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SEC Filings

10-Q
ATHENEX, INC. filed this Form 10-Q on 05/09/2019
Entire Document
 

 

 

 

 

Fair Value Measurements at December 31, 2018 Using:

 

 

 

Total

 

 

 

 

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

 

 

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets included within cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

25

 

 

 

 

$

25

 

 

 

 

$

 

 

 

 

$

 

Short-term investments - commercial paper

 

 

5,396

 

 

 

 

 

 

 

 

 

 

5,396

 

 

 

 

 

 

Financial assets included within short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments - commercial paper

 

 

36,544

 

 

 

 

 

 

 

 

 

 

36,544

 

 

 

 

 

 

Short-term investments - corporate notes

 

 

16,699

 

 

 

 

 

 

 

 

 

 

16,699

 

 

 

 

 

 

Short-term investments - U.S. government bonds

 

 

3,998

 

 

 

 

 

 

 

 

 

 

3,998

 

 

 

 

 

 

Available-for-sale investment

 

 

388

 

 

 

 

 

388

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

63,050

 

 

 

 

$

413

 

 

 

 

$

62,637

 

 

 

 

$

 

 

The Company classifies its money market funds within Level 1 because it uses quoted market prices to determine their fair value. The Company classifies its commercial paper, corporate notes, and U.S. government bonds within Level 2 because it uses quoted prices for similar assets or liabilities in active markets and each has a specified term and all Level 2 inputs are observable for substantially the full term of each instrument.

The Company owns 68,000 shares of PharmaEssentia, a company publicly traded on the Taiwan OTC Exchange. As of March 31, 2019 and December 31, 2018, the Company’s investment in PharmaEssentia was valued at the reported closing price. This investment is classified as a Level 1 investment.  

6. Asset Acquisition

On June 29, 2018, the Company entered into a Share Subscription Agreement (“SSA”) for Axis Therapeutics (“Axis”), a subsidiary of the Company jointly owned by Athenex and Xiangxue Life Sciences Limited (“XLifeSc”). Under the SSA, Athenex contributed $30.0 million cash for a 55% ownership interest in Axis and XLifeSc contributed a license for IPR&D of certain immunotherapy technology for a 45% ownership interest in Axis. Also, on June 29, 2018, through a license agreement entered into between XLifeSc and Axis, XLifeSc granted Axis an exclusive, sublicensable worldwide (excluding mainland China) right and license to use its proprietary TCR-engineered T Cell therapy to develop and commercialize products for oncology indications (“TCR-T License”). Upon effectiveness of the TCR-T License and satisfaction of certain conditions of the license agreement, the Company issued 267,952 shares of its common stock equal to $5.0 million to XLifeSc as an upfront payment by Axis. On September 14, 2018, Athenex completed the $30.0 million cash injection to Axis and all the closing conditions under the SSA were fulfilled.

The Company has consolidated the financial statements of Axis into its condensed consolidated financial statements as of and for the three months ended March 31, 2019 and as of and for the year ended December 31, 2018 using the voting interest model. The nonmonetary exchange of 45% of the shares of Axis for the IPR&D from XLife has been accounted for as an asset acquisition that does not constitute a business under ASC 805. Therefore, the acquisition of IPR&D was expensed as research and development expense at its fair value. The Company determined that the fair value of the equity issued to XLifeSc was $24.5 million, considering the $30.0 million contribution made by the Company for its 55% ownership interest and the arms-length nature of the transaction. Accordingly, the Company recorded an expense of $24.5 million within research and development expenses on its consolidated statements of operations and comprehensive loss for the year ended December 31, 2018.

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