbsp;&nbsp;Total Revenue | $14844 | $87977 | $102821 |

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------

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** |
|  | **Oncology<br>Innovation<br>Platform** | **Commercial<br>Platform** | **Consolidated<br>Total** |
| United States | $22206 | $66992 | $89198 |
| Spain | 5289 |  | 5289 |
| Other foreign countries | 882 |  | 882 |
| &nbsp;&nbsp;&nbsp;Total Revenue | $28377 | $66992 | $95369 |

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The Company also disaggregates its revenue by product group which can be found in Note 18 – Business Segment, Geographic, and Concentration Risk Information.

**Contract balances**

The following table provides information about receivables and contract liabilities from contracts with customers. The Company has not recorded any contract assets from contracts with customers (in thousands).

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| &nbsp;&nbsp;Accounts receivable, gross | $67011 | $54716 |
| &nbsp;&nbsp;Chargebacks and other deductions | (29470) | (22869) |
| &nbsp;&nbsp;Provision for credit losses | (9676) | (9069) |
| Accounts receivable, net | $27865 | $22778 |
| &nbsp;&nbsp;Deferred revenue | 2823 | 2798 |
| Total contract liabilities | $2823 | $2798 |

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The following tables illustrate accounts receivable by reportable segments (in thousands).

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| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Oncology<br>Innovation<br>Platform** | **Commercial<br>Platform** | **Consolidated<br>Total** |
| &nbsp;&nbsp;Accounts receivable, gross | $14520 | $52491 | $67011 |
| &nbsp;&nbsp;Chargebacks and other deductions |  | (29470) | (29470) |
| &nbsp;&nbsp;Provision for credit losses | (9444) | (232) | (9676) |
| Accounts receivable, net | $5076 | $22789 | $27865 |

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| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Oncology<br>Innovation<br>Platform** | **Commercial<br>Platform** | **Consolidated<br>Total** |
| &nbsp;&nbsp;Accounts receivable, gross | $10418 | $44298 | $54716 |
| &nbsp;&nbsp;Chargebacks and other deductions |  | (22869) | (22869) |
| &nbsp;&nbsp;Provision for credit losses | (8972) | (97) | (9069) |
| Accounts receivable, net | $1446 | $21332 | $22778 |

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The Company incurs contract obligations on general customer purchase orders that have been accepted but unfulfilled. Due to the short duration of time between order acceptance and delivery of the related product or service, the Company has determined that the balance related to these contract obligations is generally immaterial at any point in time. The Company monitors the value of orders accepted but unfulfilled at the close of each reporting period to determine if disclosure is appropriate. As of December 31, 2022 and 2021, $2.8 million and $2.7 million, respectively, of contract liabilities related to customer deposits were made by customers of the Oncology Innovation Platform.

**20. commitments and contingencies** 

<u>Rental and lease commitments</u> 

In August 2015, the Company entered into a lease agreement with FSMC to occupy a portion of the Conventus Center for Collaborative Medicine in Buffalo, NY. Total rent expense related to this location, recognized on a straight-line basis, was $1.0 million for the each of the years ended December 31, 2022 and 2021. Under the Alliance Agreement with FSMC, the Company obligated to spend $100.0 million in the Buffalo area over the initial 10-year term of the lease and an additional $100.0 million during the second 10-year term if it elects to extend the lease. The Company also committed to hiring 250 permanent employees in the Buffalo area within the first 5 years of completion of the project. As of December 31, 2022, the Company had hired 36 permanent employees in the Buffalo area.

In October 2016, the Company's Commercial Platform entered into an agreement to lease office space in Chicago, IL. Under the lease agreement, the Company will make monthly payments based on an escalating scale over ten years. Total rent expense related to this location, recognized on a straight-line basis, amounted to $0.3 million for each of the years ended December 31, 2022 and 2021. In lieu of a security deposit, an irrevocable letter of credit was issued to the landlord in the amount of $0.2 million.

In 2021, the Company extended its lease agreement to lease manufacturing and office space outside of Buffalo, NY. Under the lease agreement, the Company will make monthly payments into 2026. Total rent expense related to this location, recognized on a straight-line basis, amounted to $0.4 million for each of the years ended December 31, 2022 and 2021.

The Company entered into additional leases for lab and office space, and various equipment in, Houston, TX; Cranford, NJ; Latin America; and Buffalo, NY, during previous years which expire at various times through 2025. Rent expense recognized for these operating leases was not material to the financial statements for the years ended December 31, 2022 and 2021.

Future minimum payments under the non-cancelable operating leases consists of the following as of December 31, 2022 (in thousands):

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| | |
|:---|:---|
| **Year ending December 31:** | **Minimum<br>payments** |
| 2023 | $2238 |
| 2024 | 2034 |
| 2025 | 1472 |
| 2026 | 347 |
| 2027 and thereafter | 131 |
|  | $6222 |

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<u>Legal Proceedings</u> 

The Company is subject to litigation arising from time to time in the ordinary course of its business. The Company does not expect that the ultimate resolution of any pending legal actions will have a material effect on its consolidated operating results, cash

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flows or financial condition. However, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, will not become material in the future.

Securities Litigation

Following our receipt of the CRL in February 2021 and the subsequent decline of the market price of the Company's common stock, two purported securities class action lawsuits were filed in the U.S. District Court for the Western District of New York on March 3, 2021 and March 22, 2021, respectively, against the Company and certain members of its management team seeking to recover damages for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

The complaints generally allege that between August 7, 2019 and February 26, 2021 (the purported class period), the Company and the individual defendants made materially false and misleading statements regarding the Company's business in connection with the Company's development of Oral Paclitaxel for the treatment of metastatic breast cancer and the likelihood of FDA approval, and that the plaintiffs suffered losses when the Company's stock price dropped after its announcement on February 26, 2021 regarding receipt of the CRL. The complaints seek class certification, damages, fees, costs, and expenses. On August 5, 2021, the Court consolidated the two actions and appointed a lead plaintiff and lead counsel. Pursuant to a stipulated scheduling order, the lead plaintiff filed an amended complaint on November 19, 2021. Defendants filed their motion to dismiss on January 25, 2022. Plaintiffs filed their opposition to that motion on March 28, 2022 and the defendants filed their reply brief on May 20, 2022. The motion to dismiss is now fully briefed and awaits the Court's decision. The Company and the individual defendants believe that the claims in the consolidated lawsuits are without merit, and the Company has not recorded a liability related to these shareholder class actions as the risk of loss is remote. The Company and the individual defendants intend to vigorously defend against these claims but there can be no assurances as to the outcome.

Shareholder Derivative Lawsuit

On June 3, 2021, a shareholder derivative lawsuit was filed in the United States District Court for the District of Delaware by Timothy J. Wonnell, allegedly on behalf of the Company, that piggy-backs on the securities class actions referenced above. The complaint names Johnson Lau, Rudolf Kwan, Timothy Cook, and members of the Board as defendants, and generally alleges that they caused or failed to prevent the securities law violations asserted in the securities class actions. On September 13, 2021, the Court (i) granted the defendants' motion to stay the derivative action until after resolution of the motion to dismiss the consolidated securities class actions, and (ii) administratively closed the derivative litigation, directing the parties to promptly notify the Court when the related securities class action has been resolved so the derivative action can be reopened. The Company and the individual defendants believe the claims in the shareholder derivative action are without merit, and the Company has not recorded a liability related to this lawsuit as the risk of loss is remote. The Company and the individual defendants intend to vigorously defend against these claims should the case be reopened, but there can be no assurances as to the outcome.

Dunkirk Facility Litigation

On October 5, 2022, Exyte U.S., Inc. filed a complaint in the Supreme Court of the State of New York in Erie County against the Company and ImmunityBio, Inc., alleging breach of contract and related claims in connection with the design and build of a manufacturing facility in Dunkirk, New York, by Exyte for the Company. On February 14, 2022, ImmunityBio closed on the purchase of the Company's interest in the Dunkirk facility. The complaint alleges that the Company and/or ImmunityBio breached the agreement between the Company and Exyte by not paying amounts allegedly owed to Exyte under the agreement. The complaint seeks damages in excess of approximately $8.5 million. The Company has and will continue to vigorously defend itself against Exyte's claims in the complaint and has asserted counterclaims against Exyte in the action seeking damages in excess of $10 million based on Exyte's failure to meet its contractual obligations. This case is in its very early stages. The Company has not recorded a liability related to these claims as the risk of loss is remote, but there can be no assurance as to the outcome.

**21. SUBSEQUENT EVENTS**

On February 15, 2023, the Company effected a 20:1 reverse stock split of its common stock in order to regain compliance with Nasdaq's continued listing requirements. All share and per share amounts, and exercise prices of stock options, warrants, and pre-funded warrants, if applicable, in the consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split. On March 16, 2023, the Company received notice from The Nasdaq Stock Market LLC indicating that the Company had regained compliance with the minimum bid price requirement under Nasdaq Rule 5550(a)(2).

In early March 2023, the Company received notices of certain alleged defaults and reservations of rights from Oaktree. The alleged defaults relate to (i) the Company exceeding the $10.0 million threshold for incurring additional indebtedness by having

------

accounts payable owed to counterparties overdue by more than 90 days, (ii) the Company's obligation to provide notice to Oaktree related to the foregoing, and (iii) the Company's obligation to provide notice to Oaktree regarding the recent reverse stock split. Upon the occurrence of an Event of Default, Oaktree has the right to accelerate all amounts outstanding under the Senior Credit Agreement, in addition to other remedies available to it as a secured creditor. If Oaktree accelerates the maturity of the indebtedness under the Senior Credit Agreement, the Company does not have sufficient capital available to pay the amounts due on a timely basis, if at all, and there is no guarantee that it would be able to repay, refinance or restructure the payments due under the Senior Credit Agreement. In addition, an Event of Default under the Senior Credit Agreement may trigger cross-default under other agreements of the Company. The Company responded to Oaktree, including grounds upon which the Company disputes each of the alleged defaults. The Company has not reached a mutual agreement with Oaktree on this matter, and given the Company is in receipt of the notices of default and reservation of rights, which could result in payment to Oaktree on demand, the amounts due and outstanding to Oaktree are presented as a current obligation of the Company. Refer to Note 12 - Debt and Lease Obligations for additional information.

\*\*\*\*\*\*

------

**Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**

None.

**Item 9A. Controls and Procedures.**

**Evaluation of Disclosure Controls and Procedures**

Our management, with the participation of our Chief Executive Officer and Board Chairman (Principal Executive Officer) and our Chief Financial Officer (Principal Financial and Accounting Officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2022. Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer and Board Chairman (Principal Executive Officer) and our Chief Financial Officer (Principal Financial and Accounting Officer) concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

**Management's Annual Report on Internal Control over Financial Reporting**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2022, management assessed the effectiveness of our internal control over financial reporting based on the framework established in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 Framework). Based on this evaluation, management has determined that our internal control over financial reporting was effective as of December 31, 2022.

**Changes in Internal Control over Financial Reporting**

There were no changes in the Company's internal controls over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

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**Item 9B. Other Information.**

None.

**Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.**

Not applicable.

------

**PART III**

**Item 10. Directors, Executive Officers and Corporate Governance.**

The information required by this Item is incorporated by reference from the sections captioned "Election of Directors," "Executive Officers," "Corporate Governance Matters," and "Delinquent Section 16(a) Reports" contained in our proxy statement related to the 2023 Annual Meeting of Stockholders (the "Proxy Statement"), which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

**Item 11. Executive Compensation.**

The information required by this Item is incorporated by reference from the information under the sections captioned "Executive Compensation" and "Director Compensation" in the Proxy Statement.

**Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.**

The information required by this Item is incorporated by reference from the information under the sections captioned "Executive Compensation," "Equity Compensation Plan Information" and "Security Ownership of Certain Beneficial Owners and Management" contained in the Proxy Statement.

**Item 13. Certain Relationships and Related Transactions, and Director Independence.**

The information required by this Item is incorporated by reference from the information under the sections captioned "Certain Relationships and Related-Party Transactions" and "Corporate Governance Matters" in the Proxy Statement.

**Item 14. Principal Accounting Fees and Services.**

The information required by this Item is incorporated by reference from the information under the section captioned "Audit Committee Report" in the Proxy Statement.

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**PART IV**

**Item 15. Exhibits and Financial Statement Schedules.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** The following documents are filed as part of this report.

**1. Financial Statements.**

The financial statements of the Company and the related report of the Company's independent registered public accounting firm thereon have been filed under Item 8 hereof.

**2. Financial Statement Schedules.**

**Schedule II—Valuation and Qualifying Accounts** 

Activity in the following valuation and qualifying accounts consisted of the following (in thousands):

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | **Col. C - Additions** | **Col. C - Additions** | **Col. C - Additions** | **Col. C - Additions** |  |  |  |
| **Col. A <br>Description** | **Col. B<br>Balance at<br>Beginning of<br>Period** | **Charged to<br>Costs &<br>Expenses** | **Charged to<br>Costs &<br>Expenses** | **Charged to<br>Other<br>Accounts -<br>Describe** | **Charged to<br>Other<br>Accounts -<br>Describe** | **Col. D<br>Deductions -<br>Describe** | **Col. D<br>Deductions -<br>Describe** | **Col. E<br>Balance at<br>End of<br>Period** |
| **December 31, 2022** |  |  |  |  |  |  |  |  |
| Provision for credit losses | $9306 | $1650 | (1) | $— |  | $(1143) | (1) | $9813 |
| Allowance for chargebacks and other deductions | $22868 | $189577 | (2) | $— |  | $(182975) | (2) | $29470 |
| Deferred tax asset valuation allowance | $137742 | $— |  | $31203 | (3) | $— |  | $168945 |
| **December 31, 2021** |  |  |  |  |  |  |  |  |
| Provision for credit losses | $9637 | $29 | (1) | $— |  | $(360) | (1) | $9306 |
| Allowance for chargebacks and other deductions | $12552 | $129425 | (2) | $— |  | $(119109) | (2) | $22868 |
| Deferred tax asset valuation allowance | $150864 | $— |  | $(13122) | (3) | $— |  | $137742 |

---

(1)Increases in the provision for credit losses consist of our provision for credit losses, which is included within selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss. Decreases in the provision for credit losses consist of the write-off of specific accounts and the recovery of previously reserved receivables.

(2)Increases in the allowance for chargebacks and other deductions consist of our provision for chargebacks, cash discounts, returns, fees, and other credits, which are a deduction from product sales on the consolidated statements of operations and comprehensive loss. Decreases in the allowances for chargebacks and other deduction consist of the collection of the underlying accounts and advances received on chargebacks.

(3)Increases and decreases in the valuation allowance for deferred income tax assets offset the increases and decreases in our gross deferred tax assets, based on the expected realization of those future tax benefits.

------

**(b) Exhibits.** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | **Incorporated by Reference**<br>**(Unless Otherwise Indicated)** | **Incorporated by Reference**<br>**(Unless Otherwise Indicated)** | **Incorporated by Reference**<br>**(Unless Otherwise Indicated)** | **Incorporated by Reference**<br>**(Unless Otherwise Indicated)** |
| **Exhibit**<br>**Number** | **Exhibit Title** | **Form** | **File** | **Exhibit** | **Filing Date** |
| 1.1 | [<u>Sales Agreement, dated August 20, 2021, by and between Athenex, Inc. and SVB Leerink LLC as sales agent.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312521252903/d190005dex11.htm) | Form 8-K | 001-38112 | 1.1 | August 20, 2021 |
| 2.1 | [<u>Agreement and Plan of Merger, by and among Athenex, Inc., Athenex Pharmaceuticals LLC, Kuur Therapeutics, Inc., Shareholder Representative Services LLC, solely as representative, agent and attorney-in-fact of the Merger Stockholders, Key Employees and Individual Company Directors, dated May 4, 2021.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312521150326/d266152dex101.htm) | Form 8-K | 001-38112 | 10.1 | May 5, 2021 |
| 3.1 | [<u>Amended and Restated Certificate of Incorporation of the Company, effective as of June 19, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517210316/d389640dex31.htm) | Form 8-K | 001-38112 | 3.1 | June 22, 2017 |
| 3.2 | [<u>Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, effective as of November 22, 2022.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312522291096/d368440dex31.htm) | Form 8-K | 001-38112 | 3.1 | November 22, 2022 |
| 3.3 | [<u>Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, effective as of February 15, 2023.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312523037334/d429422dex31.htm) | Form 8-K | 001-38112 | 3.1 | February 14, 2023 |
| 3.4 | [<u>Amended and Restated Bylaws of the Company, effective as of June 19, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517210316/d389640dex32.htm) | Form 8-K | 001-38112 | 3.2 | June 22, 2017 |
| 4.1 | [<u>Specimen Common Stock Certificate.</u>](atnx-ex4_1.htm) |  |  |  | Filed herewith |
| 4.2 | [<u>Form of Warrant to Purchase Common Stock (Oaktree).</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312520174767/d944864dex41.htm) | Form 8-K | 001-38112 | 4.1 | June 22, 2020 |
| 4.3 | [<u>Form of Warrant to Purchase Common Stock (Sagard and IMCO Investors).</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312520211284/d95827dex41.htm) | Form 8-K | 001-38112 | 4.1 | August 6, 2020 |
| 4.4 | [<u>Form of Warrant to Purchase Common Stock dated August 15, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022021640/atnx-ex4_1.htm) | Form 10-Q | 001-38112 | 4.1 | November 3, 2022 |
| 4.5 | [<u>Form of Pre-Funded Warrant dated August 15, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312522220196/d333866dex102.htm) | Form 8-K | 001-38112 | 10.2 | August 15, 2022 |
| 4.6# | [<u>Warrant Agency Agreement, by and among Athenex, Inc., Computershare Inc., and Computershare Trust Company, N.A., dated as of August 15, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022021640/atnx-ex4_2.htm) | Form 10-Q | 001-38112 | 4.2 | November 3, 2022 |
| 4.7 | [<u>Description of Securities</u>](atnx-ex4_7.htm) |  |  |  | Filed herewith |
| 10.1+ | [<u>Form of Director and Officer Indemnification Agreement.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex101.htm) | Form S-1 | 333-217928 | 10.1 | May 12, 2017 |
| 10.2+ | [<u>Amended and Restated Employment Agreement by and between Johnson Lau and Kinex Pharmaceuticals, Inc., effective as of June 1, 2015.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1023.htm) | Form S-1 | 333-217928 | 10.23 | May 12, 2017 |
| 10.3+ | [<u>Employment Agreement by and between Athenex, Inc. and Dr. Rudolf Min-Fun Kwan, effective as of February 21, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1025.htm) | Form S-1 | 333-217928 | 10.25 | May 12, 2017 |
| 10.4+ | [<u>Employment Agreement by and between Athenex, Inc. and Jeffrey Yordon, effective as of February 21, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1028.htm) | Form S-1 | 333-217928 | 10.28 | May 12, 2017 |
| 10.5+ | [<u>Employment Agreement between Athenex, Inc. and Joe Annoni, effective as of February 18, 2022.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312522048551/d307171dex101.htm) | Form 8-K | 001-38112 | 10.1 | February 22, 2022 |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| 10.6+ | [<u>2013 Common Stock Option Plan and Form of Common Stock Option Agreement.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex104.htm) | Form S-1 | 333-217928 | 10.4 | May 12, 2017 |
| 10.7+ | [<u>2017 Employee Stock Purchase Plan.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517193190/d358380dex106.htm) | Form S-1/A | 333-217928 | 10.6 | June 2, 2017 |
| 10.8+ | [<u>Amended and Restated 2017 Omnibus Incentive Plan.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459020037346/atnx-ex104_377.htm) | Form 10-Q | 001-38112 | 10.4 | August 6, 2020 |
| 10.9+ | [<u>First Amendment to the Athenex, Inc. Amended and Restated 2017 Omnibus Incentive Plan.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312521225767/d184703dex46.htm) | Form S-8 | 333-258192 | 4.6 | July 27, 2021 |
| 10.10+ | [<u>Second Amendment to the Athenex, Inc. Amended and Restated 2017 Omnibus Incentive Plan.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312522291096/d368440dex101.htm) | Form 8-K | 001-38112 | 10.1 | November 22, 2022 |
| 10.11+ | [<u>Form of Stock Option Award Agreement pursuant to the 2017 Omnibus Incentive Plan.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517193190/d358380dex105.htm) | Form S-1/A | 333-217928 | 10.5 | June 2, 2017 |
| 10.12+ | [<u>Form of Restricted Stock Award Agreement pursuant to the Amended and Restated 2017 Omnibus Incentive Plan.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459021009879/atnx-ex107_399.htm) | Form 10-K | 001-38112 | 10.7 | March 1, 2021 |
| 10.13+ | [<u>Form of Restricted Stock Unit Award Agreement (Officers) pursuant to the Amended and Restated 2017 Omnibus Incentive Plan.</u>](atnx-ex10_13.htm) |  |  |  | Filed herewith |
| 10.14+ | [<u>Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) pursuant to the Amended and Restated 2017 Omnibus Incentive Plan.</u>](atnx-ex10_14.htm) |  |  |  | Filed herewith |
| 10.15+ | [<u>Form of Salary Deduction and Stock Purchase Agreement.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312522088142/d312567dex101.htm) | Form 8-K | 001-38112 | 10.1 | March 29, 2022 |
| 10.16 | [<u>Sublease Agreement by and between Fort Schuyler Management Corporation and Kinex Pharmaceuticals, Inc., effective as of July 21, 2015.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1019.htm) | Form S-1 | 333-217928 | 10.19 | May 12, 2017 |
| 10.17 | [<u>Registration Rights Agreement dated as of July 3, 2018 by and between Athenex, Inc. and Perceptive Life Sciences Master Fund Ltd</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459018021579/atnx-ex107_47.htm)<u>.</u> | Form 10-Q | 001-38112 | 10.7 | August 14, 2018 |
| 10.18# | [<u>Credit Agreement and Guaranty dated as of June 19, 2020, by and among Athenex, Inc., the subsidiary guarantors from time to time party thereto, the lenders from time to time party thereto, and Oaktree Fund Administration, LLC, as administrative agent.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312520174767/d944864dex101.htm) | Form 8-K  | 001-38112 | 10.1 | June 22, 2020 |
| 10.19 | [<u>First Amendment and Limited Waiver to Credit and Guaranty Agreement between Athenex, Inc. and Oaktree Fund Administration, LLC, as administrative agent, dated June 3, 2021.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459021041708/atnx-ex104_47.htm) | Form 10-Q | 001-38112 | 10.4 | August 5, 2021 |
| 10.20 | [<u>Second Amendment to Credit and Guaranty Agreement between Athenex, Inc. and Oaktree Fund Administration, LLC, as administrative agent, dated December 14, 2021.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022003973/atnx-ex10_60.htm) | Form 10-K | 001-38112 | 10.60 | March 16, 2022 |
| 10.21 | [<u>Third Amendment to Credit and Guaranty Agreement and First Amendment to the Warrants between Athenex, Inc. and Oaktree Fund Administration, LLC, as administrative agent, dated January 19, 2022</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022003973/atnx-ex10_61.htm) | Form 10-K | 001-38112 | 10.61 | March 16, 2022 |
| 10.22# | [<u>Fourth Amendment to Credit and Guaranty Agreement, Second Amendment to the Warrants and Partial Release of Collateral, by and among Athenex, Inc., the lenders and warrant holders party thereto, and Oaktree Fund Administration, LLC, as administrative agent for the lenders, dated as of June 21, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022013461/atnx-ex10_2.htm) | Form 10-Q | 001-38112 | 10.2 | July 29, 2022 |
| 10.23 | [<u>Fifth Amendment to Credit and Guaranty Agreement, by and among Athenex, Inc., the lenders party thereto, and Oaktree Fund Administration, LLC, as administrative agent for the lenders, dated as of June 29, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022013461/atnx-ex10_3.htm) | Form 10-Q | 001-38112 | 10.3 | July 29, 2022 |

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---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| 10.24 | [<u>Sixth Amendment to Credit and Guaranty Agreement, by and among Athenex, Inc., the lenders party thereto, and Oaktree Fund Administration, LLC, as administrative agent for the lenders, dated as of August 14, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312522224125/d386166dex102.htm) | Form 8-K | 001-38112 | 10.2 | August 18, 2022 |
| 10.25 | [<u>Waiver to Credit and Guaranty Agreement, by and among Athenex, Inc., the lenders party thereto, and Oaktree Fund Administration, LLC, as administrative agent for the lenders, dated as of November 17, 2022.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312522289550/d370439dex101.htm) | Form 8-K | 001-38112 | 10.1 | November 21, 2022 |
| 10.26 | [<u>Security Agreement dated as of June 19, 2020, by and among Athenex, Inc., the subsidiary guarantors from time to time party thereto, the lenders from time to time party thereto, and Oaktree Fund Administration, LLC, as administrative agent.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459020037346/atnx-ex102_550.htm) | Form 10-Q | 001-38112 | 10.2 | August 6, 2020 |
| 10.27 | [<u>Registration Rights Agreement by and among Athenex, Inc. and the purchasers named therein, dated as of June 19, 2020.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459020037346/atnx-ex103_376.htm) | Form 10-Q | 001-38112 | 10.3 | August 6, 2020 |
| 10.28^ | [<u>License Agreement by and between Hanmi Pharmaceutical Ltd. and Kinex Pharmaceuticals, LLC, effective as of December 16, 2011.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex107.htm) | Form S-1 | 333-217928 | 10.7 | May 12, 2017 |
| 10.29 | [<u>First Amendment to License Agreement by and between Kinex Pharmaceuticals, LLC and Hanmi Pharmaceutical Co., Ltd., effective as of November 9, 2012.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1071.htm) | Form S-1 | 333-217928 | 10.7.1 | May 12, 2017 |
| 10.30 | [<u>Second Amendment to License Agreement by and between Kinex Pharmaceuticals, LLC and Hanmi Pharmaceutical Ltd., effective as of October 21, 2013.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1072.htm) | Form S-1 | 333-217928 | 10.7.2 | May 12, 2017 |
| 10.31 | [<u>Third Amendment to License Agreement by and between Kinex Pharmaceuticals, Inc. and Hanmi Pharmaceutical Ltd., effective as of March 3, 2015.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1073.htm) | Form S-1 | 333-217928 | 10.7.3 | May 12, 2017 |
| 10.32^ | [<u>Fourth Amendment to License Agreement by and between Athenex, Inc. and Hanmi Pharmaceutical Co., Ltd., effective as of March 7, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1074.htm) | Form S-1 | 333-217928 | 10.7.4 | May 12, 2017 |
| 10.33 | [<u>Fifth Amendment to License Agreement by and between Athenex, Inc. and Hanmi Pharmaceutical Co. Ltd., effective as of September 4, 2018.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459019007092/atnx-ex1045_921.htm) | Form 10-K | 001-38112 | 10.45 | March 11, 2019 |
| 10.34^ | [<u>License Agreement by and among Hanmi Pharmaceutical Co., Ltd., Kinex Therapeutics (HK) Limited, and Kinex Pharmaceuticals, Inc., effective as of June 28, 2013.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex108.htm) | Form S-1 | 333-217928 | 10.8 | May 12, 2017 |
| 10.35^ | [<u>Clinical Trial Collaboration and Supply Agreement by and among Athenex, Inc., Eli Lilly and Company and ImClone LLC, effective as of October 24, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1017.htm) | Form S-1 | 333-217928 | 10.17 | May 12, 2017 |
| 10.36^ | [<u>License and Development Agreement by and between Athenex, Inc., Almirall, S.A. and Aqua Pharmaceuticals LLC., dated as of December 11, 2017.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312517370782/d500481dex101.htm) | Form 8-K | 001-38112 | 10.1 | December 15, 2017 |
| 10.37^ | [<u>First Amendment to License and Development Agreement by and between Athenex, Inc., Almirall, S.A., and Aqua Pharmaceuticals LLC, dated as of September 26, 2018.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459018029421/atnx-ex103_322.htm) | Form 10-Q | 001-38112 | 10.3 | November 14, 2018 |
| 10.38^ | [<u>Letter Agreement by and between Athenex, Inc., Almirall, S.A. and Aqua Pharmaceuticals LLC, dated as of September 26, 2018.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459018029421/atnx-ex104_323.htm) | Form 10-Q | 001-38112 | 10.4 | November 14, 2018 |
| 10.39 | [<u>Second Amendment to License and Development Agreement by and between Athenex, Inc., Almirall, S.A., and Aqua Pharmaceuticals LLC, dated as of June 18, 2019.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459019029706/atnx-ex10302_120.htm) | Form 10-Q | 001-38112 | 10.30.2 | August 7, 2019 |

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------

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| 10.40\*\*# | [<u>Revenue Interest Purchase Agreement, by and among ATNX SPV, LLC, Athenex, Inc., and the purchaser parties thereto, dated as of June 21, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022013461/atnx-ex10_1.htm) | Form 10-Q | 001-38112 | 10.1 | July 29, 2022 |
| 10.41 | [<u>Limited Waiver under Revenue Interest Purchase Agreement, by and among ATNX SPV, LLC, Athenex, Inc., and the purchaser parties thereto, dated as of August 14, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312522224125/d386166dex101.htm) | Form 8-K | 001-38112 | 10.1 | August 18, 2022 |
| 10.42^ | [<u>License Agreement by and between Kinex Pharmaceuticals, LLC and PharmaEssentia Corp., effective as of December 8, 2011.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1010.htm) | Form S-1 | 333-217928 | 10.10 | May 12, 2017 |
| 10.43 | [<u>First Amendment to License Agreement by and between Athenex, Inc. and PharmaEssentia Corp., effective as of December 23, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex10101.htm) | Form S-1 | 333-217928 | 10.10.1 | May 12, 2017 |
| 10.44 | [<u>Second Amendment to License Agreement by and between Athenex, Inc. and PharmaEssentia Corp. dated as of February 15, 2021.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459021024603/atnx-ex102_182.htm) | Form 10-Q | 001-38112 | 10.2 | May 6, 2021 |
| 10.45^ | [<u>License Agreement by and between Kinex Pharmaceuticals, Inc. and PharmaEssentia Corp., effective as of December 16, 2013.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1011.htm) | Form 10-Q | 001-38112  | 10.11 | May 7, 2020 |
| 10.46 | [<u>First Amendment to License Agreement by and between Athenex, Inc. and PharmaEssentia Corp., effective as of December 23, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex10111.htm) | Form S-1 | 333-217928 | 10.11.1 | May 12, 2017 |
| 10.47^ | [<u>Second Amendment to License Agreement by and between Athenex, Inc. and PharmaEssentia Corp., effective as of November 27, 2018.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459020022542/atnx-ex10112_208.htm) | Form 10-Q | 001-38112 | 10.11.2 | May 7, 2020 |
| 10.48^ | [<u>Binding Term Sheet for License by and between Athenex Pharmaceutical Division, LLC and Gland Pharma Limited, effective as of August 1, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1014.htm) | Form S-1 | 333-217928 | 10.14 | May 12, 2017 |
| 10.49^ | [<u>Binding Term Sheet for License by and between Athenex Pharmaceutical Division, LLC and Gland Pharma Limited, effective as of August 26, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex10141.htm) | Form S-1 | 333-217928 | 10.14.1 | May 12, 2017 |
| 10.50^ | [<u>Binding Term Sheet for License by and between Athenex Pharmaceutical Division, LLC and Gland Pharma Limited, effective as of February 22, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex10142.htm) | Form S-1 | 333-217928 | 10.14.2 | May 12, 2017 |
| 10.51^ | [<u>Binding Term Sheet for License by and between Athenex Pharmaceutical Division, LLC and Gland Pharma Limited, effective as of May 5, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517193190/d358380dex10143.htm) | Form S-1/A | 333-217928 | 10.14.3 | June 2, 2017 |
| 10.52^ | [<u>Joint Venture Agreement by and between SunGen Pharma LLC and Athenex Pharmaceutical Division, effective as of September 22, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1015.htm) | Form S-1 | 333-217928 | 10.15 | May 12, 2017 |
| 10.53^ | [<u>Addendum to Joint Venture Agreement by and between SunGen Pharma LLC and Athenex Pharmaceutical Division, LLC, effective November 29, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex10151.htm) | Form S-1 | 333-217928 | 10.15.1 | May 12, 2017 |
| 10.54 | [<u>Limited Liability Company Agreement of Peterson Athenex Pharmaceuticals, LLC, effective as of October 4, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex10152.htm) | Form S-1 | 333-217928 | 10.15.2 | May 12, 2017 |
| 10.55^ | [<u>Service Agreement by and between Dohmen Life Science Services, LLC (n/k/a Eversana Life Science Services, LLC) and Athenex Pharmaceutical Division, LLC, effective as of August 9, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1016.htm) | Form S-1 | 333-217928 | 10.16 | May 12, 2017 |
| 10.56^ | [<u>Binding Term Sheet for License, Supply and Distribution Agreement by and among Athenex API Limited, Nang-Kuang Pharmaceutical Co., LTD and CANDA NK-2, LLC, effective as of December 29, 2016.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1021.htm) | Form S-1 | 333-217928 | 10.21 | May 12, 2017 |
| 10.57 | [<u>Asset Purchase Agreement by and between Athenex, Inc. and Amphastar Pharmaceuticals, Inc., dated February 1, 2017.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312517168575/d201422dex1022.htm) | Form S-1 | 333-217928 | 10.22 | May 12, 2017 |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| 10.58\*\* | [<u>Asset Purchase and Sale Agreement dated as of September 1, 2020 by and between Athenex Pharmaceutical Division, LLC and Ingenus Pharmaceuticals, LLC.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459021009879/atnx-ex1050_525.htm) | Form 10-K | 001-38112 | 10.50 | March 1, 2021 |
| 10.59\*\* | [<u>Co-Marketing, Manufacture and Supply Agreement dated as of November 2, 2020 by and between Athenex Pharmaceutical Division, LLC and Ingenus Pharmaceuticals, LLC.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459021009879/atnx-ex1051_527.htm) | Form 10-K | 001-38112 | 10.51 | March 1, 2021 |
| 10.60\*\* | [<u>Manufacture and Supply Agreement dated as of January 15, 2021 by and between Athenex Pharmaceutical Division, LLC and Ingenus Pharmaceuticals, LLC.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000156459021009879/atnx-ex1052_526.htm) | Form 10-K | 001-38112 | 10.52 | March 1, 2021 |
| 10.61^ | [<u>License Agreement dated as of June 29, 2018 by and between Xiangxue Life Sciences Ltd. and Axis Therapeutics Limited.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000119312518211357/d653771dex103.htm) | Form 8-K | 001-38112 | 10.3 | July 2, 2018 |
| 10.62\*\*# | [<u>Second Amended and Restated Co-Development Agreement between Baylor College of Medicine and Kuur Therapeutics Limited, dated October 12, 2021.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022003973/atnx-ex10_71.htm) | Form 10-K | 001-38112 | 10.71 | March 16, 2022 |
| 10.63\*\* | [<u>Second Amended and Restated Exclusive License and Option Agreement between Baylor College of Medicine and Kuur Therapeutics Limited, dated October 12, 2021.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022003973/atnx-ex10_72.htm) | Form 10-K | 001-38112 | 10.72 | March 16, 2022 |
| 10.64# | [<u>Purchase Agreement, by and between Athenex, Inc. and ImmunityBio, Inc. dated January 7, 2022.</u>](https://www.sec.gov/Archives/edgar/data/0001300699/000119312522007334/d292590dex101.htm) | Form 8-K | 001-38112 | 10.1 | January 12, 2022 |
| 10.65# | [<u>Equity Purchase Agreement, by and among TiHe Capital (Beijing) Co. Ltd., Athenex API Limited, Athenex Pharmaceuticals (China) Limited, Polymed Therapeutics, Inc., and Athenex, Inc., dated as of July 7, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022013461/atnx-ex10_4.htm) | Form 10-Q | 001-38112 | 10.4 | July 29, 2022 |
| 10.66 | [<u>Letter Agreement, by and among TiHe Capital (Beijing) Co. Ltd., Athenex API Limited, Athenex Pharmaceuticals (China) Limited, Polymed Therapeutics, Inc., and Athenex, Inc., dated as of September 30, 2022.</u>](https://www.sec.gov/Archives/edgar/data/1300699/000095017022021640/atnx-ex10_5.htm) | Form 10-Q | 001-38112 | 10.5 | November 3, 2022 |
| 10.67# | [<u>Supply Agreement, by and among Chongqing Taihao Pharmaceutical Co., Ltd., Chongqing Sintaho Pharmaceutical Co., Ltd., and ATNX SPV, LLC, dated as of November 16, 2022.</u>](atnx-ex10_67.htm) | __ | __ | __ | Filed herewith |
| 21.1 | [<u>Subsidiaries of Athenex, Inc.</u>](atnx-ex21_1.htm) | __ | __ | __ | Filed herewith |
| 23.1 | <u>Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.</u> | __ | __ | __ | Filed herewith |
| 24.1 | <u>Power of Attorney (included on signature page hereto).</u> | __ | __ | __ | Filed herewith |
| 31.1 | [<u>Certification of the Chief Executive Officer and Board Chairman (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](atnx-ex31_1.htm) | __ | __ | __ | Filed herewith |
| 31.2 | [<u>Certification of the Chief Financial Officer (Principal Financial and Accounting Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</u>](atnx-ex31_2.htm) | __ | __ | __ | Filed herewith |
| 32.1 | [<u>Certification of the Chief Executive Officer and Board Chairman (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</u>](atnx-ex32_1.htm) | __ | __ | __ | Filed herewith |
| 101.INS | Inline XBRL Instance Document. | __ | __ | __ | Filed herewith |
| 101.SCHY | Inline XBRL Taxonomy Extension Schema Document. | __ | __ | __ | Filed herewith |

---

------

---

| | | |
|:---|:---|:---|
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | Filed herewith |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | Filed herewith |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | Filed herewith |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | Filed herewith |
| 104 | Cover Page Interactive Data File  | Filed herewith |

---

+ Indicates management contract or compensatory plan.

^ Confidential treatment has been granted for certain confidential portions of this exhibit pursuant to Rule 406 under the Securities Act. In accordance with Rule 406, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission.

\*\* Certain portions of this exhibit have been omitted (indicated by asterisks) pursuant to Item 601(b) of Regulation S-K of the Securities Act of 1933, as amended, because such omitted information is (i) not material and (ii) would be competitively harmful if publicly disclosed.

# Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish a copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.

**Item 16. Form 10-K Summary.**

None.

------

**SIGNATURES** 

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 20, 2023

---

| | |
|:---|:---|
| **ATHENEX, INC.** | **ATHENEX, INC.** |
| By: | /s/ Johnson Y.N. Lau |
|  | Johnson Y.N. Lau |
|  | Chief Executive Officer and Board Chairman |

---

------

**POWER OF ATTORNEY**

Each person whose individual signature appears below hereby authorizes and appoints Johnson Y. N. Lau and Joe Annoni, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **Signature** | &nbsp;&nbsp;&nbsp;**Title** | **Date** |
| /s/ Johnson Y.N. Lau<br>Johnson Y.N. Lau | &nbsp;&nbsp;Chief Executive Officer and Board Chairman (Principal Executive Officer) | &nbsp;&nbsp;March 20, 2023 |
| /s/ Joe Annoni<br>Joe Annoni | &nbsp;&nbsp;Chief Financial Officer<br>(Principal Financial and Accounting Officer) | &nbsp;&nbsp;March 20, 2023 |
| /s/ Stephanie Davis<br>Stephanie Davis | &nbsp;&nbsp;Director | &nbsp;&nbsp;March 20, 2023 |
| /s/ Manson Fok<br>Manson Fok | &nbsp;&nbsp;Director | &nbsp;&nbsp;March 20, 2023 |
| /s/ Jordan Kanfer<br>Jordan Kanfer | &nbsp;&nbsp;Director | &nbsp;&nbsp;March 20, 2023 |
| /s/ Robert Spiegel<br>Robert Spiegel | &nbsp;&nbsp;Director | &nbsp;&nbsp;March 20, 2023 |
| /s/ Benson Tsang<br>Benson Tsang | &nbsp;&nbsp;Director | &nbsp;&nbsp;March 20, 2023 |
| /s/ John Moore Vierling<br>John Moore Vierling | &nbsp;&nbsp;Director | &nbsp;&nbsp;March 20, 2023 |
| /s/ Jinn Wu<br>Jinn Wu | &nbsp;&nbsp;Director | &nbsp;&nbsp;March 20, 2023 |

---

------

## Ex-4

**Exhibit 4.1**

![img118509878_0.jpg](img118509878_0.jpg)

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![img118509878_1.jpg](img118509878_1.jpg)

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## Ex-4

&nbsp;&nbsp;**Exhibit 4.7**<br>

DESCRIPTION OF SECURITIES

The following is a brief description of the common stock, par value $0.001 per share (the "common stock"), of Athenex, Inc. (the "Company," "we," "our" or "us"), which is the only security of the Company registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. This description is not complete and is qualified by reference to our amended and restated certificate of incorporation, as amended (the "certificate of incorporation"), our amended and restated bylaws (the "bylaws") and applicable provisions of Delaware corporate law. You should read our certificate of incorporation and bylaws, which are filed as exhibits to the Annual Report on Form 10-K to which this exhibit is attached.

Our certificate of incorporation authorizes us to issue 50,000,000 shares of capital stock, divided into two classes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•25,000,000 shares of common stock, $0.001 par value per share; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•25,000,000 shares of preferred stock, $0.001 par value per share ("preferred stock").

As of December 31, 2022, no shares of preferred stock were outstanding.

**Common Stock**

Holders of our common stock are entitled to one vote per share with respect to each matter presented to our stockholders and such matters are decided by a majority of votes cast, except that the election of directors is decided by a plurality of votes cast. Holders of our common stock do not have cumulative voting rights. We maintain a classified board of directors with approximately one-third of our board being elected in any given year to one of three classes for a term of three years.

The holders of common stock are entitled to receive dividends and other distributions ratably when, as and if declared by the board of directors out of legally available funds, subject to each class of stock if any, having preference over the common stock to receive dividends. In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to share ratably in all assets remaining available for distribution after payment of debts and liabilities and after provision is made for each class of stock, if any, having preference over the common stock. Holders of common stock have no preemptive, subscription, redemption, sinking fund, or conversion rights. All the outstanding shares of common stock are validly issued, fully paid and non-assessable.

Our common stock is listed for trading on The Nasdaq Stock Market LLC under the symbol "ATNX."

**Preferred Stock**

Our board of directors has authority, without vote or further action by the stockholders, to issue up to 25,000,000 shares of preferred stock in one or more series. Our board of directors has

DOCPROPERTY YCFooter \\* MERGEFORMAT 12238243_3

------

the authority to fix or alter the terms of each series of preferred stock, within the limits of the certificate of incorporation and applicable provisions of Delaware corporate law. These terms include the number of shares in a series, dividend rights, liquidation preferences, terms of redemption, conversion rights and voting rights.

The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future. These possible negative effects include diluting the voting power of shares of our common stock and affecting the market price of our common stock.

**Anti-Takeover Effects of Provisions of our Certificate of Incorporation and Bylaws**

**Classified Board**

Our certificate of incorporation provides that subject to the rights of holders of any one or more series of preferred stock to elect one or more directors, the board shall be divided into three classes, with the intention that each class consist of approximately one-third of the total number of our directors. Our stockholders elect only one class of directors each year. We believe that classification of our board of directors helps to assure the continuity of our business strategies and policies. The classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult. At least two annual meetings of our stockholders generally are required to effect a change in a majority of our board of directors.

**Removal of Directors; Filling Vacancies and Newly Created Directorships**

Our certificate of incorporation and bylaws provide that subject to any limitations imposed by law and the rights of the holders of any series of our preferred stock, the board of directors or any individual director may be removed from office by our stockholders only for cause. Subject to the rights of holders of any series of outstanding preferred stock, vacancies in the board and newly created directorships shall, unless otherwise provided by law, be filled solely by the affirmative vote of a majority of directors then in office, or by a sole remaining director, and shall not be filled by stockholders. Our board of directors has the power to fix the number of directors within a range specified in our amended and restated bylaws.

**Restrictions on Call of Special Meetings of Stockholders; No Written Consent**

Our certificate of incorporation provides that special meetings of stockholders may only be called by the chairman of our board of directors, our chief executive officer, or our board of directors. In addition, our bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice of such meeting. Our certificate of incorporation provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting.

**Advance Notice Requirements and Procedures**

Our bylaws include advance notice procedures for stockholders to nominate candidates for election as directors or to bring other business before any meeting of our stockholders. These

DOCPROPERTY YCFooter \\* MERGEFORMAT 12238243_3

------

procedures provide that notice of stockholder nominations and proposals must be timely given in writing to our secretary prior to the meeting at which the action is to be taken.

Under the stockholder notice procedures, for notice of stockholder nominations or other business to be made at the stockholders' annual meeting to be timely, the notice must be received at our principal executive offices not later than the 90th day nor earlier than the 120th day prior to the one-year anniversary of the immediately preceding year's annual meeting or as otherwise provided in our bylaws. The stockholder's notice to us proposing to nominate a person for election as a director or proposing other business must contain certain information specified in the bylaws.

These stockholder notice procedures may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal, without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.

**Amendment to Certificate of Incorporation and Bylaws**

Our certificate of incorporation provides that the affirmative votes of the holders of at least 75% of the voting power of all of the then outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class, are required to amend or repeal certain provisions of our certificate of incorporation, including provisions relating to the size of our board of directors, term and classification of directors, removal of directors, filling board vacancies and newly-created directorships, special meetings of stockholders, stockholder action by written consent, limitation of liability and indemnification, and amendment of the certificate of incorporation and bylaws.

The affirmative votes of the holders of at least 75% of the voting power of all of the then-outstanding shares of our voting stock are required to amend or repeal our bylaws. In addition, our amended and restated bylaws may be amended by our board of directors.

**Preferred Stock**

Our certificate of incorporation permits our board of directors, without vote or further action by the stockholders, to issue up to 25,000,000 shares of preferred stock in one or more series and to fix or alter the terms of each series of preferred stock, within the limits of the certificate of incorporation and applicable provisions of Delaware corporate law. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of us without further action by our stockholders and may adversely affect the dividend, liquidation and voting and other rights of the holders of common stock. The issuance of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to others.

**Exclusive Forum of Certain Actions**

Our certificate of incorporation provides that, unless a majority of our board of directors consents in writing to an alternative forum, the Court of Chancery of the State of Delaware (or, if

DOCPROPERTY YCFooter \\* MERGEFORMAT 12238243_3

------

the Court of Chancery does not have jurisdiction, another state court located within the State of Delaware, or, if no court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for any derivative action brought in the name of the Company, (ii) any action against directors, officers or employees for breach a breach of fiduciary duty, (iii) any action or claim against the Company pursuant to the Delaware General Corporation Law, as amended, or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us or any of our directors, officers or employees governed by the internal affairs doctrine of the State of Delaware.

DOCPROPERTY YCFooter \\* MERGEFORMAT 12238243_3

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## Ex-10

**Exhibit 10.13**

**ATHENEX, INC.**

**AMENDED AND RESTATED<br>2017 OMNIBUS INCENTIVE PLAN**

**NOTICE OF RESTRICTED STOCK UNIT AWARD (OFFICER)**

Grantee's Name and Address:

[Participant Name:First Name Last Name]

[Address:Linear]

You (the "Grantee") have been granted an Award (the "Award") of Restricted Stock Units (the "RSUs"), subject to the terms and conditions of this Notice of Restricted Stock Unit Award (the "Notice"), the Athenex, Inc. Amended and Restated 2017 Omnibus Incentive Plan (as further amended from time to time, the "Plan"), and the Restricted Stock Unit Award Agreement (the "RSU Agreement") attached hereto, as follows. Unless otherwise provided herein, the terms in this Notice shall have the same meaning as those defined in the Plan.

---

| | |
|:---|:---|
| &nbsp;&nbsp;Award Number: | &nbsp;&nbsp;[Grant ID:Grant ID] |
| &nbsp;&nbsp;Date of Award:  | &nbsp;&nbsp;[Grant Date:Month DD, YYYY]  |
| &nbsp;&nbsp;Total Number of Restricted Stock Units: | &nbsp;&nbsp;[Granted:RSUs Granted]  |

---

<u>Vesting Schedule</u>:

Subject to the Grantee's Continuous Service and other limitations set forth in this Notice, the RSU Agreement and the Plan, the RSUs will "vest" in accordance with the following schedule (the "Vesting Schedule"):

25% on the first anniversary of the date of this Agreement;

25% on the second anniversary of the date of this Agreement;

25% on the third anniversary of the date of this Agreement; and

25% on the fourth anniversary of the date of this Agreement.

In the event of the Grantee's change in status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the RSUs shall continue to vest in accordance with the Vesting Schedule set forth above.

Vesting shall cease upon the date of termination of the Grantee's Continuous Service for any reason, including death or Disability.

------

The Award shall be subject to the provisions of Section 11 of the Plan in the event of a Corporate Transaction or Change in Control.

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE RSUS SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE'S CONTINUOUS SERVICE OR AS OTHERWISE SPECIFICALLY PROVIDED HEREIN (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE AWARD OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE RSU AGREEMENT, OR THE PLAN SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF THE GRANTEE'S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE'S RIGHT OR THE RIGHT OF THE COMPANY OR RELATED ENTITY TO WHICH THE GRANTEE PROVIDES SERVICES TO TERMINATE THE GRANTEE'S CONTINUOUS SERVICE AT ANY TIME, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, THE GRANTEE'S STATUS IS AT WILL.

The Grantee acknowledges receipt of a copy of the Plan and the RSU Agreement, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the RSU Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice, and fully understands all provisions of this Notice, the RSU Agreement and the Plan.

The Grantee further acknowledges that, from time to time, the Company may be in a "blackout period" and/or subject to applicable federal securities laws that could subject the Grantee to liability for engaging in any transaction involving the sale of the Shares. The Grantee further acknowledges and agrees that, prior to the sale of any Shares acquired under the Award, it is the Grantee's responsibility to determine whether or not the sale of the Shares will subject the Grantee to liability under insider trading rules or other applicable federal securities laws.

The Company may, in its sole discretion, decide to deliver this Notice, the RSU Agreement, the Plan and the Plan prospectus (collectively, the "Plan Documents") to the Grantee by electronic means or request the Grantee's consent to participate in the Plan by electronic means. The Grantee hereby agrees to Company's provision to the Grantee of these documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

The Grantee acknowledges that the Grantee has access to the Company's intranet and has either received electronic or paper copies of the Plan Documents.

The Grantee hereby agrees that all questions of interpretation and administration relating to this Notice, the Plan and the RSU Agreement shall be resolved by the Administrator in accordance with Section 8 of the RSU Agreement. The Grantee further agrees to the venue selection and waiver of a jury trial in accordance with Section 9 of the RSU Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.

**END OF NOTICE**

------

**Award Number: [Grant ID:Grant ID]**

**ATHENEX, INC.**

**AMENDED AND RESTATED<br>2017 OMNIBUS INCENTIVE PLAN**

**<u>RESTRICTED STOCK UNIT AWARD AGREEMENT</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Grant of Restricted Stock Units</u>. Athenex, Inc., a Delaware corporation (the "Company"), hereby grants to the Grantee (the "Grantee") named in the Notice of Restricted Stock Unit Award (the "Notice"), an Award (the "Award") of Restricted Stock Units (the "RSUs") for the Number of Shares of Restricted Stock Units set forth in the Notice, subject to the terms and provisions of the Notice, this Restricted Stock Unit Award Agreement (this "RSU Agreement") and the Company's Amended and Restated 2017 Omnibus Incentive Plan (as further amended from time to time, the "Plan"), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this RSU Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Vesting</u>. Subject to the provisions of the Notice, this RSU Agreement and the Plan, the RSUs shall vest in accordance with the Vesting Schedule set out in the Notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Settlement</u>. As soon as reasonably practicable after the vesting of any RSUs, but no later than thirty (30) days thereafter, the Company shall issue to the Grantee a number of Shares equal to the number of RSUs that vested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Taxes</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) No Shares will be delivered to the Grantee or other person pursuant to the vesting of the RSUs until the Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of applicable income tax and employment tax withholding obligations, including, without limitation, such other tax obligations of the Grantee incident to the receipt of Shares. Upon vesting of the RSUs, the Company or the Grantee's employer may offset or withhold (from any amount owed by the Company or the Grantee's employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax withholding obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) At the time that the Grantee accepts this Award, the Grantee shall irrevocably elect to have the Tax Withholding Obligation satisfied by either (i) agreeing to pay the Tax Withholding Amount to the Company in cash or by check or wire transfer on or before the day the Tax Withholding Obligation arises, or (ii) instructing and authorizing the Company to withhold a whole number of Shares from those Shares issuable to the Grantee having a Fair Market Value sufficient to satisfy the minimum applicable Tax Withholding Obligation (a "Tax Obligation Net Settlement"). If a Grantee elects to have the Tax Withholding Obligation satisfied by paying the Tax Withholding Amount to the Company and the Grantee fails to pay the Tax Withholding Amount on or before the day the Tax Withholding Obligation arises, then the Grantee's acceptance of this Award constitutes the Grantee's instruction and authorization to the Company to satisfy the minimum applicable Tax Withholding Obligation by means of a Tax Obligation Net Settlement. If a Grantee elects to have the Tax Withholding Obligation satisfied by the Company withholding Shares in a Tax Obligation Net Settlement, then the Company shall withhold on the day the Tax Withholding Obligation arises a whole number of Shares from those Shares issuable to the Grantee having a Fair Market Value sufficient to satisfy the minimum applicable Tax Withholding Obligation. If the Tax Withholding Obligation is satisfied by a Tax Obligation Net

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Settlement and the Fair Market Value of the whole number of Shares in the Tax Obligation Net Settlement exceeds the Grantee's minimum Tax Withholding Obligation, the Company agrees to pay the excess in cash to the Grantee. Notwithstanding the foregoing terms of this Section 4(c), a Grantee's election shall not be binding on the Company and in all cases the Committee (in its sole discretion) may require that the Tax Withholding Obligation be satisfied in another manner of its choosing.]

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In the event of any determination that the Company and/or a Related Entity has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the RSUs, the Grantee agrees to pay the Company and/or the Related Entity the amount of such deficiency in cash within five (5) days after receiving a written demand from the Company and/or the Related Entity to do so, whether or not the Grantee is an employee of the Company and/or the Related Entity at that time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Transferability</u>. The RSUs may not be sold, assigned, pledged, hypothecated or otherwise transferred, whether by operation of law or otherwise, nor may the RSUs be made subject to execution, attachment or similar process. If the Grantee attempts to do any of these things, the Grantee will immediately forfeit the RSUs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Entire Agreement; Governing Law</u>. The Notice, the Plan and this RSU Agreement constitute the entire agreement of the parties with respect to the subject matter of this RSU Agreement and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter of this RSU Agreement, and may not be modified adversely to the Grantee's interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan and this RSU Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this RSU Agreement are to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties. Should any provision of the Notice, the Plan or this RSU Agreement be determined to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Construction</u>. The captions used in the Notice and this RSU Agreement are inserted for convenience and shall not be deemed a part of the Award for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Administration and Interpretation</u>. Any question or dispute regarding the administration or interpretation of the Notice, the Plan or this RSU Agreement shall be submitted by the Grantee or by the Company to the Administrator. The resolution of such question or dispute by the Administrator shall be final and binding on all persons.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Venue and Waiver of Jury Trial</u>. The Company and the Grantee (the "parties") agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this RSU Agreement shall be brought in the United States District Court for Western District of New York (or should such court lack jurisdiction to hear such action, suit or proceeding, in an appropriate state court in the State of New York) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. **THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING**. If any one or more provisions of this Section 9 shall for any reason be held invalid or

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unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. <u>Notices</u>. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. <u>Language</u>. If the Grantee has received this RSU Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control, unless otherwise prescribed by Applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. <u>Nature of Award</u>. In accepting the Award, the Grantee acknowledges and agrees that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this RSU Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Award is voluntary and occasional and does not create any contractual or other right to receive future awards, or benefits in lieu of awards, even if awards have been awarded repeatedly in the past;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the Grantee's participation in the Plan is voluntary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Grantee's participation in the Plan shall not create a right to any employment with the Grantee's employer and shall not interfere with the ability of the Company or the employer to terminate the Grantee's employment relationship, if any, at any time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or any Related Entity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) in the event that the Grantee is not an Employee of the Company or any Related Entity, the Award and the Grantee's participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company or any Related Entity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the future value of the underlying Shares is unknown and cannot be predicted with certainty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) in consideration of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or diminution in value of the Award or Shares acquired upon vesting of the Award, resulting from termination of the Grantee's Continuous Service by the Company or any Related Entity (for any reason whatsoever and whether or not in breach of local labor laws) and in

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consideration of the grant of the Award, the Grantee irrevocably releases the Company and any Related Entity from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing the Notice, the Grantee shall be deemed irrevocably to have waived his or her right to pursue or seek remedy for any such claim or entitlement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) in the event of termination of the Grantee's Continuous Service (whether or not in breach of local labor laws), the Grantee's right to receive Awards under the Plan and to vest in such Awards, if any, will (except as otherwise provided in the Notice or herein) terminate effective as of the date that the Grantee is no longer providing services and will not be extended by any notice period mandated under local law (e.g., providing services would not include a period of "garden leave" or similar period pursuant to local law); furthermore, in the event of termination of the Grantee's Continuous Service (whether or not in breach of local labor laws), the Administrator shall have the exclusive discretion to determine when the Grantee is no longer providing services for purposes of this Award;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Grantee's participation in the Plan or the Grantee's acquisition or sale of the underlying Shares; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) the Grantee is hereby advised to consult with the Grantee's own personal tax, legal and financial advisers regarding the Grantee's participation in the Plan before taking any action related to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. <u>Data Privacy</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee's personal data as described in the Notice and this RSU Agreement by and among, as applicable, the Grantee's employer, the Company and any Related Entity for the exclusive purpose of implementing, administering and managing the Grantee's participation in the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Grantee understands that the Company and the Grantee's employer may hold certain personal information about the Grantee, including, but not limited to, the Grantee's name, home address and telephone number, date of birth, social insurance or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Awards or any other entitlement to Shares awarded, canceled, vested, unvested or outstanding in the Grantee's favor, for the exclusive purpose of implementing, administering and managing the Plan ("Data").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Grantee understands that Data will be transferred to any third party assisting the Company with the implementation, administration and management of the Plan. The Grantee understands that the recipients of the Data may be located in the Grantee's country, or elsewhere, and that the recipients' country may have different data privacy laws and protections than the Grantee's country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantee's local human resources representative. The Grantee authorizes the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing the Grantee's participation in the Plan. The Grantee understands that Data will be held only as long as is necessary to implement, administer and manage the Grantee's participation in the Plan. The Grantee understands that the Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantee's local human resources

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representative. The Grantee understands, however, that refusal or withdrawal of consent may affect the Grantee's ability to participate in the Plan. For more information on the consequences of the Grantee's refusal to consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantee's local human resources representative.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. <u>Section 409A</u>. The Award is intended to qualify for the short-term deferral exception to Section 409A of the Code, and this RSU Agreement shall be interpreted and administered accordingly. Notwithstanding the foregoing, the Company makes no representations that the Award is exempt from Section 409A of Code, and in no event shall the Company or any Related Entity be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of Code.

**END OF AGREEMENT**

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## Ex-10

**Exhibit 10.14**

**ATHENEX, INC.**

**AMENDED AND RESTATED<br>2017 OMNIBUS INCENTIVE PLAN**

**NOTICE OF RESTRICTED STOCK UNIT AWARD (NON-EMPLOYEE DIRECTOR)**

Grantee's Name and Address:

[Participant Name:First Name Last Name]

[Address:Linear]

You (the "Grantee") have been granted an Award (the "Award") of Restricted Stock Units (the "RSUs"), subject to the terms and conditions of this Notice of Restricted Stock Unit Award (the "Notice"), the Athenex, Inc. Amended and Restated 2017 Omnibus Incentive Plan (as further amended from time to time, the "Plan"), and the Restricted Stock Unit Award Agreement (the "RSU Agreement") attached hereto, as follows. Unless otherwise provided herein, the terms in this Notice shall have the same meaning as those defined in the Plan.

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| | |
|:---|:---|
| &nbsp;&nbsp;Award Number: | &nbsp;&nbsp;[Grant ID:Grant ID] |
| &nbsp;&nbsp;Date of Award:  | &nbsp;&nbsp;[Grant Date:Month DD, YYYY]  |
| &nbsp;&nbsp;Total Number of Restricted Stock Units: | &nbsp;&nbsp;[Granted:RSUs Granted]  |

---

<u>Vesting Schedule</u>:

Subject to the Grantee's Continuous Service and other limitations set forth in this Notice, the RSU Agreement and the Plan, the RSUs will "vest" in accordance with the following schedule (the "Vesting Schedule"):

25% on the first anniversary of the date of this Agreement;

25% on the second anniversary of the date of this Agreement;

25% on the third anniversary of the date of this Agreement; and

25% on the fourth anniversary of the date of this Agreement.

In the event of the Grantee's change in status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the RSUs shall continue to vest in accordance with the Vesting Schedule set forth above.

Vesting shall cease upon the date of termination of the Grantee's Continuous Service for any reason, including death or Disability.

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The Award shall be subject to the provisions of Section 11 of the Plan in the event of a Corporate Transaction or Change in Control.

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE RSUS SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE'S CONTINUOUS SERVICE OR AS OTHERWISE SPECIFICALLY PROVIDED HEREIN (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE AWARD OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE RSU AGREEMENT, OR THE PLAN SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF THE GRANTEE'S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE'S RIGHT OR THE RIGHT OF THE COMPANY OR RELATED ENTITY TO WHICH THE GRANTEE PROVIDES SERVICES TO TERMINATE THE GRANTEE'S CONTINUOUS SERVICE AT ANY TIME, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, THE GRANTEE'S STATUS IS AT WILL.

The Grantee acknowledges receipt of a copy of the Plan and the RSU Agreement, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the RSU Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice, and fully understands all provisions of this Notice, the RSU Agreement and the Plan.

The Grantee further acknowledges that, from time to time, the Company may be in a "blackout period" and/or subject to applicable federal securities laws that could subject the Grantee to liability for engaging in any transaction involving the sale of the Shares. The Grantee further acknowledges and agrees that, prior to the sale of any Shares acquired under the Award, it is the Grantee's responsibility to determine whether or not the sale of the Shares will subject the Grantee to liability under insider trading rules or other applicable federal securities laws.

The Company may, in its sole discretion, decide to deliver this Notice, the RSU Agreement, the Plan and the Plan prospectus (collectively, the "Plan Documents") to the Grantee by electronic means or request the Grantee's consent to participate in the Plan by electronic means. The Grantee hereby agrees to Company's provision to the Grantee of these documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

The Grantee acknowledges that the Grantee has access to the Company's intranet and has either received electronic or paper copies of the Plan Documents.

The Grantee hereby agrees that all questions of interpretation and administration relating to this Notice, the Plan and the RSU Agreement shall be resolved by the Administrator in accordance with Section 8 of the RSU Agreement. The Grantee further agrees to the venue selection and waiver of a jury trial in accordance with Section 9 of the RSU Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.

**END OF NOTICE**

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**Award Number: [Grant ID:Grant ID]**

**ATHENEX, INC.**

**AMENDED AND RESTATED<br>2017 OMNIBUS INCENTIVE PLAN**

**<u>RESTRICTED STOCK UNIT AWARD AGREEMENT</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Grant of Restricted Stock Units</u>. Athenex, Inc., a Delaware corporation (the "Company"), hereby grants to the Grantee (the "Grantee") named in the Notice of Restricted Stock Unit Award (the "Notice"), an Award (the "Award") of Restricted Stock Units (the "RSUs") for the Number of Shares of Restricted Stock Units set forth in the Notice, subject to the terms and provisions of the Notice, this Restricted Stock Unit Award Agreement (this "RSU Agreement") and the Company's Amended and Restated 2017 Omnibus Incentive Plan (as further amended from time to time, the "Plan"), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this RSU Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Vesting</u>. Subject to the provisions of the Notice, this RSU Agreement and the Plan, the RSUs shall vest in accordance with the Vesting Schedule set out in the Notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Settlement</u>. As soon as reasonably practicable after the vesting of any RSUs, but no later than thirty (30) days thereafter, the Company shall issue to the Grantee a number of Shares equal to the number of RSUs that vested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Taxes</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) No Shares will be delivered to the Grantee or other person pursuant to the vesting of the RSUs until the Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of applicable income tax and employment tax withholding obligations, including, without limitation, such other tax obligations of the Grantee incident to the receipt of Shares. Upon vesting of the RSUs, the Company or the Grantee's employer may offset or withhold (from any amount owed by the Company or the Grantee's employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax withholding obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In the event of any determination that the Company and/or a Related Entity has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the RSUs, the Grantee agrees to pay the Company and/or the Related Entity the amount of such deficiency in cash within five (5) days after receiving a written demand from the Company and/or the Related Entity to do so, whether or not the Grantee is an employee of the Company and/or the Related Entity at that time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Transferability</u>. The RSUs may not be sold, assigned, pledged, hypothecated or otherwise transferred, whether by operation of law or otherwise, nor may the RSUs be made subject to execution, attachment or similar process. If the Grantee attempts to do any of these things, the Grantee will immediately forfeit the RSUs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Entire Agreement; Governing Law</u>. The Notice, the Plan and this RSU Agreement constitute the entire agreement of the parties with respect to the subject matter of this RSU Agreement and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter of this RSU Agreement, and may not be modified adversely to the Grantee's

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interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan and this RSU Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this RSU Agreement are to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties. Should any provision of the Notice, the Plan or this RSU Agreement be determined to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Construction</u>. The captions used in the Notice and this RSU Agreement are inserted for convenience and shall not be deemed a part of the Award for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Administration and Interpretation</u>. Any question or dispute regarding the administration or interpretation of the Notice, the Plan or this RSU Agreement shall be submitted by the Grantee or by the Company to the Administrator. The resolution of such question or dispute by the Administrator shall be final and binding on all persons.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Venue and Waiver of Jury Trial</u>. The Company and the Grantee (the "parties") agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this RSU Agreement shall be brought in the United States District Court for Western District of New York (or should such court lack jurisdiction to hear such action, suit or proceeding, in an appropriate state court in the State of New York) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. **THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING**. If any one or more provisions of this Section 9 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. <u>Notices</u>. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. <u>Language</u>. If the Grantee has received this RSU Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control, unless otherwise prescribed by Applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. <u>Nature of Award</u>. In accepting the Award, the Grantee acknowledges and agrees that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this RSU Agreement;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Award is voluntary and occasional and does not create any contractual or other right to receive future awards, or benefits in lieu of awards, even if awards have been awarded repeatedly in the past;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the Grantee's participation in the Plan is voluntary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Grantee's participation in the Plan shall not create a right to any employment with the Grantee's employer and shall not interfere with the ability of the Company or the employer to terminate the Grantee's employment relationship, if any, at any time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or any Related Entity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) in the event that the Grantee is not an Employee of the Company or any Related Entity, the Award and the Grantee's participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company or any Related Entity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the future value of the underlying Shares is unknown and cannot be predicted with certainty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) in consideration of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or diminution in value of the Award or Shares acquired upon vesting of the Award, resulting from termination of the Grantee's Continuous Service by the Company or any Related Entity (for any reason whatsoever and whether or not in breach of local labor laws) and in consideration of the grant of the Award, the Grantee irrevocably releases the Company and any Related Entity from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing the Notice, the Grantee shall be deemed irrevocably to have waived his or her right to pursue or seek remedy for any such claim or entitlement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) in the event of termination of the Grantee's Continuous Service (whether or not in breach of local labor laws), the Grantee's right to receive Awards under the Plan and to vest in such Awards, if any, will (except as otherwise provided in the Notice or herein) terminate effective as of the date that the Grantee is no longer providing services and will not be extended by any notice period mandated under local law (e.g., providing services would not include a period of "garden leave" or similar period pursuant to local law); furthermore, in the event of termination of the Grantee's Continuous Service (whether or not in breach of local labor laws), the Administrator shall have the exclusive discretion to determine when the Grantee is no longer providing services for purposes of this Award;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Grantee's participation in the Plan or the Grantee's acquisition or sale of the underlying Shares; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) the Grantee is hereby advised to consult with the Grantee's own personal tax, legal and financial advisers regarding the Grantee's participation in the Plan before taking any action related to the Plan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. <u>Data Privacy</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee's personal data as described in the Notice and this RSU Agreement by and among, as applicable, the Grantee's employer, the Company and any Related Entity for the exclusive purpose of implementing, administering and managing the Grantee's participation in the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Grantee understands that the Company and the Grantee's employer may hold certain personal information about the Grantee, including, but not limited to, the Grantee's name, home address and telephone number, date of birth, social insurance or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Awards or any other entitlement to Shares awarded, canceled, vested, unvested or outstanding in the Grantee's favor, for the exclusive purpose of implementing, administering and managing the Plan ("Data").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Grantee understands that Data will be transferred to any third party assisting the Company with the implementation, administration and management of the Plan. The Grantee understands that the recipients of the Data may be located in the Grantee's country, or elsewhere, and that the recipients' country may have different data privacy laws and protections than the Grantee's country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantee's local human resources representative. The Grantee authorizes the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing the Grantee's participation in the Plan. The Grantee understands that Data will be held only as long as is necessary to implement, administer and manage the Grantee's participation in the Plan. The Grantee understands that the Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantee's local human resources representative. The Grantee understands, however, that refusal or withdrawal of consent may affect the Grantee's ability to participate in the Plan. For more information on the consequences of the Grantee's refusal to consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantee's local human resources representative.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. <u>Section 409A</u>. The Award is intended to qualify for the short-term deferral exception to Section 409A of the Code, and this RSU Agreement shall be interpreted and administered accordingly. Notwithstanding the foregoing, the Company makes no representations that the Award is exempt from Section 409A of Code, and in no event shall the Company or any Related Entity be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of Code.

**END OF AGREEMENT**

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## Ex-10

**Exhibit 10.67**

**<u>SUPPLY AGREEMENT</u>**

**THIS SUPPLY AGREEMENT** (this "<u>Agreement</u>") is entered into as of November 16, 2022, (the "<u>Effective Date</u>"), by and between Athenex, Inc., a Delaware corporation with an address at 1001 Main Street, Suite 600, Buffalo, New York 14203 ("<u>Athenex</u>"), and Chongqing Taihao Pharmaceutical Co., Ltd. (重庆泰濠制药有限公司) with an address at No. 105 Erlang Chuangye Road, Jiulongpo District, Chongqing, China ("<u>Chongqing Taihao</u>") and Chongqing Sintaho Pharmaceutical Co., Ltd. (重庆兴泰濠制药有限公司) with an address at 600 Liuqing Road, Maliuzui Town, Banan District, Chongqing 401319, China ("<u>Chongqing Sintaho</u>") (Chongqing Taihao and Chongqing Sintaho together the "<u>Supplier</u>") and ATNX SPV, LLC, a Delaware limited liability company ("<u>SPV</u>"). Supplier and Athenex together shall be referred to in this Agreement as the "<u>Parties</u>" and individually as a "<u>Party</u>". The SPV is solely a party to this Agreement to give effect as set forth herein.

**RECITALS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.Athenex is a biopharmaceutical company engaged in the discovery, development and commercialization of novel therapies for the treatment of cancer including, without limitation, its Klisyri/ONAKTA (active ingredient: Tirbanibulin API), Oral Paclitaxel (active ingredients: Paclitaxel (Semi-Synthetic) API, Oral Docetaxel (active ingredients: Docetaxel Trihydrate API or Docetaxel Anhydrous API), and Encequidar Methanesulfonate Monohydrate API) (the "<u>Athenex Product</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.Supplier develops, manufactures and sells biochemicals, organic chemicals and other compounds and ingredients for use, as active pharmaceutical ingredients and excipients, in pharmaceutical development. Supplier, through one or more of its Affiliates, currently operates two manufacturing sites located at (1) No. 105, Chuangye Road, Erlang, Jiulongpo District, Chongqing, P. R. China 400039 ("<u>Taihao API Plant</u>") and (2) 600 Liuqing Road, Maliuzui Town, Banan District, Chongqing 401319, China ("<u>Sintaho API Plant</u>") (each a "<u>Manufacturing Site</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.The SPV is an Affiliate of Athenex which owns certain rights, but not obligations, pertaining to Klisyri/ONAKTA (active ingredient: Tirbanibulin API).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.Athenex and its Affiliates wish to purchase Products (as defined below) from Supplier, and Supplier wishes to sell Products to Athenex, on the terms and subject to the conditions of this Agreement.

**AGREEMENT**

**NOW, THEREFORE**, the Parties agree as follows:

ARTICLE I

<u>DEFINITION</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1<u>Definition</u>. As used in this Agreement (including any Exhibits and Schedules hereto), the following terms have the meanings as set forth below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)"<u>Affiliate"</u> means with respect to a Party (i) any corporation or business entity of which more than fifty percent (50%) of the securities or other ownership interests representing the equity, the voting stock or general partnership interest are owned, controlled or held, directly or indirectly, by a Party; (ii) any corporation or business entity which, directly or indirectly, owns, controls or holds more than fifty percent (50%) of the securities or other ownership interests

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representing the equity, voting stock or general partnership interest of a Party; (iii) any corporation or business entity of which, directly or indirectly, an entity described in the immediately preceding subsection (ii) controls or holds more than fifty percent (50%) of the securities or other ownership interests representing the equity, voting stock or general partnership interest of such corporation or entity; or (iv) any corporation or business entity of which a Party has the right to acquire, directly or indirectly, more than fifty percent (50%) of the securities or other ownership interests representing the equity, voting stock or general partnership interest thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)"<u>Agreement</u>" has the meaning set forth in the Preamble of this

Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)"<u>Applicable Law</u>" means all federal, foreign, state, and local statutes, laws, rules, regulations and directives applicable to a particular activity hereunder including, without limitation, the Manufacture or sale of the Products, that may be in effect from time to time, including those promulgated by the FDA or any other Regulatory Agency, and including without limitation cGMP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)"<u>Athenex</u>" has the meaning as set forth in the Preamble of this

Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)"<u>Athenex Indemnified Parties</u>" has the meaning as set forth in Section

&nbsp;&nbsp;&nbsp;&nbsp;9.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)"<u>Athenex Product</u>" has the meaning set forth in the Recitals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)"<u>Batch</u>" means a specific quantity of Products that is intended to be of uniform character and quality, within specified limits, and is produced during the same cycle of Manufacture as defined by the applicable Batch Records.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)"<u>Batch Records</u>" means, with respect to a Batch, the documents, prepared in accordance with cGMP, recording the relevant Manufacturing or packaging of the Products, including the controls, quality specifications, regulatory and other requirements, under which such Batch of Products was Manufactured or packaged.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)"<u>Business Day</u>" means any day of the year other than (i) any Saturday or Sunday or (ii) any other day on which banks located in New York, New York are closed for business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)"<u>Certificate of Analysis</u>" shall mean a document, dated and signed by a duly authorized representative of the quality control or quality assurance department of Supplier, certifying that a Batch of Products meets all Specifications.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)"<u>Confidential Information</u>" means any information, Know-How or other proprietary information or materials furnished to one Party by the other Party pursuant to this Agreement, except to the extent that such information or materials: (a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party, as demonstrated by competent evidence; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; (d) was disclosed to the receiving Party by a third party who had no obligation to the disclosing Party not to disclose such information to others; or (e) was subsequently developed by the receiving Party without use of the

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Confidential Information, as demonstrated by competent evidence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)"<u>Contract Price</u>" has the meaning set forth in Section 4.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)"<u>Cost of Goods</u>" or "<u>COGS</u>" means the auditable, fully burdened cost of Manufacturing and/or supplying Products and related inputs and services, such costs to include the cost of direct materials and labor, conversion, packaging and labeling, quality assurance/control and other services such as release testing, stability testing, associated freight expenses, and attributable portion of all indirect and overhead amounts (including depreciation and amortization expenses) attributable to such Manufacturing, delivery, and related inputs and services). Costs shall be calculated in accordance with generally accepted accounting principles and allocations shall be commercially justifiable consistent with fair industry practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)"<u>cGM</u>P" means the current Good Manufacturing Practices officially published and interpreted by FDA and other applicable Regulatory Authorities that may be in effect from time to time and are applicable to the Manufacture of the Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)"<u>Delivery</u>" means, in each case, delivery of Products in accordance with

Section 5.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)"<u>Delivery Date Change Request</u>" has the meaning as set forth in Section

&nbsp;&nbsp;&nbsp;&nbsp;5.3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)"<u>Delivery Location</u>" has the meaning set forth in Section 4.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)"<u>Dollar</u>", "<u>Dollars</u>" or numbers proceeded by the symbol "<u>$</u>" means amounts in United States Dollars.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)"<u>Effective Date</u>" has the meaning as set forth in the Preamble of this

Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)"<u>FDA</u>" means the United States Food and Drug Administration, and any successor thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)"<u>Good Condition</u>" means that Products supplied are the right product, made in accordance with the registered process, have in no way deteriorated or broken down, have at least 85% of their "shelf life" remaining at the time of Delivery, are not damaged or contaminated upon Delivery, are in the right container, are correctly labelled and properly sealed in their container, are in accordance with the relevant Specifications and are capable of any agreed standard of performance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)"<u>Governmental Authority</u>" means any federal, state, local or foreign government or subdivision thereof, or any entity, body or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any federal, state, local or foreign government.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)"<u>Indemnifying Party</u>" has the meaning as set forth in Section 9.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)"<u>Indemnified Party</u>" has the meaning as set forth in Section 9.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)"<u>Invoice</u>" has the meaning as set forth in Section 4.2.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)"<u>Know-How</u>" means any proprietary invention, innovation, improvement, development, discovery, computer program, device, trade secret, method, know- how, process, technique or the like, including manufacturing, use, process, structural, operational and other data and information, whether or not written or otherwise fixed in any form or medium, regardless of the media on which contained and whether or not patentable or copyrightable, that is not generally known or otherwise in the public domain.

(aa) "<u>Losses</u>" has the meaning as set forth in Section 9.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb) "<u>Manufacture</u>," "<u>Manufactured</u>," or "<u>Manufacturing</u>" means all stages of the manufacture of a Product, including planning, purchasing, manufacture, processing, compounding, storage, filling, packaging, waste disposal, labeling, testing, quality assurance, sample retention, stability testing, release, dispatch, shipping, and supply, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc) "<u>Market Supply Price</u>" means the lowest and most favorable price for the supply of comparable Products offered by other third-party suppliers at similar terms and conditions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd) "<u>Party</u>" or "<u>Parties</u>" has the meaning as set forth in the Preamble of this

Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee) "<u>Person</u>" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity or Governmental Authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff) "<u>Products</u>" means the products identified on <u>Exhibit A</u> attached hereto, as may be amended by mutual agreement between the Parties in writing from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg) "<u>Purchase Order</u>" has the meaning as set forth in Section 3.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh) "<u>Purchase Order Acknowledgement</u>" has the meaning as set forth in

Section 3.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) "<u>Quality Agreement</u>" means an agreement between the Parties that describes the Parties' quality control, technical, quality assurance and regulatory responsibilities relating to the Manufacture and sale of Products supplied under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj) "<u>Regulatory Agency</u>" means any applicable Governmental Authority which regulates any aspect of the Manufacture of Products or the Athenex Product or any active pharmaceutical ingredient in general, or the sale or marketing of any Product or the Athenex Product, including the FDA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk) "<u>Specifications</u>" means, with respect to a given Product, the set of requirements for such Product as set forth in the Quality Agreement or otherwise agreed upon in writing from time to time by the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll) "<u>Supplier</u>" has the meaning as set forth in the Preamble of this

Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm) "<u>Supplier Indemnified Parties</u>" has the meaning as set forth in Section

&nbsp;&nbsp;&nbsp;&nbsp;9.2. 4

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(nn) "<u>Term</u>" has the meaning as set forth in Section 8.1.

ARTICLE II

<u>SUPPLY OF PRODUCTS</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1<u>Sale of the Products</u>. Subject to the terms and conditions set forth herein, Supplier agrees to Manufacture and sell to Athenex, and Athenex agrees to purchase from Supplier, the Products that Athenex orders from time to time pursuant to Purchase Orders delivered pursuant to Section 3.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2<u>No Exclusivity; Priority</u>. This Agreement shall not preclude or limit (a) Supplier's sale of the Products or other products of Supplier to any other Person or (b) Athenex's right to purchase any of the Products from other sources. If at any time Supplier is unable to fulfill orders or Products or other products, Supplier shall first fulfill Athenex's Purchase Orders before orders from any other Person. If at any time Athenex places orders for the Products set forth in List 2 of <u>Exhibit A</u> attached hereto, Athenex shall first place orders with Supplier before placing orders with any other Person, provided that if for any reason Supplier cannot fulfill any order or provide the Purchase Order Acknowledgement pursuant to section 3.3, Athenex may place such order with any other Person. Notwithstanding any of the foregoing, Supplier is deemed a major supplier of Athenex for the Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3<u>No Manufacturing or Product Changes</u>. In consideration of Applicable Law and Regulatory Agency requirements on the Products and manufacturing facilities, without the written approval of Athenex (such approval not to be unreasonably withheld), Supplier agrees that it will not, at any time, make any changes to the manufacturing facility(ies) or Products including, without limitation, any material change in the Specifications, configuration or production of the Products. If at any time a Regulatory Agency or a change to Applicable Law requires Supplier to change the Specifications, configuration, packaging or Manufacturing process for Products, (i) Supplier will provide Athenex with as much notice as possible of such change, and (ii) Supplier shall bear all costs and expenses associated with such change; provided however, that each Party will be responsible for, and will bear the costs of, any filings or other actions it must take with the FDA as a result of such change.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4<u>Facility Change</u>. Supplier shall use commercially reasonable efforts to provide Athenex a written notice as soon as Supplier being aware of a manufacturing facility change.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5<u>Product Requirements; Quality Agreement</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All Products that Supplier supplies to Athenex shall conform to the warranties set forth in ARTICLE VII.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Representatives of the Parties' quality assurance departments shall meet to develop and approve a Quality Agreement. In the event of conflict between terms of the Quality Agreement and this Agreement, the terms of this Agreement will govern. Once executed by both Parties, the Quality Agreement shall be incorporated into and made part of this Agreement by this reference.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6<u>Compliance with Laws</u>. Supplier shall at all times comply with all Applicable Laws. Without limitation of the foregoing, Supplier shall ensure the Products and any related packaging conform fully to all Applicable Law. Upon Athenex's reasonable request, Supplier shall provide Athenex with: (a) written certification of Supplier's compliance with Applicable Laws; (b) written certification of the origin of any ingredients or materials in the Products; and (c) any additional information regarding the Products requested by Athenex such that Athenex may comply in a timely

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manner with its obligations under Applicable Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7<u>Permits, Licenses and Authorizations</u>. Supplier shall obtain and maintain all licenses, permits and authorizations necessary for the performance of Supplier's obligations under this Agreement, including any license, permits and authorizations necessary for the Manufacture or sale of the Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8<u>Contract Manufacturer(s)</u>. Athenex acknowledges and agrees that Supplier may contract with other Persons for the Manufacture or supply of Products to enable it to satisfy its obligations hereunder. Any appointment or change of a contract manufacturer must be approved in advance by Athenex. Supplier shall be the primary obligor to Athenex for any activity conducted by any such contract manufacturer(s). Supplier shall ensure that any such contract manufacturer(s) maintain all records as necessary to comply with all Applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9<u>Alternative Manufacturer and Product Approval Assistance</u>. Athenex has the right to Manufacture Product to satisfy all its needs of Product at its own cost. Athenex may exercise this right to manufacture at any moment. Supplier will provide all necessary documentation and required Know-How and assistance during the technology transfer process to enable Athenex to manufacture and package Product at alternate manufacturing sites identified in Exhibit C, as may be amended by mutual agreement between the Parties in writing from time to time. Athenex shall bear any direct costs of the technology transfer process upon written consent by both Parties.

ARTICLE III

<u>DELIVERY FORECASTS AND PURCHASE ORDERS</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1<u>Delivery Forecasts</u>. For planning purposes only, no later than the 15th Business Day of each calendar quarter, Athenex shall deliver to Supplier a forecast of the quantities of Products that Athenex anticipates that it will order from Supplier over the subsequent rolling 12 months. Such rolling forecasts are for capacity planning purposes only, and such estimated amounts in the rolling forecasts shall have no effect on Athenex's obligation to purchase, or Supplier's obligation to deliver, the indicated quantities, unless such quantity is confirmed pursuant to a Purchase Order delivered pursuant to Section 3.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2<u>Purchase Orders</u>. Athenex may place purchase orders (each, a "<u>Purchase Order</u>") to Supplier pursuant to the procedures in Section 11.2. Each Purchase Order shall specify the type and quantity of Products and the requested Delivery dates, provided that Purchase Orders must be placed at least 30 days in advance of the requested Delivery date, unless otherwise agreed to by Supplier. Each Purchase Order issued by Athenex and received by Supplier constitutes the binding obligation of Supplier to Manufacture, sell, and deliver to Athenex whole Batch quantities by the Delivery date specified in such Purchase Order, and the binding obligation of Athenex to purchase the quantity of Products specified therein. All Purchase Orders shall be subject to the terms and conditions set forth in this Agreement and to the extent that the terms of any Purchase Order vary from, conflict with, or supplement the terms and conditions of this Agreement, the terms of the Purchase Order shall be void and of no force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3<u>Purchase Order Acknowledgement</u>. Within 10 Business Days after it receives any Purchase Order, Supplier shall respond to Athenex and confirm such Purchase Order with an acknowledgement (each, a "<u>Purchase Order Acknowledgement</u>") pursuant to the procedures in Section 11.2. If the requested Delivery date for the Products in a Purchase Order is within 30 days of the date of such Purchase Order, Supplier may extend such Delivery for such Purchase Order (but not past 5

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days from the date of the Purchase Order) by notifying Athenex of same in the Purchase Order Acknowledgement. Otherwise, Supplier must comply with the Purchase Order in all respects. Rolling forecasts that require delivery 30 days from Purchase Order receipt date will be provided to Supplier by Athenex. If a rolling forecast is not available, the delivery date must be at least three months from the Purchase Order receipt date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4<u>Capacity</u>. Supplier shall use commercially reasonable efforts to ensure that it has sufficient manufacturing capacity to meet Athenex's requirements for Products as shown in Supplier's forecasts provided pursuant to Section 3.1. In the event of a breakdown or fault in production which impacts the manufacturing capacity required hereunder or otherwise impacts the supply of Products to Athenex, Supplier shall notify Athenex as soon as reasonably practicable and shall use commercially reasonable efforts to ensure a return to production as soon as possible.

ARTICLE IV

<u>PRICING AND PAYMENTS</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1<u>Pricing</u>. Supplier shall sell to Athenex, and Athenex shall purchase from Supplier, the Products at the applicable prices for the Products set forth on <u>Exhibit B</u> attached hereto (as applicable, the "<u>Contract Price</u>") during the five (5) year period beginning on the Effective Date and ending on the fifth anniversary of the Effective Date, except that in the case of Tirbanibulin API manufactured at the Sintaho API Plant, the five (5) year period shall commence on the date on which Athenex makes its first Purchase Order of Tirbanibulin API manufactured at the Sintaho API Plant ("<u>Contract Price Period</u>"). Except as otherwise provided in this Agreement, the Contract Price includes the cost of the material and all costs and expenses relating to testing, packing, crating, boxing, loading, and unloading of the material for transportation. Customs, taxes, tariffs and duties, insurance and any other similar financial contributions or obligations relating to the transportation and delivery of the Products are the responsibility of Athenex. Except as specifically provided herein, the Contract Price is firm and is not subject to increase for any reason, including changes in market conditions, increases in raw material, component, labor or overhead costs or because of labor disruptions. All prices are based on FCA Supplier Facility in China or such other location as Athenex may designate in the Purchase Order (as applicable, the "<u>Delivery Location</u>"). After the Contract Price Period, the Contract Price may be adjusted on each subsequent anniversary by an amount that is mutually agreed upon by Supplier and Athenex and that is reflective of then current market conditions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2<u>Invoice</u>. Supplier shall invoice the Products (each, an "<u>Invoice</u>") on the date such Products are shipped to Athenex. Each Invoice must set forth in reasonable detail the amounts payable by Athenex under this Agreement and contain the following information, as applicable: a reference to this Agreement; number of the applicable Athenex Purchase Order, carrier name; ship-to address; quantity of Products shipped; number of cartons or containers in shipment; bill of lading number; country of origin; and any other information necessary for identification and control of the Products. Athenex reserves the right to return and withhold payment due to any Invoices or related documents that are inaccurate or incorrectly submitted to Athenex. To the extent there is any variance from, conflict with or supplement to the terms and conditions of this Agreement by any such Invoices, the terms and conditions of this Agreement shall prevail, and such terms of such Invoices shall be void and of no force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3<u>Payment</u>. Except for amounts disputed by Athenex in good faith, each of Supplier's accurate and correctly submitted Invoices will be payable within 45 days following the later of (a) Athenex's receipt of Supplier's invoice or (b) Athenex's receipt of the applicable Products. Athenex shall make all payments in Dollars by wire transfer of immediately available funds to an account designated in writing by Supplier. Any payment by Athenex for Products will not be deemed

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acceptance of the Products or waive Athenex's right to inspect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4<u>Taxes</u>. Athenex shall pay any and all sales, use, and transfer taxes (but not including any income taxes of Supplier) levied, assessed or arising by virtue of any its purchase of Products hereunder. To the extent any such taxes are imposed on Supplier, the amount of such taxes shall be set forth in the Invoice relating to the relevant Products, and Athenex shall pay such amounts. If any charges are exempt from sales, use or transfer tax liability, Athenex must provide Supplier with evidence of tax exemption acceptable to the relevant taxing authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5<u>Setoff; Contingent or Disputed Claims</u>. All amounts due from Athenex to Supplier are net of any indebtedness of Supplier to Athenex. In addition to any right of set-off, deduction or recoupment provided or allowed by law, Athenex may, with written notice to Supplier, set off against, and deduct and recoup from, any amounts due or to become due from Athenex to Supplier, any amounts due or to become due from Supplier to Athenex, including for damages resulting from breaches by Supplier of its obligations under this Agreement or any other agreement between the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6<u>Reports and Communications</u>. During the Term and thereafter, Supplier shall maintain records of all transactions hereunder in accordance with industry wide practices, including, but not limited to, records pertaining to the Manufacture and supply of all Products hereunder, Batch Records, import/export documentation, shipping records, legal documents and notices, contracts for the supply of all materials, purchase orders, sales orders, manufacturing process changes, books and records and other materials with respect to Supplier's COGS calculation, and all other documents and materials created or used by Supplier in the performance of their obligations under this Agreement. All such records required shall be retained for the longer of: (i) a period of at least five years from the completion of the transaction to which those records pertain, (ii) any time period required by Applicable Law, (iii) until two (2) years after the expiry date of the Product (including any finished product made using any Product) to which such records relate or (iv) such other period agreed between Athenex and Supplier. Athenex shall, during normal business hours and upon reasonable prior written notice to Supplier, be permitted reasonable access to such records. With respect to Supplier's COGS, if any record is found to be inaccurate, a corrected record shall be issued and any amount due thereunder will be paid, together with interest at the U.S. prime rate on the amount of such overpayment or underpayment, within thirty (30) days of the issuance of the corrected record.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7<u>Technical Audit</u>. In order for Athenex to determine whether the Supplier is operating in accordance with the provisions of this Agreement and to ensure the adequacy of its supply of Products, the Supplier agrees to allow Athenex or an agent or nominee of Athenex (which may include any Athenex sublicensee), upon no less than ten (10) calendar days' prior notice and at Athenex's expense, to periodically inspect any and all facilities, technical quality assurance and quality control records, inventory of Products (including API compounds) and any other manufacture related materials and associated business functions relating to the manufacture, testing and supply of Products to be provided pursuant to this Agreement and/or performance of the Supplier's obligations under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8<u>Inspections</u>. In consideration of Applicable Law and Regulatory Agency requirements on the Products and manufacturing facilities, the Supplier shall promptly, but in any event not later than three (3) Business Days after receipt, provide Athenex with copies of all communications and correspondence received from, or sent to, any Regulatory Agency or other governmental agency regarding any Product or the activities performed, or to be performed, under this Agreement. Such notification shall be within 48 hours if a Regulatory Agency or governmental agency is commencing, or threatening to commence, any activities related to the seizure of Product, or closure of or suspension

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of operations at any Supplier facility. The Supplier shall be responsible for handling and responding to any inspection by a Regulatory Agency, however the Supplier shall notify Athenex within one (1) Business Day of receipt of any notification by any Regulatory Agency that such agency intends to inspect, audit or take any legal action with respect to any Supplier facility. Athenex or an agent or nominee of Athenex (which may include any Athenex sublicensee), shall have the right to participate in any inspection by any Regulatory Agency which involves or relates to any Product. The Supplier shall promptly provide Athenex with a copy of all inspection reports, including any such reports prepared by or on behalf of the Supplier or any Regulatory Agency, relating to any Supplier's facility. The Supplier shall keep Athenex fully and regularly informed of any deficiencies identified by any Regulatory Agency in any Supplier facility or the Supplier's processes, the Supplier's proposed responses regarding any corrective or remedial actions to be taken, and the time it will take to correct such deficiencies. In the event that the Supplier subcontracts any of its obligations under this Agreement to a third party, the Supplier shall ensure that such third party is subject to provisions equivalent to those set out in Sections 4.8 and 4.9 of this Agreement, such that Athenex will have the same rights to audit, attend inspections and receive information as it would had such obligations not been subcontracted.

ARTICLE V

<u>DELIVERY; ACCEPTANCE AND REJECTION</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1<u>Delivery Date</u>. The scheduled Delivery date for the Products will be specified in the Purchase Order or, if applicable, the Delivery Date Change Request. Supplier agrees that the Delivery date from the date of the Purchase Order shall be of a duration consistent with similar Purchase Orders made by Athenex prior to and as of the date of this Agreement, subject to a maximum extension of up to 30 days, which will be mutually agreed upon between Supplier and Athenex.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2<u>Delivery</u>. All sales of Products hereunder shall be made FCA Delivery Location, and risk of loss of the Products shall pass to Athenex at the time the Products are delivered to Athenex or Athenex's agent at the Delivery Location.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3<u>Delivery Date Change Requests</u>. Athenex may request to delay or accelerate Delivery of an individual order or any part thereof upon written notice to Supplier (each, a "<u>Delivery Date Change Request</u>"), subject to the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)unless agreed to by Supplier, the Delivery Date Change Request must be received by Supplier at least 10 days prior to the originally scheduled shipment date or changed shipment date, whichever is earlier;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)if the Delivery Date Change Request is a delay request, (i) Athenex must commit to nonetheless purchase the delayed Products within 60 days of the originally scheduled Delivery date by Supplier; and (ii) Athenex shall be liable for any costs and expenses reasonably incurred or suffered by, or imposed on Supplier resulting from such delay, such as increased shipping costs due to date changes; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)if the Delivery Date Change Request is an accelerated shipment date, such accelerated shipment date is only agreed upon Supplier's written consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4<u>Inspection</u>. Products are subject to Athenex's inspection and approval or rejection notwithstanding Athenex's prior receipt of or payment for the Products. Athenex shall have a period of 60 days following Delivery of the Products to the Delivery Location ("<u>Inspection</u> <u>Period</u>"), to inspect all Products received under this Agreement and to inform Supplier, in writing, of Athenex's

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rejection of any defective or nonconforming Products; provided, however, that in the event of a latent defect, Athenex may reject any defective or nonconforming Product within 30 days after the discovery of such latent defect. Upon Athenex's discovery and communication of the defect to Supplier, Supplier will perform an internal investigation based on Athenex's nonconformity report and share the results with Athenex. Final disposition will be determined by the results of Supplier's investigation and negotiation with Athenex. Athenex may reject and return to Supplier any or all units of Products that exceed the quantity stated in or any Purchase Order. If Athenex rejects any defective or nonconforming Products, Supplier shall (a) promptly reimburse Athenex in respect of any reasonable and documented out-of-pocket costs (including without limitation freight, clearance, duty and storage) incurred by Athenex in respect of the Delivery of defective or non-conforming Products, and (b) Supplier shall, at Supplier's cost and expense, replace the defective or nonconforming Products at the location specified by Athenex, without limiting the exercise by Athenex of any other rights available to Athenex under this Agreement or pursuant to Applicable Law. All returns of nonconforming Products to Supplier are at Supplier's sole risk and expense, and Supplier shall promptly collect at its own expense any rejected Products from Athenex. Products that are not rejected within the Inspection Period will be deemed to have been accepted by Athenex; provided, however, that Athenex's acceptance of any Products will not be deemed to be a waiver or limitation of Supplier's obligations pursuant to this Agreement (or any breach thereof), including those obligations with respect to Supplier's warranties and Supplier's duty to indemnify Athenex.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5<u>Packaging and Labeling; Certificate of Analysis</u>. Supplier shall properly pack, mark and ship Products as instructed by Athenex and otherwise in accordance with Applicable Law and industry standards. At the time of Delivery of Products to Athenex or Athenex's designee, Supplier shall deliver to Athenex a Certificate of Analysis relating to each Batch of Products delivered.

ARTICLE VI

<u>CONFIDENTIALITY AND INTELLECTUAL PROPERTY</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>6.1</u><u>Confidentiality Obligations.</u> During the Term and for a period of two years after expiration or termination of this Agreement, each Party and the SPV agrees to keep in confidence, with at least the same degree of care such Party would protect its own Confidential Information, and not to disclose to any Person, or use for any purpose, except pursuant to, and in order to carry out, the terms and objectives of this Agreement, any Confidential Information of the other parties. The terms and existence of this Agreement shall be considered Confidential Information hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>6.2</u><u>Permitted Disclosure</u>. Notwithstanding Section 6.1:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)If either party is required to disclose Confidential Information of another party by regulation, law or legal process, such party shall provide prior written notice of such intended disclosure to such other party and shall disclose only such Confidential Information of such other party as is required to be disclosed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)If either party desires to disclose Confidential Information of another party to existing or potential acquirers, investors, investment bankers, accountants, attorneys or other financial institutions for use of such information for business purposes relevant to this Agreement or for due diligence in connection with financing or acquisition of such party, (i) prior advanced written consent by the non-disclosing party is required, (ii) each individual and entity to whom such Confidential Information is disclosed is bound in writing to non-use and non-disclosure obligations, and (iii) the party making disclosure shall be liable for such third parties' compliance with such obligations.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>6.3</u><u>Employee, Consultant and Advisor Obligations</u>. Each party agrees that it and its Affiliates shall provide or permit access to Confidential Information received from the other party and such other party's Affiliates and representatives only to the receiving party's employees, consultants, sublicensees and advisors and to the employees, consultants and advisors of the receiving party's Affiliates who, in such party's reasonable judgment have a need to know such Confidential Information to assist the receiving party with the activities contemplated by this Agreement, or who will receive any products which incorporate the Product, and who are subject to obligations of confidentiality and non-use with respect to such Confidential Information similar to the obligations of confidentiality and non-use of the receiving party pursuant to Section 6.1; <u>provided, however,</u> that Athenex, Supplier and the SPV shall each remain responsible for any failure by its Affiliates, and its and its Affiliates' respective employees, consultants, sublicensees and advisors, to treat such Confidential Information as required under Section 6.1 (as if such Affiliates, employees, consultants, sublicensees and advisors were parties directly bound by the requirements of Section 6.1).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>6.4</u><u>Return of Confidential Information</u>. Upon expiration or termination of this Agreement (or, if earlier, upon the request of the disclosing party), each party shall promptly return or destroy all of the other party's Confidential Information, including all reproductions and copies thereof in any medium (except that the receiving party may retain one copy for its legal files, provided that any Confidential Information so retained shall remain subject to the terms of this ARTICLE VI).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>6.5</u><u>License to Manufacture</u>. Athenex and the SPV hereby grant the Supplier a non-exclusive, fully paid-up, non-sublicensable (other than to its Affiliates), non-transferable license under the intellectual property rights owned or controlled by Athenex or the SPV, solely to the extent necessary to allow the Supplier to perform its obligations under this Agreement.

ARTICLE VII

<u>WARRANTIES AND COVENANTS</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2<u>Supplier's Product Warranties</u>. Supplier warrants to Athenex that the Products will: (a) conform, in all respects to the Specifications and all requirements set forth in this Agreement and the Quality Agreement; (b) be free from defects, latent or otherwise, in materials and workmanship and shall not be adulterated or misbranded within the meaning of Applicable Laws; (c) not infringe upon, violate or misappropriate the intellectual property rights of any Person; and (d) comply with all Applicable Laws. At the time of Delivery to the Delivery Location, the Products shall be in Good Condition, provided that this provision does not apply to Products that have not been approved for commercial use or sale in any territory. The Manufacture, generation, processing, distribution, transport, treatment, storage, disposal and other handling of any Products until Delivery shall be in accordance with and conform to the Specifications, cGMP, and all other Applicable Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3<u>Supplier's Manufacturing Site Covenants.</u> Supplier covenants to Athenex that Supplier shall (a) maintain the legal name of the Taihao API Plant as Chongqing Taihao Pharmaceutical Co., Ltd.; (b) complete the Manufacture and delivery of the orders of tirbanibulin API at the Taihao API Plant as detailed in Exhibit D (which may be amended from time to time); (c) complete the build-out of the new tirbanibulin API production line at Sintaho API Plant pursuant to OEB5 classification and obtain and maintain all licenses, permits and authorizations necessary for the for the Manufacture or sale of the Products by April 2023; and (d) use best efforts to ensure the continuous supply of tirbanibulin API.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4<u>Additional Terms</u>. The warranties set forth in this ARTICLE VII (a) survive Supplier's Delivery of the Products, Athenex's receipt, inspection, acceptance, use of the Products and payment for the Products, and the termination or expiration of this Agreement, (b) inures to the benefit of Athenex and its successors and assigns, and (c) may not be limited or disclaimed by Supplier. Athenex's approval of Supplier's materials, processes, specifications, or similar requirements will not be construed to relieve Supplier of any warranties. Any applicable statute of limitations on Athenex's claims for breach of warranty will commence no earlier than the date on which Athenex discovers the breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5<u>No Other Warranties</u>. EXCEPT AS SET FORTH IN THIS ARTICLE VII, NONE OF SUPPLIER, ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR REPRESENTATIVES MAKE OR HAVE MADE ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE PRODUCTS INCLUDING WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE. NOTWITHSTANDING THE FOREGOING, NONE OF THIS SECTION 7.4, THE SCOPE OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, NOR THE ABSENCE OF ANY REPRESENTATION OR WARRANTY FROM THIS AGREEMENT, SHALL (OR SHALL BE DEEMED TO) LIMIT, MODIFY OR OTHERWISE AFFECT, ANY CLAIM OR LACK OF ACTION BASED ON FRAUD, INTENTIONAL MISREPRESENTATION, OR WILLFUL BREACH OR MISCONDUCT.

ARTICLE VIII

<u>TERM AND TERMINATION</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>8.1</u><u>Term</u>. The term of this Agreement shall commence on the Effective Date and shall continue for the later of (a) ten (10) years; or (b) the expiration of the last Athenex licensing agreement for the Products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>8.2</u><u>Termination by Either Party</u>. Either Party may terminate this Agreement, by providing written notice to the other Party (with a copy to the SPV), if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)the other Party is in breach of any representation, warranty or covenant under this Agreement, and either the breach cannot be cured or, if the breach can be cured, it is not cured within 45 days after the breaching Party's receipt of written notice of such breach; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)if (i) the other Party's business is terminated or such other Party makes a general assignment for the benefit of creditors, becomes insolvent, commences a voluntary proceeding under any law relating to bankruptcy, insolvency, reorganization or winding up, or a receiver is appointed with respect to the other Party or (ii) an involuntary proceeding commences in any court of competent jurisdiction seeking such other Party's liquidation, reorganization, dissolution or winding up or similar relief in respect of such other Party under any bankruptcy or similar laws (whether domestic or foreign), and such proceeding is not dismissed within 60 days of the commencement of such proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>8.3</u><u>Mutual Termination for Convenience</u>. This Agreement may be terminated at any time and for any reason by mutual agreement upon receipt of 180 days' written notice delivered by either Party to the other Party (with a copy to the SPV).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>8.4</u><u>Termination by Athenex Upon Force Majeure Event</u>. In addition, Athenex may

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terminate this Agreement pursuant to Section 10.2 in connection with a Force Majeure Event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>8.5</u><u>Effects of Termination</u>. Upon expiration or termination of this Agreement, the Parties will have no further obligations to each other, except as otherwise set forth in this Section

&nbsp;&nbsp;&nbsp;&nbsp;8.5 and 8.6 and except that termination or expiration of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such termination or expiration. Further, such termination or expiration shall not relieve either Party from obligations which expressly survive, or by their nature are intended to survive, the expiration or termination of this Agreement including, without limitation, ARTICLE VI, ARTICLE VII, and ARTICLE IX. Unless otherwise approved in writing by Athenex, if Supplier terminates this Agreement, this Agreement shall remain in effect until Supplier has fulfilled all outstanding Purchase Orders that it has accepted prior to such termination. Pursuant to ARTICLE IV, Athenex shall remit payment for all fulfilled outstanding Purchase Orders under this ARTICLE VIII.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>8.6</u><u>SPV Rights Upon Termination.</u> The Parties acknowledge that the SPV is a third party beneficiary of this Agreement as set forth in Section 11.12. The Parties agree that, in the event of a termination of this Agreement prior to the natural expiration of the Term set forth in Section 8.1 as a result of any default by Athenex, that prompt written notice of such termination shall be provided to the SPV by Supplier and that the SPV shall have the right, but not the obligation, to request in writing within sixty (60) days of such notice of termination that Supplier enter into a new agreement, on substantially the same terms and conditions as this Agreement except that the Products listed in Exhibit A shall be limited solely to Tirbanibulin API (KX2-391 Freebase), with the SPV, or its designee approved by Supplier (such approval not to be unreasonably withheld), being substituted for Athenex and endowed with equivalent rights and obligations to Athenex's rights and obligations pertaining to Tirbanibulin API hereunder, beginning as of the effective date of the new agreement (the "New Agreement"). Upon receipt of such timely request, Supplier shall enter into the New Agreement with the SPV, or the SPV's designee, provided that any such designee counterparty has been approved by Supplier.

ARTICLE IX

<u>INDEMNIFICATION; INSURANCE</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1<u>Indemnification by Supplier</u>. Subject to the terms and conditions of this Agreement, Supplier shall indemnify, defend and hold harmless Athenex and its officers, directors, employees, agents, Affiliates, successors and permitted assigns (collectively, "<u>Athenex</u> <u>Indemnified Parties</u>") against any and all losses, damages, liabilities, deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs, or expenses of whatever kind, including reasonable attorneys' fees, fees and the costs of enforcing any right to indemnification under this Agreement and the cost of pursuing any insurance providers, incurred by any Supplier Indemnified Party (collectively, "<u>Losses</u>"), relating to, arising out of, or resulting from any third- party claim alleging (i) negligence or willful misconduct on the part of Supplier (or any of its Affiliates, or its and their employees, directors, subcontractors or agents); (ii) a breach by Supplier of any of its representations, warranties, covenants or obligations under this Agreement; or (iii) any violation of Applicable Law by Supplier.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2<u>Indemnification by Athenex</u>. Subject to the terms and conditions of this Agreement, Athenex shall indemnify, defend and hold harmless Supplier and its officers, directors, employees, agents, Affiliates, successors and permitted assigns (collectively, "<u>Supplier</u> <u>Indemnified Parties</u>") against any and all Losses relating to, arising out of, or resulting from any third-party claim alleging (i) negligence or willful misconduct on the part of Athenex (or any of its Affiliates, or its and their employees, directors, subcontractors or agents); (ii) a breach by Athenex of any of its representations,

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warranties, covenants or obligations under this Agreement; or (iii) any violation of Applicable Law by Athenex.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3<u>Comparative Negligence</u>. It is the intent of the Parties that where negligence is determined to have been joint or contributory, principles of comparative negligence shall be followed and each Party shall bear the proportionate cost of any Liabilities attributable to that Party's negligence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4<u>Indemnification Procedure</u>. When Supplier or Athenex (as applicable, an "<u>Indemnifying Party</u>") is required to indemnify an Athenex Indemnified Party or Supplier Indemnified Party (as applicable, an "<u>Indemnified Party</u>") in accordance with this Article IX, the Indemnifying Party shall assume on behalf of such Indemnified Party, and conduct with due diligence and in good faith, the defense of any claim against such Indemnified Party, whether or not the Indemnifying Party shall be joined therein, and the Indemnified Party shall cooperate with the Indemnifying Party in such defense. The Indemnifying Party shall be in charge of the defense and settlement of such claim; provided that, without relieving the Indemnifying Party of its obligations hereunder or impairing the Indemnifying Party's right to control the defense or settlement thereof, the Indemnified Party may elect to participate through separate counsel reasonably acceptable to the Indemnifying Party in the defense of any such claim, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party, except in the event that (a) the Indemnified Party shall have reasonably concluded that there exists a material conflict of interest between the Indemnifying Party and the Indemnified Party in the conduct of the defense of such claim (in which case the Indemnifying Party shall not have the right to control the defense or settlement of such claim, on behalf of such Indemnified Party); or (b) the Indemnifying Party did not employ counsel to assume the defense of such claim within a reasonable time after notice of the commencement of an action thereon, in which case the reasonable fees and expenses of counsel shall be paid by the Indemnifying Party. No Indemnifying Party shall settle any claims or actions without the prior written consent of the Indemnified Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5<u>No Consequential Damages</u>. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION, DAMAGES RESULTING FROM LOSS OF USE, LOSS OF PROFITS, INTERRUPTION OR LOSS OF BUSINESS, LOST GOODWILL, LOST REVENUE AND LOST OPPORTUNITY) ARISING OUT OF ANY OF THE TERMS OR CONDITIONS OF THIS AGREEMENT OR WITH RESPECT TO ITS PERFORMANCE HEREUNDER; <u>PROVIDED, HOWEVER</u>, THAT THE FOREGOING SHALL NOT BE CONSTRUED TO PRECLUDE RECOVERY IN RESPECT OF ANY LOSS DIRECTLY INCURRED OR SUFFERED FROM THIRD PARTY CLAIMS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6<u>Insurance</u>. Each Party shall at all times during the Term maintain in full force and effect, with financially sound and reputable carriers reasonably satisfactory to the other Party, product liability, property, and liability insurance in such amounts and with such scope of coverage as are adequate to cover such Party's obligations under this Agreement and as are appropriate companies of like size, taking into account the nature of Products to be supplied hereunder and the nature of the Athenex Product.

ARTICLE X

<u>FORCE MAJEURE</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1<u>General</u>. Neither Party shall be liable to the other on account of any failure to perform or on account of any delay in performance of any obligation under this Agreement (excluding payment

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obligations), if and to the extent that such failure or delay shall be due to a cause beyond the control of the relevant Party and which, by the exercise of its commercially reasonable efforts of diligence and care, such Party could not reasonably have been expected to avoid (a "<u>Force Majeure Event</u>") including, without limitation, natural disasters, embargoes, explosions, riots, wars or acts of terrorism, epidemic, pandemic or outbreak or occurrence of any disease or contagion. Supplier's financial inability to perform, changes in cost or availability of materials, components or services, market conditions or supplier actions or contract disputes will not constitute a Force Majeure Event or excuse performance by Supplier under this Section. The Party experiencing the delay and seeking relief under this Section shall promptly notify the other Party of the delay and the probable duration of the delay, and use commercially reasonable efforts to overcome such delay.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2<u>Termination</u>. If as a result of the conditions of a Force Majeure Event, Supplier is unable to fully perform its obligations for a period of 90 days, Athenex shall have the right to terminate this Agreement upon 30 days prior notice to Supplier.

ARTICLE XI

<u>GENERAL PROVISIONS</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1<u>Expenses</u>. Except as otherwise expressly provided in this Agreement, each Party will bear its respective costs and expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated herein, including all fees and expenses of agents, representatives and counsel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2<u>SPV's Rights</u>. The SPV's rights, and the Supplier's obligations to the SPV, under this Agreement are limited to those expressly set out herein and the SPV shall have no implied rights under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3<u>Notices</u>. All notices, consents, requests, waivers, demands or other communications under this Agreement must be in writing and will be deemed to have been duly given (a) when delivered if delivered by hand (with written confirmation of receipt), (b) when sent if sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (return receipt requested and delivery costs prepaid), or (d) when received by the addressee, if sent by email (return receipt requested) if sent on a Business Day during normal business hours of the Party to be notified, and if not, then on the next Business Day, in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a Party may designate by notice to the other Parties by like notice) provided that where a notice, consent, request, waiver, demand or other communication is provided by any Party by email in accordance with this Section 11.3, such Party shall also provide such notice, consent, request, waiver, demand or other communication by one of the other methods set out in this Section 11.3:

If to Athenex: Athenex, Inc. Conventus Building1001 Main Street, Suite 600 Buffalo, New York 14203Attn: Legal Department Email: ###

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| | |
|:---|:---|
| If to Supplier: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amy Wu<br>Marketing Director<br>Chongqing Sintaho Pharmaceutical Co., Ltd.<br>Add: #600 Liuqing Road, Maliuzui Town, Banan District, Chongqing 401319, China<br>Tel： ###<br>E-mail：###  |
| <br>If to SPV: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br>ATNX SPV, LLC<br>1001 Main Street, Suite 600 Buffalo, New York 14203<br>Attn: Dan Lang<br>Email: ### <br>with a copy (which shall not constitute notice) to:<br>Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.<br>666 Third Avenue<br>New York, New York 10017<br>Attention: Richard G. Gervase Jr., Esq.<br>Email: ### |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.4<u>Further Assurances</u>. The Parties agree (a) to furnish upon reasonable request to each other such further information, (b) to execute and deliver to each other such other documents and (c) to do such other acts and things, all as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5<u>Waiver</u>. The rights and remedies of the Parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of, or estoppel with respect to, such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Party, (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement by the Party against whom enforcement is sought and such notice or demand expressly references the provision of this Agreement that is waived.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.6<u>Governing Law</u>. This Agreement shall be construed in accordance with and governed by the laws of Hong Kong applicable to agreements made and to be performed wholly within that jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.7<u>Arbitration</u>. Any controversy or claim arising out of or relating to this Agreement, or the

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breach thereof, shall be determined by final and binding arbitration conducted in Hong Kong and administered by the Hong Kong International Arbitration Centre ("HKIAC") under the HKIAC Administered Arbitration Rules in force when the notice of arbitration is submitted. There shall be three arbitrators. Such arbitrators shall be selected, within 30 days following the request for arbitration, as follows: (i) Buyer shall select one arbitrator, (ii) Seller Parent shall select one arbitrator; and (iii) the arbitrators selected by Buyer and Seller Parent shall together select a third arbitrator. The arbitration shall be conducted in English. The award rendered by the arbitrators shall be final, non-reviewable, non-appealable and binding on the Parties and may be entered and enforced in any court having jurisdiction, and any court where a Party or its assets is located (to whose jurisdiction the Parties consent for the purposes of enforcing the award). Judgment on the award shall be final and non-appealable. If more than one arbitration is commenced under this Agreement and any Party contends that two or more arbitrations are substantially related and that the issues should be heard in one proceeding, the arbitrators selected in the first-filed proceeding shall determine whether, in the interests of justice and efficiency, the proceedings should be consolidated before those arbitrators. Except as may be required by applicable Law or the rules of any securities exchange, neither a Party nor the arbitrators may disclose the existence, content or results of any arbitration without the prior written consent of all Parties, unless to protect or pursue a legal right.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.8<u>Entire Agreement and Modification</u>. This Agreement supersedes all prior agreements and understandings between the Parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter. This Agreement may be amended, modified or supplemented in whole or in part at any time only by an agreement in writing between Athenex and Supplier.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.9<u>Assignments</u>. No Party may assign any of its rights or delegate or subcontract any of its obligations under this Agreement, except to the SPV, without the prior written consent of the other Party, which will not be unreasonably withheld. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.10<u>Removal of Parties</u>. Athenex acknowledges that, after the Effective Date, Chongqing Taihao may be removed as a Party to this Agreement, provided that (a) Supplier provides written notification to Athenex 120 days prior to the proposed date of removal; (b) Athenex agrees to enter into an amendment to this Agreement pursuant to Section 11.8 to reflect such change; and (c) Supplier has provided sufficient evidence that Supplier's obligations under this Agreement can be performed by Chongqing Sintaho.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.11<u>Relationship of the Parties</u>. The relationship between Supplier and Athenex is solely that of vendor and vendee, as independent contracting parties. Nothing in this Agreement creates any agency, joint venture, partnership or other form of joint enterprise, employment or fiduciary relationship between the Parties. Neither Party has any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other Party or to bind the other Party to any contract, agreement or undertaking with any Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.12<u>Binding Effect; Third Party Beneficiaries</u>. This Agreement shall be binding upon and inure solely to the benefit of the Parties hereto and their respective successors and permitted assigns. The Indemnified Parties shall be express third party beneficiaries to the provisions of this Agreement in ARTICLE IX. In addition, the Parties agree that SPV is an express third party beneficiary of all of Athenex's rights (but none of its obligations), solely to the extent such rights relate to Tirbanibulin

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API, as expressly set out under this Agreement. Except for the prior two sentences, nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.13<u>Severability</u>. If any provision of this Agreement (or any portion thereof) is declared by a court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement (or any portion thereof) shall remain in full force and effect. The Parties shall then use all reasonable endeavors to replace the illegal, void or unenforceable provision with a legal, valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the illegal, void or unenforceable provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.14<u>Time of Essence</u>. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.15<u>Equitable Remedies</u>. In addition to legal remedies, to the extent allowed pursuant to this Agreement or by law, in recognition of the fact that remedies at law may not be sufficient, each Party (and its successors) shall be entitled to equitable remedies (including, without limitation, specific performance and injunction) in the event the other Party breaches the provisions of ARTICLE VI.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.16<u>Debarment and Disqualification</u>. Supplier represents and warrants to Athenex that neither Supplier nor any of its employees, consultants and agents who will perform any activities in supplying Products to Athenex is debarred, disqualified or involved in any regulatory or misconduct litigation or investigation by any Governmental Authority that might result in any sanction or other disciplinary measures prohibiting or restricting any of them to carry out or participate in such activities. In the event that Supplier becomes aware that any of its employees or agents has any pending proceeding, threatened debarment or disqualifications, it will promptly notify Athenex.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.17<u>Execution</u>. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Party, it being understood that both Parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a ".pdf" data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or e-mail signature page were an original thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.18<u>Other Definitional and Interpretive Matters</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Calculation of Time Period</u>. When calculating the period of time before which, within which or following which, any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Agreement</u>. Any definition of or reference in this Agreement to any

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agreement, contract, document, instrument or other record shall be construed as referring to such agreement, contract, document, instrument or other record as from time to time amended, supplemented restated or otherwise modified (subject to any restriction on such amendments, supplements or modifications set forth herein).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Headings</u>. The division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any "<u>Section</u>" are to the corresponding Section of this Agreement unless otherwise specified.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)<u>Including</u>. The word "including" or any variation thereof means (unless the context of its usage requires otherwise) "including, but not limited to," and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.

[SIGNATURE PAGE FOLLOWS]

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**IN WITNESS WHEREOF**, the Parties hereto have caused this Agreement to be executed and delivered as of the Effective Date.

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| |
|:---|
| **"SUPPLIER"**<br>CHONGQING TAIHAO PHARMACEUTICAL CO., LTD.<br>By: <u>/s/ Xiaodong Wang</u> Name: <u>Xiaodong Wang</u><br>Title: <u>CEO</u> |
| <br>CHONGQING SINTAHO PHARMACEUTICAL CO., LTD.<br>By: <u>/s/ Xiaodong Wang</u> Name: <u>Xiaodong Wang</u><br>Title: <u>CEO</u> |
| <br>**"ATHENEX"**<br>ATHENEX, INC.<br>By: <u>/s/ Johnson Lau</u><br>Name: <u>Johnson Lau</u><br>Title: <u>Chief Executive Officer</u> |

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<br>**"SPV"**<br>ATNX SPV, LLC<br>By: <u>/s/ Daniel Lang</u> Name: <u>Daniel Lang</u><br>Title: <u>Director</u><br>

[Signature Page to Supply Agreement]

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**EXHIBIT A PRODUCTS**

**EXHIBIT B**

**CONTRACT PRICE**

**EXHIBIT C**

**PROPOSED ALTERNATE MANUFACTURING SITE(S)**

**EXHIBIT D**

**PURCHASE ORDERS OF TIRBANIBULIN API**

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## Ex-21

**Exhibit 21.1**

Subsidiaries of Athenex, Inc.

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| | |
|:---|:---|
| **Subsidiary Companies** | **Jurisdiction of Incorporation** |
| Athenex API Limited | Hong Kong |
| Athenex Belgium | Belgium |
| ATHENEX CIDAL HOLDINGS I, S.A. | Panama |
| ATHENEX CIDAL HOLDINGS II, S.A. | Panama |
| ATHENEX CIDAL PANAMA, S.A. | Panama |
| Athenex Cidal Colombia S.A.S. | Columbia |
| Athenex Cidal Argentina S.A.U. | Argentina |
| Athenex Cidal Chile SpA | Chile |
| Athenex Cidal Costa Rica S.A. | Costa Rica |
| Athenex Cidal Peru, S.A.C. | Peru |
| Athenex Cidal Ecuador ATHENEXCUA S.A. | Ecuador |
| Athenex Cidal Guatemala S.A. | Guatemala |
| Athenex Euro Limited | United Kingdom |
| Athenex HK Innovative Limited | Hong Kong |
| Athenex Manufacturing China Limited | British Virgin Islands |
| Athenex Pharma Solutions, LLC | Delaware |
| Athenex Pharmaceuticals Co., Ltd. | Taiwan |
| Athenex Pharmaceutical Division, LLC | Delaware |
| Athenex Pharmaceuticals (China) Limited | Hong Kong |
| Athenex Pharmaceuticals LLC | Delaware |
| Athenex R&D LLC | Delaware |
| Athenex Therapeutics Limited | Hong Kong |
| Atis Science and Technology Company Limited | Hong Kong |
| ATNX SPV, LLC | Delaware |
| Axis Therapeutics Limited | Hong Kong |
| Cell Medica GmbH | Germany |
| Cell Medica Inc. dba Kuur Therapeutics | Texas |
| Chongqing MJ Medical Devices Co., Ltd.\* | People's Republic of China |
| Chongqing MJ Medical Sciences Co., Ltd. | People's Republic of China |
| Comprehensive Drug Enterprises Limited | Hong Kong |
| Excel Bloom Limited | British Virgin Islands |
| Kuur Therapeutics Inc. | Delaware |
| Kuur Therapeutics Ltd. | United Kingdom |
| Maxinase Life Sciences Limited | Hong Kong |
| Meridian East Limited | British Virgin Islands |
| MJ Medical Gel Systems Limited | Hong Kong |
| Nuwagen Limited\* | Hong Kong |
| Peterson Athenex Pharmaceuticals, LLC\* | Delaware |
| Polymed Therapeutics, Inc. | Texas |

---

\* Minority-owned

DOCPROPERTY YCFooter \\* MERGEFORMAT 12233478_2

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## Ex-23

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in Registration Statement Nos. 333-241665 and 333-258185 on Form S-3 and No. 333-218984, 333-241666, 333-258192 and 333-268734 on Form S-8 of our report dated March 20, 2023, relating to the financial statements of Athenex, Inc. and subsidiaries (the "Company") appearing in this Annual Report on Form 10-K for the year ended December 31, 2022.

/s/ Deloitte & Touche LLP

Williamsville, New York

March 20, 2023

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## Ex-31

**Exhibit 31.1**

CERTIFICATION PURSUANT TO

EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Johnson Y.N. Lau, certify that:

1. I have reviewed this Annual Report on Form 10-K of Athenex, Inc. (the "Registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: March 20, 2023

---

| | |
|:---|:---|
| /s/ Johnson Y.N. Lau | /s/ Johnson Y.N. Lau |
| Name: | Johnson Y.N. Lau |
| Title: | Chief Executive Officer and Board Chairman |
| (Principal Executive Officer) | (Principal Executive Officer) |

---

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## Ex-31

**Exhibit 31.2**

CERTIFICATION PURSUANT TO

EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joe Annoni, certify that:

1. I have reviewed this Annual Report on Form 10-K of Athenex, Inc. (the "Registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: March 20, 2023

---

| | |
|:---|:---|
| /s/ Joe Annoni | /s/ Joe Annoni |
| Name: | Joe Annoni |
| Title: | Chief Financial Officer |
| (Principal Financial and Accounting Officer) | (Principal Financial and Accounting Officer) |

---

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## Ex-32

**Exhibit 32.1**

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Johnson Y.N. Lau, Chief Executive Officer and Board Chairman (Principal Executive Officer) of Athenex, Inc. (the "Registrant"), and Joe Annoni, Chief Financial Officer of the Registrant (Principal Financial and Accounting Officer), each hereby certifies that, to the best of their knowledge:

1. The Registrant's Annual Report on Form 10-K for the year ended December 31, 2022, to which this Certification is attached as Exhibit 32.1 (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition of the Registrant at the end of the period covered by the Report and results of operations of the Registrant for the period covered by the Report.

Date: March 20, 2023

---

| | |
|:---|:---|
| /s/ Johnson Y.N. Lau | /s/ Johnson Y.N. Lau |
| Name: | Johnson Y.N. Lau |
| Title: | Chief Executive Officer and Board Chairman |
| (Principal Executive Officer) | (Principal Executive Officer) |

---

---

| | |
|:---|:---|
| /s/ Joe Annoni | /s/ Joe Annoni |
| Name: | Joe Annoni |
| Title: | Chief Financial Officer |
| (Principal Financial and Accounting Officer) | (Principal Financial and Accounting Officer) |

---

------