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or

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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.

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 Securities 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, 2023, the registrant had 47,290,666 shares of common stock outstanding.

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains express and implied forward-looking statements that involve risks and uncertainties. Except as otherwise indicated by the context, references in this Quarterly Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “design,” “seek,” “should,” “target,” “will,” “would” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•the initiation, timing, progress and results of our research and development programs as well as our preclinical studies and clinical trials;

•our ability to advance therapeutic candidates into, and successfully complete, clinical trials;

•our interpretation of initial, interim or preliminary data from our clinical trials, including interpretations regarding disease control and disease response;

•the timing or likelihood of regulatory filings and approvals;

•the commercialization of our therapeutic candidates, if approved;

•the pricing, coverage and reimbursement of our therapeutic candidates, if approved;

•our ability to utilize our technology platform to generate and advance additional therapeutic candidates;

•the implementation of our business model and strategic plans for our business and therapeutic candidates;

•our ability to successfully manufacture our therapeutic candidates for clinical trials and commercial use, if approved;

•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•the scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates;

•our ability to enter into strategic partnerships and the potential benefits of such partnerships;

•our estimates regarding expenses, capital requirements and needs for additional financing;

•our ability to raise funds needed to satisfy our capital requirements, which may depend on financial, economic and market conditions and other factors, over which we may have no or limited control;

•our ability to continue operations and advance our therapeutic candidates through clinical trials, as well as the ability of our third party manufacturers to provide the required raw materials, antibodies and other biologics for our preclinical research and clinical trials, in light of the current market conditions, labor conditions and geopolitical events;

•our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals; and

•developments relating to our competitors and our industry.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the header “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission, or the SEC, on March 6, 2023, and as updated in our Quarterly Report on Form 10-Q for the three months ended March 31, 2023, filed with the SEC on May 8, 2023. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to new information, actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report and the documents that we file with the SEC with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

This Quarterly Report includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Quarterly Report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.

Inhibrx, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data and par value)
(Unaudited)

Inhibrx, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Inhibrx, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands)
(Unaudited)

Inhibrx, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)

Inhibrx, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

Inhibrx, Inc., or the Company, or Inhibrx, is a clinical-stage biopharmaceutical company focused on developing a broad pipeline of novel biologic therapeutic candidates. The Company combines target biology with protein engineering, technologies, and research and development to design therapeutic candidates. The Company’s current pipeline is focused on oncology and orphan diseases.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, related to an interim report on the Form 10-Q. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

The unaudited interim condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, the accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 6, 2023.

As of September 30, 2023, the Company had an accumulated deficit of $520.1 million and cash and cash equivalents of $337.3 million. From its inception and through September 30, 2023, the Company has devoted substantially all of its efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of its therapeutic candidates, pre-commercialization activities, organizing and staffing the Company, establishing its intellectual property portfolio and raising capital to support and expand these activities.

In August 2023, the Company received gross proceeds of $200.0 million before deducting $0.4 million of offering expenses payable by the Company in a private placement transaction, or the Private Placement, with certain institutional and other accredited investors, or Purchasers, in which the Company sold and issued 3,621,314 shares of the Company’s common stock and, with respect to certain Purchasers, pre-funded warrants to purchase 6,714,636 shares of the Company’s common stock. See Note 4 for further discussion of this equity offering.

The Company believes that its existing cash and cash equivalents will be sufficient to fund the Company’s operations for at least 12 months from the date these condensed consolidated financial statements are issued. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses, strategic transactions and other similar arrangements.

If the Company does raise additional capital through public or private equity or convertible debt offerings, the ownership interests of its existing stockholders will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect its stockholders’ rights. If the Company raises capital through additional debt financings, it may be subject to covenants limiting or restricting its ability to take specific actions, such as incurring additional debt or making certain capital expenditures. To the extent that the Company raises additional capital through strategic licensing, collaboration or other similar agreement, it may have to relinquish valuable rights to its therapeutic candidates, future revenue streams or research programs at an earlier stage of development or on less favorable terms than it would otherwise choose, or to grant licenses on terms that may not be favorable to the Company.

There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure adequate additional funding, it will need to reevaluate its operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of its development programs, or relinquish rights to its technology on less favorable terms than it would otherwise choose. These actions could materially impact its business, financial condition, results of operations and prospects.

The rules and regulations of the SEC or any other regulatory agencies may restrict the Company’s ability to conduct certain types of financing activities, or may affect the timing of and amounts it can raise by undertaking such activities.

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The Company’s most significant estimates relate to evaluation of whether revenue recognition criteria have been met, accounting for development work and preclinical studies and clinical trials, determining the assumptions used in measuring stock-based compensation, the incremental borrowing rate estimated in relation to the Company’s operating lease, and valuation allowances for the Company’s deferred tax assets. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. The Company’s actual results may differ from these estimates under different assumptions or conditions.

Cash and cash equivalents are comprised of cash held in financial institutions including readily available checking, overnight sweep, and money market accounts, and highly liquid investments in debt securities with an original maturity of three months or less. The Company’s investments in debt securities have consisted of U.S. Treasury Bills, which were recorded at their amortized cost, reflective of the amortization or accretion of premiums or discounts.

As of September 30, 2023, the Company held no investments in debt securities. As of December 31, 2022, the Company held investments in debt securities of $196.3 million.

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits by the Federal Deposit Insurance Corporation, or FDIC, of up to $250,000. The Company’s cash management and investment policy limits investment instruments to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds can be used in operations. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial condition of the depository institutions in which those deposits are held.

The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. These tiers include:

•Level 1 - Quoted prices in active markets for identical assets or liabilities.

•Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

During the nine months ended September 30, 2023, the Company’s investments in debt securities consisted of U.S. Treasury Bills, which were classified as Level 1 in the fair value hierarchy. Due to the short-term nature of these securities which were classified as cash equivalents, the amortized value approximated fair value and the Company did not remeasure these instruments at fair value. As of September 30, 2023, the Company held no investments in debt securities following their maturity during the three months ended September 30, 2023. The Company’s outstanding debt is classified as Level 2 in the fair value hierarchy. As of September 30, 2023 and December 31, 2022, the Company had no financial instruments measured at fair value on a recurring basis.

The Company has generated revenue from its license and collaboration agreements with partners, as well as from grants from government agencies and private not-for-profit organizations.

The Company enters into collaborative agreements with partners which may include the transfer of licenses, options to license and the performance of research and development activities. The terms associated with these agreements may include one or more of the following: (1) license fees; (2) nonrefundable up-front fees; (3) payments for reimbursement of research costs; (4) payments associated with achieving specific development, regulatory or commercial milestones; and (5) royalties based on specified percentages of net product sales, if any. Payments received from customers are included in deferred revenue, allocated between current and non-current on the condensed consolidated balance sheet, until all revenue recognition criteria are met.

Typically, license fees, non-refundable upfront fees and funding of research activities are considered fixed, while milestone payments, including option exercise fees, are identified as variable consideration, which is constrained and excluded from the transaction price. The Company will recognize revenue for sales-based royalty if and when a subsequent sale occurs.

The Company applies significant judgment when making estimates and assumptions under these agreements, including evaluating whether contractual obligations represent distinct performance obligations, including the assessment of whether options represent material rights, determining whether there are observable standalone prices and allocating transaction price to performance obligations within a contract, assessing whether any licenses are functional or symbolic, determining when performance obligations have been met, and assessing the recognition of variable consideration. The Company evaluates each performance obligation to determine if it can be satisfied and recognized as revenue at a point in time or over time. Typically, performance obligations consisting of a transfer of a license or the achievement of milestones are recognized at a point in time upon the transfer, while performance obligations consisting of research activities are recognized over time using an input method which is representative of the Company’s efforts to fulfill the performance obligation, based on costs incurred with third-parties or internal labor hours performed.

Research and development costs are expensed as incurred and include the cost of compensation and related expenses, as well as expenses for third parties who conduct research and development on the Company’s behalf, pursuant to development and consulting agreements in place. The Company’s preclinical studies and clinical trials are performed internally, by third party contract research organizations, or CROs, and/or clinical investigators. The Company also engages with contract development and manufacturing organizations, or CDMOs, for clinical supplies and manufacturing scale-up activities related to its therapeutic candidates. Invoicing from these third parties may be monthly based upon services performed or based upon milestones achieved. The Company accrues these expenses based upon its assessment of the status of each clinical trial and the work completed, and upon information obtained from the CROs and CDMOs.

The Company’s estimates are dependent upon the timeliness and accuracy of data provided by the CROs and CDMOs regarding the status and cost of the studies. Costs incurred related to the Company’s purchases of in-process research and development for early-stage products or products that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred. Costs incurred related to the licensing of products that have not yet received marketing approval to be marketed, or that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred.

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.

Basic net loss per share is computed by dividing net loss by the weighted average number of common stock outstanding during the same period. Diluted net loss per share is computed by dividing net loss by the weighted average number of common and common stock equivalent outstanding during the same period. The Company excludes common stock equivalents from the calculation of diluted net loss per share when the effect is anti-dilutive.

The weighted average number of common stock used in the basic and diluted net loss per common stock calculations includes the weighted-average pre-funded warrants outstanding during the period as they are exercisable at any time for nominal cash consideration.

For purposes of the diluted net loss per share calculation, warrants for purchase of common stock, other than pre-funded warrants as discussed above, and stock options are considered to be potentially dilutive securities. Accordingly, for the nine months ended September 30, 2023 and September 30, 2022, there is no difference in the number of shares used to calculate basic and diluted shares outstanding.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in thousands):

			THREE MONTHS ENDED SEPTEMBER 30,												NINE MONTHS ENDED SEPTEMBER 30,
			2023						2022						2023						2022
Outstanding stock options			6,650						5,229						6,269						4,925
Warrants to purchase common stock			47						47						47						40
			6,697						5,276						6,316						4,965

The Company operates under one segment which develops biologic therapeutic candidates. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies. The Company believes that the impact of the recently issued accounting pronouncements that are not yet effective will not have a material impact on its condensed consolidated financial condition or results of operations upon adoption.

In June 2016, the FASB issued Accounting Standards Update, or ASU, 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as held-to-maturity debt securities. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. The Company adopted ASU 2016-13 as of January 1, 2023, which did not result in a material impact on its condensed consolidated financial statements and related disclosures.

Prepaid expense and other current assets were comprised of the following (in thousands):

(1) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. As of September 30, 2023, the balance includes a prepayment to one of the Company’s CDMO partners for the purchase of $15.2 million in specialized raw materials with no alternative future use. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

(2) Relates primarily to the Company’s prepayments to third-party CROs for management of clinical trials and prepayments for drug supply to be used in combination with the Company’s therapeutics. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

Property and equipment, net were comprised of the following (in thousands):

Depreciation and amortization expense totaled $0.3 million for each of the three months ended September 30, 2023 and September 30, 2022, and $0.9 million for each of the nine months ended September 30, 2023 and September 30, 2022 and consisted of the following (in thousands):

Accrued expenses were comprised of the following (in thousands):

(1) Relates primarily to the Company’s usage of third-party CROs for management of clinical trials. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

(2) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development.

In July 2020, the Company entered into a loan and security agreement, or the 2020 Loan Agreement, with Oxford Finance LLC, or Oxford, pursuant to which it received $10.0 million in gross proceeds, or Term A. The 2020 Loan Agreement was subsequently amended in November 2020, or the November 2020 Amendment, upon which a second tranche in an aggregate principal amount of $20.0 million was funded, or Term B, and in June 2021, or the June 2021 Amendment, upon which a third tranche in an aggregate principal amount of $40.0 million was funded, or Term C.

In February 2022, the Company entered into an additional amendment, or the February 2022 Amendment, to the 2020 Loan Agreement, collectively, the Amended 2020 Loan Agreement, upon which the Company received gross proceeds of $40.0 million, or Term D. The February 2022 Amendment also provided for an increase in the interest rate and for three future tranches of debt to be funded upon the achievement of certain milestones. In June 2022, the Company received additional gross proceeds of $30.0 million, or Term E, following the initiation of part 4 of the Phase 1/2 clinical trial of INBRX-105, as well as an additional $30.0 million in gross proceeds, or Term F, following the receipt of positive topline data from the Phase 1 clinical trial of INBRX-101.

In October 2022, the Company entered into an amendment to the Amended 2020 Loan Agreement, or the October 2022 Amendment. The October 2022 Amendment amended the milestone terms of the last remaining tranche, Term G, under the Amended 2020 Loan Agreement to provide for the funding of $30.0 million upon the announcement of the regulatory path for INBRX-101 rather than upon the initiation of a registration-enabling clinical trial of INBRX-101.

In October 2022, the Company met this milestone and drew the final tranche for additional gross proceeds of $30.0 million.

The Company determined the November 2020, June 2021, February 2022, and October 2022 Amendments should be treated as modifications of the original 2020 Loan Agreement since the terms and resulting cash flows were not substantially changed upon each of the amendments. The Company will continue to amortize the existing debt discounts prior to modification through the Amended Maturity Date (as defined below).

As of July 1, 2023, a LIBOR Transition Event, as defined in the Amended 2020 Loan Agreement, occurred, and pursuant to the Amended 2020 Loan Agreement, Oxford selected a LIBOR Replacement Rate, as defined in the Amended 2020 Loan Agreement, replacing the 30 day U.S. Dollar London InterBank Offered Rate with the 1-Month Chicago Mercantile Exchange term secured overnight financing rate, or 1-Month CME Term SOFR, causing an amendment to the interest rate of the Company’s outstanding loans. No other terms were changed. The Company has elected the optional expedient under ASC Topic 848-20 and therefore deemed the modification to not be substantial.

As of September 30, 2023, the Company had $200.0 million in gross principal outstanding in term loans under the Amended 2020 Loan Agreement. The outstanding term loans will mature on January 1, 2027, or the Amended Maturity Date, and bear interest at a floating per annum rate equal to the greater of (1) 8.30% or (2) the sum of (i) the 1-Month CME Term SOFR on the last business day of the month that immediately precedes the month in which the interest will accrue, (ii) 0.10%, and (iii) 8.19%. Under the Amended 2020 Loan Agreement, the repayment schedule provides for interest-only payments through February 1, 2025, followed by 23 months of principal and interest payments. In the event of a qualifying financing event in which the Company raises at least $100.0 million in upfront licensing or partnership proceeds by February 2025, the interest-only period may be extended an additional 12 months through February 1, 2026, which would then be followed by 11 months of equal payments of principal plus interest, beginning on March 1, 2026. Upon the Amended Maturity Date, a final payment of 9.0% of the original principal amount will be due to Oxford. This final payment of $18.0 million is being accreted over the life of the Amended 2020 Loan Agreement using the effective interest method. The Company has the option to prepay the outstanding balance of the term loans in full prior to the Amended Maturity Date, subject to a prepayment fee ranging from 1.0% to 3.0%, depending upon the timing of the prepayment.

The Company’s outstanding debt balance under the Amended 2020 Loan Agreement consisted of the following as of September 30, 2023 and December 31, 2022 (in thousands).

As of September 30, 2023, and unless extended in accordance with the terms described above, the Company’s interest-only period will continue through February 2025, with principal payments beginning in March 2025. Future principal payments and final fee payments will be made as follows (in thousands):

The Company’s obligations under the Amended 2020 Loan Agreement are secured by a first priority security interest of substantially all of the Company’s assets with a positive lien on intellectual property. The Amended 2020 Loan Agreement includes customary events of default, including instances of a material adverse change in the Company’s operations, that may require prepayment of the outstanding term loans. Additionally, following the June 2021 Amendment, the Amended 2020 Loan Agreement requires the Company to maintain a minimum cash balance of $20.0 million. As of September 30, 2023, the Company is in compliance with all covenants under the Amended 2020 Loan Agreement and has not received any notification or indication from Oxford of an intent to declare the loan due prior to maturity.

Concurrently with the February 2022 Amendment, the Company issued 40,000 warrants to Oxford to purchase shares of the Company’s common stock at an exercise price of $45.00. Upon issuance, the warrants were classified as equity and recorded at their fair value of $0.7 million. See Note 4 for further discussion of these warrants.

Interest expense is calculated using the effective interest method and is inclusive of non-cash amortization of the debt discount and accretion of the final payment. During the three months ended September 30, 2023, interest expense was $8.1 million, $1.2 million of which related to non-cash amortization of the debt discount and accretion of the final payment. During the three months ended September 30, 2022, interest expense was $5.5 million, $1.0 million of which related to non-cash amortization of the debt discount and accretion of the final payment. During the nine months ended September 30, 2023, interest expense was $23.6 million, $3.7 million of which related to non-cash amortization of the debt discount and accretion of the final payment. During the nine months ended September 30, 2022, interest expense was $11.1 million, $2.2 million of which related to non-cash amortization of the debt discount and accretion of the final payment.

In September 2021, the Company entered into the Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or the Sales Agent, under which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent. Pursuant to the Sales Agreement, the Company will pay the Sales Agent a commission for its services in acting as an agent in the sale of common stock in an amount equal to 3% of the gross sales price per share sold. During each of the nine months ended September 30, 2023 and September 30, 2022, the Company did not issue any shares under the Sales Agreement.

In August 2023, the Company entered into a Securities Purchase Agreement, or the Purchase Agreement, with the Purchasers, pursuant to which the Company sold and issued 3,621,314 shares of the Company’s common stock for $19.35 per share and, with respect to certain Purchasers, pre-funded warrants to purchase 6,714,636 shares of the Company’s common stock in the Private Placement. The purchase price of the pre-funded warrants was $19.3499 per pre-funded warrant, with an exercise price of $0.0001 per share. The Company received gross proceeds of $200.0 million from the Private Placement, before deducting $0.4 million of offering expenses payable by the Company. The pre-funded warrants are equity-classified and carried at the instruments’ fair value upon issuance. The pre-funded warrants are exercisable upon issuance pursuant to certain beneficial ownership limitations as defined in the Purchase Agreement and will expire when exercised in full. As of September 30, 2023, all pre-funded warrants are still outstanding.

As of September 30, 2023, the following equity-classified warrants were outstanding, in addition to the pre-funded warrants discussed above:

The Company’s warrants are equity-classified and carried at the instruments’ fair value upon classification into equity, with no subsequent remeasurements.

Common stock reserved for future issuance as of September 30, 2023 and December 31, 2022 consist of the following (in thousands):

			AS OF						AS OF
			SEPTEMBER 30, 2023						DECEMBER 31, 2022
Options to purchase common stock issued and outstanding			6,668						5,305
Shares available for future equity grants			437						162
Pre-funded warrants issued and outstanding			6,715						—
Warrants issued and outstanding			47						47
Total common stock reserved for future issuance			13,867						5,514

The Company’s share-based compensation plan, the Amended and Restated 2017 Employee, Director and Consultant Equity Incentive Plan, or the 2017 Plan, provides for the issuance of incentive stock options, restricted and unrestricted stock awards, and other stock-based awards. As of September 30, 2023, an aggregate of 7.8 million shares of common stock were authorized for issuance under the 2017 Plan, of which 0.4 million remain available for issuance.

The Company recognizes compensation costs related to stock-based awards, including stock options, based on the estimated fair value of the awards on the date of grant. The Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant. The options are subject to four-year vesting with a one-year cliff and have a contractual term of 10 years.

A summary of the Company’s stock option activity under its 2017 Plan for the nine months ended September 30, 2023 is as follows (in thousands, except for per share data and years):

			Number of Shares						Weighted Average Exercise Price						Weighted Average Remaining Contractual Term (In Years)						Aggregate Intrinsic Value
Outstanding as of December 31, 2022			5,305						$	22.95
Granted			1,575						$	23.00
Exercised			(105)						$	11.72
Forfeited			(107)						$	29.04
Outstanding as of September 30, 2023			6,668						$	23.04					7.8						$	12,290
Vested and exercisable as of September 30, 2023			3,134						$	21.19					6.8						$	10,480

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2023 and September 30, 2022 was $1.3 million and $1.4 million, respectively. Aggregate intrinsic value of stock options exercised and outstanding is calculated using the fair value of common stock on the date of exercise and the fair value of common stock as of September 30, 2023, respectively. The total fair value of stock options vested during the nine months ended September 30, 2023 and September 30, 2022 was $19.0 million and $20.7 million, respectively. The Company expects all outstanding stock options to vest.

The weighted-average assumptions used by the Company to estimate the fair value of stock option grants using the Black-Scholes option pricing model, as well as the resulting weighted-average fair value, for the nine months ended September 30, 2023 and September 30, 2022 were as follows:

Stock-based compensation expense for stock options consisted of the following (in thousands):

As of September 30, 2023, the Company had $58.9 million of total unrecognized stock-based compensation expense related to its stock options, which is expected to be recognized over a weighted-average period of 2.6 years.

The following table summarizes the total revenue recorded in the Company’s condensed consolidated statements of operations (in thousands):

			THREE MONTHS ENDED SEPTEMBER 30,												NINE MONTHS ENDED SEPTEMBER 30,
			2023						2022						2023						2022
License fee revenue
Chiesi Farmaceutici S.p.A.			$	119					$	264					$	166					$	603
Phylaxis BioScience, LLC			—						14						—						1,101
2seventy bio, Inc.			—						—						—						200
Total license fee revenue			119						278						166						1,904
Grant revenue			—						—						—						14
Total revenue			$	119					$	278					$	166					$	1,918

In May 2019, the Company entered into an Option Agreement, as amended by the First Amendment to Option Agreement, dated August 19, 2019, or the Chiesi Option Agreement, with Chiesi Farmaceutici S.p.A., or Chiesi, pursuant to which the Company granted to Chiesi an exclusive option to obtain an exclusive license to develop and commercialize INBRX-101 outside of the United States and Canada. Additionally, the Chiesi Option Agreement provided Chiesi with a right of negotiation for INBRX-101 development and commercialization rights in the United States and Canada in the event that the Company engages in discussions with any third parties for such rights during the term of the Chiesi Option Agreement. Under the terms of the Chiesi Option Agreement, the Company received a one-time, non-refundable option initiation payment of $10.0 million in August 2019.

The Company identified one performance obligation as of the effective date of the Chiesi Option Agreement, which was to perform research and development services for Chiesi during the option period. The Company determined that the option to grant a license in the future was not a material right. The $10.0 million upfront payment was allocated to the single performance obligation. Revenue was recognized over time as services were performed during the option period, based on the Company’s effort to satisfy the performance obligation relative to the total expense estimated to be incurred during the option period.

On July 24, 2023, the Company provided a copy of the European Medicines Agency, or EMA, scientific advice to Chiesi upon receipt, which fulfilled the necessary deliverables to Chiesi and triggered the start of its 60-day option period window. On September 18, 2023, the Company was notified that Chiesi declined to exercise its option.

During the three months ended September 30, 2023 and September 30, 2022, the Company recognized approximately $0.1 million and $0.3 million in revenue related to this agreement, respectively. During the nine months ended September 30, 2023 and September 30, 2022, the Company recognized approximately $0.1 million and $0.6 million in revenue related to this agreement, respectively.

As of September 30, 2023, the Company had no deferred revenue remaining related to this agreement. As of December 31, 2022, the Company had $0.1 million of deferred revenue related to this agreement, all of which was classified as current deferred revenue.

In July 2020, the Company entered into a joint venture with Phylaxis BioScience, LLC, or Phylaxis. In connection with the joint venture, the Company entered into the following agreements: Contribution Agreement, License Agreement, Limited Liability Company Agreement and Master Services Agreement, or collectively, the Phylaxis Agreements, pursuant to which the Company licensed certain intellectual property and know-how to Phylaxis and agreed to provide services to develop certain compounds. To date, the Company has received $5.0 million in connection with the Phylaxis Agreements. The Company also received a 10% equity interest in Phylaxis as consideration for the contribution of the license of the Company’s intellectual property and know-how and is entitled to receive an additional 5% based on the achievement of certain milestones, in addition to a share in a percentage of the profits of Phylaxis under the Phylaxis Agreements. Under the License Agreement, the Company is also entitled to specified development and commercialization milestone payments of up to an aggregate of $225.0 million and $175.0 million, respectively.

During the three and nine months ended September 30, 2023, the Company recognized no revenue related to this performance obligation following its completion in 2022. During the three months ended September 30, 2022, the Company recognized $14,000 of revenue related to this performance obligation. During the nine months ended September 30, 2022, the Company recognized $1.1 million of revenue related to this performance obligation. As of September 30, 2023 and December 31, 2022, there was no deferred revenue remaining related to the Phylaxis Agreements.

In June 2020, the Company entered into an Option and License Agreement with bluebird bio, Inc., or bluebird, pursuant to which the Company granted to bluebird exclusive worldwide rights to develop binders and cell therapy products containing single domain antibodies, or sdAbs, directed to specified targets, consisting of two initial programs and up to an additional 8 programs. The Company retains all rights to the specific sdAbs outside of the cell therapy field. In November 2021, bluebird assigned this agreement, or the 2020 2seventy Agreement, to 2seventy bio, Inc., or 2seventy, in connection with bluebird’s internal restructuring and subsequent spin-out of 2seventy.

In June 2020, the Company received a non-refundable upfront option fee of $0.2 million in connection with each of the two initial programs, or $0.4 million in aggregate, and is entitled to an upfront option fee for each additional program, on a program-by-program basis. For each program selected by 2seventy, the Company granted an option in which 2seventy may acquire an exclusive license with respect to all binders and cell therapy products developed under this agreement, which entitles the Company to additional fees upon exercise of the option.

In June 2022, pursuant to the terms regarding the addition of new programs in the 2020 2seventy Agreement, the Company received a $0.2 million upfront option fee related to the selection of a third program and transferred the related know-how and development license. The Company recognized the $0.2 million of revenue at the point in time in which the program was added and the program term began.

During the nine months ended September 30, 2022, the Company recognized $0.2 million of revenue related to this agreement. During the three months ended September 30, 2022, the Company did not recognize any revenue related to this agreement. During the three and nine months ended September 30, 2023, the Company did not recognize any revenue related to this agreement.

In September 2017, the Company entered into a seven-year lease agreement as its sole location in La Jolla, California. The lease expires in June 2025 with an option to extend the lease an additional five years. The lease contained an initial base rent of approximately $0.1 million per month with 2% annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which to be determined annually.

In May 2019, the Company executed an amendment to its lease agreement to expand its facilities and began occupying this space in January 2020. The amended lease terminates coterminously with the initial lease agreement and contains an initial base rent of approximately $30,000 per month with 2% annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which is to be determined annually.

The operating right-of-use asset and lease liability as of September 30, 2023 and December 31, 2022 are as follows (in thousands):

During each of the three months ended September 30, 2023 and September 30, 2022, the Company recognized operating lease expense of $0.9 million. During the nine months ended September 30, 2023 and September 30, 2022, the Company recognized operating lease expense of $2.6 million and $2.5 million, respectively. During each of the three months ended September 30, 2023 and September 30, 2022, the Company paid $0.5 million in cash for amounts included in the measurement of the operating lease liability. During each of the nine months ended September 30, 2023 and September 30, 2022, the Company paid $1.6 million in cash for amounts included in the measurement of the operating lease liability.

As of September 30, 2023 and December 31, 2022, the Company’s operating lease had a remaining term of 1.8 and 2.5 years, respectively. The Company discounts its lease payments using its incremental borrowing rate as of the commencement of the lease. The Company has determined a weighted-average discount rate of 8.2% as of September 30, 2023 and December 31, 2022.

Future minimum rental commitments for the Company’s operating leases reconciled to the operating lease liability are as follows (in thousands):

The Company has several ongoing contracts with CROs for preclinical studies and clinical trials and with CDMOs for clinical supplies and manufacturing scale-up activities. While these contracts are generally cancellable, some may contain specific activities that involve one or more noncancellable commitments, including minimum purchase commitments, binding annual forecasts and capital equipment investments. Additionally, depending on the timing and reasoning of the exit, certain termination penalties may apply and can range from cost of work performed to date and up to twelve months of future committed manufacturing costs. As of September 30, 2023 and December 31, 2022, the noncancellable portion of these contracts total in aggregate, excluding amounts paid or incurred at each respective date, approximately $52.5 million and $74.8 million, respectively. The noncancellable purchase commitments relate to the purchase of raw materials and future contract manufacturing of drug supply for INBRX-101. During the nine months ended September 30, 2023 and September 30, 2022, the Company incurred $4.3 million and $0.8 million, respectively, of expenses related to its noncancellable purchase agreements.

The Company is not party to any material legal proceedings. From time to time, it may be involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

We are a clinical-stage biopharmaceutical company with a pipeline of novel biologic therapeutic candidates developed using our proprietary modular protein engineering platforms. In particular, our proprietary single domain antibody, or sdAb, platform allows us to pursue validated targets with clinical promise where other antibody and biologic based approaches have failed. Highly modular, our platform technologies can be combined with precise valencies and multiple specificities, creating therapeutic candidates designed to be capable of enhanced cell signaling, conditional activation or combined synergistic functions.

We have multiple programs in various stages of development from discovery to preclinical to clinical. We currently have four programs in ongoing clinical trials. Three of these programs are for the treatment of various cancers, and one for the treatment of Alpha-1 Antitrypsin Deficiency, or AATD, as shown below:

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*    Third party partnership with Chinese biotechnology company, Transcenta Holding, Ltd., or Transcenta, currently in place for development and commercialization in China, Hong Kong, Macau and/or Taiwan.

**    Third party partnership with Chinese biotechnology company, Elpiscience Biopharmaceuticals, Inc., or Elpiscience, currently in place for development and commercialization in China, Hong Kong, Macau and/or Taiwan.

INBRX-101 is an optimized, recombinant alpha-1 antitrypsin, or AAT, augmentation therapy candidate for AATD. In March 2022, the United States Food and Drug Administration, or FDA, granted orphan drug designation for INBRX-101 for the treatment of AATD. In May 2022, we announced topline results from the INBRX-101 Phase 1 clinical trial. We believe the data revealed the potential to achieve normal AAT levels with less frequent dosing than the current standard of care and showed the treatment was well tolerated with no drug-related severe or serious adverse events at doses up to and including 120 mg/kg in single and multi-dose administered intravenously. In April 2023, we initiated ElevAATe, a registration-enabling trial for INBRX-101 for the treatment of patients with emphysema due to AATD. The primary endpoint of the trial is the mean change in the average functional AAT, or fAAT, concentration as measured by anti-neutrophil elastase capacity from baseline to average serum trough fAAT concentration at steady state (Ctrough,ss). The initial read-out from the ElevAATe trial is expected to occur in late 2024 and we intend to submit for regulatory approval once completed. In our end of Phase 1 meeting, the FDA requested additional information to support the correlation between serum AAT levels and the clinical benefit in AATD to further support serum AAT levels as a surrogate endpoint reasonably likely to predict clinical benefit. We are in the process of compiling this data through existing registry, health records and published data and plan to submit those analyses to the FDA as part of the BLA submission. In May 2023, the FDA granted Fast Track designation to INBRX-101 for the treatment of patients with emphysema due to AATD.

Our most advanced therapeutic candidate, INBRX-109, is a tetravalent death receptor 5, or DR5, agonist currently being evaluated in patients diagnosed with difficult-to-treat cancers, such as chondrosarcoma, mesothelioma, colorectal cancer, Ewing sarcoma and pancreatic adenocarcinoma. In June 2021, based on the initial Phase 1 data results, we initiated a registration-enabling Phase 2 trial for the treatment of unresectable or metastatic conventional chondrosarcoma for which the FDA and the European Medicine Agency, or EMA, granted orphan drug designation in November 2021 and August 2022, respectively. In November 2022, we announced updated efficacy and safety data from the ongoing Phase 1 INBRX-109 expansion cohorts for the treatment of chondrosarcoma, which showed disease control was observed in patients with and without isocitrate dehydrogenase, or IDH, mutations. Data from the registration-enabling trial in unresectable or metastatic conventional chondrosarcoma is expected during the second half of 2024.

On November 2, 2023, we announced preliminary efficacy and safety data from the Phase 1 trial of INBRX-109 in combination with Irinotecan, or IRI, and Temozolomide, or TMZ, for the treatment of advanced or metastatic, unresectable Ewing sarcoma. Among the 13 patients evaluable as of the data cut of September 8, 2023, the observed disease control rate was 76.9%, or 10 out of 13 patients as measured by RECISTv1.1, with 7 patients achieving partial responses (53.8%) and 3 patients achieving stable disease (23.1%). Overall, INBRX-109 in combination with IRI/TMZ was well tolerated from a safety perspective.

INBRX-105 is a precisely engineered multi-specific sdAb-based therapeutic candidate that is designed to agonize 4-1BB selectively in the presence of PD-L1, which is typically found in the tumor microenvironment and associated lymphoid tissues. It is currently being investigated as a single agent and in combination with Keytruda, a PD-1 blocking checkpoint inhibitor, in patients with locally advanced or metastatic solid tumors. Parts 1 and 3, dose escalation as a single agent and in combination with Keytruda, have been completed. We continue to enroll and/or have active patients in Part 2, single agent dose expansion, and Part 4, combination expansion cohorts. We expect to announce initial data from these cohorts mid-year of 2024.

INBRX-106 is a precisely engineered hexavalent sdAb-based therapeutic candidate targeting OX40, designed to be an optimized agonist of this co-stimulatory receptor. It is currently being investigated as a single agent and in combination with Keytruda in patients with locally advanced or metastatic solid tumors. Parts 1 and 3, dose escalation as a single agent and in combination with Keytruda, have been completed. It was observed to be well tolerated, with predominantly mild or moderate immune-related toxicities notes. We observed durable responses across multiple tumor types. We continue to enroll and/or have active patients in Part 2, single agent dose expansion, and Part 4, combination expansion cohorts. We expect to announce initial data from these cohorts during the second half of 2024.

To date, all of our revenue has been derived from licenses with collaboration partners and grant awards. We have not generated any revenue from the commercial sale of approved therapeutic products, and until, if ever, they are approved for commercial sale, we expect our revenue will be derived primarily from payments under our current license agreements and any potential future collaborations or strategic transactions.

To date, our research and development expenses have related primarily to research activities, including our discovery efforts, and preclinical and clinical development and the manufacturing of our therapeutic candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We do not track our internal research and development expenses on a program-by-program basis as they primarily relate to personnel, early research and consumable costs, which are deployed across multiple projects under development.

Research and development expenses consist primarily of:

•External expenses, consisting of:

◦expenses incurred in connection with the preclinical development of our programs;

◦clinical trials of our therapeutic candidates, including under agreements with third parties, such as consultants and contract research organizations, or CROs;

◦expenses associated with the manufacturing of our therapeutic candidates under agreements with contract development and manufacturing organizations, or CDMOs;

◦expenses associated with regulatory requirements, including fees and other expenses related to our Scientific Advisory Board; and

◦other external expenses, such as laboratory services related to our discovery and development programs and other shared services, and

•Internal expenses, consisting of:

◦salaries, benefits and other related costs, including non-cash stock-based compensation, for personnel engaged in research and development functions;

◦facilities, depreciation and other expenses, which include direct and allocated expenses for depreciation and amortization, rent and maintenance of facilities; and

◦other internal expenses, such as laboratory supplies and other shared research and development costs.

We expect that research and development expense will continue to increase over the next several years as we continue development of our therapeutic candidates currently in clinical stage development, support our preclinical programs, and continue to discover new therapeutic candidates, as well as increase our headcount. In particular, clinical development of our therapeutic candidates, as opposed to preclinical development, generally has higher development costs, primarily due to the increased size and duration of later-stage clinical trials. Moreover, the costs associated with our CDMOs to manufacture our therapeutic candidates and future commercial products is also much more costly as compared to early stage preclinical development. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our therapeutic candidates due to the inherently unpredictable nature of preclinical and clinical development. Preclinical and clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which therapeutic candidates to pursue and how much funding to direct to each therapeutic candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each therapeutic candidate’s commercial potential. We will need substantial additional capital in the future to support these efforts. In addition, we cannot forecast which therapeutic candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our clinical development costs may vary significantly based on factors such as:

•the per patient trial costs;

•the number of trials required for approval;

•the number of sites included in the trials;

•the countries in which the trials are conducted;

•the length of time required to enroll eligible patients;

•the number of patients that participate in the trials;

•the number of doses that patients receive;

•the drop-out or discontinuation rates of patients;

•the potential additional safety monitoring requested by regulatory agencies;

•the duration of patient participation in the trials and follow-up;

•the cost, timing, and successful manufacturing of our therapeutic candidates;

•the phase and development of our therapeutic candidates;

•the efficacy and safety profile of our therapeutic candidates; and

•the uncertainties related to potential economic downturn, geopolitical events and widespread health events on capital and financial markets.

General and administrative, or G&A, expenses consist primarily of:

•salaries, benefits and other related costs, including non-cash stock-based compensation, for personnel engaged in G&A functions;

•expenses incurred in connection with accounting and audit services, legal services, including costs associated with obtaining and maintaining our patent portfolio, investor relations and consulting expenses under agreements with third parties, such as consultants and contractors;

•expenses incurred in connection with commercialization and business development activity; and

•facilities, depreciation and other expenses, which include direct and allocated expenses for depreciation and amortization, rent and maintenance of facilities, insurance and supplies.

We expect our G&A expenses will continue to increase in the future to support our continued research and development activities. We expect increased costs related to pre-commercialization and business development activities, including the hiring of additional personnel as we continue to build our commercial team in preparation for our future product launches. Additionally, we expect other professional service fees to increase, including but not limited to, patent-related costs for filing, prosecution and maintenance of our product candidates, and compliance costs, accounting, legal, investor and public relations and additional personnel.

Interest expense. Interest expense consists of interest on our loans with Oxford Finance LLC, or Oxford.

Interest income. Interest income consists of interest earned on cash and cash equivalents, which include investments held during the period in highly liquid debt securities with original maturities of less than three months from our date of acquisition.

License fee revenue decreased by $0.2 million from $0.3 million during the three months ended September 30, 2022 to $0.1 million during the three months ended September 30, 2023. During the three months ended September 30, 2023 and September 30, 2022, we recognized $0.1 million and $0.3 million, respectively, of license fee revenue related to our option agreement, or the Chiesi Option Agreement, with Chiesi Farmaceutici S.p.A., or Chiesi. Upon Chiesi’s declination of its option, all remaining deferred revenue under this agreement was recognized during the period. Additionally, during the three months ended September 30, 2022, we recognized all remaining deferred revenue related to our agreements with Phylaxis BioScience, LLC, or Phylaxis, for total license fee revenue of approximately $14,000 during the period.

The following table sets forth the primary external and internal research and development expenses (in thousands, except percentages):

			THREE MONTHS ENDED SEPTEMBER 30,												CHANGE
			2023						2022						($)						(%)
External expenses:
Contract manufacturing			$	10,475					$	5,064					$	5,411					107		%
Clinical trials			8,906						6,870						2,036						30		%
Other external research and development			2,695						1,034						1,661						161		%
Internal expenses:
Personnel			12,498						9,052						3,446						38		%
Equipment, depreciation, and facility			1,760						1,552						208						13		%
Other internal research and development			1,723						1,362						361						27		%
Total research and development expenses			$	38,057					$	24,934					$	13,123					53		%

Research and development expenses increased by $13.2 million from $24.9 million during the three months ended September 30, 2022 to $38.1 million during the three months ended September 30, 2023. The overall increase was primarily due to the following factors:

•contract manufacturing expense increased by $5.4 million, due to the nature of the development and manufacturing activities performed during the current period at our CDMO and CRO partners supporting our clinical and preclinical therapeutic candidates, which reflect the stage-specific needs of our programs and include early and late stage drug substance clinical manufacturing, analytical development, quality control, or QC, testing and stability studies, as well as drug product development, scale-up, robustness studies and selected biologics license applications, or BLA,-enabling activities;

•clinical trial expense increased by $2.0 million due to costs incurred in the registration-enabling Phase 2 trial for INBRX-101 for the treatment of emphysema due to AATD which we initiated during the current year, as well as the progression of our INBRX-109 registration-enabling Phase 2 trial for the treatment of unresectable or metastatic conventional chondrosarcoma. Costs associated with our Phase 1/2 clinical trials for INBRX-105 and INBRX-106 remained consistent in each period;

•personnel-related expense increased by $3.4 million, which was primarily related to an increase in headcount as a result of a significant expansion of our clinical team, as well as the issuance of additional stock options and the expansion of the bonus eligibility pool during the current year;

•facility and equipment-related expense increased by $0.2 million, which was primarily attributable to an increase in software subscriptions to support research and development activities; and

•other research and development expense increased by $2.0 million, which was primarily attributable to an increase in clinical-related consulting expenses, the purchase of lab supplies, and preclinical studies.

G&A expenses increased by $2.6 million from $5.3 million during the three months ended September 30, 2022 to $7.9 million during the three months ended September 30, 2023. The overall increase during the three months ended September 30, 2023 was primarily due to the following factors:

•personnel-related expenses increased by $1.8 million, primarily attributable to an increase in headcount as we continue to build out our commercial strategy and medical affairs team, as well as increased expense related to additional stock option grants to employees and the expansion of the bonus eligibility pool in the current year;

•pre-commercialization expenses increased by $0.3 million, primarily related to increases in consulting services to support our commercial operations business intelligence strategies and our market research expenses related to INBRX-101 and INBRX-109; and

•professional services-related expense increased by $0.4 million, which was primarily attributable to increases in legal expenses, including those related to intellectual property and other general corporate matters, in addition to increases in accounting services performed during the period as a result of our filing status in the current year.

Interest expense. Interest expense increased by $2.6 million from $5.5 million during the three months ended September 30, 2022 to $8.1 million during the three months ended September 30, 2023, all of which relates to interest incurred and the amortization of debt discounts related to the Amended 2020 Loan Agreement. The increase in interest expense is the result of an increase in the outstanding principal balance from $170.0 million as of September 30, 2022 to $200.0 million as of September 30, 2023, as well as an increase in our variable interest rate driven by overall market conditions during the three months ended September 30, 2023. For more information regarding the Amended 2020 Loan Agreement, refer to Note 3 to the condensed consolidated financial statements.

Interest income. During the three months ended September 30, 2023, we earned $2.3 million of interest income, of which $1.7 million related to interest earned on our sweep and money market account balances and $0.6 million related to the accretion of discounts on investments in debt securities during the period. During the three months ended September 30, 2022, we earned $0.2 million of interest income. The increase in interest income during the three months ended September 30, 2023 is the result of higher cash and cash equivalent balances, coupled with rising interest rates, generating higher returns.

License fee revenue decreased by $1.7 million from $1.9 million during the nine months ended September 30, 2022 to $0.2 million during the nine months ended September 30, 2023. During the nine months ended September 30, 2023 and September 30, 2022, we recognized $0.2 million and $0.6 million, respectively, of license fee revenue related to the Chiesi Option Agreement. Upon Chiesi’s declination of its option, all remaining deferred revenue under this agreement was recognized during the period. Additionally, during the nine months ended September 30, 2022 we recognized license fee revenue of approximately $1.1 million related to our agreements with Phylaxis. Work on the first phase of these agreements was completed and all deferred revenue was recognized during 2022. Accordingly, no revenue was recognized under our agreements with Phylaxis during the nine months ended September 30, 2023. We also recognized $0.2 million of revenue under the 2020 2seventy Agreement following the grant of an exclusive option and development license upon initiation of a third program during the nine months ended September 30, 2022. No revenue was recognized under this agreement with 2seventy during the nine months ended September 30, 2023.

The following table sets forth the primary external and internal research and development expenses (in thousands, except percentages):

Research and development expenses increased by $29.8 million from $79.7 million during the nine months ended September 30, 2022 to $109.5 million during the nine months ended September 30, 2023. The overall increase was primarily due to the following factors:

•clinical trial expense increased by $9.1 million due to costs incurred upon the initiation of the registration-enabling Phase 2 trial for INBRX-101 for the treatment of emphysema due to AATD, which we initiated during the current year, as well as the progression of our INBRX-109 registration-enabling Phase 2 trial for the treatment of unresectable or metastatic conventional chondrosarcoma. Costs associated with our Phase 1/2 clinical trials for INBRX-105 and INBRX-106 remained consistent in each period;

•contract manufacturing expense increased by $6.8 million due to the nature of the development and manufacturing activities performed during the current period at our CDMO and CRO partners supporting our clinical and preclinical therapeutic candidates, which reflect the stage-specific needs of our programs, including early and late stage drug substance clinical manufacturing, analytical development, QC testing, and stability studies, as well as drug product development, scale-up, robustness studies, and selected BLA-enabling activities;

•personnel-related expense increased by $9.6 million, primarily related to an increase in headcount as a result of a significant expansion of our clinical team, as well as the issuance of additional stock options and the expansion of the bonus eligibility pool during the current year;

•facility and equipment-related expense increased by $0.8 million, which was attributable to an increase in software subscriptions to support research and development activities, in addition to increased repairs and maintenance services; and

•other research and development expense increased by $3.5 million, which was primarily attributable to an increase in travel expenses to clinical and vendor sites, clinical-related consulting expenses, the purchase of lab supplies, and preclinical studies.

G&A expenses increased by $5.7 million from $15.8 million during the nine months ended September 30, 2022 to $21.5 million during the nine months ended September 30, 2023. The overall increase during the nine months ended September 30, 2023, was primarily due to the following factors:

•personnel-related expenses increased by $4.1 million, related to an increase in headcount primarily due to building out our commercial strategy and medical affairs team, additional stock option grants to employees, and the expansion of the bonus eligibility pool in the current year;

•pre-commercialization expenses increased by $0.8 million, primarily related to increases in consulting services to support our commercial operations business intelligence strategies and our market research expenses related to INBRX-101 and INBRX-109; and

•facility and equipment-related expense increased by $0.5 million, which was primarily attributable to an increase in software subscriptions and IT services related to software implementations.

Interest expense. Interest expense increased by $12.5 million from $11.1 million during the nine months ended September 30, 2022 to $23.6 million during the nine months ended September 30, 2023, all of which relates to interest incurred and the amortization of debt discounts related to the Amended 2020 Loan Agreement. The increase in interest expense is the result of an increase in outstanding principal balance from $170.0 million as of September 30, 2022 to $200.0 million as of September 30, 2023 as well as an increase in our variable interest rate driven by overall market conditions during the nine months ended September 30, 2023. For more information regarding the Amended 2020 Loan Agreement, refer to Note 3 to the condensed consolidated financial statements.

Interest income. During the nine months ended September 30, 2023, we earned $7.2 million of interest income, of which $2.8 million related to interest earned on our sweep and money market account balances and $4.4 million related to the accretion of discounts on investments in debt securities during the period. During the nine months ended September 30, 2022, we earned $0.3 million of interest income. The increase in interest income during the nine months ended September 30, 2023 is the result of higher cash and cash equivalent balances, coupled with rising interest rates, generating higher returns.

To date, sources of capital raised to fund our operations have been comprised of the sale of equity securities, borrowings under the loan and security agreements for gross proceeds of $200.0 million, payments received from commercial partners for licensing rights to our therapeutic candidates under development, grants, and proceeds from the sale and issuance of convertible promissory notes.

Through September 30, 2023, proceeds from the sale of equity securities as a public company consisted of (i) $136.9 million in gross proceeds from our initial public offering, (ii) $171.4 million in gross proceeds under our Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or the Sales Agent, and (iii) $200.0 million in gross proceeds from the private placement transaction with certain institutional and other accredited investors, or Purchasers, in which we sold and issued shares of our common stock and, with respect to certain Purchasers, pre-funded warrants to purchase our common stock pursuant to a Securities Purchase Agreement, or the Purchase Agreement. The Purchasers have certain registration rights pursuant to the Purchase Agreement which have been waived until the first business day following December 31, 2023. Sales of our common stock made pursuant to the Sales Agreement have been made under our $400.0 million Shelf Registration on Form S-3ASR, which became automatically effective upon filing on September 3, 2021. As of September 30, 2023, we have used a total of $171.4 million of the $400.0 million under our Shelf Registration, with $228.6 million remaining and available for use.

Since our inception, we have devoted substantially all of our efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of our therapeutic candidates, establishing our intellectual property portfolio, developing our commercialization strategy, hiring to support these departments and activities and raising capital to support and expand these activities. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

Our net loss for the nine months ended September 30, 2023 and September 30, 2022 was $147.8 million and $104.3 million, respectively. As of September 30, 2023, we had an accumulated deficit of $520.1 million and cash and cash equivalents of $337.3 million. Based upon our current operating plans, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months from the date these condensed consolidated financial statements are issued. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong and we could deplete our capital resources sooner than we expect.

The process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain. We expect to continue to incur net losses for the foreseeable future until, if ever, we have an approved product and can successfully commercialize it. We expect our research and development expenses to increase as we continue our development of, and seek marketing approvals for, our therapeutic candidates (especially as we move more candidates into later stages of clinical development), and begin to commercialize any approved products, if ever. At this time, we are preparing to proceed with the commercialization of certain of our product candidates, if ever approved. As a result, we will incur significant pre-commercialization expenses in preparation for launch, the outcome of which is uncertain. Additionally, if approved, we will incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. We also expect additional general and administrative expenses as we hire additional personnel and incur increased accounting, audit, legal, regulatory and compliance, investor and public relations expense to support the Company as we continue to expand.

Until such time we, if ever, can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including strategic licensing and collaborations, strategic transactions, or other similar arrangements and transactions, and from time to time, we engage in discussions with potential acquirers regarding the disposition of one or more of our product candidates. However, there can be no assurance as to the availability or terms upon which such finances or capital might be available in the future. If we are unable to secure adequate additional funding, we will need to reevaluate our operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our intellectual property on less favorable terms than we would otherwise choose. These actions could materially impact our business, results of operations, financial condition, and prospects.

Our future liquidity and capital funding requirements will depend on numerous factors, including:

•the outcome, costs and timing of preclinical studies and clinical trials for our current or future therapeutic candidates;

•whether and when we are able to obtain marketing approval to market any of our therapeutic candidates and the outcome of meetings with applicable regulatory agencies, including the FDA;

•our ability to successfully commercialize any therapeutic candidates that receive marketing approval;

•the emergence and effect of competing or complementary therapeutics or therapeutic candidates;

•our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

•our ability to retain our current employees and the need and ability to hire additional management and scientific and medical personnel;

•the terms and timing of any strategic licensing, collaboration or other similar agreement that we have established or may establish;

•our ability to repay, refinance or restructure our indebtedness when payment is due, including in the event such indebtedness is accelerated;

•the valuation of our capital stock; and

•the continuing or future effects of a potential economic downturn, geopolitical events, and widespread health events on capital and financial markets.

We do not own or operate manufacturing and testing facilities for the production of any of our therapeutic candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on a limited number of third-party contract manufacturers for all of our required raw materials, antibodies and other biologics for our preclinical research, clinical trials, and if and when applicable, commercial product, and employ internal resources to manage our manufacturing relationships with these third parties.

Our material cash requirements from known contractual and other obligations primarily relate to our lease obligations, debt, and services provided by our third party CROs, and CDMOs.

We have two leases for our laboratory and office space, which expire in 2025, with an option to extend the leases for an additional five years. As of September 30, 2023, we have future minimum rental payments under these leases of $3.9 million, of which $2.2 million and $1.7 million are current and non-current, respectively. For more information regarding these lease agreements, refer to Note 7 to the condensed consolidated financial statements.

Under the Amended 2020 Loan Agreement, we are required to make interest only payments through February 2025, with all principal payments and final fee payments beginning in March 2025 and continuing through the maturity date of January 2027. The interest-only period may be extended an additional twelve months if the Company raises at least $100.0 million in upfront licensing or partnership proceeds by February 2025, upon which principal payments would begin in March 2026. As of September 30, 2023, we have a minimum obligation of $261.8 million of long-term debt, including minimum interest and final fee payments, of which $18.6 million and $243.2 million are current and non-current, respectively. For more information regarding the Amended 2020 Loan Agreement, refer to Note 3 to the condensed consolidated financial statements.

We enter into contracts in the normal course of business with CROs related to our ongoing preclinical studies and clinical trials and with CDMOs for clinical supplies and manufacturing scale-up activities. These contracts are generally cancellable, with notice, at our option. We have recorded accrued expenses of approximately $17.4 million in our condensed consolidated balance sheets for expenditures incurred by CROs and CDMOs as of September 30, 2023.

While these contracts are generally cancellable, some may contain specific activities that involve one or more noncancellable commitments, including minimum purchase commitments, binding annual forecasts and capital equipment investments. Additionally, depending on the timing and reasoning of the exit, certain termination penalties may apply and can range from the cost of work performed to date up to twelve months of future committed manufacturing costs. As of September 30, 2023, the noncancellable portion of these contracts total in aggregate, excluding amounts recorded in accounts payable and accrued expenses as of this date is approximately $52.5 million. The noncancellable purchase commitments relate to the purchase of raw materials and future contract manufacturing of drug supply for INBRX-101.

The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):

Net cash used in operating activities was $136.5 million during the nine months ended September 30, 2023 and consisted primarily of a net loss of $147.8 million, adjusted for non-cash items including accretion on our debt discount and the non-cash portion of interest expense related to our debt of $3.7 million, stock-based compensation expense of $18.4 million, depreciation and amortization of $0.9 million and non-cash lease expense of $1.3 million. Changes in operating assets and liabilities also contributed to the cash used in operating activities, primarily related to an increase in prepaid expenses and other current assets of $19.3 million due to the prepayment of raw materials to one of our CDMO partners during the third quarter of 2023. This was offset in part by increases in accrued expenses and other current liabilities of $8.7 million and an increase in accounts payable of $0.8 million due to the timing of payments to our CRO and CDMO partners during the period. Additionally, the operating lease liability decreased by $1.4 million as a result of lease payments made throughout the period, while deferred revenue decreased by $0.2 million due to the recognition of revenue under the Chiesi Option Agreement upon Chiesi’s declination of its option.

Net cash used in operating activities was $84.7 million during the nine months ended September 30, 2022 and consisted primarily of a net loss of $104.3 million, adjusted for non-cash items including accretion on our debt discount and the non-cash portion of interest expense related to our debt of $2.2 million, stock-based compensation expense of $15.1 million, depreciation and amortization of $0.9 million, and non-cash lease expense of $1.2 million. Changes in operating assets and liabilities also contributed to the cash used in operating activities, primarily related to increases in prepaid expenses and other current assets of $0.4 million and accrued expenses and other current liabilities of $5.0 million due to the timing of clinical activity and contract manufacturing work performed by our CDMO partners. These were offset by increases in other non-current assets of $1.3 million relating to deposits paid to one of our CRO partners. Additionally, deferred revenue decreased by $1.7 million upon the recognition of revenue under our option and license agreements, and the operating lease liability decreased by $1.2 million.

Net cash used in investing activities was $1.2 million and $0.4 million during the nine months ended September 30, 2023 and September 30, 2022, respectively, and was related to capital purchases of laboratory and office equipment.

Net cash provided by financing activities was $201.1 million during the nine months ended September 30, 2023, which consisted primarily of gross proceeds of $200.0 million from the issuance of our common stock and pre-funded warrants to purchase shares of our common stock in a private placement transaction, offset in part by the payment of $0.1 million of issuance costs associated with this transaction. Additionally, we received approximately $1.2 million of proceeds upon the exercise of stock options.

Net cash provided by financing activities was $99.9 million during the nine months ended September 30, 2022 and consisted primarily of approximately $98.9 million in net proceeds from Oxford under the Amended 2020 Loan Agreement upon draw of the Term D loan in February 2022 and the Term E and Term F loans in June 2022. Additionally, we received approximately $1.1 million of proceeds upon the exercise of stock options.

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in estimates are reflected in reported results for the period in which they become known. Actual results could differ significantly from the estimates made by our management.

There have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of recent accounting pronouncements and their effect, if any, on us.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not required to provide the information required under this item.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were designed and operating effectively at the reasonable assurance level.

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

We are not currently a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.

There have been no material changes to the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the three months ended March 31, 2023.

None.

None.

Not applicable.

On November 6, 2023 the Compensation Committee of our Board of Directors approved and adopted the Company’s Clawback Policy, or the Clawback Policy, which was established in accordance with the listing requirements of the Nasdaq Stock Market LLC. The Clawback Policy provides for the recovery or “clawback” of certain erroneously awarded incentive-based compensation in the event that the Company is required to prepare an accounting restatement. The Clawback Policy is effective as of October 2, 2023. The foregoing description of the material terms of Clawback Policy is qualified in its entirety by reference to the full text of the Clawback Policy, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

^     Certain schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Copies of the omitted schedules will be furnished to the SEC upon request.

*    This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.