Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “Pyxis Oncology,” the “Company,” “we,” “us,” and “our” refer to Pyxis Oncology, Inc. and its subsidiaries.
Overview
Pyxis Oncology is a clinical stage oncology company executing on a development strategy designed to address unmet medical needs in patients with solid tumors with an immediate focus on head and neck squamous cell carcinoma (HNSCC) tumors.
Our lead product candidate, micvotabart pelidotin, formerly referred to as PYX-201, is an investigational novel antibody-drug conjugate (ADC) that uniquely targets Extradomain-B Fibronectin (EDB+FN), a non-cellular structural component within the tumor extra-cellular matrix (ECM). The tumor ECM is a complex network of fibrous proteins and molecules with unique composition that play an important role in cell development and tumor growth and in some instances, in supporting metastasis. The fibronectin strands within the ECM give the tumor shape and support the clustering of tumor cells.
Fibronectin is a key component of the ECM and its downstream signaling pathways regulate cell adhesion, migration, differentiation and wound healing. EDB+FN is an alternatively spliced form of fibronectin. EDB+FN regulates blood vessel morphogenesis, which provides the tumor access to nutrition and oxygen, and provides a means to remove waste and a pathway for cells to metastasize. EDB+FN is a compelling target for cancer therapeutics as the physiological expression of EDB+FN is very low in healthy adult tissues, yet it is found to be highly expressed in a large variety of solid tumor tissues. EDB+FN is also found to be expressed during embryogenesis.
By targeting EDB+FN, our goal is to destabilize the barrier that protects, feeds, and provides structure to the tumor, in addition to killing tumor cells directly while sparing healthy cells.
Our ADC, micvotabart pelidotin, consists of human Immunoglobulin G1 (IgG1) and is site-specifically conjugated with a cleavable linker and a microtubule inhibitor (optimized auristatin) payload. Micvotabart pelidotin is designed to optimize linker stability to enable delivery of the next generation auristatin payload that can be cleaved and released in the ECM and penetrate through the tumor cell membrane to kill tumor cells directly without the need for cell surface antigen-mediated internalization of the ADC. Unlike conventional ADCs which bind to the tumor cell surface antigens, micvotabart pelidotin is designed to deliver the auristatin payload to the extra-cellular environment and release the free payload to kill tumor cells as well as activated fibroblasts and vascular endothelial cells that support tumor growth. We believe the free payload kills the tumor cells through a combination of bystander effect directly killing highly proliferative cells and through stimulation of the local immune cells.
We conducted a Phase 1 dose escalation (Part 1) study, referred to as PYX-201-101 which began dosing patients in March of 2023. The study’s objective was to evaluate micvotabart pelidotin monotherapy in patients with advanced solid tumors predicted to express EDB+FN. PYX-201-101 (Part 1) is an open label, multicenter, dose escalation Phase 1 trial designed to evaluate the safety, tolerability, pharmacokinetics (PK), pharmacodynamics (PD) and preliminary efficacy of micvotabart pelidotin, and to identify recommended doses for further study. Patients with a variety of relapsed or refractory solid tumor types were eligible to participate, including patients with recurrent and metastatic head and neck squamous cell carcinoma (R/M HNSCC), hepatocellular carcinoma (HCC), hormone receptor positive and human epidermal growth factor receptor 2 negative (HR+/HER2-) breast cancers, locally advanced / metastatic non-small cell lung cancer (NSCLC), ovarian cancer, pancreatic ductal adenocarcinoma (PDAC), renal cell carcinoma (RCC), sarcoma, thyroid cancer and triple negative breast cancer (TNBC). A total of 80 patients were dosed during the PYX-201-101 (Part 1) study.
In November 2024, we announced positive preliminary data from Part 1 of our Phase 1 dose escalation study of PYX-201-101 with a data cut-off date of October 4, 2024. The enrolled patients were heavily pre-treated with a median of four prior lines of systemic therapy in the advanced disease setting as many were seeking the micvotabart pelidotin experimental therapy as part of end-of-life care. Of the ten solid tumor types eligible to enroll in the study, patients across nine solid tumor types were enrolled and dosed. Tumor regression was observed in patients across all nine solid tumor types that were enrolled. The identified dose response range in the study was 3.6 mg/kg – 5.4 mg/kg IV Q3W.
The R/M HNSCC patients were observed to show the strongest tumor regression response during this Part 1 phase of the study. Among the six efficacy evaluable patients with R/M HNSCC at the therapeutically active dose response range of 3.6 mg/kg – 5.4 mg/kg IV Q3W, the study achieved a confirmed 50% objective response rate (ORR) based on RECIST 1.1 criteria including one confirmed complete response (cCR) and two confirmed partial responses (cPRs) and yielded a disease control rate (DCR) of 100%. These six heavily pre-treated patients with R/M HNSCC had either HPV-positive (HPV+) or HPV-negative (HPV-) tumors and a median of four prior lines of systemic therapy in the advanced disease setting.
While we observed evidence of tumor regression across all nine solid tumor types that were enrolled in the Phase 1 Part 1 dose escalation study, dose responses were most pronounced in six solid tumor types of interest, including R/M HNSCC, HR+/HER2- breast cancer, NSCLC, ovarian, sarcoma and TNBC, at the therapeutically active dose response range of 3.6 mg/kg – 5.4 mg/kg IV
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Q3W. Micvotabart pelidotin achieved a 26% ORR (n=31) in patients with these six solid tumor types dosed at 3.6 mg/kg – 5.4 mg/kg IV Q3W.
Dose-dependent responses were observed in patients who had failed to respond or had developed resistance to prior microtubule inhibitors (MTIs) such as taxanes or an ADC with Monomethyl Auristatin E (MMAE) payload. We believe this is a significant finding as response in this patient population indicates that prior treatment with MTIs may not confer resistance to micvotabart pelidotin. Additionally, we observed tumor regression in patients who had progressed on previous treatment with ADCs with Topoisomerase 1 Inhibitor payloads, which is a significant finding given the number of ADCs with Topoisomerase 1 Inhibitor payloads that are approved and in clinical development. Finally, we observed that several R/M HNSCC patients who had been previously treated with and progressed on epidermal growth factor receptor inhibitors (EGFRi) directed therapies experienced tumor regression while being treated with micvotabart pelidotin. We believe this is a very important observation as the R/M HNSCC marketplace is evolving to potentially include new EGFRi targeting agents and the ability for our product candidate to regress tumors in patients who have relapsed on EGFRi therapies will enable us to compete in both the current and emerging standard of care landscape. We believe the totality of our preliminary data supports further development of both micvotabart pelidotin monotherapy expansion and combination therapy trials.
Our Clinical Pipeline
In February 2025, the U.S. Food and Drug Administration (FDA) granted Fast Track Designation to micvotabart pelidotin for the monotherapy treatment of adult patients with R/M HNSCC whose disease has progressed following treatment with platinum-based chemotherapy and an anti-PD-(L)1 antibody.
Fast Track Designation is an FDA program intended to facilitate and expedite the development and review of new drugs in the U.S. for the treatment of a serious or life-threatening condition. To qualify for this designation, there must be clear data demonstrating the drug has potential to address unmet medical need in the designated condition.
Based on the strength of the HNSCC signal that emerged in the Part 1 dose escalation study of PYX-201-101, we have decided to prioritize our resources to focus the next stage of development on characterizing the R/M HNSCC efficacy signal.
The following table summarizes our clinical pipeline reflecting this prioritized focus:
In early January 2025, we initiated the dose expansion phase (Part 2) of the PYX-201-101 monotherapy study with a prioritized focus to confirm the preliminary efficacy signals in R/M HNSCC seen in Part 1. We are actively recruiting patients for two monotherapy R/M HNSCC expansion cohorts. The Part 2 dose expansion phase includes the following two R/M HNSCC cohorts across sites in the United States (US), European Union (EU) and other countries:
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micvotabart pelidotin monotherapy for second line (2L) and third line (3L) R/M HNSCC patients who have received prior platinum-based chemotherapy and prior PD-(L)1 inhibitor therapy. We expect to enroll patients in this expansion cohort at the 5.4 mg/kg IV Q3W dose, a pharmacologically active dose identified during Part 1 of this trial where we have seen clinically meaningful anti-tumor activity with manageable safety. We anticipate having preliminary data in the second half of 2025; and
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micvotabart pelidotin monotherapy for 2L and 3L R/M HNSCC patients who have received prior epidermal growth factor receptor (EGFR) directed therapy and prior PD-(L)1 inhibitor therapy. We expect to enroll patients in this expansion cohort also at the 5.4 mg/kg IV Q3W dose and anticipate having preliminary data in the first half of 2026.
We are planning to hold a discussion with the FDA to align on our approach for finding the optimal monotherapy dose, as required under Project Optimus and expect the dose optimization phase to commence in 2026.
In November 2024, we announced a Clinical Trial Collaboration and Supply Agreement with Merck & Co, Inc. or Merck (known as MSD outside of the US and Canada), for a Pyxis Oncology-sponsored study of micvotabart pelidotin in combination with Merck’s anti-PD-(L)1 therapy, KEYTRUDA® (pembrolizumab).
In early January 2025, we initiated the Phase 1/2 combination study with KEYTRUDA® now called PYX-201-102 and are actively recruiting patients in this study. PYX-201-102 is a Phase 1/2 open label, global, multicenter dose escalation and dose expansion study to evaluate the safety, tolerability, PK, PD and preliminary efficacy of micvotabart pelidotin in combination with pembrolizumab in patients with advanced solid tumors. Patients with histologically or cytologically confirmed advanced solid tumors, including 1L R/M HNSCC, 2L+ R/M HNSCC, cervical cancer, gastric cancer, HR+/HER2- breast cancer, sarcoma and locally advanced or metastatic TNBC, are eligible to enroll.
We are planning to conduct the dose escalation phase of PYX-201-102 covering multiple tumor types with an aim to identify the Recommended Phase 2 Dose (RP2D) of micvotabart pelidotin in combination with pembrolizumab. We plan to enroll and dose patients to clear the three doses that will be tested in combination with pembrolizumab. During Part 1 dose escalation, we anticipate testing a fixed dose of pembrolizumab in combination with 3 different doses of micvotabart pelidotin ranging from 3.6 mg/kg – 5.4 mg/kg IV Q3W. Pembrolizumab (standard dose at 200 mg IV) will be given with escalating doses of micvotabart pelidotin with a starting dose of 3.6 mg/kg IV every 3 weeks (Q3W). Upon clearance of the initial dose level of 3.6 mg/kg IV Q3W by the Dose Escalation and Steering Committee (DESC), and depending on observed safety data, we may escalate to 4.4 mg/kg IV Q3W of micvotabart pelidotin with 200 mg IV of pembrolizumab, with a potential of dosing at 5.4 mg/kg IV Q3W of micvotabart pelidotin with 200 mg IV of pembrolizumab. We aim to select a dose of micvotabart pelidotin in combination with pembrolizumab by mid-year 2025, which will guide our discussion with the FDA about potential RP2D for further combination study.
Concurrently to the Part 1 dose escalation and assuming each dose clears the escalation step, the Phase 1/2 combination study will evaluate micvotabart pelidotin and pembrolizumab in patients with 1L and 2L+ R/M HNSCC. Patients will be enrolled for each dose in their respective backfill cohort upon clearance of the dose by the DESC. Pembrolizumab (standard dose at 200 mg IV) will be given with escalating doses of micvotabart pelidotin with a starting dose of 3.6 mg/kg IV every 3 weeks, followed by dose of 4.4 mg/kg IV Q3W, if DESC clears it and then a dose of 5.4 mg/kg IV Q3W, if DESC clears it. We anticipate having preliminary data on at least a subset of these R/M HNSCC patients in the second half of 2025. Timing of data availability from the full recruitment and dosing of R/M HNSCC patients is dependent on the timing of activation of additional clinical trial sites and patient enrollment. Further guidance on anticipated timing of the full preliminary data readout will be provided in 2025.
Since our inception, we have focused substantially all of our resources on conducting research and development activities, undertaking preclinical studies and clinical trials, organizing and staffing our company, business planning, raising capital, establishing and maintaining our intellectual property portfolio and identifying potential product candidates. We do not have any products approved for sale and have not generated any revenue from product sales. We have incurred significant operating losses since our inception. We reported net losses of $77.3 million and $73.8 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $363.6 million, net equity of $120.8 million, and cash, cash equivalents and short-term investments of $126.9 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We expect that our expenses and capital expenditures will increase substantially in connection with our ongoing activities. Our operations to date have been financed primarily through sales of convertible preferred stock and sale of equity securities and additional funding may be necessary to fund future clinical and preclinical activities.
Components of Our Results of Operations
Revenues
To date, we have not generated any revenues from product sales and do not expect to generate any revenues from product sales in the foreseeable future. We record revenues from research and development agreements, including amounts related to upfront receipt for license fees, royalties, milestones and other contingent receipts and fees for research and development services.
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Our ability to generate product revenues will depend upon our ability to successfully develop, obtain regulatory approval and commercialize our product candidate. Due to the numerous risks and uncertainties associated with product development and regulatory approval, we are unable to predict the amount, timing or whether we will be able to obtain product revenues.
Costs and Operating Expenses
Cost of Revenues
The components of our cost of revenues are expenses directly attributable to earn revenues. Pursuant to the Settlement Agreement with Novartis, we transferred our rights to future royalties on the net sales of Beovu® to Novartis and recorded the remaining definite-lived intangible asset of $0.5 million related to these royalty rights to cost of revenues. Refer to Note 5, Sale of Royalty Rights, in our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
Research and Development Expenses
Research and development expenses consist of costs incurred for our research activities, including our discovery efforts and research work to support clinical development and the development of our programs. Research and development expenses are separated into program-specific costs and unallocated costs.
Program-specific costs include:
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direct third party costs, which include expenses incurred under agreements with contract research organizations (CROs) and the cost of consultants who assist with the development of our product candidates on a program-specific basis, investigator grants, sponsored research and any other third party expenses directly attributable to the development of the product candidates;
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costs of acquiring, developing, manufacturing and testing clinical and preclinical materials, including costs incurred under agreements with contract development and manufacturing organizations (CDMOs) to the extent they can be allocated to a specific program;
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license fees and milestone payments related to the acquisition and retention of certain licensed technology and intellectual property rights for a specific product candidate; and
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costs associated with preclinical and clinical activities that are directly attributable to the development of the product candidates.
Unallocated costs include:
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employee-related expenses for research and development personnel, including salaries, bonus, payroll taxes, related benefits, severance and other staff-related expenses;
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stock-based compensation expenses for employees engaged in research and development activities; and
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facilities and other costs which include allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment, laboratory supplies, third party cost for discovery research and the cost of consultants who assist with our research and development and costs related to contract manufacturing, but are not allocated to a specific program.
We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered, or the services rendered.
We expect that our research and development expenses will increase substantially in connection with our ongoing and planned clinical development activities related to our product candidate in the near term and in the future. The successful development of our product candidate is highly uncertain. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of our product candidate and we may never succeed in obtaining regulatory approval for our product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation for our personnel in executive, legal, finance and accounting, human resources and other administrative functions. General and administrative expenses also include professional fees for auditing, tax and legal services, as well as insurance, board of director compensation, consulting, other administrative expenses and facility costs not otherwise included in research and development expenses.
Other Income, Net
Other income, net primarily consists of interest earned on our invested cash and cash equivalent balances, accretion of discounts associated with our marketable debt securities and sublease income under our sublease.
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Income Taxes
Since our inception, we have not recognized any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year and interim period, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating losses (NOLs), carryforwards and tax credit carryforwards will not be realized.
As of December 31, 2024, our federal and state NOLs in the U.S. were $63.1 million ($300.7 million before tax) and $15.1 million ($229.6 million before tax), respectively. The federal NOL carryforwards in the U.S. can be carried forward indefinitely but may be subject to annual usage limitations to the extent certain substantial changes our ownership occur. The federal NOLs carryforward relating to tax years prior to 2017 of $5.9 million ($28.3 million before tax), acquired with Apexigen, begin to expire in 2033. The state NOL carryforwards begin expiring in 2035. In addition, as of December 31, 2024, we had $8.7 million and $3.9 million of federal and state credit carryovers related to research and development costs which begin to expire in 2030. These credit carryforwards related to research and development costs and NOLs are subject to review and possible adjustment by the relevant taxing authorities.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
Our results of operations were as follows (in thousands):
Year Ended December 31,
Revenues
Costs and operating expenses
Other income, net
Revenues
Revenues for the year ended December 31, 2024, were $16.1 million, compared to $0 for the year ended December 31, 2023. In March 2024, we entered into the Settlement Agreement with Novartis, pursuant to which we transferred our rights to future royalties on the net sales of Beovu® to Novartis for a one-time amount of $8.0 million. Novartis also agreed to forgo its right to reclaim royalties previously paid of $8.1 million to us and Apexigen. Both of these amounts were recognized as revenues upon execution of the Settlement Agreement during the year ended December 31, 2024.
Costs and Operating Expenses
Cost of Revenues
Upon execution of the Settlement Agreement with Novartis, we expensed the remaining definite-lived intangible asset of $0.5 million related to these royalty rights to cost of revenues.
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Research and Development Expenses
Research and development expenses were as follows (in thousands):
Year Ended December 31,
Program-specific costs:
Unallocated costs:
Research and development expenses increased by $9.1 million, from $49.6 million for the year ended December 31, 2023, to $58.7 million for the year ended December 31, 2024.
Micvotabart pelidotin program-specific research and development costs increased by $18.3 million, primarily due to a $10.2 million increase in contract manufacturing costs due to the timing of manufacturing runs for micvotabart pelidotin, a $4.8 million increase in clinical trial related expenses due to a higher number of patients dosed and a $2.3 million increase in preclinical and translation work to support micvotabart pelidotin clinical development work.
PYX-106 program-specific research and development costs increased by $2.8 million, primarily due to a $2.0 million increase in clinical trial related expenses and $0.7 million increase in contract manufacturing costs for our Phase 1 clinical trial, PYX-106-101.
Unallocated research and development costs decreased by $12.5 million which was primarily due to lower personnel-related expenses due to decreases in our headcount as a result of the reduction in workforce completed in the fourth quarter of 2023 and lower other unallocable costs of $3.5 million.
General and Administrative Expenses
General and administrative expenses were as follows (in thousands):
Year Ended December 31,
Facilities, insurance and other costs 5,149 5,173 (24 )
General and administrative expenses decreased by $7.2 million, from $32.6 million for the year ended December 31, 2023, to $25.4 million for the year ended December 31, 2024. Personnel-related expenses decreased by $5.3 million, primarily due to a $2.4 million decrease in employee costs as a result of the reduction in workforce completed in the fourth quarter of 2023 and higher stock-based compensation of $2.6 million in the prior comparable period. The decrease in professional and consultant fees is primarily due to higher legal costs in the prior year related to the acquisition and integration of Apexigen.
Impairment of In-Process Research and Development Intangible Asset
In December 2024, we announced our strategic realignment plan to prioritize resources towards clinical development of our lead asset micvotabart pelidotin and we continue to defer further clinical development of PYX-107. Given the uncertain timing of future clinical development of PYX-107, our decline in market capitalization in the fourth quarter of 2024 and the current biotech environment, in which access to additional capital is limited, we concluded that the in-process research and development intangible asset related to PYX-107 was fully impaired during the fourth quarter of 2024. We recognized a non-cash impairment loss of $21.0 million during the year ended December 31, 2024. No impairment loss was recorded during the year ended December 31, 2023. We continue to believe in the scientific and clinical potential of PYX-107 and the opportunity to advance clinical development of PYX-107 may be re-evaluated upon new data availability from any ongoing investigator initiation trials (ISTs) in PYX-107 in the context of any future portfolio evaluations that we may conduct.
PYX-107 was acquired by us in August 2023 as part of the acquisition of Apexigen. Despite the impairment loss, the acquisition of Apexigen remains a net accretive transaction for us, whereby we issued 4.3 million common stock to acquire Apexigen in a non-cash transaction and received $9.5 million of cash since acquisition from the sale of royalty rights and royalty payments. Further, the assets
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acquired still have revenue generating potential through potential development milestone from out-licensing arrangement, particularly related to Simcere for which application for approval is submitted to Chinese health regulator.
Other Income, net
The increase in other income, net for the year ended December 31, 2024, as compared to 2023, was primarily the result of a $1.1 million increase in sublease income as rent payments on the sublease began mid-2023.
Liquidity and Capital Resources
We had cash, cash equivalents and short-term investments of $126.9 million as of December 31, 2024. For the years ended December 31, 2024 and 2023, we had net losses of $77.3 million and $73.8 million, respectively. As of December 31, 2024, we had an accumulated deficit of $363.6 million
On November 1, 2022, we filed a registration statement on Form S-3 with the U.S. Securities and Exchange Commission (SEC) for the issuance of common stock, preferred stock, warrants, debt securities, rights and units up to an aggregate of $250.0 million. On November 14, 2022, the registration statement was declared effective by the SEC. The registration statement includes an at-the-market (ATM) offering program for the sale of up to $125.0 million shares of our common stock.
On January 30, 2024, we completed the sale of an aggregate of 3,600,000 shares of our common stock under the ATM offering program, with an average sale price of $3.00 per share, resulting in gross proceeds of $10.8 million, before the placement agent fees.
On February 29, 2024, we completed the private placement with certain accredited investors and issued and sold to the purchasers an aggregate of (i) 8,849,371 shares of common stock at a purchase price of $4.78 per share and (ii) Pre-Funded Warrants to purchase up to an aggregate of 1,611,215 shares of common stock at a purchase price of $4.779 per Pre-Funded Warrant. We received aggregate gross proceeds from the private placement of $50 million, before deducting placement agent fees and offering expenses.
On March 25, 2024, we entered into the Settlement Agreement with Novartis, pursuant to which Novartis agreed to pay $8.0 million to transfer our rights to future royalties on the net sales of Beovu®, which was received on April 8, 2024.
On August 29, 2024, we completed the sale of an aggregate of 450,000 shares of our common stock under the ATM offering program, with an average sale price of $3.66 per share, resulting in gross proceeds of $1.7 million, before the placement agent fees.
As of December 31, 2024, we had $106.2 million of remaining capacity available under the ATM offering program.
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance further clinical trials for micvotabart pelidotin. The timing and amount of our funding requirements will depend on many factors, including:
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the cost associated with monotherapy and combination therapy clinical trials for micvotabart pelidotin;
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the manufacture of drug products and drug substance for micvotabart pelidotin;
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the timing and progress of our other preclinical and clinical development activities;
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the progress of the development efforts of parties with whom we have entered or may in the future enter into in-licensing, collaborations and research and development agreements;
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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for our product candidate for which we receive marketing licensure;
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our ability to maintain our current licenses and research and development programs and to establish new collaboration arrangements;
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the costs involved in prosecuting, maintaining and enforcing patent and other intellectual property rights;
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the cost and timing of regulatory licenses; and
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insurance, legal and other regulatory compliance expenses to operate as a public company.
Until such time, if ever, we can generate substantial product revenues, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. 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 of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions, engaging in acquisition, merger or collaboration transactions, selling or licensing our assets, making capital expenditures, redeeming our stock, making certain investments or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or
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grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2024 and 2023 (in thousands):
Year Ended December 31,
Net cash used in operating activities $ (57,672 ) $ (70,709 )
Net cash provided by (used in) investing activities 8,155 (104,849 )
Net cash provided by financing activities 59,326 5,929
Operating Activities
Net cash used in operating activities for the year ended December 31, 2024, was $57.7 million, which consisted of our net loss of $77.3 million and a net change in our operating assets and liabilities of $11.8 million, offset by non-cash charges of $31.5 million. The non-cash charges were primarily due to $21.0 of impairment, $12.9 million in stock-based compensation and $3.0 million of depreciation and amortization expense, offset by $6.1 million of accretion of discounts on marketable debt securities. The net change in our operating assets and liabilities was primarily due to a decrease of $7.7 million in deferred revenue related to the Settlement Agreement with Novartis, a reduction of $1.7 million in accrued expenses and other current liabilities and operating lease payments of $1.2 million. These decreases were partially offset by a $1.2 million increase in accounts payable related to timing of vendor payments.
Net cash used in operating activities for the year ended December 31, 2023, was $70.7 million, which consisted of our net loss of $73.8 million and a net change in our operating assets and liabilities of $11.7 million, offset by non-cash charges of $14.7 million. The non-cash charges were primarily due to $16.9 million in stock-based compensation and $1.9 million of depreciation and amortization expense, partially offset by $4.8 million of accretion of discounts on marketable debt securities. The net change in our operating assets and liabilities was primarily due to a decrease of $14.1 million in accrued expenses and other current liabilities, which primarily relates to a one-time payment of $8.0 million made to Pfizer in January 2023 pursuant to the Pfizer A&R License Agreement, and reduction in accounts payable by $3.5 million resulting from the timing of payments to our service providers. These decreases were partially offset by a $2.5 million increase to prepaid expenses and other current assets and a $2.4 million increase to operating lease liabilities driven by tenant improvement allowance deposits.
Investing Activities
Net cash provided by investing activities for the year ended December 31, 2024, was $8.2 million, which consisted primarily of redemption of marketable debt securities of $168.5 million, partially offset by purchases of marketable debt securities of $160.1 million.
Net cash used in investing activities for the year ended December 31, 2023, was $104.9 million, which consisted primarily of purchases of marketable debt securities of $196.8 million and leasehold improvements and purchases of property and equipment for our headquarters of $7.0 million, partially offset by redemption of marketable debt securities of $92.0 million and cash acquired as part of the acquisition of Apexigen of $6.7 million.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2024, was $59.3 million, which consisted primarily of $46.9 million net proceeds from the Private Placement which closed in February 2024 and net proceeds of $12.2 million from our ATM offering program.
Net cash provided by financing activities for the year ended December 31, 2023, was $5.9 million, which consisted primarily of net proceeds from our ATM offering program.
Outlook
As of December 31, 2024, we had approximately $126.9 million in cash, cash equivalents and short-term investments. We believe that our cash and cash equivalents as of December 31, 2024, will be sufficient to fund our operations into the second half of 2026. However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. In addition, we could utilize our available capital resources sooner than we expect.
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Contractual Obligations and Commitments
Operating Lease Obligation
We lease an office and laboratory space in Boston, Massachusetts with lease payments that continue through December 31, 2032, and have scheduled rent increases each year of 3%. Additionally, we sublease 17,729 square feet of office and laboratory space in the building located at 321 Harrison Avenue, Boston, Massachusetts. The remaining contractual fixed lease payments, net of sublease payments and tenant improvement allowance, over the term of the lease aggregate to $26.7 million. The operating lease obligation is discussed in Note 13, Operating Leases, in our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Other obligations
We enter into licensing and related agreements in the normal course of business. In accordance with these agreements, we are obligated to pay, among other items, future contingent payments, royalties, and sublicensing revenue in the future, as applicable. We have not included potential future payments due under these licensing and collaboration agreements in contractual obligations because the payment obligations under the agreements are contingent upon future events. Refer to Note 4, Licensing Agreements, in our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
In addition, we enter into contracts in the normal course of business with CDMOs, CROs, and other third parties for preclinical work and clinical development related work. These contracts do not contain minimum purchase commitments and are cancelable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation. These payments are not included in the contractual obligations above as the amount and timing of such payments are not known.
Off-Balance Sheet Arrangements
We did not have during the years presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe are 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2, Summary of Significant Accounting Policies, in our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies are the critical accounting policies used in the preparation of our consolidated financial statements that require significant estimates and judgments.
Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. At each period end, we corroborate the accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include those related to fees paid to:
•
CROs in connection with performing research and development services on our behalf;
•
CDMOs in connection with manufacturing of drug substance and drug products to be used in clinical trials on our behalf;
•
other providers in connection with clinical trials;
•
vendors in connection with non-clinical development activities; and
•
vendors related to product manufacturing, development and distribution of clinical supplies.
We record the expense and accrual related to contract research and manufacturing based on our estimates of the services received and efforts expended considering a number of factors, including our knowledge of the progress towards completion of the research, development and manufacturing activities; invoicing to date under contracts; communication from the CROs, CDMOs and other companies of any actual
89
costs incurred during the period that have not yet been invoiced; and the costs included in the contracts and purchase orders. In accruing service fees, we estimate the period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expense accordingly. There have not been any material adjustments to our prior estimates of accrued research and development expenses.
Recent Accounting Pronouncements
For information with respect to recently issued accounting standards and the impact of these standards on our consolidated financial statements, refer to Note 2, Summary of Significant Accounting Policies, in our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Jumpstart Our Business Startups Act
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” to take advantage of an extended transition period to comply with new or revised accounting standards. We are an “emerging growth company,” as defined in the JOBS Act. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
We are also a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and have reduced disclosure obligations regarding executive compensation, and, similar to emerging growth companies, if we are a smaller reporting company with less than $100 million in annual revenue, we are not required to obtain an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Under SEC rules and regulations, because we are considered to be a “smaller reporting company”, we are not required to provide the information required by this item in this report.
Item 8. Financial Statements and Supplementary Data.
The financial information required by Item 8 is located beginning on page F-1 of this report.
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
We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024, the end of the period covered by this Annual Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2024, at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
90
•
pertain to the maintenance of records that, in reasonable detail, accurately, and fairly reflect our transactions and dispositions of our assets;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in its 2013 Internal Control - Integrated Framework. Based on our assessment, our management has concluded that, as of December 31, 2024, our internal control over financial reporting is effective based on those criteria.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitation on the Effectiveness of Internal Control
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”
Item 9B. Other Information.
During the year ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K for the purchase or sale of our securities, except as set forth below:
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
We have an Insider Trading Policy governing the purchase, sale and other dispositions of its securities by employees, directors and consultants that is reasonably designed to promote compliance with insider trading laws, rules and regulations and the Nasdaq Stock Market LLC listing standards. Our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
The remaining information required by this item will be included in our definitive proxy statement to be filed with the SEC for the 2025 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this Item will be included in our definitive proxy statement to be filed with the SEC for the 2025 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item will be included in our definitive proxy statement to be filed with the SEC for the 2025 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item will be included in our definitive proxy statement to be filed with the SEC for the 2025 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this Item will be included in our definitive proxy statement to be filed with the SEC for the 2025 Annual Meeting of Stockholders and is incorporated herein by reference.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(1)
For a list of the financial statements included herein and report of independent registered public accounting firm (PCAOB ID: 42), see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.
(2)
Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.
(3)
Exhibits:
ExhibitNumber Description Form File No. Exhibit Filing Date Filed Herewith
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19.1 Insider Trading Policy dated November 14, 2023 X
101.SCH Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Document X
* The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in such filing.
+ Indicates management contract or compensatory plan.
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† Certain confidential information contained in this exhibit, marked by [***], has been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
Item 16. Form 10-K Summary.
None.
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SIGNATURES
Pursuant to the requirements of Section 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.
Pyxis Oncology, Inc.
Date: March 18, 2025 By: /s/ Lara Sullivan
Lara Sullivan, M.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lara Sullivan, M.D. and Pamela Connealy and each of them, as such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective 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 requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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 in the capacities and on the dates indicated.
Name Title Date
/s/ Lara Sullivan President, Chief Executive Officer and Director March 18, 2025
Lara Sullivan, M.D. (Principal Executive Officer)
Pamela Connealy (Principal Financial Officer)
/s/ Jitendra Wadhane Chief Accounting Officer March 18, 2025
Jitendra Wadhane (Principal Accounting Officer)
/s/ John Flavin Chairman of the Board of Directors March 18, 2025
John Flavin
/s/ Thomas Civik Director March 18, 2025
Thomas Civik
/s/ Darren Cline Director March 18, 2025
Darren Cline
/s/ Freda Lewis-Hall, M.D. Director March 18, 2025
Freda Lewis-Hall, M.D.
/s/ Rachel Humphrey, M.D. Director March 18, 2025
Rachel Humphrey, M.D.
/s/ Jakob Dupont, M.D. Director March 18, 2025
Jakob Dupont, M.D.
/s/ Santhosh Palani, Ph.D., CFA Director March 18, 2025
Santhosh Palani, Ph.D., CFA
/s/ Michael A. Metzger Director March 18, 2025
Michael A. Metzger
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PYXIS ONCOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023 F-3
Notes to Consolidated Financial Statements F-7
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Pyxis Oncology, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Pyxis Oncology, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
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.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2021.
Boston, Massachusetts
March 18, 2025
F-2
PYXIS ONCOLOGY, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
Assets
Current assets:
Prepaid expenses and other current assets 4,037 3,834
Liabilities and Stockholders’ Equity
Current liabilities:
Accrued expenses and other current liabilities 11,371 12,971
Operating lease liabilities, current portion 1,450 1,232
Deferred revenues — 7,660
Operating lease liabilities, net of current portion 18,650 20,099
Financing lease liabilities, net of current portion 100 —
Deferred tax liability, net — 2,164
Commitments and contingencies (Note 20)
Stockholders’ equity:
Accumulated other comprehensive income 170 63
Total liabilities and stockholders’ equity $ 157,181 $ 173,726
The accompanying notes are an integral part of these consolidated financial statements.
F-3
PYXIS ONCOLOGY, INC.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
Year Ended December 31,
Revenues
Royalty revenues (See Note 5) $ 8,146 $ —
Sale of royalty rights (See Note 5) 8,000 —
Costs and operating expenses
Cost of revenues 475 —
Other income, net
Interest and investment income 7,039 6,630
Income tax benefit (2,164 ) —
Net loss per common share - basic and diluted $ (1.32 ) $ (1.85 )
Other comprehensive income
Net unrealized gain on marketable debt securities 107 63
Other comprehensive income 107 63
The accompanying notes are an integral part of these consolidated financial statements.
F-4
PYXIS ONCOLOGY, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share amounts)
Accumulated
Additional Other Total
Common Stock Paid-In Comprehensive Accumulated Stockholders’
Shares Amount Capital Income Deficit Equity
Net unrealized gains on marketable debt securities — — — 107 — 107
Accumulated
Additional Other Total
Common Stock Paid-In Comprehensive Accumulated Stockholders’
Shares Amount Capital Income Deficit Equity
Issuance of common stock under ESPP 79,350 — 132 — — 132
Net unrealized gains on marketable debt securities — — — 63 — 63
The accompanying notes are an integral part of these consolidated financial statements.
F-5
PYXIS ONCOLOGY, INC.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
Operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,982 1,927
Non-cash operating lease expense 700 660
Impairment of in-process research and development intangible asset 20,964 —
Accretion of discount on marketable debt securities (6,109 ) (4,788 )
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (203 ) 2,532
Accrued expenses and other current liabilities (1,670 ) (14,097 )
Operating lease liabilities (1,231 ) 2,410
Deferred tax liabilities (2,164 ) —
Other (95 ) —
Net cash used in operating activities (57,672 ) (70,709 )
Investing activities
Cash acquired in acquisition of Apexigen, Inc. — 6,660
Purchase of property and equipment (237 ) (6,726 )
Net cash provided by (used in) investing activities 8,155 (104,849 )
Financing activities
Proceeds from the exercise of stock options 296 120
Proceeds from issuance of common stock under ESPP 224 132
Net cash provided by financing activities 59,326 5,929
Cash, cash equivalents and restricted cash at beginning of year 11,136 180,765
Cash, cash equivalents and restricted cash at end of year $ 20,945 $ 11,136
Supplemental cash flow information
Cash paid for interest $ 10 $ 1
Cash paid for income taxes, net of refunds received $ 164 $ 48
Noncash investing and financing activities
ROU asset in exchange for financing lease liability $ 265 $ —
Property and equipment in accounts payable and accrued expenses $ — $ 237
Issuance of common stock to Pfizer Inc. $ — $ 5,000
Reconciliation of cash, cash equivalents and restricted cash
The accompanying notes are an integral part of these consolidated financial statements.
F-6
PYXIS ONCOLOGY, INC.
Notes to Consolidated Financial Statements
1. Description of Business
Nature of Business
Pyxis Oncology, Inc. (the “Company”), a Delaware corporation, was founded in June 2018 and launched its operations in July 2019. The Company is a clinical stage oncology company executing on a development strategy designed to address unmet medical needs in patients with solid tumors with a specific focus on head and neck squamous cell carcinoma (HNSCC) tumors.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Company’s fiscal year ends on December 31 and its first three fiscal quarters end on March 31, June 30 and September 30. The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB). The consolidated financial statements include the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has irrevocably elected not to avail itself of this extended transition period, and, as a result, the Company will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
Liquidity
As of December 31, 2024, the Company had an accumulated deficit of $363.6 million. The Company has incurred losses and negative cash flows from operations since inception, including net losses of $77.3 million and $73.8 million for the years ended December 31, 2024 and 2023, respectively.
The Company has not generated any revenues from product sales to date and does not anticipate generating any revenues from product sales unless and until it successfully completes development and obtains regulatory approval for its current or any future product candidates. The Company expects that its operating losses and negative cash flows will continue for the foreseeable future as the Company continues to expand its research and development programs and develop its product candidate.
The Company currently expects that its existing cash, cash equivalents and short-term investments of $126.9 million as of December 31, 2024 will fund its operating expenses and capital requirements at least twelve months from the date these audited consolidated financial statements are issued. Additional funding may be necessary to fund future clinical and preclinical activities.
The Company plans to continue to fund its losses from operations and capital funding needs through public or private equity, convertible or debt financing or other sources. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. The Company regularly evaluates estimates and assumptions related to assets, liabilities, stock-based compensation, operating leases, assessment of the useful lives of property and equipment, marketable debt securities, fair value of intangible assets, deferred tax and related valuation allowance and research and development costs, including clinical trial accruals. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes 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.
Actual results could differ from those estimates and there may be changes to management’s estimates in future periods.
F-7
Risks and Uncertainties
The Company is subject to risks common to early clinical stage companies in the biopharmaceutical industry including, but not limited to, uncertainties related to commercialization of products, regulatory approvals, dependence on key suppliers for active ingredients, third party service providers such as contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs), protection of intellectual property rights and the ability to make milestone, royalty or other payments due under any license, collaboration or supply agreements.
Concentration of Credit Risks
Financial instruments which potentially subject the Company to significant concentration of credit risk consist of cash and cash equivalents, restricted cash and short-term investments.
The Company invests its excess cash primarily in money market funds and highly liquid United States (U.S.) Treasury securities. The Company has adopted an investment policy that includes guidelines relative to credit quality, diversification and maturities to preserve principal and liquidity.
Cash and Cash Equivalents
The Company considers all short term, highly liquid investments with original maturities of 90 days or less to be cash equivalents. Cash equivalents consist primarily of money market funds as of December 31, 2024 and 2023.
Investments
Short-term investments consist of U.S. Treasury securities with original maturities greater than three months. The Company may sell investments at any time for use in current operations even if the investments have not yet reached maturity. As a result, the Company classifies its investments as current assets. All investments have been classified as available-for-sale marketable debt securities. Marketable debt securities are recorded at fair value, with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income (loss) in stockholders’ equity and a component of total comprehensive loss in the consolidated statements of operations and comprehensive loss, until realized. The fair value of these securities is determined based upon quoted market prices at period end. Premiums paid or discounts received at the time of purchase of marketable securities, are amortized to interest and investment income over the terms of the related securities. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities sold.
At each reporting date the Company will evaluate available-for-sale marketable debt securities in an unrealized loss position, using the discounted cash flow model, to determine whether the unrealized loss or any potential credit losses should be recognized in net loss. For available-for-sale marketable debt securities in an unrealized loss position, the Company will assess (i) whether it intends to sell, or (ii) it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If the aforementioned criteria is met, such marketable debt security’s amortized cost basis will be written down to its fair value through earnings along with any existing allowance for credit losses. For available-for-sale marketable debt securities that do not meet this criteria, the Company will evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded as an allowance in interest income.
There have been no impairment or credit losses recognized during the periods presented in the accompanying consolidated statements of operations and comprehensive loss.
Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principle or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, the first two are considered observable and the last is considered unobservable:
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2—Quoted prices in markets that are not considered to be active or financial instrument valuations for which all significant inputs are observable, either directly or indirectly; and
Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.
F-8
Property and Equipment, net
Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful lives of the related assets as follows:
Estimated Useful Life (Years)
Laboratory equipment 3
Furniture and office equipment 3
Leasehold improvements Shorter of remaining life of lease or useful life
Depreciation and amortization expense is included in research and development and general and administrative expenses. Major additions and upgrades are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred. Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation and amortization are removed from the respective accounts and any resulting gain or loss is included in the consolidated statements of operations and comprehensive loss.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets, which consist of property and equipment and lease right-of-use assets, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. Management then determines whether the remaining useful life continues to be appropriate, or whether there has been an impairment of long-lived assets based primarily upon whether expected future undiscounted cash flows are sufficient to support the assets’ recovery. Recoverability of these assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. The Company recognized no impairment losses for the years ended December 31, 2024 and 2023.
Intangible Assets, Net
Acquired In-Process Research & Development
The Company’s indefinite-lived intangible assets consisted of in-process research and development (IPR&D), which were acquired in connection with the acquisition of Apexigen. IPR&D represents the fair value assigned to research and development projects acquired which were in-process, but not yet completed at the time of acquisition. The primary basis for determining the completion of these projects is obtaining regulatory approval to market the underlying products in an applicable geographic region.
The Company classifies IPR&D acquired in a business combination as an indefinite-lived intangible asset until the associated research and development efforts are either completed or abandoned. IPR&D becomes definite-lived upon the completion or abandonment of the associated research and development efforts. Indefinite-lived intangible assets are not amortized, but evaluated for impairment on an annual basis or more frequently if an indicator of impairment is identified. All research and development costs incurred subsequent to the acquisition of IPR&D are expensed as incurred. As described in Note 11, Intangible Assets, Net, the Company fully impaired its IPR&D during the year ended December 31, 2024.
Definite-Lived Intangible Assets
Definite-lived intangible assets are recorded at cost, net of accumulated amortization, and, if applicable, impairment charges. Definite-lived intangible assets consist of a retained royalty right under an Apexigen agreement. The useful life was determined based on the terms and conditions underlying the licensing agreement and the expected use of the asset by the Company. Amortization of definite-lived intangible assets is recorded over the assets’ estimated useful lives on a straight-line basis and is included as part of research and development expenses within the accompanying consolidated statements of operations and comprehensive loss.
F-9
Impairment of Intangible Assets
The Company evaluates the indefinite-lived intangible assets, which consisted of acquired IPR&D, for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may be impaired. The Company evaluates it definite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If the projected undiscounted cash flows of the intangible asset are less than the carrying amount, the intangible asset is written down to its fair value in the period in which the impairment occurs. As described in Note 11, Intangible Assets, Net, the Company fully impaired its IPR&D during the year ended December 31, 2024.
Operating Leases
Operating lease right-of-use (ROU) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are initially recognized and measured based on the present value of the future fixed lease payments over the expected lease term at the commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. The Company determines the lease term as the non-cancelable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease ROU assets also include any initial direct costs incurred and any lease payments made on or before the lease commencement date, less lease incentives received. Operating lease ROU assets are subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease costs such as common area costs and other operating costs are expensed as incurred. The Company accounts for lease and non-lease components as a single lease component for all its facilities leases.
Warrants
The Company classifies warrants issued for the purchase of shares of its common stock as either equity or liability instruments based on an assessment of the specific terms and conditions of each respective contract. The assessment considers whether the warrants are freestanding financial instruments or embedded in a host instrument, whether the warrants meet the definition of a liability, whether the warrants meet the definition of a derivative, and whether the warrants meet all of the requirements for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants classified as liabilities are recognized as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss.
Contingencies
The Company, from time to time, may be a party to various disputes and claims arising from normal business activities. The Company continually assesses disputes and claims including resulting litigation to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated. The Company accrues for all contingencies at the earliest date at which the Company deems it probable that a liability has been incurred and the amount of such liability can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely than another, the Company accrues the minimum of the range. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the contingencies, including an estimable range, if possible.
Revenue Recognition
Revenue is recognized when the customer obtains control of the promised goods or services, at an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company has not commenced sales of its drug candidates and does not have any products approved for marketing as of December 31, 2024.
The Company may also earn contingent fees, including milestone payments, based on counterparty performance and royalties on sales, from collaborations and other out-license arrangements. The Company recognizes milestone payments as revenue once the underlying events are probable of being met and there is not a significant risk of reversal. The Company recognizes sales-based royalties as revenue when the underlying sales occur and there are no constrains to recognize the revenue for such sales-based royalties.
F-10
Research and Development Expenses
The Company expenses research and development costs as incurred. The Company’s research and development expenses consist primarily of license fees to acquire intellectual property which does not meet the definition of intangible assets and costs incurred in performing research and development activities, including personnel-related expenses such as salaries, stock-based compensation and benefits, facilities costs, depreciation as well as external costs from third parties who conduct research and development activities (including manufacturing) on behalf of the Company. The Company accrues expenses related to development activities performed by third parties based on an evaluation of services received and efforts expended pursuant to the terms of the contractual arrangements. Payments under some of these contracts depend on preclinical and/or clinical trial milestones. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of expenses. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts the accrual or prepaid expense accordingly.
Stock-Based Compensation
The Company maintains an equity incentive plan as a long-term incentive for employees, consultants and directors. The Company accounts for all stock-based awards granted to employees and non-employees based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The grant date fair value of the stock-based awards with graded vesting is recognized on a straight-line basis over the requisite service period. The Company recognizes forfeitures related to stock-based compensation awards as they occur and reverses any previously recognized compensation cost associated with forfeited awards in the period the forfeiture occurs. The Company classifies stock-based compensation expense in the consolidated statements of operations and comprehensive loss in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.
The Company values its stock options with service conditions using the Black-Scholes option-pricing model. The Company uses certain assumptions to determine fair value of the stock options pursuant to the Black-Scholes option-pricing model, including the expected life of the award, volatility of the underlying shares, the risk-free interest rate, expected dividend yield and the fair value of the Company’s common stock. Since the Company lacks sufficient historical option exercise data to provide a reasonable basis upon which to estimate the expected term, the Company uses the simplified method described in the U.S. Securities and Exchange Commission's (SEC) Staff Accounting Bulletin No. 107, Share-Based Payment (“SAB 107”), to determine the expected life of the option grants. The Company lacks sufficient company-specific historical and implied volatility information that is at least equal to the expected life of most stock options. Therefore, the Company estimates the expected stock volatility based on a blend of the historical volatility of a publicly traded set of peer companies and the Company’s own volatility. The risk-free interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the equity award. As the Company has never paid and does not anticipate paying cash dividends on its common stock, the expected dividend yield is considered as zero. When determining the grant-date fair value of stock-based awards, management further considers whether an adjustment is required to the observable market price or volatility of the Company’s common stock that is used in the valuation as a result of material non-public information, if that information is expected to result in a material increase in share price.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between amounts in the consolidated financial statements and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax (benefit) expense in the consolidated statements of operations and comprehensive loss in the period that includes the enactment date. The Company’s policy is to recognize interest and/or penalties related to income tax matters in provision for income taxes.
The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.
F-11
Net Loss per Share
Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the diluted weighted average number of common shares outstanding for the period.
In periods in which the Company reports a net loss, all common stock equivalents are deemed anti-dilutive such that basic net loss per common share and diluted net loss per common share are equivalent. Potentially dilutive common stock has been excluded from the diluted net loss per common share computations in all periods presented because such securities have an anti-dilutive effect on net loss per common share due to the Company’s net loss. There are no reconciling items used to calculate the weighted-average number of total common stock outstanding for basic and diluted net loss per common share data.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures. The amendment requires disclosure of incremental segment information on an annual and interim basis. The amendments also require companies with a single reportable segment to provide all disclosures required by this amendment and all existing segment disclosures in Accounting Standards Codification 280, Segment Reporting. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. On January 1, 2024, the Company adopted ASU 2023-07, refer to the disclosure included in Note 6, Segment Disclosures, in these Notes to Consolidated Financial Statements.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures. The amendment requires (i) enhanced disclosures in connection with an entity's effective tax rate reconciliation and (ii) income taxes paid disaggregated by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of the new standard on the Company's consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendment requires disaggregated disclosure of (i) certain costs and expenses, (ii) certain already required disclosures must be included in the same disclosure as the new disaggregation requirements and (iii) a qualitative description of the amounts not separately disaggregated. The amendments are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, early adoption is permitted. The Company is currently evaluating the impact of the new standard on the Company's consolidated financial statements and related disclosures.
3. Acquisition of Apexigen
On August 23, 2023 (the Closing Date), the Company completed the acquisition of Apexigen, Inc., (Apexigen) contemplated by certain Agreement and Plan of Merger, dated as of May 23, 2023 (the Merger Agreement), with Apexigen surviving as a wholly owned subsidiary of the Company (the Acquisition). Pursuant to the Merger Agreement, the Company issued 4,344,435 shares of its common stock as non-cash purchase consideration, to Apexigen stockholders and replaced outstanding stock options, restricted stock units (RSUs) and warrants using an exchange ratio of 0.1725 per share of common stock. The Acquisition was accounted for as a business combination using the acquisition method. The non-cash consideration for the Acquisition was $10.7 million and consisted of the fair value of the Company’s common stock of $10.0 million, as determined on the Closing Date, the fair value of replacement stock options and RSUs of $0.1 million and the fair value of Apexigen warrants converted to the Company’s warrants of $0.6 million.
F-12
The purchase price was allocated to the assets acquired and liabilities assumed on August 23, 2023, based on their estimated fair value, summarized below (in thousands):
Amount
Assets acquired:
Cash and cash equivalents $ 6,660
Prepaid expenses and other current assets 519
Intangible assets, net 24,458
Total identifiable assets $ 31,637
Liabilities assumed:
Accounts payable (4,548 )
Accrued liabilities (7,531 )
Deferred tax liability, net (2,164 )
Deferred revenue (6,662 )
Total identifiable liabilities (20,905 )
Total purchase price $ 10,732
The Company incurred transaction related costs of $1.7 million for the year ended December 31, 2023. All transaction related costs were recognized in general and administrative expenses on the consolidated statements of operations and comprehensive loss. No issuance costs were incurred relating to the issuance of shares to Apexigen stockholders. The prior year provisional accounting for this acquisition was finalized as of August 23, 2024, and there were no material changes to the previously recorded fair values of assets acquired and liabilities assumed.
Supplemental Pro Forma Information (Unaudited)
On a pro forma basis to give effect to the Acquisition as if it occurred on January 1, 2022, net loss for the year ended December 31, 2023, would have been $97.8 million. The supplemental pro forma net loss includes a pro forma adjustment related to amortization expense for the acquired royalty rights as if the Acquisition occurred on January 1, 2022.
4. Licensing Agreements
The University of Chicago Agreement
In April 2020, the Company entered into a license agreement (the University License Agreement), as well as a sponsored research agreement, with the University of Chicago (the University). Under the terms of the license, the Company has the global right to develop and commercialize products that are covered by a valid claim of a licensed patent, incorporate or use the licensed know-how and materials or are known to assess, modulate or utilize the activity of certain specified biological targets. In partial consideration for the license from the University, the Company issued to the University 48,919 shares of its common stock in 2020.
Pursuant to the University License Agreement, the Company is obligated to pay potential development and commercial milestones of up to $7.7 million as well as running royalties on net sales of licensed products at varying rates ranging from less than a percent to the low single digits, subject to a minimum annual royalty of up to $3.0 million during certain years following the effective date. The Company is also obligated to pay the University a percentage of certain sublicensing revenue ranging from low- to mid-teens based on the date of entering into the applicable sublicense.
The Company assessed the milestone and royalty events under the University License Agreement as of December 31, 2024 and 2023, and determined that no such amounts were required.
Pfizer Inc. Agreement
In December 2020, the Company entered into a license agreement (as amended, the Pfizer License Agreement) with Pfizer Inc. (Pfizer) for worldwide development and commercialization rights to ADC product candidates directed to certain licensed targets, including micvotabart pelidotin and PYX-203, and products containing the ADC product candidates. The Company’s rights are exclusive with respect to certain patents owned or controlled by Pfizer covering the licensed ADCs. The initial licensed targets include CD123 and EDB+FN and the Company has the option to expand the scope of its license to add additional licensed targets that have not been licensed to a third party or are not the subject of a Pfizer ADC development program. The Pfizer License Agreement became effective in March 2021 and the Company paid a combined $25.0 million for the license fee, consisting of an upfront cash payment of $5.0 million and issued 12,152,145 shares of Series B convertible preferred stock, which was converted into 1,911,015 shares of its common stock upon the initial public offering (IPO) in October 2021, with a value of $20.0 million to Pfizer.
F-13
On October 6, 2022, the Company entered into an amended and restated license agreement (the A&R License Agreement) with Pfizer, which amends and restates the Pfizer License Agreement. Pursuant to the A&R License Agreement, Pfizer granted to the Company exclusive worldwide rights under Pfizer’s Flexible Antibody Conjugation Technology (FACT) Platform to develop and commercialize ADC product candidates directed to certain licensed targets, including micvotabart pelidotin and PYX-203, and products containing the ADC product candidates. Additional ADC targets may be licensed for a nominal upfront payment and milestones. In accordance with the terms of the A&R License Agreement, the Company issued 2,229,654 shares of its common stock to Pfizer in October 2022, paid $8.0 million to Pfizer in January 2023 and issued 1,811,594 shares of its common stock to Pfizer in March 2023.
The Company is also obligated to pay future contingent payments including development, regulatory and commercial milestones up to an aggregate of $665 million for the first four licensed ADCs. In addition, the Company is required to pay future contingent payments including development, regulatory and commercial milestones for ADCs to each additional licensed target beyond the first four licensed ADC targets developed and commercialized via the FACT Platform. Additionally, if ADC licensed products are launched, the Company will pay Pfizer tiered royalties on net sales of licensed products in varying royalty rates ranging from low single digits to mid-teens. The Company’s royalty obligations apply on a licensed product-by-licensed product and country-by-country basis from first commercial sale until the latest to occur of: (1) 12 years from first commercial sale; (2) the expiration of all regulatory or data exclusivity; and (3) the expiration of the last valid claim of a licensed patent covering the licensed product in a country. The Company is also obligated to pay Pfizer a percentage of certain sublicensing revenue ranging from low-double digits to twenty percent based on the stage of development of the licensed product at the time of entering into the applicable sublicense.
The Company assessed the milestone and royalty events under the A&R License Agreement as of December 31, 2024 and 2023, and determined that no such amounts were required.
License Agreement with Biosion USA, Inc.
On March 28, 2022, the Company entered into a license agreement (the Biosion License Agreement) with Biosion USA, Inc. (Biosion), pursuant to which the Company obtained an exclusive, worldwide (other than Greater China (mainland China, Hong Kong, Macau and Taiwan)) license for development, manufacturing and commercialization rights for BSI-060T, a Siglec-15 targeting antibody, an IO product candidate (now referred to as PYX-106), and products containing the licensed compound. Under the terms of the Biosion License Agreement, each party granted to the other party a right of first offer to obtain an exclusive license in the other party’s territory (Greater China for Biosion, and the rest of the world for Pyxis) to develop, manufacture and commercialize any bi-specific or multi-specific antibody any ADC controlled by a party or its affiliate that inhibits, modulates or binds to Siglec-15 as an intended mechanism of action.
Pursuant to the Biosion License Agreement, the Company paid an upfront license fee of $10.0 million in March 2022. Further, the Company is obligated to pay future contingent payments including development, regulatory and commercial milestones up to an aggregate of $217.5 million in case of normal approval and $222.5 million in case of Accelerated Approval. Additionally, if products are launched, the Company will pay Biosion tiered royalties on net sales of licensed products in varying royalty rates ranging from low single digits to low teens. The Company’s royalty obligations apply on a licensed product-by-licensed product and country-by-country basis from first commercial sale until the latest to occur of: (1) 12 years from first commercial sale; (2) the expiration of all regulatory or data exclusivity; and (3) the expiration of the last valid claim of a licensed patent covering the licensed product in a country. The Company is also obligated to pay Biosion a percentage of certain sublicensing revenue ranging from low-double to mid-double digits based on the stage of development of the licensed product at the time of entering into the applicable sublicense.
The Company assessed the milestone and royalty events involving the Biosion License Agreement as of December 31, 2024 and 2023, and determined that no such amounts were required.
Acquired Out-Licensing Agreements
In August 2023, the Company completed the acquisition of Apexigen, andassumed all out-licensing agreements of Apexigen upon the Acquisition.
Simcere License and Collaboration Agreement
In December 2008, Epitomics (Apexigen's predecessor) and Jiangsu Simcere Pharmaceutical R&D Co., Ltd. (Simcere) entered into a license and collaboration agreement (the Simcere Agreement) for the development and commercialization of suvemcitug (BD0801) for oncology in China. Suvemcitug is, a humanized anti-VEGF rabbit monoclonal antibody molecule. Under the Simcere Agreement, Simcere has an exclusive, royalty-bearing license (without the right to sublicense) to rights in certain intellectual property to develop and commercialize suvemcitug in the field of oncology therapeutics in China.
Simcere granted the Company a non-exclusive, royalty-free, worldwide license (without the right to sublicense) to improvements derived from suvemcitug using the intellectual property the Company licensed to Simcere. Simcere is obligated to pay the Company milestone payments for achievement of certain clinical development milestones and low to high single-digit percentage royalties on net sales of suvemcitug in China until 15 years after the first commercial sale of suvemcitug. The Company assessed the milestone and royalty events involving Simcere as of December 31, 2024 and 2023, and determined that no such amounts were receivable.
F-14
T-Mab/Mabwell Agreement
In May 2008, Epitomics and Jiangsu T-Mab Biotechnology Ltd., Co. (T-Mab) entered into a license, co-development and contract manufacture agreement (the T-Mab Agreement) for the development and commercialization of therapeutic candidates, each directed to a specified target for specified fields, including VEGF for the treatment of ocular diseases, in China. Mabwell (Shanghai) Bioscience Co., Ltd. (Mabwell) acquired T-Mab in 2015.
Under the T-Mab Agreement, Mabwell was granted an exclusive, royalty-bearing, perpetual license (without the right to sublicense) to rights in certain intellectual property to develop and commercialize such therapeutic candidates. Mabwell is obligated to pay the Company a mid-single-digit percentage royalty on net sales of such therapeutic candidates in China. The royalty term for 9MW0211, an anti-VEGF antibody licensed under the T-Mab Agreement, will begin with the first commercial sale in China. The Company assessed the milestone and royalty events involving Mabwell as of December 31, 2024 and 2023, and determined that no such amounts were receivable.
Toray Sublicense Agreement
In May 2012, Epitomics and Toray Industries, Inc. (Toray), entered into a non-exclusive sublicense agreement (the Toray Agreement) under which Epitomics granted Toray a non-exclusive, worldwide sublicense, with the right to grant further sublicenses, to develop and commercialize drug product candidates that Toray developed using antibodies created using the APXiMAB platform that target certain molecules to use in the development of its drug product candidates. Under the Toray Agreement, Toray paid an upfront fee, and agreed to pay certain development- and regulatory-related milestone payments and a low single-digit percentage royalty on net sales of licensed products by Toray or its affiliates. Toray is also obligated to pay the Company a mid-teens percentage of certain payments Toray receives from sublicensees under the Toray Agreement, which payments may limit Toray’s obligations to pay the milestone payments described above. The Toray Agreement continues on a product-by-product and country-by-country basis until 10 years after the first commercial sale of such product in such country. The Company assessed the milestone and royalty events involving Toray as of December 31, 2024 and 2023, and determined that no such amounts were receivable.
5. Sale of Royalty Rights
In March 2007, Epitomics entered into an antibody candidate discovery and development agreement with ESBATech AG (ESBATech) (the ESBATech Agreement). ESBATech was acquired by Alcon Research, Ltd. in 2009 and later merged with Novartis AG (Novartis) in 2011.
Novartis, the successor in interest to ESBATech, has successfully developed and commercialized one of those drug product candidates, brolucizumab-dbll, a single-chain antibody fragment (scFv) targeting all of the isoforms of VEGF-A, which was approved for commercial sale in 2019 and marketed under the brand name Beovu®.
Upon commercialization, pursuant to the ESBATech Agreement, Novartis was obligated to pay Apexigen a very low single-digit royalty on net sales of the Beovu® product. However, Novartis disputed its obligation to pay these royalties on Beovu® sales under the ESBATech Agreement. As a result, Apexigen and the Company determined that any sales-based Beovu® product royalties received under the ESBATech Agreement should be fully constrained and reported royalties received by Apexigen and the Company as deferred revenues.
On March 25, 2024, the Company entered into the Fourth Amendment, Settlement Agreement, and Royalty Purchase Agreement (the Settlement Agreement) with Novartis, pursuant to which Novartis agreed to pay the Company $8.0 million to transfer its rights to future royalties on the net sales of Beovu®. Additionally, the dispute regarding Novartis’ obligation to pay royalties on Beovu® sales was resolved and royalties previously received by Apexigen and the Company were agreed to be free from any reclaim rights.
The ESBATech Agreement and the Settlement Agreement with Novartis both constitute contracts with a customer. Upon execution of the Settlement Agreement, the $8.0 million payment related to future royalties was recorded as revenues and the remaining definite-lived intangible asset of $0.5 million related to these royalty rights was recorded as cost of revenues within the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2024. Additionally, the related deferred revenues of $8.1 million previously constrained was also recorded as revenues within the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2024, as the uncertainty resulting in the revenue constraint had been resolved.
6. Segment Disclosures
Operating segments are defined as components of an enterprise for which separate discrete information is available for evaluation by the chief operating decision maker, or decision making group, in deciding how to allocate resources in assessing performance. The Company has one reportable segment related to the development of clinical and preclinical product candidates focused on addressing unmet medical needs in patients with solid tumors with a specific focus on HNSCC tumors. The Company’s chief operating decision maker (CODM) is the Chief Executive Officer.
The accounting policies of the single segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the segment based on net loss, which is reported on the consolidated statements of operations and comprehensive loss as net loss. The measure of segment assets is reported on the consolidated balance sheets as total assets.
F-15
To date, the Company has not generated any product revenue. As described in Note 5, Sale of Royalty Rights, the Company generated revenue in the year ended December 31, 2024, from the sale of its royalty rights under an agreement with Novartis and the recognition of revenue that had been previously deferred. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future as it advances the product candidate through all stages of development and clinical trials and, ultimately, seek regulatory approval.
As such, the CODM uses cash forecast models in deciding how allocate resources. Such cash forecast models are reviewed to assess the entity-wide operating results and performance. Net loss is used to monitor budget versus actual results. Monitoring budgeted versus actual results is used in assessing performance of the segment and in establishing management’s compensation, along with cash forecast models.
The table below summarizes segment net loss, including significant expenses for the years ended December 31, 2024 and 2023 (in thousands):
Year Ended December 31,
Royalty revenues and sale of royalty rights $ 16,146 $ —
Costs and operating expenses
Cost of revenues 475 —
Research and development
Personnel-related expenses excluding stock-based compensation 14,293 21,885
Depreciation and amortization 1,922 1,634
Total research and development expenses 58,747 49,586
General and administrative
Personnel-related expenses excluding stock-based compensation 5,837 8,553
Professional and consultant fees 4,491 6,347
Total general and administrative expenses 25,420 32,610
Impairment of in-process research and development intangible asset 20,964 —
Income tax benefit (2,164 ) —
Reconciliation of profit or loss
Adjustments and reconciling items — —
F-16
7. Fair Value Measurements
The following tables present the financial instruments carried at fair value on a recurring basis as of December 31, 2024 and 2023, respectively, in accordance with the fair value hierarchy (in thousands):
Level 1 Level 2 Level 3 Total
Cash equivalents
Money market funds $ 9,491 $ — $ — $ 9,491
Marketable debt securities
Level 1 Level 2 Level 3 Total
Cash Equivalents
Money market funds $ 8,360 $ — $ — $ 8,360
Marketable debt securities
The Company’s cash equivalents represent deposits in a short-term money market funds quoted in an active market and classified as Level 1 assets. Marketable debt securities include investments in U.S. Treasury securities and are classified as Level 1 assets as they are valued using quoted prices in active markets. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended December 31, 2024 and 2023.
8. Marketable Debt Securities
Marketable debt securities, all of which were classified as available-for-sale, consisted of the following (in thousands):
Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
Marketable debt securities
Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
Marketable debt securities
As of December 31, 2024 and 2023, the remaining contractual terms of the U.S. Treasury securities were less than 12 months. As of December 31, 2024, the Company held no securities in an unrealized loss position. As of December 31, 2023, the Company held one security in an unrealized loss position of $8 thousand with a fair value of $41.7 million. There were no securities in a continuous unrealized loss position for greater than twelve months at December 31, 2024 or 2023.
To date, we have not recognized any allowances for credit losses or impairments in relation to our marketable securities as these securities are comprised of high credit quality, investment grade securities that we do not intend or expect to be required to sell prior to their anticipated recovery, and the decline in fair value of these securities is attributable to factors other than credit losses.
Interest and Investment Income
Interest and investment income consisted of the following (in thousands):
Year Ended December 31,
Total interest and investment income $ 7,039 $ 6,630
F-17
9. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
December 31,
Total prepaid expenses and other current assets $ 4,037 $ 3,834
10. Property and Equipment, Net
Property and equipment, net, consisted of the following (in thousands):
December 31,
Furniture and office equipment 1,029 1,123
Financing lease right-of-use asset 202 —
Less: accumulated depreciation and amortization (5,233 ) (3,602 )
Total property and equipment, net $ 9,899 $ 11,872
Depreciation and amortization expense on property and equipment for the years ended December 31, 2024 and 2023, was $2.0 million and $1.8million, respectively, of which $1.4 million and $1.5 million, respectively, was included within research and development expenses and $0.6 million and $0.3 million, respectively, was included in general and administrative expenses in the accompanying statements of operations and comprehensive loss.
11. Intangible Assets, Net
IPR&D relates to the research and development assets of Apexigen, renamed PYX-107, acquired by the Company in 2023, which were in-process, but not yet completed, and which the Company had the opportunity to advance.
In December 2024, the Company announced a strategic realignment plan to prioritize resources towards clinical development of micvotabart pelidotin and continue to defer further clinical development of PYX-107. Given the uncertain timing of the future clinical development of PYX-107, decline in the market capitalization of the Company in the fourth quarter of 2024 and the current biotech environment, in which access to additional capital is limited, the Company concluded that the in-process research and development intangible assets related to PYX-107 was fully impaired during the fourth quarter of 2024. The Company recognized an impairment loss of $21.0 million during the year ended December 31, 2024. No impairment loss was recorded during the year ended December 31, 2023.
Intangible assets, net, consisted of the following (in thousands):
Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Amount
Gross Carrying Amount Accumulated Amortization Impairment Net Carrying Amount
F-18
As described in Note 4, Licensing Agreements, the Company assumed all out-licensing agreements of Apexigen upon the completion of the Acquisition. As described in Note 5, Sale of Royalty Rights, the Company sold its royalty rights under an agreement with Novartis; therefore, the recorded intangible asset net of accumulated amortization of $0.5 million was expensed as cost of revenue in the accompanying consolidated statements of operations and comprehensive loss.
Amortization expense was $0.3 million for the year ended December 31, 2024, and was recorded as part of “Research and development” within the accompanying consolidated statements of operations and comprehensive loss. Amortization of intangible assets for the next five years related to the intangible asset held as of December 31, 2024, is estimated to be as follows (in thousands):
Years Ending December 31, Estimated Amortization Expense
12. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31,
Research and development expenses $ 6,365 $ 6,594
Employee compensation and benefits 3,983 5,219