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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to        
Commission File Number: 001-36296
Sesen Bio, Inc.
(Exact name of registrant as specified in its charter)

Delaware
26-2025616
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

245 First Street, Suite 1800
Cambridge, MA
02142
(Address of principal executive offices)(Zip Code)
(617444-8550
(Registrant’s telephone number, including area code)
Not applicable.
(Former name, former address and former fiscal year, if changed since last report)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueSESNThe Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerSmaller reporting company
Accelerated Filer
Emerging growth company
Non-accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒    
There were 129,339,617 shares of the registrant's common stock outstanding as of November 2, 2020.



Table of Contents
SESEN BIO, INC.
Quarterly Report on Form 10-Q for the Quarterly Period ended September 30, 2020
Table of Contents
  Page
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements.
Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2020 and 2019
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Three and Nine Months ended September 30, 2020 and 2019
Condensed Consolidated Statements of Cash Flows for the Nine Months ended
    September 30, 2020 and 2019
Notes to Condensed Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Item 4.Controls and Procedures.
PART II - OTHER INFORMATION
Item 1.Legal Proceedings.
Item 1A.Risk Factors.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3.Defaults Upon Senior Securities.
Item 4.Mine Safety Disclosures.
Item 5.Other Information.
Item 6. Exhibits.



Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.         Financial Statements.
SESEN BIO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In thousands, except share and per share data)
September 30,
2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents$41,969 $48,121 
Prepaid expenses and other current assets7,072 6,326 
Total current assets49,041 54,447 
Restricted cash20 20 
Property and equipment, net of accumulated depreciation
    of $850 and $758, respectively
154 238 
Intangible assets46,400 46,400 
Goodwill13,064 13,064 
Other assets349 196 
Total Assets$109,028 $114,365 
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable$1,524 $1,902 
Accrued expenses7,703 6,169 
Other current liabilities481 446 
Total current liabilities9,708 8,517 
Contingent consideration103,200 120,020 
Deferred tax liability12,528 12,528 
Other liabilities145  
Total Liabilities$125,581 $141,065 
Commitments and contingencies
Stockholders’ Deficit:
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and December 31, 2019
  
Common stock, $0.001 par value per share; 200,000,000 shares authorized at September 30, 2020 and December 31, 2019; 123,645,007 and 106,801,409 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
123 107 
Additional paid-in capital284,236 266,717 
Accumulated deficit(300,912)(293,524)
Total Stockholders’ Deficit(16,553)(26,700)
Total Liabilities and Stockholders’ Deficit$109,028 $114,365 

The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Table of Contents
SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited; In thousands, except per share data)
 
 Three Months ended
September 30,
Nine Months ended September 30,
 2020201920202019
License revenue$11,236 $ $11,236 $ 
Operating expenses:
Research and development10,196 6,613 23,625 19,243 
General and administrative4,115 3,238 10,882 8,910 
Change in fair value of contingent consideration18,400 3,600 (16,820)46,600 
Total operating expenses32,711 13,451 17,687 74,753 
Loss from operations(21,475)(13,451)(6,451)(74,753)
Other income (expense), net:
Other income (expense), net(1)319 195 806 
Net Loss and Comprehensive Loss Before Taxes(21,476)(13,132)(6,256)(73,947)
Provision for income taxes(1,132) (1,132) 
Net Loss and Comprehensive Loss After Taxes$(22,608)$(13,132)$(7,388)$(73,947)
Deemed dividend on adjustment of exercise price on certain warrants$ $— (147)$ 
Net Loss and Comprehensive Loss Attributable to Common Shareholders$(22,608)$(13,132)$(7,535)$(73,947)
Net loss per common share - basic and diluted$(0.19)$(0.13)$(0.07)$(0.85)
Weighted-average common shares outstanding - basic and diluted117,886 101,266 113,437 86,575 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Table of Contents
SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited; In thousands, except share data)
 Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Stockholders’
Equity (Deficit)
 SharesAmount
Balance at December 31, 2019106,801,409 $107 $266,717 $(293,524)$(26,700)
Net income (loss)— — — 41,564 41,564 
Share-based compensation— — 407 — 407 
Sales of common stock under 2014 ESPP2,785 — 1 — 1 
Issuance of common stock under ATM Offering, net of issuance costs of $0.1 million
3,187,359 3 3,176 — 3,179 
Balance at March 31, 2020109,991,553 $110 $270,301 $(251,960)$18,451 
Net income (loss)— — — (26,344)(26,344)
Share-based compensation— — 491 — 491 
Issuance of common stock under ATM Offering, net of issuance costs of $0.1 million
6,636,100 6 4,768 — 4,774 
Balance at June 30, 2020116,627,653 $116 $275,560 $(278,304)$(2,628)
Net income (loss)— — — (22,608)(22,608)
Share-based compensation— — 453 — 453 
Sales of common stock under 2014 ESPP25,401 — 9 9 
Issuance of common stock under ATM Offering, net of issuance costs of $0.3 million
6,991,953 7 8,214 — 8,221 
Balance at September 30, 2020123,645,007 $123 $284,236 $(300,912)$(16,553)



3

Table of Contents
 Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Stockholders’
Equity
 SharesAmount
Balance at December 31, 201877,456,180 $77 $230,154 $(186,024)$44,207 
Net income (loss)— — — (6,480)(6,480)
Share-based compensation— — 326 — 326 
Sales of common stock under 2014 ESPP8,601 — 7 — 7 
Balance at March 31, 201977,464,781 $77 $230,487 $(192,504)$38,060 
Net income (loss)— — — (54,335)(54,335)
Share-based compensation— — 356 — 356 
Exercise of stock options30,000 — 45 — 45 
Exercise of common stock warrants3,361,115 4 3,430 — 3,434 
Issuance of common stock and common stock warrants, net of issuance costs of $2.2 million
20,410,000 20 27,789 — 27,809 
Balance as of June 30, 2019101,265,896 $101 $262,107 $(246,839)$15,369 
Net income (loss)— — — (13,132)(13,132)
Share-based compensation— — 229 — 229 
Sales of common stock under the 2014 ESPP1,682  1 — 1 
Balance at September 30, 2019101,267,578 $101 $262,337 $(259,971)$2,467 

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

4

Table of Contents
SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; In thousands)
 Nine Months ended September 30,
 20202019
Cash Flows from Operating Activities:
Net loss$(7,388)$(73,947)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation92 164 
Share-based compensation1,351 911 
Change in fair value of contingent consideration(16,820)46,600 
Changes in operating assets and liabilities:
Prepaid expenses and other assets(899)(421)
Accounts payable(378)1,216 
Accrued expenses and other liabilities1,714 1,761 
Net Cash Used in Operating Activities(22,328)(23,716)
Cash Flows from Investing Activities:
Net Cash Used in Investing Activities(8)(137)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock under ATM Offering, net of issuance costs16,174  
Proceeds from sales of common stock under 2014 ESPP10 8 
Proceeds from exercises of stock options 45
Proceeds from the issuance of common stock and common stock warrants, net of issuance costs 27,809 
Proceeds from the exercise of common stock warrants 3,434 
Net Cash Provided by Financing Activities16,184 31,296 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash(6,152)7,443 
Cash, Cash Equivalents and Restricted Cash - Beginning of Period48,141 50,442 
Cash, Cash Equivalents and Restricted Cash - End of Period$41,989 $57,885 
Supplemental disclosure of non-cash operating activities:
Right-of-use assets related to the adoption of ASC 842$ $236 
Right-of-use assets obtained in exchange for lease obligations290$ 
Cash paid for amounts included in the measurement of lease liabilities$113 $115 
Supplemental disclosure of non-cash financing activities:
Deemed dividend on adjustment of exercise price on certain warrants$147 $ 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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SESEN BIO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS
Sesen Bio, Inc. ("Sesen" or the “Company”), a Delaware corporation formed in February 2008, is a late-stage clinical company developing targeted fusion protein therapeutics ("TFPTs") for the treatment of patients with cancer. The Company’s most advanced product candidate, VicineumTM, also known as VB4-845, is a locally-administered targeted fusion protein composed of an anti-epithelial cell adhesion molecule ("EpCAM") antibody fragment tethered to a truncated form of Pseudomonas exotoxin A. The Company has an ongoing single-arm, multi-center, open-label Phase 3 clinical trial of Vicineum as a monotherapy in patients with high-risk, bacillus Calmette-Guérin ("BCG")-unresponsive non-muscle invasive bladder cancer ("NMIBC") (the "VISTA Trial"). The VISTA Trial completed enrollment in April 2018 with a total of 133 patients, and in December 2019, the Company initiated submission of the Biologics License Application ("BLA") for Vicineum to the United States Food and Drug Administration ("FDA") under Rolling Review, which enables individual modules to be submitted and reviewed on an ongoing basis, rather than waiting for all sections to be completed before submission. The Company operates in one segment under the direction of its Chief Executive Officer (chief operating decision maker).
Viventia Acquisition
In September 2016, the Company entered into a Share Purchase Agreement with Viventia Bio, Inc., a corporation incorporated under the laws of the Province of Ontario, Canada ("Viventia"), the shareholders of Viventia named therein (the “Selling Shareholders”) and, solely in its capacity as seller representative, Clairmark Investments Ltd., a corporation incorporated under the laws of the Province of Ontario, Canada (“Clairmark”) (the “Share Purchase Agreement”), pursuant to which the Company agreed to and simultaneously completed the acquisition of all of the outstanding capital stock of Viventia from the Selling Shareholders (the “Viventia Acquisition”). In connection with the closing of the Viventia Acquisition, the Company issued 4.0 million shares of its common stock to the Selling Shareholders, which at that time represented approximately 19.9% of the voting power of the Company as of immediately prior to the issuance of such shares. Clairmark is an affiliate of Leslie L. Dan, a director of the Company until his retirement in July 2019.
In addition, under the Share Purchase Agreement, the Company is obligated to pay to the Selling Shareholders certain post-closing contingent cash payments upon the achievement of specified milestones and based upon net sales, in each case subject to the terms and conditions set forth in the Share Purchase Agreement, including: (i) a one-time milestone payment of $12.5 million payable upon the first sale of Vicineum (the “Purchased Product”) in the United States; (ii) a one-time milestone payment of $7.0 million payable upon the first sale of the Purchased Product in any one of certain specified European countries; (iii) a one-time milestone payment of $3.0 million payable upon the first sale of the Purchased Product in Japan; and (iv) quarterly earn-out payments equal to 2% of net sales of the Purchased Product during specified earn-out periods. Such earn-out payments are payable with respect to net sales in a country beginning on the date of the first sale in such country and ending on the earlier of (i) December 31, 2033 and (ii) fifteen years after the date of such sale, subject to early termination in certain circumstances if a biosimilar product is on the market in the applicable country (collectively, the "Contingent Consideration"). Under the Share Purchase Agreement, the Company, its affiliates, licensees and subcontractors are required to use commercially reasonable efforts for the first seven years following the closing of the Viventia Acquisition, to achieve marketing authorizations throughout the world and, during the applicable earn-out period, to commercialize the Purchased Product in the United States, France, Germany, Italy, Spain, United Kingdom, Japan, China and Canada. Certain of these payments are payable to individuals or affiliates of individuals that were previously employees or members of the Company's board of directors.
Liquidity and Going Concern
As of September 30, 2020, the Company had cash and cash equivalents of $42 million, net working capital of $39.3 million and an accumulated deficit of $300.9 million. The Company incurred negative cash flows from operating activities of $37.5 million for the year ended December 31, 2019 and $22.3 million for the nine months ended September 30, 2020. Since its inception, the Company has received no revenue from sales of its products, and management anticipates that operating losses will continue for the foreseeable future as the Company continues its ongoing Phase 3 VISTA Trial for Vicineum for the treatment of high-risk NMIBC and seeks marketing approval from the FDA and the European Medicines Agency. The Company has financed its operations to date primarily through private placements of its common stock, preferred stock, common stock warrants and convertible bridge notes, venture debt borrowings, its initial public offering ("IPO"), follow-on public offerings, sales effected in "at-the-market" ("ATM") offerings, a License Agreement with F. Hoffmann-La Roche Ltd and Hoffman-La Roche Inc. (collectively, "Roche") (the "License Agreement with Roche"), a License Agreement with Qilu Pharmaceuticals Ltd. (“Qilu”) (the "License Agreement with Qilu"), and, to a lesser extent, from a collaboration. See “Note 9. Stockholders’ Equity” below for information regarding the Company’s recently completed equity financings.
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Under Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements - Going Concern, management is required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management's plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates the substantial doubt about the Company's ability to continue as a going concern. The mitigating effect of management's plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved by the Company's board of directors before the date that the financial statements are issued.
The Company's future success is dependent on its ability to develop and commercialize Vicineum for the treatment of high-risk NMIBC, and ultimately upon its ability to attain profitable operations. In order to commercialize its product candidates, including Vicineum for the treatment of high-risk NMIBC, the Company needs to complete clinical development and comply with comprehensive regulatory requirements. The Company is subject to a number of risks similar to other late-stage clinical companies, including, but not limited to, successful discovery and development of its product candidates, raising additional capital, development and commercialization by its competitors of new technological innovations, protection of proprietary technology, market acceptance of its products and dependence on third parties for the development and commercialization of Vicineum in certain markets. The successful discovery and development of product candidates, including Vicineum for the treatment of high-risk NMIBC, requires substantial working capital, and management expects to seek additional funds through equity or debt financings or through additional collaboration or licensing transactions or other sources. The Company may be unable to obtain equity or debt financings or enter into additional collaboration or licensing transactions on favorable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include liens or other restrictive covenants limiting the Company's ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If the Company raises additional funds through government or other third-party funding, strategic collaborations and alliances or licensing arrangements, it may have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable. If the Company is unable to raise additional funds when needed, it may be required to implement cost reduction strategies and delay, limit, reduce or terminate its product development, regulatory approval or future commercialization efforts or grant rights to develop and market products or product candidates that management would otherwise prefer to develop and market.
The Company's management does not believe that its cash and cash equivalents of $42.0 million as of September 30, 2020 are sufficient to fund the Company's current operating plan for at least twelve months after the issuance of these condensed consolidated financial statements. Given the history of significant losses, negative cash flows from operations, limited cash resources currently on hand, the ongoing COVID-19 pandemic and dependence by the Company on its ability - about which there can be no certainty - to obtain additional financing to fund its operations after the current cash resources are exhausted, substantial doubt exists about the Company's ability to continue as a going concern. These condensed consolidated financial statements were prepared under the assumption that the Company will continue as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.


2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the ASC and Accounting Standards Updates (“ASUs”), promulgated by the Financial Accounting Standards Board (“FASB”).
Interim Financial Statements
The accompanying unaudited interim condensed consolidated financial statements have been prepared from the books and records of the Company in accordance with GAAP for interim financial information and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”), which permit reduced disclosures for interim periods. All adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the accompanying condensed consolidated balance sheets and statements of operations and comprehensive loss, stockholders’ equity (deficit) and cash flows have been made. Although these interim financial statements do not include all of the
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information and footnotes required for complete annual financial statements, management believes the disclosures are adequate to make the information presented not misleading. These unaudited interim results of operations and cash flows for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the full year. These unaudited interim condensed consolidated financial statements and footnotes should be read in conjunction with the Company’s audited annual consolidated financial statements and footnotes included in its Annual Report on Form 10-K, as filed with the SEC on March 16, 2020, wherein a more complete discussion of significant accounting policies and certain other information can be found.
Use of Estimates
The preparation of financial statements in accordance with GAAP and the rules and regulations of the SEC requires the use of estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience, known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although management believes its estimates and assumptions are reasonable when made, they are based upon information available at the time they are made. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, makes adjustments. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions, and given the subjective element of the estimates and assumptions made, actual results may differ from estimated results. The most significant estimates and judgments impact the fair value of intangible assets, goodwill and contingent consideration; income taxes (including the valuation allowance for deferred tax assets); research and development expenses; revenue recognition and going concern considerations.
Principles of Consolidation
The Company’s consolidated financial statements include the accounts of the Company, its wholly owned subsidiary Viventia and its indirect subsidiaries, Viventia Bio USA Inc. and Viventia Biotech (EU) Limited. All intercompany transactions and balances have been eliminated in consolidation.
Foreign Currency Translation
The functional currency of the Company and each of its subsidiaries is the U.S. dollar.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's complete summary of significant accounting policies can be found in "Item 15. Exhibits and Financial Statement Schedules - Note 3. Summary of Significant Accounting Policies" in the audited annual consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2019.

4. RECENT ACCOUNTING PRONOUNCEMENTS
Adopted in 2020
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU 2016-13 eliminate the probable threshold for initial recognition of a credit loss in GAAP and reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 is effective for annual and interim periods beginning January 1, 2020 and is to be applied using a modified retrospective transition method. The Company adopted this guidance effective January 1, 2020, and it did not have a material impact on the Company’s financial position, results of operations or cash flows.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements ("ASU 2018-13"). ASU 2018-13 modifies fair value measurement disclosure requirements. ASU 2018-13 is effective for annual and interim periods beginning after December 15, 2019. The Company adopted this guidance effective January 1, 2020, and although it resulted in some additional footnote disclosures, it did not have a material impact on the Company’s disclosures. For the new disclosures regarding our Level 3 instruments, please read Note 5, Fair Value Measurements and Financial Instruments, to these condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service
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Contract ("ASU 2018-15"). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to defer and recognize as an asset. The effective date for ASU 2018-15 is for annual and interim periods beginning after December 15, 2019. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted this guidance effective January 1, 2020, and it did not have a material impact on the Company’s financial position, results of operations or cash flows.
Pending Adoption
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments in ASU 2019-12 also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The method with which the amendments in this ASU are to be applied varies depending on the nature of the tax item impacted by amendment. Because the Company generates losses and pays no income taxes, it does not expect the adoption of ASU 2019-12 to have a material impact on the Company's financial position, results of operations or cash flows.

5. FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, restricted cash, prepaid expenses and other current assets, and accounts payable on the Company’s condensed consolidated balance sheets approximated their fair values as of September 30, 2020 and December 31, 2019 due to their short-term nature.
Certain of the Company’s financial instruments are measured at fair value using a three-level hierarchy that prioritizes the inputs used to measure fair value. This fair value hierarchy prioritizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1:    Inputs are quoted prices for identical instruments in active markets.
Level 2:    Inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3:    Inputs are unobservable and reflect the Company’s own assumptions, based on the best information available, including the Company’s own data.
The following tables set forth the carrying amounts and fair values of the Company's financial instruments measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 (in thousands):
September 30, 2020
Fair Value Measurement Based on
Carrying AmountFair ValueQuoted Prices in Active
Markets
(Level 1)
Significant other Observable
Inputs
(Level 2)
Significant Unobservable
Inputs
(Level 3)
Assets:
Money market funds
(cash equivalents)
$16,370 $16,370 $16,370 $ $ 
Liabilities:
Contingent consideration$103,200 $103,200 $ $ $103,200 

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December 31, 2019
Fair Value Measurement Based on
Carrying AmountFair ValueQuoted Prices in Active
Markets
(Level 1)
Significant other Observable
Inputs
(Level 2)
Significant Unobservable
Inputs
(Level 3)
Assets:
Money market funds
(cash equivalents)
$31,146 $31,146 $31,146 $ $ 
Liabilities:
Contingent consideration$120,020 $120,020 $ $ $120,020 
The Company evaluates transfers between fair value levels at the end of each reporting period. There were no transfers of assets or liabilities between fair value levels during the nine months ended September 30, 2020.
Contingent Consideration
On September 20, 2016, the Company acquired Viventia through the issuance of shares of common stock plus contingent consideration, pursuant to the terms of a Share Purchase Agreement. The Company recorded the acquired assets and liabilities based on their estimated fair values as of the acquisition date and finalized its purchase accounting for the Viventia Acquisition during the third quarter of 2017. The contingent consideration relates to amounts potentially payable to the former shareholders of Viventia under the Share Purchase Agreement. Contingent consideration is measured at its estimated fair value at each reporting period, with fluctuations in value resulting in a non-cash charge to earnings (or loss) during the period. The estimated fair value measurement is based on significant inputs, including internally developed financial forecasts, probabilities of success, and the timing of certain milestone events and achievements, which are not observable in the market, representing a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration requires the use of significant assumptions and judgments, which management believes are consistent with those that would be made by a market participant. Management reviews its assumptions and judgments on an ongoing basis as additional market and other data is obtained, and any future changes in the assumptions and judgments utilized by management may cause the estimated fair value of contingent consideration to fluctuate materially, resulting in earnings volatility.
The following table sets forth a summary of the change in the fair value of the Company's contingent consideration liability, measured on a recurring basis at each reporting period, for the nine months ended September 30, 2020 (in thousands):
Balance at December 31, 2019$120,020 
Change in fair value of contingent consideration(16,820)
Balance at September 30, 2020$103,200 
The fair value of the Company’s contingent consideration was determined using probabilities of successful achievement of regulatory milestones and commercial sales, the period in which these milestones and sales are expected to be achieved ranging from 2021 to 2033, and the level of commercial sales of Vicineum forecasted for the United States, Europe, Japan, China and other potential markets. There have been no changes to the valuation methods utilized during the nine months ended September 30, 2020. Because of the ongoing business environment uncertainty created by the ongoing COVID-19 pandemic, management carefully reviewed as of September 30, 2020 all of the Company’s financial forecast assumptions related to probability, timing and anticipated level of commercial sales in both US and OUS markets which were used to determine the estimated fair value of contingent consideration, and updated its forecasts for commercial sales in the third quarter of 2020 as needed. However, given the evolving and uncertain nature of the COVID-19 pandemic, management will continue to closely monitor developments in order to timely determine if any financial forecast changes may be required. As of September 30, 2020, no financial forecast changes due to COVID-19 were currently required. Changes to probabilities of success, timing of certain milestones and achievements, and level of commercial sales could materially affect the valuation of contingent consideration.
The estimated fair value of contingent consideration is also determined by applying appropriate discount rates to future cash outflows related to the contingent payment obligations, and these discount rates have fluctuated significantly in 2020 as a result of the extreme volatility of financial markets as global economies shut down in order to contain the spread of COVID-19. The milestone payments constitute debt-like obligations, and the high-yield debt index rate applied to the milestones in order to determine the estimated fair value moved from 11.8% as of December 31, 2019 to 17.9% as of March 31, 2020, 14.5% as of June 30, 2020 and back to 11.8% as of September 30, 2020. The discount rate applied to the 2% royalty due on forecasted Vicineum revenues is derived from the Company’s estimated weighted-average cost of capital (“WACC”), and this WACC-derived discount rate fluctuated from 5.6% as of December 31, 2019 to 14.7% as of March 31, 2020, to 13.2% as of June 30,
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2020 and to 9.4% as of September 30, 2020. These changes in the applicable discount rates, plus refinement of timelines in certain OUS markets and changes to the competitive landscape, resulted in an overall $16.8 million decrease in the estimated fair value of contingent consideration as of September 30, 2020. Changes to the discount rates could materially affect the valuation of the contingent consideration.

6. INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
Intangible assets on the Company's condensed consolidated balance sheet are the result of the Viventia Acquisition in September 2016. The following table sets forth the composition of intangible assets as of September 30, 2020 and December 31, 2019 (in thousands):
September 30, 2020December 31, 2019
IPR&D intangible assets:
Vicineum United States rights
$31,700 $31,700 
Vicineum European Union rights
14,700 14,700 
Total Intangibles$46,400 $46,400 
Goodwill
Goodwill on the Company's consolidated balance sheet is the result of the Viventia Acquisition in September 2016. Goodwill had a carrying value of $13.1 million as of September 30, 2020 and December 31, 2019.

7. LEASES
On January 1, 2019, the Company adopted ASC Topic 842, Leases using the optional transition method. The Company’s lease portfolio includes:
1.An operating lease for its 31,100 square foot facility in Winnipeg, Manitoba which consists of manufacturing, laboratory, warehouse and office space. In September 2020, the Company entered into an extension of this lease for an additional two years, through September 2022, with a right to extend the lease for one subsequent three-year term. The minimum monthly rent under this lease is $13,500 per month. In addition to rent expense, the Company expects to incur $12,300 per month in related operating expenses. Operating lease cost under this lease, including the related operating costs, was $75,000 and $223,000 for the three and nine months ended September 30, 2020 and $76,000 and $222,000 for the three and nine months ended September 30, 2019, respectively;
2.Short-term property leases for modular office space for 1) its corporate headquarters in Cambridge, MA and 2) office space in Philadelphia, PA. The short-term leases renew every four to nine months and currently extend through May 2021. The minimum monthly rent for these office spaces is $21,400 per month, which is subject to change if and as the Company adds or deducts space to or from the leases. The Company recorded $64,000 and $195,000 in rent expense for the three and nine months ended September 30, 2020, respectively, and $59,000 and $188,000 in rent expense for the three and nine months ended September 30, 2019, respectively, for these leases.
The asset component of the Company’s operating leases is recorded as operating lease right-of-use assets and reported within other assets on the Company's condensed consolidated balance sheets. The short-term liability is recorded in other current liabilities on the Company’s condensed consolidated balance sheet. Operating lease cost is recognized on a straight-line basis over the term of the lease.

8. ACCRUED EXPENSES
The following table sets forth the composition of accrued expenses as of September 30, 2020 and December 31, 2019 (in thousands):
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September 30,
2020
December 31, 2019
Research and development$5,145 $3,688 
Payroll-related expenses1,474 1,638 
Severance to former Executives and other employees 378 
Professional fees1,060 378 
Other24 87 
Total Accrued Expenses$7,703 $6,169 

Management Changes
On August 26, 2019, Richard Fitzgerald departed as the Company's Chief Financial Officer. In connection with his separation from the Company, Mr. Fitzgerald and the Company entered into a Separation Agreement and General Release dated as of September 9, 2019 (the "Fitzgerald Separation Agreement), pursuant to which the Company provided Mr. Fitzgerald with twelve months of separation payments and benefits. The Company recorded $0.3 million of expense related to this agreement in 2019. The separation payments were paid through the normal payroll cycle through August 2020, when the Company concluded its obligations under the Fitzgerald Separation Agreement.
On August 2, 2019, Dennis Kim, M.D., MPH departed as the Company's Chief Medical Officer. In connection with his separation from the Company, Dr. Kim and the Company entered into a Separation Agreement and General Release dated as of August 2, 2019 (the “Kim Separation Agreement”), pursuant to which the Company provided Dr. Kim with six months of separation payments in the amount of $0.2 million. In addition, Dr. Kim and the Company entered into a Consulting Agreement dated as of August 3, 2019 (the "Kim Consulting Agreement"), pursuant to which the Company agreed to pay Dr. Kim $0.1 million in consulting fees and transition expenses over the three months ended November 2, 2019. The Company recorded $0.3 million of expenses related to these agreements in 2019. The Kim Consulting Agreement payments were made in a lump sum when the agreement concluded in November 2019. The separation payments were paid through the normal payroll cycle through January 2020, when the Company concluded its obligations under the Kim Separation Agreement.

9. STOCKHOLDERS' EQUITY (DEFICIT)
Equity Financings
ATM Offering
In November 2019, the Company entered into an Open Market Sale Agreement SM (the "Sale Agreement") with Jefferies LLC ("Jefferies"), under which the Company may issue and sell shares of its common stock from time to time for an aggregate sales price of up to $35.0 million through Jefferies (the "ATM Offering"). Sales of common stock under the Sale Agreement are made by any method that is deemed to be an ATM offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including but not limited to sales made directly on or through the Nasdaq Global Market or any other existing trading market for the common stock. The Company has no obligation to sell any of its common stock and may at any time suspend offers under the Sale Agreement or terminate the Sale Agreement. Subject to the terms and conditions of the Sale Agreement, Jefferies will use its commercially reasonable efforts to sell common stock from time to time, as the sales agent, based upon the Company’s instructions, which include a prohibition on sales below a minimum price set by the Company from time to time. The Company has provided Jefferies with customary indemnification rights, and Jefferies is entitled to a commission at a fixed rate equal to 3.0% of the gross proceeds for each sale of common stock under the Sale Agreement. The Company incurred $0.2 million in legal, accounting and printing costs related to the commencement of the ATM Offering. For the nine months ended September 30, 2020, the Company raised $16.2 million of net proceeds from the sale of 16.8 million shares of common stock at a weighted-average price of $0.99 per share under the ATM Offering, including $8.2 million of net proceeds from the sale of 7.0 million shares of common stock at a weighted-average price of $1.21 per share during the three months ended September 30, 2020. Share issue costs, including sales agent commissions, related to the ATM Offering totaled $0.3 million and $0.5 million during the three and nine months ended September 30, 2020, respectively.
June 2019 Financing
In June 2019, the Company raised $27.8 million of net proceeds from the sale of 20.4 million shares of common stock and accompanying warrants to purchase an additional 20.4 million shares of common stock in an underwritten public offering (the "June 2019 Financing"). The combined purchase price for each share of common stock and accompanying warrant was $1.47. Subject to certain ownership limitations, the warrants issued in the June 2019 Financing were exercisable immediately upon issuance at an exercise price of $1.47 per share, subject to adjustments as provided under the terms of such warrants, and had a
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one-year term expiring on June 21, 2020. As of September 30, 2020, all warrants issued in connection with the June 2019 financing have expired.
Preferred Stock
Pursuant to its Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation"), the Company is authorized to issue 5.0 million shares of "blank check" preferred stock, $0.001 par value per share, which enables its board of directors, from time to time, to create one or more series of preferred stock. Each series of preferred stock issued shall have the rights, preferences, privileges and restrictions as designated by the board of directors. The issuance of any series of preferred stock could affect, among other things, the dividend, voting and liquidation rights of the common stock. The Company had no preferred stock issued and outstanding as of September 30, 2020 and December 31, 2019.
Common Stock
Pursuant to its Certificate of Incorporation, the Company is authorized to issue 200.0 million shares of common stock, $0.001 par value per share, of which 123.6 million and 106.8 million shares were issued and outstanding as of September 30, 2020 and December 31, 2019, respectively. In addition, the Company had reserved for issuance the following amounts of shares of its common stock for the purposes described below as of September 30, 2020 and December 31, 2019 (in thousands):
September 30, 2020December 31, 2019
Shares of common stock issued123,645 106,801 
Shares of common stock reserved for issuance for:
Warrants2,485 22,895 
Stock options10,227 6,236 
Shares available for grant under 2014 Stock Incentive Plan4,795 8,753 
Shares available for sale under 2014 Employee Stock Purchase Plan 28 
Total shares of common stock issued and reserved for issuance141,152 144,713 

The voting, dividend and liquidation rights of holders of shares of common stock are subject to and qualified by the rights, powers and preferences of holders of shares of preferred stock. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company's stockholders; provided, however, that, except as otherwise required by law, holders of common stock shall not be entitled to vote on any amendment to the Company’s Certificate of Incorporation that relates solely to the terms of one or more outstanding series of preferred stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more such series, to vote thereon. There shall be no cumulative voting.
Dividends may be declared and paid on the common stock from funds lawfully available thereof as and when determined by the board of directors and subject to any preferential dividend or other rights of any then-outstanding preferred stock. The Company has never declared or paid, and for the foreseeable future does not expect to declare or pay, dividends on its common stock.
Upon the dissolution or liquidation of the Company, whether voluntary or involuntary, holders of common stock will be entitled to receive all assets of the Company available for distribution to its stockholders, subject to any preferential or other rights of any then-outstanding preferred stock.
Warrants
All of the Company’s outstanding warrants are non-tradeable and permanently classified as equity because they meet the derivative scope exception under ASC Topic 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity ("ASC 815-40"). The following table sets forth the Company's warrant activity for the nine months ended September 30, 2020 (in thousands):
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Year-to-Date Warrant Activity
Issued
Exercise
Price (1)
ExpirationDecember 31, 2019Issued(Exercised)(Expired)September 30, 2020
Jun-2019$1.47Jun-202020,410   (20,410) 
Mar-2018$0.55*Mar-20231,943    1,943 
Nov-2017$0.55*Nov-2022487    487 
May-2015$11.83Nov-202428    28 
Nov-2014$11.04Nov-202427    27 
22,895   (20,410)2,485 
(1) As of September 30, 2020.
* Exercise price shown subject to further adjustment based on down round provision added by amendment.
In March 2018, the Company raised $9.0 million of net proceeds from the sale of common stock in a registered direct public offering and the sale of warrants to purchase shares of common stock with an exercise price of $1.20 per share (the "2018 Warrants") in a concurrent private placement. On October 28, 2019, the Company entered into transactions with certain holders of its then outstanding 2018 Warrants to amend their warrants pursuant to a Warrant Amendment Agreement (the "2018 Warrant Amendment Agreements"). The 2018 Warrant Amendment Agreements reduced the exercise price of the warrants from $1.20 to the lesser of (a) $0.95 per share of common stock and (b) the exercise price as determined from time to time, pursuant to the anti-dilution provisions in the 2018 Warrant Amendment Agreements. During the second quarter of 2020, the anti-dilution provision was triggered; as such, the Company recognized a deemed dividend of approximately $0.1 million which reduced the income available to common stockholders. As the Company has an accumulated deficit balance, there is no overall impact to additional paid-in capital, as the deemed dividend is recorded as offsetting debit and credit entries to additional paid-in capital. Therefore the amounts were not presented on the Statement of Stockholders' Equity (Deficit). There were no adjustments to the exercise price of any warrants for the three month period ended September 30, 2020.

10. LOSS PER SHARE
A net loss cannot be diluted. Therefore, when the Company is in a net loss position, basic and diluted loss per common share are the same. If the Company achieves profitability, the denominator of a diluted earnings per common share calculation includes both the weighted-average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents potentially include warrants, stock options and non-vested restricted stock awards and units using the treasury stock method, along with the effect, if any, from outstanding convertible securities. The majority of the Company’s outstanding warrants to purchase common stock have participation rights to any dividends that may be declared in the future and are therefore considered to be participating securities. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, no loss is allocated to the participating securities since the holders have no contractual obligation to share in the losses of the Company.

The following potentially dilutive securities outstanding as of September 30, 2020 and 2019 have been excluded from the denominator of the diluted loss per share of common stock outstanding calculation as their effect is anti-dilutive (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Warrants2,485 6,450 2,485 6,450 
Stock options10,227 26,307 10,227 26,307 
12,712 32,757 12,712 32,757 

11. SHARE-BASED COMPENSATION
The following table sets forth the amount of share-based compensation expense recognized by the Company by line item on its consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 (in thousands):
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 Three Months ended
September 30,
Nine Months ended
September 30,
 2020201920202019
Research and development$95 $(20)$266 $119 
General and administrative358 249 1,085 792 
$453 $229 $1,351 $911 

2014 Stock Incentive Plan
The Company's 2014 Stock Incentive Plan, as amended ("2014 Plan"), was adopted by its board of directors in December 2013 and subsequently approved by its stockholders in January 2014. The 2014 Plan became effective immediately prior to the closing of the Company's IPO in February 2014 and provides for the grant of incentive and non-qualified stock options, restricted stock awards and units, stock appreciation rights and other stock-based awards, with amounts and terms of grants determined by the Company's board of directors at the time of grant, to the Company's employees, officers, directors, consultants and advisors. Currently there are only stock options outstanding under the 2014 Plan, which generally vest over a four-year period at the rate of 25% of the grant vesting on the first anniversary of the date of grant and 6.25% of the grant vesting at the end of each successive three-month period thereafter. Stock options granted under the 2014 Plan are exercisable for a period of ten years from the date of grant. There were 8.0 million stock options outstanding under the 2014 Plan as of September 30, 2020. There were 4.8 million shares of common stock available for issuance under the 2014 Plan as of September 30, 2020.
2009 Stock Incentive Plan
The Company maintains a 2009 Stock Incentive Plan, as amended and restated ("2009 Plan"), which provided for the grant of incentive and non-qualified stock options and restricted stock awards and units, with amounts and terms of grants determined by the Company's board of directors at the time of grant, to its employees, officers, directors, consultants and advisors. Upon the closing of its IPO in February 2014, the Company ceased granting awards under the 2009 Plan and all shares (i) available for issuance under the 2009 Plan at such time and (ii) subject to outstanding awards under the 2009 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased without having been fully exercised or resulting in any common stock being issued were carried over to the 2014 Plan. Stock options granted under the 2009 Plan are exercisable for a period of ten years from the date of grant. There were 0.1 million fully vested stock options outstanding under the 2009 Plan as of September 30, 2020.
Out-of-Plan Inducement Grants
From time to time, the Company has granted equity awards to its newly hired executives in accordance with the Nasdaq Stock Market LLC ("Nasdaq") employment inducement grant exemption (Nasdaq Listing Rule 5635(c)(4)). Such grants are made outside of the 2014 Plan and act as an inducement material to the executive's acceptance of employment with the Company. There were 2.1 million stock options outstanding which were granted as employment inducement awards outside of the 2014 Plan as of September 30, 2020.
Stock Options
The following table sets forth a summary of the Company’s total stock option activity, including awards granted under the 2014 Plan and 2009 Plan and inducement grants made outside of stockholder approved plans, for the nine months ended September 30, 2020:
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Number of Shares under Option
(in thousands)
Weighted-average Exercise Price per OptionWeighted-average Remaining Contractual Life
(in years)
Aggregate Intrinsic Value
(in thousands)
Outstanding at December 31, 20196,236 $1.528.8$358 
Granted4,044 $0.87
Exercised $0.00
Canceled or forfeited(53)$0.84
Outstanding at September 30, 202010,227 $1.268.6$3,541 
Exercisable at September 30, 20203,637 $1.738.0$786 

The Company recognized share-based compensation expense related to stock options of $0.5 million and $1.4 million for the three and nine months ended September 30, 2020, respectively, and $0.2 million and $0.9 million for the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, there was $4.1 million of total unrecognized compensation cost related to non-vested stock options which the Company expects to recognize over a weighted-average period of 2.6 years. The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2020 was $0.56 per option. The total intrinsic value of stock options exercised during the nine months ended September 30, 2020 was de minimus.
For the nine months ended September 30, 2020 and 2019, the grant-date fair value of stock options was determined using the following weighted-average inputs and assumptions in the Black-Scholes option pricing model:
September 30, 2020September 30, 2019
Fair value of common stock$0.56$0.69
Exercise price$0.87$1.02
Expected term (in years)6.105.98
Risk-free interest rate1.32.1
Expected volatility71.578.1
Dividend yield%%

12. EMPLOYEE BENEFIT PLANS
2014 Employee Stock Purchase Plan
The Company's 2014 Employee Stock Purchase Plan ("2014 ESPP") was adopted by its board of directors in December 2013 and subsequently approved by its stockholders in January 2014. The 2014 ESPP became effective immediately prior to the closing of the Company's IPO in February 2014 and established an initial reserve of 0.2 million shares of the Company's common stock for issuance to participating employees. The purpose of the 2014 ESPP is to enhance employee interest in the success and progress of the Company by encouraging employee ownership of common stock of the Company. The 2014 ESPP provides employees with the opportunity to purchase shares of common stock at a 15% discount to the market price through payroll deductions or lump sum cash investments. The Company estimates the number of shares to be issued at the end of an offering period and recognizes expense over the requisite service period. Shares of the common stock issued and sold pursuant to the 2014 ESPP are shown on the consolidated statements of changes in stockholders' equity (deficit). The most recent offering of the 2014 ESPP, which closed in September 2020, exhausted the remaining shares available for sale under the 2014 ESPP. As such, as of September 30, 2020, there were no further shares of common stock available for sale under the 2014 ESPP.
Defined Contribution Plans
United States - 401(k) Plan
The Company maintains a 401(k) defined contribution retirement plan which covers all of its U.S. employees. Employees are eligible to participate immediately upon their date of hire. Under the 401(k) plan, participating employees may defer up to 75% of their pre-tax salary, subject to certain statutory limitations. Employee contributions vest immediately. The plan allows for a
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discretionary match per participating employee up to a maximum $4,000 per year. The expenses incurred for the periods presented were de minimis.
Canada - Defined Contribution Plan
The Company maintains a defined contribution plan for its Canadian employees. Participants may contribute a percentage of their annual compensation to this plan, subject to statutory limitations. The Company contributes up to the first 4% of eligible compensation for its Canadian-based employees to the retirement plan. The expenses incurred for the periods presented were de minimis.

13. LICENSE AGREEMENTS
In-License Agreements
License Agreement with Zurich
The Company has a License Agreement with the University of Zurich ("Zurich") which grants the Company exclusive license rights, with the right to sublicense, to make, have made, use and sell under certain patents primarily directed to the Company's targeting agent, including an EpCAM chimera and related immunoconjugates and methods of use and manufacture of the same. These patents cover some key aspects of Vicineum. The Company may be obligated to pay $0.75 million in milestone payments for the first product candidate that achieves applicable clinical development milestones. Based on current status, the Company anticipates that these milestones may be triggered by Vicineum's clinical development pathway. As part of the consideration, the Company is also obligated to pay up to a 4% royalty on the net product sales for products covered by or manufactured using a method covered by a valid claim in the Zurich patent rights. Royalties owed to Zurich will be reduced if the total royalty rate owed by the Company to Zurich and any other third party is 10% or greater, provided that the royalty rate to Zurich may not be less than 2% of net sales. The obligation to pay royalties in a particular country expires upon the expiration or termination of the last of the Zurich patent rights that covers the manufacture, use or sale of a product. There is no obligation to pay royalties in a country if there is no valid claim that covers the product or a method of manufacturing the product.
License Agreement with Micromet
The Company has a License Agreement with Micromet AG ("Micromet"), now part of Amgen, Inc., which grants it nonexclusive rights, with certain sublicense rights, for know-how and patents allowing exploitation of certain single chain antibody products. These patents cover some key aspects of Vicineum. Under the terms of the License Agreement with Micromet, the Company may be obligated to pay up to €3.6 million in milestone payments for the first product candidate that achieves applicable clinical development milestones. The Company anticipates that certain of these milestones may be triggered by Vicineum’s clinical development pathway. The Company is also required to pay up to a 3.5% royalty on the net sales for products covered by the agreement, which includes Vicineum. The royalty rate owed to Micromet in a particular country will be reduced to 1.5% if there are no valid claims covering the product in that country. The obligation to pay royalties in a particular country expires upon the later of the expiration date of the last valid claim covering the product and the tenth anniversary of the first commercial sale of the product in such country. Finally, the Company is required to pay to Micromet an annual license maintenance fee of €50,000, which can be credited towards any royalty payment the Company owes to Micromet.
License Agreement with XOMA
The Company has a License Agreement with XOMA Ireland Limited ("XOMA") which grants it non-exclusive rights to certain XOMA patent rights and know-how related to certain expression technology, including plasmids, expression strains, plasmid maps and production systems. These patents and related know-how cover some key aspects of Vicineum. Under the terms of the License Agreement with XOMA, the Company is required to pay up to $0.25 million in milestone payments for a product candidate that incorporates know-how under the license and achieves applicable clinical development milestones. Based on current clinical status, the Company anticipates that these milestones may be triggered by Vicineum’s clinical development pathway. The Company is also required to pay a 2.5% royalty on the net sales for products incorporating XOMA’s technology, which includes Vicineum. The Company has the right to reduce the amount of royalties owed to XOMA on a country-by-country basis by the amount of royalties paid to other third parties, provided that the royalty rate to XOMA may not be less than 1.75% of net sales. In addition, the foregoing royalty rates are reduced by 50% with respect to products that are not covered by a valid patent claim in the country of sale. The obligation to pay royalties in a particular country expires upon the later of the expiration date of the last valid claim covering the product and the tenth anniversary of the first commercial sale of the product in such country.
Out-License Agreements
License Agreement with Roche
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In June 2016, the Company entered into the License Agreement with Roche, pursuant to which the Company granted Roche an exclusive, worldwide license, including the right to sublicense, to its patent rights and know-how related to the Company’s monoclonal antibody EBI-031 and all other IL-6 anti-IL-6 antagonist monoclonal antibody technology owned by the Company (collectively, the "Roche Licensed Intellectual Property"). Under the License Agreement with Roche, Roche is required to continue developing, at its cost, EBI-031 and any other product made from the Licensed Intellectual Property that contains an IL-6 antagonist anti-IL monoclonal antibody (“Roche Licensed Product”) and pursue ongoing patent prosecution, at its cost.
Financial Terms
The Company received from Roche an upfront license fee of $7.5 million in August 2016 upon the effectiveness of the License Agreement with Roche following approval by the Company's stockholders, and Roche agreed to pay up to an additional $262.5 million upon the achievement of specified regulatory, development and commercialization milestones with respect to up to two unrelated indications. Specifically, an aggregate amount of up to $197.5 million is payable to the Company for the achievement of specified milestones with respect to the first indication, consisting of $72.5 million in development milestones, $50.0 million in regulatory milestones and $75.0 million in commercialization milestones. In September 2016, Roche paid the Company the first development milestone of $22.5 million as a result of the Investigational New Drug application for EBI-031 becoming effective on or before September 15, 2016. Additional amounts of up to $65.0 million are payable upon the achievement of specified development and regulatory milestones in a second indication.
In addition, the Company is entitled to receive royalty payments in accordance with a tiered royalty rate scale, with rates ranging from 7.5% to 15% of net sales of potential future products containing EBI-031 and up to 50% of these rates for net sales of potential future products containing other IL-6 compounds, with each of the royalties subject to reduction under certain circumstances and to the buy-out options of Roche.
Buy-Out Options
The License Agreement with Roche provides for two “option periods” during which Roche may elect to make a one-time payment to the Company and, in turn, terminate its diligence, milestone and royalty payment obligations under the License Agreement with Roche. Specifically, (i) Roche may exercise a buy-out option following the first dosing (“Initiation”) in the first Phase 2 study for a Licensed Product until the day before Initiation of the first Phase 3 study for a Licensed Product, in which case Roche is required to pay the Company $135.0 million within 30 days after Roche's exercise of such buy-out option and receipt of an invoice from the Company, or (ii) Roche may exercise a buy-out option following the day after Initiation of the first Phase 3 study for a Licensed Product until the day before the acceptance for review by the FDA or other regulatory authority of a BLA or similar application for marketing approval for a Licensed Product in either the United States or in the E.U., in which case Roche is required to pay the Company, within 30 days after Roche’s exercise of such buy-out option and receipt of an invoice from the Company, $265.0 million, which amount would be reduced to $220.0 million if none of the Company’s patent rights containing a composition of matter claim covering any compound or Roche Licensed Product has issued in the E.U.
Termination
Either the Company or Roche may each terminate the License Agreement with Roche if the other party breaches any of its material obligations under the agreement and does not cure such breach within a specified cure period. Roche may terminate the License Agreement with Roche following effectiveness by providing advance written notice to the Company or by providing written notice if the Company is debarred, disqualified, suspended, excluded, or otherwise declared ineligible from certain federal or state agencies or programs. The Company may terminate the License Agreement with Roche if, prior to the first filing of a BLA for a Roche Licensed Product, there is a period of 12 months where Roche is not conducting sufficient development activities with respect to the products made from the Roche Licensed Intellectual Property.
License Agreement with Qilu
On July 30, 2020, the Company and its a wholly-owned subsidiary, Viventia Bio, Inc., entered into the License Agreement with Qilu pursuant to which the Company granted Qilu an exclusive, sublicensable, royalty-bearing license, under certain intellectual property owned or exclusively licensed by the Company, to develop, manufacture and commercialize Vicineum™ (the “Licensed Product”) for the treatment of NMIBC and other types of cancer (the “Field”) in China, Hong Kong, Macau and Taiwan (the “Territory”). The Company also granted Qilu a non-exclusive, sublicensable, royalty-bearing sublicense, under certain other intellectual property licensed by the Company to develop, manufacture and commercialize the Licensed Product in the Territory. The Company retains development, manufacturing and commercialization rights with respect to Vicineum in the rest of the world.

In consideration for the rights granted by the Company, Qilu agreed to pay to the Company (i) a one-time upfront cash payment of $12 million, subject to certain tax withholdings such as income taxes and value added taxes ("VAT"), payable within 45 business days of the execution date, subject to delivery by the Company of certain know-how and other documentation related
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to the Licensed Product to Qilu, and (ii) milestone payments totaling up to $23 million upon the achievement of certain technology transfer, development and regulatory milestones. All payments are inclusive of VAT, which are withheld by Qilu upon payment, and for which future recovery of such taxes may be available. In September 2020, the Company received $10.0 million in net proceeds associated with the $12 million upfront payment due under the License Agreement with Qilu.

Qilu also agreed to pay the Company a 12% royalty based upon annual net sales of Licensed Products in the Territory. The royalties are payable on a Licensed Product-by-Licensed Product and region-by-region basis commencing on the first commercial sale of a Licensed Product in a region and continuing until the latest of (i) twelve years after the first commercial sale of such Licensed Product in such region, (ii) the expiration of the last valid patent claim covering or claiming the composition of matter, method of treatment, or method of manufacture of such Licensed Product in such region, and (iii) the expiration of regulatory or data exclusivity for such Licensed Product in such region (collectively, the “Royalty Term”). The royalty rate is subject to reduction under certain circumstances, including when there is no valid claim of a licensed patent that covers a Licensed Product in a particular region or no data or regulatory exclusivity of a Licensed Product in a particular region.

Qilu is responsible for all costs related to developing, obtaining regulatory approval of and commercializing the Licensed Products in the Field in the Territory. Qilu is required to use commercially reasonable efforts to develop, seek regulatory approval for, and commercialize at least one Licensed Product in the Field in the Territory. A joint development committee will be established between the Company and Qilu to coordinate and review the development, manufacturing and commercialization plans with respect to the Licensed Products in the Territory. The Company and Qilu also agreed to negotiate in good faith the terms and conditions of a supply agreement and related quality agreement pursuant to which the Company will manufacture or have manufactured and supply Qilu with all quantities of the Licensed Product necessary for Qilu to develop and commercialize the Licensed Product in the Field in the Territory until the Company has completed manufacturing technology transfer to Qilu and approval of a Qilu manufactured product by the National Medical Products Administration in China for the Licensed Product.

The License Agreement with Qilu will expire on a Licensed Product-by-Licensed Product and region-by-region basis on the date of the expiration of all applicable Royalty Terms. Either party may terminate the License Agreement with Qilu for the other party’s material breach following a cure period or upon certain insolvency events. Qilu has the right to receive a refund of all amounts paid to the Company in the event the License Agreement with Qilu is terminated under certain circumstances. The License Agreement with Qilu includes customary representations and warranties, covenants and indemnification obligations for a transaction of this nature.

The License Agreement with Qilu is subject to the provisions of Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"), which was adopted effective January 1, 2018. The initial transaction price was estimated to be $11.2 million and was based on the up-front fixed consideration of $12 million less amounts withheld for VAT. The Company concluded that its promises under the License Agreement with Qilu represented one bundled performance obligation that had been achieved as of September 30, 2020. As such, $11.2 million of the total $11.2 million transaction price was considered earned and the Company recorded $11.2 million of revenue during the three-month period ended September 30, 2020. The Company is reasonably certain that no refund of the upfront payment will be due to Qilu. As of September 30, 2020, $0.2 million of the up-front fixed consideration remains payable to the Company. Additional consideration to be paid to the Company upon the achievement of certain milestones, as well as recoverability of VAT, will be included if it is expected that the amounts will be received and the amounts would not be subject to a constraint. As of September 30, 2020, none of these amounts were reasonably certain to be achieved due to the nature and timing of the underlying activities.
For the three and nine months ended September 30, 2020, the Company recorded $1.1 million of income tax expense pursuant to the License Agreement with Qilu. The income tax expense relates to withholding taxes paid in foreign jurisdictions and is reported as provision for income taxes on the condensed consolidated statement of operations and comprehensive loss for each period.

14. RELATED PARTY TRANSACTIONS
The Company leases its facility in Winnipeg, Manitoba from an affiliate of Leslie L. Dan, a director of the Company until his retirement in July 2019. The Company paid $0.1 million and $0.2 million of rent for the three and nine months ended September 30, 2020, respectively, and $0.1 million and $0.2 million of rent for the three and nine months ended September 30, 2019, respectively. All payments include related operating expenses. In September 2020, the Company entered into an extension of this lease for an additional two years, through September 2022, with a right to extend the lease for one subsequent three-year term.
The Company pays fees under an intellectual property license agreement to Protoden Technologies Inc. (“Protoden”), a company owned by Clairmark, an affiliate of Mr. Dan. Pursuant to the agreement, the Company has an exclusive, perpetual, irrevocable and non-royalty bearing license, with the right to sublicense, to certain patents and technology to make, use and sell
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products that utilize such patents and technology. The annual fee is $0.1 million. Upon expiration of the term on December 31, 2024, the licenses granted to the Company will require no further payments to Protoden. For each of the nine months ended September 30, 2020 and 2019, the Company paid $0.1 million under this agreement. The Company did not make payments under this agreement during the three months ended September 30, 2020 and 2019.
Mr. Dan was not deemed a related party during the three and nine months ended September 30, 2020; as such, only payments made during the three and nine months ended September 30, 2019 are considered payments to a related party.

15. SUBSEQUENT EVENTS

On October 30, 2020, the Company entered into an amendment to the Sale Agreement pursuant to which it may issue and sell an additional $50 million of shares of common stock through Jefferies.
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Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto appearing elsewhere herein and our audited annual consolidated financial statements and related notes thereto and “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2019, included in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 16, 2020. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, the impact of the COVID-19 pandemic, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties, assumptions and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to the “Company,” “Sesen,” “we,” “us,” and “our” include Sesen Bio, Inc. and its subsidiaries.
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Overview
We are a late-stage clinical company advancing targeted fusion protein therapeutics ("TFPTs") for the treatment of patients with cancer. We genetically fuse the targeting antibody fragment and the cytotoxic protein payload into a single molecule which is produced through our proprietary one-step, microbial manufacturing process. We target tumor cell surface antigens with limited expression on normal cells. Binding of the target antigen by the TFPT allows for rapid internalization into the targeted cancer cell. We have designed our targeted proteins to overcome the fundamental efficacy and safety challenges inherent in existing antibody-drug conjugates ("ADCs") where a payload is chemically attached to a targeting antibody.
Our most advanced product candidate, Vicineum, also known as VB4-845, is a locally-administered targeted fusion protein composed of an anti-epithelial cell adhesion molecule ("EpCAM") antibody fragment tethered to a truncated form of Pseudomonas exotoxin A for the treatment of high-risk non-muscle invasive bladder cancer ("NMIBC"). On December 6, 2019, we initiated our Biologics License Application ("BLA") submission for Vicineum to the United States Food and Drug Administration ("FDA") under Rolling Review. "Rolling Review" of the BLA enables individual modules to be submitted and reviewed on an ongoing basis, rather than waiting for all sections to be completed before submission. The submission consisted of Modules 1, 2, 4 and 5, with information amendments to be submitted to these modules throughout 2020. We anticipate completing Module 3 (Chemistry, Manufacturing and Controls ("CMC")) to finalize the BLA submission by the end of 2020. We may experience disruptions as a result of the COVID-19 pandemic that may impact our expected timeline to finalize the BLA submission, including manufacturing activities of our contract manufacturers due to limitations on work and travel imposed or recommended by federal or state governments, employers and others.
In August 2019, we reported updated preliminary efficacy data from our ongoing single-arm, multi-center, open-label Phase 3 clinical trial of Vicineum as a monotherapy in patients with high-risk, bacillus Calmette-Guérin ("BCG")-unresponsive NMIBC (the "VISTA Trial"). As of the May 29, 2019 data cutoff date, we reported the preliminary complete response rates ("CRRs") in evaluable carcinoma in situ ("CIS") patients following three, six, nine and 12 months of treatment in the clinical trial. The results were consistent with the results observed in the previously completed Phase 1 and Phase 2 clinical trials of Vicineum for the treatment of high-risk NMIBC. The VISTA Trial completed enrollment in April 2018 with a total of 133 patients across three cohorts based on histology and time to disease recurrence after adequate BCG treatment (under 2018 FDA guidance on treatment of NMIBC, adequate BCG is defined as at least two courses of BCG with at least five doses in an initial induction course of treatment, plus at least two doses in a second course of treatment):
Cohort 1 (n=86): Patients with CIS with or without papillary disease that were determined to be refractory or recurred within six months of their last course of adequate BCG;
Cohort 2 (n=7): Patients with CIS with or without papillary disease that recurred after six months, but less than 11 months, after their last course of adequate BCG; and
Cohort 3 (n=40): Patients with high-risk (Ta or T1) papillary disease without CIS that was determined to be refractory or recurred within six months of their last course of adequate BCG.
As of the end of April 2020, all patients have completed treatment in the VISTA Trial. The primary endpoints of the VISTA Trial are CRR at 3 months in patients with CIS (with or without papillary disease) whose disease is BCG-unresponsive and duration of response ("DoR") for BCG-unresponsive CIS patients who experience a complete response ("CR").
As of the May 29, 2019 data cutoff date, preliminary primary and secondary endpoint data for each of the trial cohorts were as follows:
Cohort 1 (n=86) Evaluable Population (n=82) Complete Response Rate, for CIS:
Time PointEvaluable Patients*Complete Response Rate
(95% Confidence Interval)
3-monthsn=8239% (28%-50%)
6-monthsn=8226% (17%-36%)
9-monthsn=8220% (12%-30%)
12-monthsn=8217% (10%-27%)
* Response-evaluable population includes any modified intention-to-treat ("mITT") subject who completed the induction phase.
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Cohort 2 (n=7) Evaluable Population (n=7) Complete Response Rate, for CIS:
Time PointEvaluable Patients*Complete Response Rate
(95% Confidence Interval)
3-monthsn=757% (18%-90%)
6-monthsn=757% (18%-90%)
9-monthsn=743% (10%-82%)
12-monthsn=714% (0%-58%)
* Response-evaluable population includes any mITT subject who completed the induction phase.

Pooled Cohorts 1 and 2 Evaluable Population (n=89) Complete Response Rate, for CIS:
Time PointEvaluable Patients*
Complete Response Rate
(95% Confidence Interval)
3-monthsn=8940% (30%-51%)
6-monthsn=8928% (19%-39%)
9-monthsn=8921% (13%-31%)
12-monthsn=8917% (10%-26%)
* Response-evaluable population includes any mITT subject who completed the induction phase.

Phase 3 Pooled Complete Response Rate vs. Phase 2 Pooled Complete Response Rate:
Time Point
Preliminary Phase 3 Pooled CRR
(95% Confidence Interval)
Phase 2 Pooled CRR
(95% Confidence Interval)
3-months40% (30%-51%)40% (26%-56%)
6-months28% (19%-39%)27% (15%-42%)
9-months21% (13%-31%)18% (8%-32%)
12-months17% (10%-26%)16% (7%-30%)

Cohort 3 (n=40) Evaluable Population (n=38) Recurrence-Free Rate†:
Time PointEvaluable Patients*
Recurrence-Free Rate
(95% Confidence Interval)
3-monthsn=3871% (54%-85%)
6-monthsn=3858% (41%-74%)
9-monthsn=3845% (29%-62%)
12-monthsn=3842% (26%-59%)
† Recurrence-free rate is defined as the percentage of patients that are recurrence-free at the given assessment time point.
* Response-evaluable population includes any mITT subject who completed the induction phase.

Duration of Response: The median DoR for patients in Cohort 1 and Cohort 2 combined (n=93) is 287 days (lower 95% confidence interval ("CI") = 154 days, upper 95% confidence interval is not estimable ("NE") due to the limited number of events occurring beyond the median), using the Kaplan-Meier method. The Kaplan-Meier method is a non-parametric statistical analysis used to estimate survival times and times to event when incomplete observations in data exist. Additional ad hoc analysis of pooled data for all patients with CIS (Cohorts 1 and 2, n=93) shows that among patients who achieved a complete response at 3 months, 52% remained disease-free for a total of 12 months or longer after starting treatment, using the Kaplan-Meier method. DoR is defined as the time from first occurrence of complete response to documentation of treatment failure or death.
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We have conducted additional analyses for secondary endpoints based on the May 29, 2019 data cutoff date. These additional preliminary data include the following:
Time to Cystectomy: Across all 133 patients treated with Vicineum in the VISTA Trial, greater than 75% of all patients are estimated to remain cystectomy-free at 3 years, using the Kaplan-Meier method. Additional ad hoc analysis shows that approximately 88% of responders are estimated to remain cystectomy-free at 3 years. Time to cystectomy is defined as the time from the date of first dose of study treatment to surgical bladder removal. The first 2018 FDA guidance on treatment of BCG-unresponsive NMIBC patients states that the goal of therapy in such patients is to avoid cystectomy. Therefore, time to cystectomy is a key secondary endpoint in the VISTA Trial.
Time to Disease Recurrence: High-grade papillary (Ta or T1) NMIBC is associated with higher rates of progression and recurrence. The median time to disease recurrence for patients in Cohort 3 (n=40) is 402 days (95% CI, 170-NE), using the Kaplan-Meier method. Time to disease recurrence is defined as the time from the date of the first dose of study treatment to the first occurrence of treatment failure or death on or prior to treatment discontinuation.
Progression-Free Survival ("PFS"): 90% of all 133 patients treated with Vicineum in the VISTA Trial are estimated to remain progression-free for 2 years or greater, using the Kaplan-Meier method. PFS is defined as the time from the date of first dose of study treatment to the first occurrence of disease progression (e.g. T2 or more advanced disease) or death on or prior to treatment discontinuation.
Event-Free Survival: 29% of all 133 patients treated with Vicineum in the VISTA Trial are estimated to remain event-free at 12 months, using the Kaplan-Meier method. Event-free survival is defined as the time from the date of first dose of study treatment to the first occurrence of disease recurrence, progression or death on or prior to treatment discontinuation.
Overall Survival ("OS"): 96% of all 133 patients treated with Vicineum in the VISTA Trial are estimated to have an overall survival of 2 years or greater, using the Kaplan-Meier method. OS is defined as the time from the date of first dose of study treatment to death from any cause.
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Preliminary Safety Results
As of the May 29, 2019 data cutoff date, in patients across all cohorts (n=133) of our Phase 3 VISTA Trial of Vicineum for the treatment of high-risk NMIBC, 88% experienced at least one adverse event, with 95% of adverse events being Grade 1 or 2. The most commonly reported treatment-related adverse events were dysuria (14%), hematuria (13%) and urinary tract infection (12%) - all of which are consistent with the profile of bladder cancer patients and the use of catheterization for treatment delivery. These adverse events were determined by the clinical investigators to be manageable and reversible, and only four patients (3%) discontinued treatment due to an adverse event. Serious adverse events, regardless of treatment attribution, were reported in 14% of patients. There were four treatment-related serious adverse events reported in three patients including acute kidney injury (Grade 3), pyrexia (Grade 2), cholestatic hepatitis (Grade 4) and renal failure (Grade 5). There were no age-related increases in adverse events observed in the VISTA Trial.
Other Vicineum Activity
In August 2018, we received Fast Track designation from the FDA for Vicineum for the treatment of high-risk NMIBC.
In May 2019, we met with the FDA for a Type C meeting for CMC and reached agreement with the FDA on the analytical comparability plan to be used to assess comparability between the drug supply used in clinical trials and the potential commercial drug supply to be produced by Fujifilm. We also confirmed with the FDA that, subject to final comparability data to be provided in the BLA submission, no additional clinical trials were deemed necessary to establish comparability.
In June 2019, we met with the FDA for a Type B Pre-BLA meeting regarding the approval pathway for Vicineum for the treatment of patients with high-risk, BCG-unresponsive NMIBC. At the meeting, we reached alignment with the FDA on an accelerated approval pathway for Vicineum along with Rolling Review. The FDA also indicated that the clinical data, nonclinical data, clinical pharmacology data, and the safety database were sufficient to support a BLA submission, and that no additional clinical trials were necessary for a BLA submission. Per the official FDA minutes received post-meeting, the FDA stated that the pre-licensing inspection may be completed at the time of process performance qualification manufacturing, which we believe will benefit the overall review timeline for the BLA. In addition, the FDA communicated that they expect that a meeting with the FDA’s Oncologic Drugs Advisory Committee ("ODAC") will be required as part of the accelerated approval pathway. If Vicineum receives marketing approval for treatment of NMIBC, a post-marketing confirmatory trial will also be required.
In November 2019, we met with the FDA for a Type C meeting to discuss the details of a post-marketing confirmatory trial for Vicineum for the treatment of high-risk NMIBC. At that meeting, we reached agreement with the FDA that the post-marketing confirmatory trial for Vicineum will enroll BCG-refractory patients who have received less-than-adequate BCG, which is especially important in light of the ongoing BCG shortage. This represents a broader patient population than the BCG-intolerant population originally proposed. We anticipate that, if Vicineum is approved by the FDA, the initial indication will be for BCG-unresponsive patients who have received adequate BCG. If the post-marketing confirmatory trial is successful, it could result in an expanded label to include this additional population of patients who have received less-than-adequate BCG.
On December 4, 2019, we met with the FDA for a Type B pre-BLA meeting for CMC. At that meeting, we reached agreement with the FDA on the final content for Module 3 (CMC) of the BLA.
On December 6, 2019, we initiated our BLA submission for Vicineum to the FDA under Rolling Review. The submission consisted of Modules 1, 2, 4 and 5, with information amendments to be submitted to these modules throughout 2020. We anticipate completing Module 3 (CMC) to finalize the BLA submission in December 2020.
On May 7, 2020, we received clinical Scientific Advice from the Committee for Medicinal Products for Human Use ("CHMP") of the European Medicines Agency ("EMA") stating that the Committee agreed that our nonclinical, clinical pharmacology and safety database are all sufficient to support a marketing authorization application ("MAA"). Furthermore, additional clinical trials were not requested by the CHMP in support of the MAA submission for Vicineum for the treatment of high-risk NMIBC. Based on the guidance received, we expect to submit the MAA for Vicineum for the treatment of high-risk NMIBC to the EMA in early 2021, with potential approval anticipated in early 2022.

On May 29, 2020, we received CMC Scientific Advice from the CHMP of the EMA, stating that the committee agreed that our comparability plan provides a strong analytical package, and no additional clinical trials to establish comparability are deemed necessary at this time. Furthermore, the CHMP agreed to accept the Good
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Manufacturing Practice ("GMP") inspections conducted by the FDA and will therefore not conduct an independent inspection of the manufacturing facilities.

On June 17, 2020, we were informed that the FDA has conditionally accepted the proprietary brand name VICINEUM™ for our product candidate, oportuzumab monatox. The name VICINEUM was developed in compliance with the FDA’s final Guidance for Industry, Contents of a Complete Submission for the Evaluation of Proprietary Names and the FDA’s draft Guidance for Industry, Best Practices in Developing Proprietary Name for Drugs. We believe VICINEUM is a proprietary name with strong marketing potential that is also consistent with FDA’s goal of preventing medication errors and potential harm to the public by ensuring that only appropriate proprietary names are approved for use. Final approval of the VICINEUM brand name is conditional on FDA approval of our product candidate, oportuzumab monatox. Based upon FDA feedback, we withdrew our previously submitted proposed brand name, VICINIUM®, from consideration due to potential for confusion with ammonium derivatives products with the “-ium” suffix as established by the United States Adopted Names Council.
On July 28, 2020, we received notice from the EMA that it has approved our request to review Vicineum under the EMA’s centralized authorization procedure drug review process and on September 29, 2020, we received notice from the EMA that it has appointed the Rapporteur and Co-Rapporteur for our planned MAA. The Rapporteur and Co-Rapporteur are members of EMA’s CHMP and will jointly coordinate CHMP’s evaluation of our planned MAA for Vicineum.
On October 23, 2020, we completed a successful pre-submission meeting with the EMA which addressed product-specific, legal, regulatory and scientific topics related to Vicineum. The information and insights gained from the meeting will help to facilitate the validation of the MAA and support a smooth evaluation. The agency also provided guidance on various administrative topics which helps to clarify the regulatory path forward. The success of this meeting, in addition to the receipt of centralized procedure eligibility confirmation from the EMA, are significant milestones toward our regulatory path forward in Europe and reaffirms our intent to complete all necessary pre-submission activities with the EMA by the end of 2020 and submit the MAA in early 2021.

Manufacturing
In October 2018, we entered into a Master Bioprocessing Services Agreement with Fujifilm (the "Fujifilm MSA") for the manufacturing process and technology transfer of Vicineum drug substance production. In April 2019, the first full, commercial-scale current GMP ("cGMP") run was completed at Fujifilm and all quality acceptance criteria were met. This supports Fujifilm’s ability to produce the bulk drug substance form of Vicineum for commercial purposes if we receive regulatory approval to market Vicineum for the treatment of high-risk NMIBC. In February 2020, manufacturing of the pre-process performance qualification ("pre-PPQ") cGMP batch was completed at Fujifilm. Full quality release testing of the drug substance has been completed and all quality acceptance criteria were met. On August 4, 2020, we completed manufacturing of the drug substance PPQ batches. In September, 2020, we successfully completed the final of three drug product PPQ batches. All of the completed drug substance PPQ batches and the first and second of three drug product PPQ batches met all quality acceptance criteria. We believe these results are a strong indicator for meeting the quality testing acceptance criteria for the third drug product PPQ batch. Testing of this batch is currently underway and is expected to be completed in November 2020.

Joint Development
In June 2017, we entered into a Cooperative Research and Development Agreement ("CRADA") with the National Cancer Institute ("NCI") for the development of Vicineum in combination with AstraZeneca’s immune checkpoint inhibitor durvalumab for the treatment of NMIBC. Under the terms of the CRADA, the NCI will conduct a Phase 1 clinical trial in patients with high-risk NMIBC to evaluate the safety, efficacy and biological correlates of Vicineum in combination with durvalumab. This Phase 1 clinical trial is open and is actively recruiting patients.
Vicineum has also been evaluated for the treatment of squamous cell carcinoma of the head and neck ("SCCHN"). Vicineum for the treatment of SCCHN had previously been designated as ProxiniumTM to indicate its different fill volume and vial size as well as its different route for local administration via intratumoral injection. In addition to our locally-administered TFPTs, our pipeline also includes systemically-administered TFPTs that are built around our proprietary de-immunized variant of the plant-derived cytotoxin bouganin ("deBouganin"). One of these product candidates, VB6-845d, is a TFPT consisting of an EpCAM-targeting fragment antigen binding domain ("Fab") genetically linked to deBouganin, a novel plant derived cytotoxic payload that we have optimized for minimal immunogenic potential and is administered by intravenous infusion. We have deferred further development of Vicineum for the treatment of SCCHN and of VB6-845d in order to focus our efforts and our
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resources on our ongoing development of Vicineum for the treatment of high-risk NMIBC. We are also exploring collaborations for Vicineum for the treatment of SCCHN and for VB6-845d.
We maintain global development, marketing and commercialization rights for all of our TFPT-based product candidates. We intend to explore various commercialization strategies to market our approved products. If we obtain regulatory approval for Vicineum for the treatment of high-risk NMIBC, we intend to build a specialty urology sales force to market the product in the United States. Outside the United States, we will seek commercialization partners with urology expertise. We also own or exclusively license worldwide intellectual property rights for all of our TFPT-based product candidates, covering our key patents with protection into 2036.
License Agreement with Roche
In June 2016, we entered into a License Agreement with F. Hoffman-La Roche Ltd. and Hoffman-La Roche Inc. (collectively, "Roche") (the "License Agreement with Roche"), pursuant to which we granted Roche an exclusive, worldwide license, including the right to sublicense, to our patent rights and know-how related to our monoclonal antibody EBI-031 and all other IL-6 anti-IL antagonist monoclonal antibody technology owned by us (collectively, the "Licensed Intellectual Property"). Under the License Agreement with Roche, Roche is required to continue developing, at its cost, EBI-031 and any other product made from the Licensed Intellectual Property that contains an IL-6 antagonist anti-IL monoclonal antibody ("Licensed Product") and pursue ongoing patent prosecution, at its cost. At the time of the License Agreement with Roche, EBI-031, which was derived using our previous AMP-Rx platform, was in pre-clinical development as an intravitreal injection for diabetic macular edema and uveitis.
Through September 30, 2020, we have received a total of $30.0 million in payments pursuant to the License Agreement with Roche, including a $7.5 million upfront payment in August 2016 and a $22.5 million milestone payment in September 2016 as a result of the investigational new drug ("IND") application for EBI-031 becoming effective. We are also entitled to receive up to an additional $240.0 million upon the achievement of other specified regulatory, development and commercial milestones, as well as royalty payments in accordance with a tiered royalty rate scale, with rates ranging from 7.5% to 15% of net sales of potential future products containing EBI-031 and up to 50% of these rates for net sales of potential future products containing other IL-6 compounds, with each of the royalties subject to reduction under certain circumstances and to the buy-out options of Roche.
License Agreement with Qilu
On July 30, 2020, we and our wholly-owned subsidiary, Viventia Bio, Inc., entered into an exclusive license agreement with Qilu Pharmaceuticals, Ltd. ("Qilu") ("License Agreement with Qilu") pursuant to which we granted Qilu an exclusive, sublicensable, royalty-bearing license, under certain intellectual property owned or exclusively licensed by us, to develop, manufacture and commercialize Vicineum for the treatment of NMIBC and other types of cancer in China, Hong Kong, Macau and Taiwan ("the Territory"). We also granted Qilu a non-exclusive, sublicensable, royalty-bearing sublicense, under certain other intellectual property licensed by us to develop, manufacture and commercialize Vicineum™ in the Territory. We retained development, manufacturing and commercialization rights with respect to Vicineum in the rest of the world.
Through September 30, 2020, we have received a total of $10 million in net proceeds associated with the $12 upfront payment due pursuant to the License Agreement with Qilu. We are also entitled to receive up to an additional $23 million upon the achievement of certain technology transfer, development and regulatory milestones, as well as a 12% royalty based upon annual net sales of Vicineum in the Territory. The royalties are payable upon the first commercial sale of Vicineum in a region and continuing until the latest of (i) twelve years after the first commercial sale of Vicineum in such region, (ii) the expiration of the last valid patent claim covering or claiming the composition of matter, method of treatment, or method of manufacture of such Vicineum in such region, and (iii) the expiration of regulatory or data exclusivity for such Vicineum in such region. The royalty rate is subject to reduction under certain circumstances, including when there is no valid claim of a licensed patent that covers Vicineum in a particular region or no data or regulatory exclusivity of Vicineum in a particular region.
Liquidity and Going Concern
As of September 30, 2020, we had cash and cash equivalents of $42.0 million, net working capital (current assets less current liabilities) of $39.3 million and an accumulated deficit of $300.9 million. We incurred negative cash flows from operating activities of $37.5 million for the year ended December 31, 2019 and $22.3 million for the nine months ended September 30, 2020. Since our inception, we have received no revenue from sales of our products, and we anticipate that operating losses will continue for the foreseeable future as we continue our ongoing Phase 3 VISTA Trial of Vicineum for the treatment of high-risk NMIBC and seek marketing approval from the FDA and EMA. We have financed our operations to date primarily through private placements of our common stock, preferred stock, common stock warrants and convertible bridge notes, venture debt borrowings, our
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initial public offering ("IPO"), follow-on public offerings, sales effected in "at-the-market" ("ATM") offerings, our License Agreement with Roche, our License Agreement with Qilu and, to a lesser extent, from a collaboration.
Under Accounting Standards Codification Topic 205-40, Presentation of Financial Statements - Going Concern, we are required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of our plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists, we evaluate whether the mitigating effect of our plans sufficiently alleviates the substantial doubt about our ability to continue as a going concern. The mitigating effect of our plans, however, is only considered if both (i) it is probable that our plans will be effectively implemented within one year after the date that our financial statements are issued and (ii) it is probable that our plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that our financial statements are issued. Generally, to be considered probable of being effectively implemented, our plans must have been approved by our board of directors before the date that our financial statements are issued.
Our future success is dependent on our ability to develop our product candidates, including Vicineum for the treatment of high-risk NMIBC, and ultimately upon our ability to attain profitable operations. In order to commercialize our product candidates, including Vicineum for the treatment of high-risk NMIBC, we need to complete clinical development and comply with comprehensive regulatory requirements. We are subject to a number of risks similar to other late-stage clinical companies, including, but not limited to, successful discovery and development of our product candidates, raising additional capital, development and commercialization by our competitors of new technological innovations, protection of proprietary technology and market acceptance of our products. The successful discovery and development of product candidates, including Vicineum for the treatment of high-risk NMIBC, requires substantial working capital, and we expect to seek additional funds through equity or debt financings or through additional collaboration, licensing transactions or other sources. We may be unable to obtain equity or debt financings or enter into additional collaboration or licensing transactions at favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include liens or other restrictive covenants limiting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, strategic collaborations and alliances or licensing arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable. If we are unable to raise additional funds when needed, we may be required to implement cost reduction strategies and delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market.
We continue to monitor the effect of the outbreak of a novel strain of coronavirus ("COVID-19"). This virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 200 countries and territories, including the United States disproportionately. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to businesses and capital markets around the world. We are proactively executing risk mitigation strategies to attenuate the impact of COVID-19 on us, and at this time, we have not yet experienced any business disruptions as a result of the pandemic. We are continually assessing the effect of the COVID-19 pandemic on our operations and we are monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world.
We do not believe that our cash and cash equivalents of $42.0 million as of September 30, 2020 is sufficient to fund our current operating plan for at least twelve months after the issuance of our condensed consolidated financial statements. Based on our current operating plan, we anticipate having sufficient cash and cash equivalents to fund our operations into the second quarter of 2021; however, we have based this estimate on assumptions that may prove to be wrong, and our capital resources may be utilized faster than we currently expect. Given our history of significant losses, negative cash flows from operations, limited cash resources currently on hand, the ongoing COVID-19 pandemic and dependence on our ability - about which there can be no certainty - to obtain additional financing to fund our operations after the current cash resources are exhausted, substantial doubt exists about our ability to continue as a going concern. The condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q were prepared under the assumption that we will continue as a going concern and
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do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
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Components of Our Results of Operations
License Revenue
License revenue consists of revenue recognized pursuant to our License Agreement with Qilu and for which is assessed under ASC 606. In the future, we may generate revenue from a combination of reimbursements, up-front payments, milestone payments and royalties in connection with the License Agreement with Qilu.
Research and Development
Research and development expenses consist primarily of costs incurred for the development of Vicineum for the treatment of high-risk NMIBC, which include: 
employee-related expenses, including salaries, benefits, travel and share-based compensation expense;
expenses incurred under agreements with contract research organizations ("CROs") and investigative sites that conduct our clinical trials;
expenses associated with developing manufacturing capabilities;
expenses associated with transferring manufacturing capabilities to contract manufacturing organizations ("CMOs") for commercial-scale production;
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies; and
expenses associated with regulatory activities.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.
The successful development and commercialization of Vicineum for the treatment of high-risk NMIBC is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
the scope, progress, outcome and costs of our clinical trials and other research and development activities;
the efficacy and potential advantages of Vicineum for the treatment of high-risk NMIBC compared to alternative treatments, including any standard of care;
the market acceptance of Vicineum for the treatment of high-risk NMIBC;
the cost and timing of the implementation of commercial-scale manufacturing of Vicineum;
obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
significant and changing government regulation;
the impact of the COVID-19 pandemic; and
the timing, receipt and terms of any marketing approvals.
A change in the outcome of any of these variables with respect to the development of Vicineum for the treatment of high-risk NMIBC could mean a significant change in the costs and timing associated with the development of Vicineum for the treatment of high-risk NMIBC. For example, if the FDA, EMA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently contemplate will be required for the completion of clinical development of Vicineum for the treatment of high-risk NMIBC, we could be required to expend significant additional financial resources and time on the completion of clinical development of Vicineum for the treatment of high-risk NMIBC.
We allocate direct research and development expenses, consisting principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials, and costs related to manufacturing or purchasing clinical trial materials and technology transfer, to specific product programs. We do not allocate employee and contractor-related costs, costs associated with our platform and facility expenses, including depreciation or other indirect costs, to specific product programs because these costs may be deployed across multiple product programs under research and development and, as such, are separately classified. The table below provides research and development expenses incurred for Vicineum for the treatment of high-risk NMIBC and other expenses by category. We have deferred further development of Vicineum for the treatment of SCCHN and VB6-845d in order to focus our efforts and our resources on our ongoing development of Vicineum for the treatment of high-risk NMIBC.
We did not allocate research and development expenses to any other specific product program during the periods presented (in thousands):
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 Three Months ended
September 30,
Nine Months ended
September 30,
 2020201920202019
Programs:
Vicineum for the treatment of high-risk NMIBC
$8,506 $4,248 $19,005 $12,620 
Total direct program expenses8,506 4,248 19,005 12,620 
Personnel and other expenses:
Employee and contractor-related expenses1,314 1,916 3,688 4,973 
Platform-related lab expenses184 51 264 464 
Facility expenses109 94 322 319 
Other expenses83 304 346 867 
Total personnel and other expenses1,690 2,365 4,620 6,623 
Total Research and Development$10,196 $6,613 $23,625 $19,243 
General and Administrative
General and administrative expenses consist primarily of salaries and related costs for personnel, including share-based compensation, in executive, operational, finance, business development and human resource functions. Other general and administrative expenses include facility-related costs, professional fees for legal, insurance, patent, consulting and accounting services, commercial market research and United States pre-launch market readiness.
Change in Fair Value of Contingent Consideration
In connection with the acquisition of Viventia Bio, Inc. ("Viventia") in September 2016, we recorded contingent consideration pertaining to the amounts potentially payable to the former shareholders of Viventia pursuant to the terms of the Share Purchase Agreement among us, Viventia and the other signatories thereto (the "Share Purchase Agreement") and are based on regulatory approval in certain markets and future revenue levels. The fair value of contingent consideration is assessed at each balance sheet date and changes, if any, to the fair value are recognized in earnings (or loss) for the period.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income earned on cash and cash equivalents and, to a lessor extent, any gains or losses on foreign exchange.
Provision for Income Taxes
Provision for income taxes consists of income taxes paid to foreign jurisdictions pursuant to our License Agreement with Qilu.
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Our Results of Operations
Comparison of the Three Months ended September 30, 2020 and 2019
 Three Months ended
September 30,
Increase/(Decrease)
 20202019DollarsPercentage
 (in thousands, except percentages)
License revenue$11,236 $— $11,236 — 
Operating expenses:
Research and development$10,196 $6,613 $3,583 54 %
General and administrative4,115 3,238 877 27 %
Change in fair value of contingent consideration
18,400 3,600 14,800 411 %
Total operating expenses32,711 13,451 19,260 143 %
Loss from operations(21,475)(13,451)(8,024)60 %
Other income (expense), net:
Other income (expense), net(1)319 (320)(100)%
Net Loss and Comprehensive Loss Before Taxes$(21,476)