atnx-10q_20190930.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2019

OR

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

For the transition period from              to             

Commission File Number: 001-38112

 

ATHENEX, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

43-1985966

(State or other jurisdiction of

incorporation or organization)

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

 

 

1001 Main Street, Suite 600

Buffalo, NY

14203

(Address of principal executive offices)

(Zip Code)

 

(716) 427-2950

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

ATNX

 

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

  

Small reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

 

As of October 31, 2019, the registrant had 77,505,885 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

1

Item 1.

 

Financial Statements

 

1

 

 

Condensed Consolidated Balance Sheets (Unaudited)

 

1

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

 

2

 

 

Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)

 

3

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

5

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

6

Item 2.

 

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

 

28

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

41

Item 4.

 

Controls and Procedures

 

41

PART II.

 

OTHER INFORMATION

 

42

Item 1.

 

Legal Proceedings

 

42

Item 1A.

 

Risk Factors

 

42

Item 6.

 

Exhibits

 

43

Signatures

 

44

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

(In thousands, except share and per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

61,481

 

 

$

49,794

 

Restricted cash

 

 

25,424

 

 

 

 

Short-term investments

 

 

42,273

 

 

 

57,629

 

Accounts receivable, net of chargebacks and other deductions of $19,909

   and $13,101, respectively, and allowance for doubtful accounts

   of $133 and $9, respectively

 

 

17,168

 

 

 

12,951

 

Inventories

 

 

28,451

 

 

 

28,787

 

Prepaid expenses and other current assets

 

 

38,744

 

 

 

21,658

 

Total current assets

 

 

213,541

 

 

 

170,819

 

Property and equipment, net

 

 

19,272

 

 

 

11,447

 

Goodwill

 

 

37,293

 

 

 

37,495

 

Intangible assets, net

 

 

8,972

 

 

 

10,848

 

Operating lease right-of-use assets, net

 

 

8,517

 

 

 

 

Deferred income tax assets

 

 

 

 

 

486

 

Total assets

 

$

287,595

 

 

$

231,095

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

16,206

 

 

$

12,997

 

Accrued expenses

 

 

69,994

 

 

 

37,718

 

Current portion of operating lease liabilities

 

 

2,810

 

 

 

 

Current portion of long-term debt

 

 

958

 

 

 

961

 

Total current liabilities

 

 

89,968

 

 

 

51,676

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Deferred compensation

 

 

2,541

 

 

 

2,825

 

Deferred rent

 

 

 

 

 

2,022

 

Long-term operating lease liabilities

 

 

7,579

 

 

 

 

Long-term debt and finance lease obligations

 

 

52,681

 

 

 

45,803

 

Total liabilities

 

 

152,769

 

 

 

102,326

 

Commitments and contingencies (See Note 16)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

   September 30, 2019 and December 31, 2018; 79,142,305 and 68,668,986 shares

   issued at September 30, 2019 and December 31, 2018, respectively; 77,469,385

   and 66,996,066 shares outstanding at September 30, 2019 and

   December 31, 2018, respectively

 

 

79

 

 

 

69

 

Additional paid-in capital

 

 

700,000

 

 

 

591,064

 

Accumulated other comprehensive loss

 

 

(423

)

 

 

(656

)

Accumulated deficit

 

 

(545,738

)

 

 

(443,716

)

Less: treasury stock, at cost; 1,672,920 shares at September 30, 2019 and

   December 31, 2018

 

 

(7,406

)

 

 

(7,406

)

Total Athenex, Inc. stockholders' equity

 

 

146,512

 

 

 

139,355

 

Non-controlling interests

 

 

(11,686

)

 

 

(10,586

)

Total stockholders' equity

 

 

134,826

 

 

 

128,769

 

Total liabilities and stockholders' equity

 

$

287,595

 

 

$

231,095

 

 

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

1


 

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

19,237

 

 

$

13,309

 

 

$

66,433

 

 

$

37,385

 

License fees and consulting revenue

 

 

115

 

 

 

5,096

 

 

 

325

 

 

 

30,278

 

Grant revenue

 

 

12

 

 

 

23

 

 

 

110

 

 

 

166

 

Total revenue

 

 

19,364

 

 

 

18,428

 

 

 

66,868

 

 

 

67,829

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

17,071

 

 

 

11,965

 

 

 

53,915

 

 

 

32,734

 

Research and development expenses

 

 

19,588

 

 

 

51,202

 

 

 

62,570

 

 

 

99,077

 

Selling, general, and administrative expenses

 

 

16,283

 

 

 

11,493

 

 

 

48,640

 

 

 

37,390

 

Total costs and operating expenses

 

 

52,942

 

 

 

74,660

 

 

 

165,125

 

 

 

169,201

 

Operating loss

 

 

(33,578

)

 

 

(56,232

)

 

 

(98,257

)

 

 

(101,372

)

Interest income

 

 

(650

)

 

 

(654

)

 

 

(1,408

)

 

 

(1,314

)

Interest expense

 

 

1,745

 

 

 

1,712

 

 

 

5,254

 

 

 

1,777

 

Loss before income tax expense (benefit)

 

 

(34,673

)

 

 

(57,290

)

 

 

(102,103

)

 

 

(101,835

)

Income tax expense (benefit)

 

 

114

 

 

 

(30

)

 

 

1,019

 

 

 

(286

)

Net loss

 

 

(34,787

)

 

 

(57,260

)

 

 

(103,122

)

 

 

(101,549

)

Less: net loss attributable to non-controlling interests

 

 

(29

)

 

 

(11,090

)

 

 

(1,100

)

 

 

(11,222

)

Net loss attributable to Athenex, Inc.

 

$

(34,758

)

 

$

(46,170

)

 

$

(102,022

)

 

$

(90,327

)

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

 

 

1

 

 

 

(37

)

 

 

(79

)

 

 

3

 

Foreign currency translation adjustment, net of income taxes

 

 

(310

)

 

 

(554

)

 

 

312

 

 

 

(477

)

Comprehensive loss

 

$

(35,067

)

 

$

(46,761

)

 

$

(101,789

)

 

$

(90,801

)

Net loss per share attributable to Athenex, Inc. common

   stockholders, basic and diluted (See Note 13)

 

$

(0.45

)

 

$

(0.70

)

 

$

(1.41

)

 

$

(1.42

)

Weighted-average shares used in computing net loss per share

   attributable to Athenex, Inc. common stockholders, basic and

   diluted (See Note 13)

 

 

77,297,555

 

 

 

66,399,091

 

 

 

72,552,248

 

 

 

63,806,787

 

 

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

.

 

2


 

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(In thousands, except share data)

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

other

 

 

Treasury Stock

 

 

Total

Athenex,

Inc.

 

 

Non-

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

paid-in

capital

 

 

Accumulated

deficit

 

 

comprehensive

income (loss)

 

 

Shares

 

 

Amount

 

 

stockholders'

equity

 

 

controlling

interests

 

 

stockholders'

equity

 

Balance at January 1, 2018

 

 

59,894,362

 

 

$

60

 

 

$

423,805

 

 

$

(326,276

)

 

$

(146

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

90,037

 

 

$

685

 

 

$

90,722

 

Sale of common stock, net of costs and discounts of

   $4,611

 

 

4,765,000

 

 

 

4

 

 

 

68,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68,055

 

 

 

 

 

 

68,055

 

Stock-based compensation cost

 

 

 

 

 

 

 

 

2,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,161

 

 

 

 

 

 

2,161

 

Restricted stock expense

 

 

 

 

 

 

 

 

540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

540

 

 

 

 

 

 

540

 

Stock options and warrants exercised

 

 

289,487

 

 

 

1

 

 

 

1,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,263

 

 

 

 

 

 

1,263

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,298

)

 

 

 

 

 

 

 

 

 

 

 

(7,298

)

 

 

(41

)

 

 

(7,339

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

683

 

 

 

 

 

 

 

 

 

683

 

 

 

 

 

 

683

 

Balance at March 31, 2018 (unaudited)

 

 

64,948,849

 

 

$

65

 

 

$

495,819

 

 

$

(333,574

)

 

$

537

 

 

 

(1,672,920

)

 

$

(7,406

)

 

$

155,441

 

 

$

644

 

 

$

156,085

 

Stock-based compensation cost

 

 

 

 

 

 

 

 

3,081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,081

 

 

 

 

 

 

3,081

 

Vesting of restricted stock

 

 

210,000

 

 

 

 

 

 

462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

462

 

 

 

 

 

 

462

 

Stock options and warrants exercised

 

 

27,630

 

 

 

 

 

 

296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

296

 

 

 

 

 

 

296

 

Research and development licensing fee satisfied with

   stock

 

 

107,181

 

 

 

 

 

 

2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,000

 

 

 

 

 

 

2,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(36,859

)

 

 

 

 

 

 

 

 

 

 

 

(36,859

)

 

 

(91

)

 

 

(36,950

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(566

)

 

 

 

 

 

 

 

 

(566

)

 

 

 

 

 

(566

)

Balance at June 30, 2018 (unaudited)

 

 

65,293,660

 

 

$

65

 

 

$

501,658

 

 

$

(370,433

)

 

$

(29

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

123,855

 

 

$

553

 

 

$

124,408

 

Sale of common stock, net of costs and discounts of

   $907

 

 

2,679,528

 

 

 

3

 

 

 

49,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,093

 

 

 

 

 

 

49,093

 

Issuance of warrants

 

 

 

 

 

 

 

 

3,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,140

 

 

 

 

 

 

3,140

 

Stock-based compensation cost

 

 

 

 

 

 

 

 

2,316

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,316

 

 

 

 

 

 

2,316

 

Vesting of restricted stock

 

 

30,000

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Stock options and warrants exercised

 

 

290,538

 

 

 

 

 

 

1,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,401

 

 

 

 

 

 

1,401

 

Research and development licensing fee satisfied with

   stock

 

 

267,952

 

 

 

 

 

 

29,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,545

 

 

 

 

 

 

29,545

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(46,170

)

 

 

 

 

 

 

 

 

 

 

 

(46,170

)

 

 

(11,090

)

 

 

(57,260

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(591

)

 

 

 

 

 

 

 

 

(591

)

 

 

 

 

 

(591

)

Balance at September 30, 2018 (unaudited)

 

 

68,561,678

 

 

$

68

 

 

$

587,155

 

 

$

(416,603

)

 

$

(620

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

162,594

 

 

$

(10,537

)

 

$

152,057

 

3


 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

other

 

 

Treasury Stock

 

 

Total

Athenex,

Inc.

 

 

Non-

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

paid-in

capital

 

 

Accumulated

deficit

 

 

comprehensive

income (loss)

 

 

Shares

 

 

Amount

 

 

stockholders'

equity

 

 

controlling

interests

 

 

stockholders'

equity

 

Balance at January 1, 2019

 

 

68,668,986

 

 

$

69

 

 

$

591,064

 

 

$

(443,716

)

 

$

(656

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

139,355

 

 

$

(10,586

)

 

$

128,769

 

Stock-based compensation cost

 

 

 

 

 

 

 

 

1,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,693

 

 

 

 

 

 

1,693

 

Stock options exercised

 

 

49,632

 

 

 

 

 

 

278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

278

 

 

 

 

 

 

278

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(35,233

)

 

 

 

 

 

 

 

 

 

 

 

(35,233

)

 

 

(997

)

 

 

(36,230

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,071

 

 

 

 

 

 

 

 

 

1,071

 

 

 

 

 

 

1,071

 

Balance at March 31, 2019 (unaudited)

 

 

68,718,618

 

 

 

69

 

 

 

593,035

 

 

 

(478,949

)

 

 

415

 

 

 

(1,672,920

)

 

 

(7,406

)

 

 

107,164

 

 

 

(11,583

)

 

 

95,581

 

Sale of common stock, net of costs of $54

 

 

10,033,362

 

 

 

10

 

 

 

100,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,319

 

 

 

 

 

 

100,319

 

Stock-based compensation cost

 

 

92,723

 

 

 

 

 

 

3,382

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,382

 

 

 

 

 

 

3,382

 

Stock options exercised

 

 

92,442

 

 

 

 

 

 

559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

559

 

 

 

 

 

 

559

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(32,031

)

 

 

 

 

 

 

 

 

 

 

 

(32,031

)

 

 

(74

)

 

 

(32,105

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(529

)

 

 

 

 

 

 

 

 

(529

)

 

 

 

 

 

(529

)

Balance at June 30, 2019 (unaudited)

 

 

78,937,145

 

 

$

79

 

 

$

697,285

 

 

$

(510,980

)

 

$

(114

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

178,864

 

 

$

(11,657

)

 

$

167,207

 

Stock-based compensation cost

 

 

130,000

 

 

 

 

 

 

2,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,148

 

 

 

 

 

 

2,148

 

Stock options exercised

 

 

75,160

 

 

 

 

 

 

567