See accompanying notes.

Humanigen, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

Description of the Business

The CompanyHumanigen, Inc. (the “Company”) was incorporated on March 15, 2000 in California, and reincorporated as a Delaware corporation in September 2001 under the nameas KaloBios Pharmaceuticals, Inc. Effective, and in August 7, 2017, the Company changed its legal name to Humanigen, Inc.During February 2018, the

The Company completed the restructuring transactions announced in December 2017 and continued its transformation intois a clinical-stageclinical stage biopharmaceutical company, by further developing its clinical stage portfolio of immuno-oncologyanti-inflammatory immunology and immunologyimmuno-oncology monoclonal antibodies.

The Company is focusing its efforts on the development of its lead product candidate, lenzilumab™lenzilumab™, its proprietary Humaneered® (“Humaneered”) anti-human granulocyte-macrophage colony-stimulating factor (“GM-CSF”) monoclonal antibody. Lenzilumab is a monoclonal antibody that has been demonstrated in animal models to neutralize GM-CSF, a cytokine that the Company believes is of critical importance in the hyperinflammatory cascade, sometimes referred to as cytokine release syndrome (“CRS”) or cytokine storm, associated with COVID-19, chimeric antigen receptor T-cell (“CAR-T”) therapy and acute Graft versus Host Disease (“GvHD”) associated with bone marrow transplants. GM-CSF neutralization with lenzilumab has been shown to reduce downstream inflammatory cytokines, prevent CRSThe Company believes the results from its Phase 3 study in COVID-19 and reduce its associated neurologic toxicities in-vivoPhase 1b study in validated preclinical human xenograft models (Blood. 2019 Feb 14;133(7):697-709).CAR-T support the mechanism of action of lenzilumab.  

Lenzilumab is currently inOn March 29, 2021, the Company announced top-line data on the primary endpoint and one secondary endpoint from a phasePhase 3, multicenter,multi-center, double-blind, placebo-controlled potential registrational trial of lenzilumab (the “LIVE-AIR” study) as a potential therapeutic for newly hospitalized, hypoxic patients with COVID-19 pneumonia. BasedAdditional data from the trial, subsequently published on discussionsMedRxiv, a non-peer reviewed journal, on May 5, 2021, support the previously reported primary endpoint that showed lenzilumab improved the likelihood of survival without ventilation, (“SWOV”), sometimes referred to as “ventilator-free survival”, by 54% in the modified intent-to-treat (“mITT”) population (Hazard Ratio, (“HR”): 1.54; 95%CI: 1.02-2.31, p=0.041). New analysis included in the publication showed that lenzilumab improved the likelihood of SWOV by 90% in the intent-to-treat (“ITT”) population (HR: 1.90; 1.02-3.52, nominal p=0.043) compared to placebo. SWOV also relatively improved by 92% in subjects who received both corticosteroids and remdesivir (1.92; 1.20-3.07, nominal p=0.0067); by 2.96-fold in subjects with C-reactive protein (“CRP”) levels <150 mg/L and age <85 years (2.96; 1.63–5.37, nominal p=0.0003); and by 88% in subjects hospitalized ≤2 days prior to randomization (1.88; 1.13-3.12, nominal p=0.015). Survival was improved by 2.17-fold in subjects with CRP<150 mg/L and age <85 years (2.17; 1.04-4.54, nominal p=0.040). The Company believes that the data published on MedRxiv, generated from the LIVE-AIR study support the conclusion that lenzilumab significantly improved SWOV in hospitalized, hypoxic subjects with COVID-19 pneumonia over and above treatment with remdesivir and/or corticosteroids. Subjects with CRP<150 mg/L and age <85 years demonstrated an improvement in survival and appeared to derive the greatest benefit from lenzilumab.

The Company shared the topline data on the primary endpoint and one secondary endpoint (the only data then available while the remaining analysis was pending) with the U.S. Food and Drug Administration (“FDA”), including in a recent Type B meeting, the Company believes that the phase 3 trial could lead to a potential filing of an EmergencyPre-Emergency Use Authorization (“EUA”) Type B meeting in mid-April 2021. The Company is preparing to submit an EUA application ifat the end of May 2021. As requested by the FDA, the EUA application will include secondary endpoints and supplemental data warrant such a filing.analysis from LIVE-AIR, including those referenced in the MedRxiv publication, as well as additional stability and compatibility information required for the Chemistry Manufacturing and Control (“CMC”) section of the EUA application. There can be no assurance that the data published on MedRxiv will be sufficient for an EUA or that the FDA will not require additional information in order to grant an EUA. If the EUA were filed andis granted, the Company could begin commercialization. The Company also intends to file a Biologics License Application (“BLA”)commercialize lenzilumab for the treatment of newly hospitalized COVID-19 pneumonia patients. COVID-19 infections are widespread and as of April 30, 2021 in 2021. Based on the discussionU.S., there were over 32 million cases, over 2.1 million hospitalizations and over 570 thousand deaths. Several vaccines have been developed which show efficacy in excess of 90%; even with FDA,the improvements in the rollout of vaccinations in the U.S., given the emergence of numerous COVID-19 variants, the Company understands that a BLAbelieves the need for therapeutics to treat hospitalized COVID-19 patients will require the Companycontinue to generate and present more clinical data than would be required to support an EUA.exist as COVID-19 becomes endemic.

The Company recently announced thathas been in discussion with the Medicines and Healthcare Products Regulatory Agency (“MHRA”) for the use of lenzilumab will be includedin COVID-19 patients in the ACTIV-5 “BigUnited Kingdom and plans to initiate a rolling submission for Conditional Marketing Authorization (“CMA”) before the end of the second quarter of 2021. The Company also plans to submit for CMA to the European Medicines Agency (“EMA”) for the use of lenzilumab in the European Union. Further, the Company is reviewing the possibility of similar submissions for approval or compassionate use in other territories or countries worldwide.

As previously reported, lenzilumab has been selected to be part of the ongoing Accelerating COVID-19 Therapeutic Interventions and Vaccines (“ACTIV”)-5 and Big Effect Trial” (ACTIV-5/BET). ThisTrial (“BET-B”), referred to as ACTIV-5/BET-B, study is sponsored by the National Institutes of Health (“NIH”). ACTIV-5/BETBET-B is designed to determine whether certain approved therapies or investigational drugs in late-stage clinical development show promise against COVID-19 and, therefore, merit advancement into larger clinical trials. ACTIV-5/BET, which is expected to enroll at as many as 40 USBET-B currently has 30 active U.S. sites enrolling and will evaluate lenzilumab with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients, with approximately 100 patients expected to be assigned to each study arm. The Company is providing lenzilumab for the study, which is fully funded by NIH. The ACTIV-5/BET-B Data and Safety Monitoring Board (“DSMB”) met on May 7th and determined that the study should continue per protocol.

The Company intends to submit a Biologics License Application (“BLA”) to FDA in 2022, for the use of lenzilumab in hospitalized, hypoxic COVID-19 patients. Since BLAs typically require more than one study, the Company is currently evaluating the extent to which ACTIV-5/BET-B may serve as a basis for a BLA-confirmatory study for lenzilumab.

Lenzilumab is also beinghas been studied in a multicenter phase 1b/2 potential registrationalmulti-center Phase 1b trial as a sequenced therapy with Yescarta® (axicabtagene ciloleucel) to reduce CRS and neurotoxicity in patients with relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”) (NCT04314843). This trial is being conductedstudy was a standard 3+3 design with three patients administered 600 mg lenzilumab (“cohort 1”) and three patients administered 1,800 mg lenzilumab (“cohort 2”) just prior to CAR-T. The recommended Phase 2 dose was determined to be 1,800 mg. On April 19, 2021, the Company announced positive data from the ZUMA-19 study. At the recommended Phase 2 dose of lenzilumab, the Objective Response Rate (“ORR”) was 100% and no patient experienced severe cytokine release syndrome (“CRS”) or severe neurotoxicity (“NT”). In the six study patients, the ORR reported was 83% (n=5) which included four complete responses (“CR”). In cohort 1, there was no severe CRS (≥ grade 3). One patient experienced grade 3 NT with a two-day duration. At the recommended Phase 2 dose (cohort 2), ORR was 100% (n=3) and the toxicity-free CR (CRS and NT < grade 2) was 66% (n = 2). There was no severe CRS or severe NT at the recommended Phase 2 dose. There were no adverse events attributed to lenzilumab across the study. Inflammatory markers were correlated with reduced rates of CRS and NT. Lenzilumab dose-dependently reduced myeloid cytokines IL-6, IL-8, MCP-1, and IP-10 (CXCL-10) and systemic inflammatory markers CRP, ferritin, and SAA in partnershipthe patients studied. As a result of this positive data and the conclusion of the Phase 1b portion of the study, the Company elected to terminate the clinical collaboration with Kite Pharmaceuticals, Inc., a Gilead company (“Kite”), which markets Yescarta. The Company intends to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the protocol is being submitted to FDA.

The Company is also in the final planning stages for a Phase 2/3 trial for lenzilumab to treat patients who have undergone allogeneic hematopoietic stem cell therapy (“HSCT”) who are at high and intermediate risk for acute GvHD.GvHD (the “Risk Adapted Therapy in Acute GvHD” or the “RATinG” study). The trial is expected to be conducted by the IMPACT Partnership, a collection of 2322 stem cell transplant centers located in the United Kingdom. It is anticipated the RATinG study will begin in the fourth quarter of 2021. The Company will provide lenzilumab for this study and support certain laboratory tests related to the study. The majority of the study costs will be borne by the partner.

In addition, the Company is in partnership with the South Australian Health & Medical Research Institute (“SAHMRI”) and the University of Adelaide to conduct a Phase 2 Trial studying the efficacy of lenzilumab in combination with azacitadine. The study, (“PREcision Approach to Chronic Myelomonocytic Leukemia” or “PREACH-M”) is anticipated to begin enrollment in the third quarter of 2021 and to include four sites. The Company will provide lenzilumab for this study and the majority of the study costs will be borne by the partner.

The Company’s proprietary, patented Humaneered technology platform is a method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies designed for therapeutic use, particularly with acute and chronic conditions. The Company has developed or in-licensed targets or research antibodies, typically from academic institutions, and then applied itsour Humaneered technology to produce them. Lenzilumab and the Company’s other two product candidates, ifabotuzumab and HGEN005, are Humaneered monoclonal antibodies. The Company’s Humaneered antibodies are closer to human antibodies than chimeric or conventionally humanized antibodies and have a high affinity for their target but low immunogenicity. The Company believes its Humaneered antibodies offer additional advantages, such as high potency, a slow off-rate and a lower likelihood to induce an inappropriate immune response or infusion related reaction, high potency, and a slow off-rate.reactions.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this Quarterly Report on Form 10-Q for additional information regarding the business.

Liquidity and Going Concern

The Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2020 were prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business.  However, the Company has incurred net losses sincebeen continuing to advance its inception and has negative operating cash flows. These conditions raised substantial doubt about the Company’s abilityefforts to continue as a going concern as describeddevelop lenzilumab for use in the Company’s historical Condensed Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in its Quarterly Reports on Form 10-Q for the quarters endedhospitalized COVID-19 pneumonia patients. As of March 31, 2020 and June 30, 2020.

Following completion of its underwritten public offering in September 2020, as of September 30, 2020,2021, the Company had cash and cash equivalents of $91.5$92.9 million, which included a $25.0 million draw under the Company’s secured term loan with Hercules Capital, Inc. (“Hercules”) or the (“Term Loan”) (see Note 6)5 below). Accordingly,Together with approximately $94.1 million of net proceeds from the underwritten public offering completed in the second quarter of 2021, potential additional draws under the Term Loan, and potential revenues from the commercial sale of lenzilumab (if an EUA is granted), the Company re-evaluatedexpects to be able to fund its potential going concern disclosureplanned operations and capital expenditure requirements, although it may pursue other funding options on an opportunistic basis to support its liquidity.

As discussed in accordance with ASC 205-40-50 as of September 30, 2020. Upon completion of this evaluation,further detail in Note 6 below, the Company has concluded thatentered into agreements with several contract manufacturing organizations (“CMOs”) to provide manufacturing, fill/finish and packaging services for lenzilumab, and is actively working with its existing cash and cash equivalents have alleviated that prior substantial doubt about the Company’sadditional CMOs on additional agreements to bolster its ability to continuesupply lenzilumab in the event of receipt of EUA or other conditional marketing authorization (“CMA”). Most of these additional manufacturing agreements, such as those currently in place, are expected to require payment of upfront fees upon execution and further payments against performance of the manufacturing services to be provided, often over a going concern.lengthy performance period. Given the competitive environment, it is not possible for the Company to predict when it will be in position to execute any additional manufacturing agreements, or to estimate the aggregate amount of potential future payments under such new agreements or the timing in which they may be made. If an EUA or other CMA were granted, the Company expects to be able to satisfy the bulk of the cash requirements associated with its manufacturing commitments from revenues from the commercial sale of lenzilumab, supplemented as necessary with proceeds from the sale of its equity securities; potential additional draws under the Term Loan; upfront and milestone payments from licensees; and government funding or financial support, if offered.

In the first quarter of 2021 the amounts included in Research and Development for lenzilumab COVID-19 clinical studies were $7.6 million and $51.7 million for production of lenzilumab finished good. The Company believes that its cash and cash equivalents will be sufficient to fund its planned operations and capital expenditureoperational requirements for at least the next 12 months. This evaluation is based on relevant conditions and events that are currently known or reasonably knowable. As a result, the Company could deplete its available capital resources sooner than it currently expects, and a delay in obtaining or failure to obtain an EUA could further constrain its cash resources. The Company has based these estimates on assumptions that may prove to be wrong, and its operating projections, including its projected net revenue following the potential receipt of an EUA for lenzilumab in COVID-19 patients, may change as a result of many factors currently unknown to it. If the Company is unable to raise additional capital when needed or on acceptable terms, it would be forced to delay, reduce or eliminate its research and development programs and commercialization efforts. Alternatively, the Company might raise funds through strategic collaborations, public or private financings or other arrangements. Such funding, if needed, may not be available on favorable terms, or at all. The financial statements included herein do not include any adjustments that might result from the outcome of these uncertainties.

Reclassifications

Certain prior year amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current year's presentation. Such reclassifications had no effect on prior years’ Net loss or Stockholders’ equity.

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and on a basis consistent with the annual consolidated financial statements and include all adjustments necessary for the presentation of the Company’s condensed consolidated financial position, results of operations and cash flows for the periods presented.

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly ownedwholly-owned subsidiaries. These financial statements have been prepared on a basis that assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The December 31, 20192020 Condensed Consolidated Balance Sheet was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2020,2021, or for any other future annual or interim period. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s 20192020 Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from those estimates. The Company believes judgment is involved in determiningaccounting for the valuationdetermination of therevenue recognition, fair value-based measurement of stock-based compensation, accruals and warrant valuations.warrants. The Company evaluates its estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements.

Certain prior2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are detailed in its Annual Report on Form 10-K for the year amountsended December 31, 2020. There have been reclassified to conformno significant changes to the current year presentation. Such reclassifications had no effectCompany’s significant accounting policies during the three months ended March 31, 2021, from those previously disclosed in its 2020 Annual Report on prior years’ Net loss or Stockholders’ equity (deficit).Form 10-K.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes. ASU No. 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted No. ASU 2019-12 on January 1, 2021 which did not have any impact to the Company’s Condensed Consolidated Financial Statements.

In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from U.S. GAAP, separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity, and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for the Company’s financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company early adopted the new guidance on January 1, 2021, using the modified retrospective approach. The adoption did not have any impact to the Company’s Condensed Consolidated Financial Statements.

3. Potentially Dilutive Securities

The Company’s potentially dilutive securities, which include stock options and warrants and shares of common stock issuable upon conversion of convertible debt, have been excluded from the computation of diluted net loss per common share as the effect of including those securities would be to reduce the net loss per common share and be antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in each period presented.

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The following outstanding potentially dilutive securities have been excluded from the computations of diluted net loss per common share:

4. License Revenue

On November 3, 2020, the Company entered into a License Agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”). Pursuant to the South Korea Agreement, among other things, the Company granted the Licensee a license under certain patents and other intellectual property to develop and commercialize lenzilumab for treatment of COVID-19 pneumonia, in South Korea and the Philippines (the “Territory”), subject to certain reservations and limitations. The Licensee will be responsible for gaining regulatory approval for, and subsequent commercialization of, lenzilumab in the Territory.

As consideration for the license, the Licensee has agreed to pay the Company (i) an up-front license fee of $6.0 million, payable promptly following the execution of the License Agreement, which was received in the fourth quarter of 2020, (ii) up to an aggregate of $14.0 million in two payments based on achievement by the Company of two specified milestones in the U.S., of which the first milestone was met in the first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) was received in the second quarter of 2021, and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that the Company will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.

The Company assessed the South Korea Agreement in accordance with Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers and ASC 808 – Collaborative Arrangements and determined that its performance obligations under the South Korea agreement include (i) the exclusive, royalty-bearing, sublicensable license to lenzilumab, (ii) the manufacturing supply services to be provided by the Company, (iii) cooperation and assistance to be provided by the Company to the Licensee with regulatory authorities in the Territory and (iv) its obligation to serve on a joint steering committee (Items (iii) and (iv) above collectively, the “Research and Development Services” or the “Services”). The Company concluded that in the initial period leading up to regulatory approval in the Territory (the “Initial Period”), the license was not distinct since it was of no benefit to Licensee without the aforementioned Services and that, as such, the license and the Services should be bundled as a single performance obligation.

The Company has concluded that the nature of its promise is to stand ready to provide Research and Development Services as needed during the Performance Period (as defined below). The Company has further concluded that for all of the increments of time during the Performance Period its promise of standing ready to provide the Services is substantially the same. While the specific tasks performed during each increment of time will vary, the nature of the overall promise to provide the Services remains the same throughout the Performance Period.

Since the provision of the license and the Services are considered a single performance obligation, the $6.0 million upfront payment (or $4.5 million net of withholding taxes and other fees and royalties) and the first milestone payment of $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) which was met in the first quarter of 2021 and received in the second quarter of 2021, are being recognized as revenue ratably over the performance period through March 2023 (the “Performance Period”), the expected period over which the Company conservatively expects the Services to be performed with approval in the Territory expected by the end of March 2023. Therefore, in the three months ended March 31, 2021, the Company recognized license revenue totaling approximately $0.5 million.

Licensee’s purchases of lenzilumab for development purposes or for commercial requirements, represent options under the agreement and revenues will therefore be recognized when control of the product is transferred to Licensee.

5. Long-Term Debt

Secured Term Loan Facility

On March 10, 2021, the Company executed a Loan and Security Agreement with Hercules as agent for its affiliates serving as lenders thereunder. The Term Loan provides a loan in the aggregate principal amount of $80 million. On March 29, 2021, the Company drew the initial $25.0 million tranche under the Term Loan. After giving effect to payment of fees and expenses associated with the draw, the Company received net proceeds of approximately $24.4 million.

In addition to the initial amount of $25.0 million, the Term Loan provides the Company with the potential for two additional tranches: a second tranche in the amount of $35.0 million or $25.0 million, which it may become entitled to draw through September 15, 2021 subject to the Company’s receipt of the EUA for lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia; and a third tranche of $20.0 million which the Company may become entitled to draw through June 15, 2022, at the discretion of Hercules if the Company requests additional funding in support of the Company’s strategic initiatives.

The Company will be required to repay amounts borrowed by March 1, 2025, subject to a one-year extension option that it may exercise if it has received FDA approval of a BLA for the use of lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia, and the FDA-authorized label for lenzilumab is generally consistent with that sought in the Company’s BLA filing, and the Company has paid Hercules certain fees and expenses associated with the extension.

Amounts drawn bear interest at a floating rate equal to the greater of either (i) 8.75% plus the prime rate as reported in The Wall Street Journal minus 3.25%, or (ii) 8.75% (such greater amount, the “Base Interest Rate”). Subject to there not having occurred any default or event of default under the loan agreement, the Base Interest Rate will be reduced by 25 basis points upon the occurrence of each of the first three of the four following events to occur:

No principal payments will be due during an interest-only period, commencing on the initial borrowing date and continuing to April 1, 2023, subject to extension to April 1, 2024, and potentially October 1, 2024, under certain conditions. Following the interest-only period, the outstanding balance of the loan will be required to be repaid monthly, continuing through the maturity date.

The Company may prepay amounts drawn under the agreement in full prior to the maturity date then in effect, subject to payment of prepayment charges equal to:

In addition, on the earliest to occur of (i) the maturity date, (ii) the date the Company prepays the outstanding principal amount of the Term Loan, or (iii) the date the outstanding principal amount of the Term Loan otherwise becomes due, the Company will owe Hercules an end of term (“EOT”) charge equal to 6.75% of the aggregate amount of the Term Loan funded by Hercules.

As a condition to obtaining the term loan facility, the Company granted Hercules a security interest in substantially all of its assets and personal property not otherwise subject to existing or permitted liens. In addition, the loan agreement contains customary representations and warranties and events of default for a term loan facility of this size and type. Under the Term Loan, the Company also agreed to comply with certain customary affirmative and negative covenants that become effective upon the initial draw of the first tranche, including covenants to:

All of these covenants will not apply upon repayment of any borrowings under the Term Loan.

Certain of the baskets for permitted investments and other exceptions to the covenants described above will increase in the event the Company raises more than $100.0 million in unrestricted net cash proceeds from one or more bona fide equity financings prior to March 31, 2022. Further, the covenants in the loan agreement will not prohibit the Company from pursuing its strategy of entering into out-bound license agreements for lenzilumab that may be exclusive as to specific geographic regions outside the U.S., nor will the covenants prohibit the Company from entering into co-development or co-promotion or commercialization agreements relating to lenzilumab, so long as such agreements generally are negotiated on arm’s length and commercially reasonable terms.

While the Term Loan is outstanding, the lenders will have the right to convert a portion of the principal amount outstanding under the Term Loan (ranging from $5.0 million to $10.0 million in the aggregate) into shares of the Company’s common stock at a conversion price equal to $19.57 per share, subject to customary anti-dilution adjustments.

The following table summarizes the outstanding future payments of principal and interest associated with the Company’s Term Loan as of March 31, 2021 (in thousands):

Interest expense related to the Term Loan, recorded during the three months ended March 31, 2021, was approximately $18 thousand and the effective interest rate was 9.0%.

6. Commitments and Contingencies

Eversana Agreement

On January 10, 2021, the Company announced that it had entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will provide the Company multiple services from its integrated commercial platform in preparation for the potential commercialization of lenzilumab.

Under the Eversana Agreement, Eversana will serve as the Company’s end-to-end commercial partner, providing the Company with a full suite of services in connection with the potential launch of lenzilumab. Eversana services initially will comprise marketing, market access, consulting, field solutions, field operations, health economics and medical affairs. Additional services may be negotiated by the parties and set forth in statements of work delivered in accordance with the Eversana Agreement.

The Company will pay Eversana fees and reimburse it for expenses in performing the services as established in applicable statements of work. Eversana has agreed to defer its fees pending the Company’s receipt of an EUA from the FDA for lenzilumab for newly hospitalized and hypoxic COVID-19 patients. The Company has accrued $0.9 million for Eversana activities performed in the first quarter of 2021, which are included in Accrued expenses in the Condensed Consolidated Balance Sheets, with the anticipated payment upon receipt of the EUA.

The Eversana Agreement provides for a one-year term and will renew for subsequent one-year terms unless either party provides a notice of non-renewal. After the first year, the Company may terminate the Eversana Agreement upon advance written notice to Eversana. The Eversana Agreement contains customary provisions allowing either party to terminate the Eversana Agreement as a result of certain changes in law and material breaches and certain insolvency events by or relating to the other party.

The Eversana Agreement imposes customary mutual obligations on the parties to protect and not disclose the confidential information and intellectual property of the other, and contains insurance, non-solicitation, indemnification and limitation of liability provisions customary for service contracts of this type.

Manufacturing Agreements

The Company has entered into agreements with several contract manufacturing organizations (“CMOs”) to manufacture bulk drug substance (“BDS”) and fill/finish/drug product (“DP”) for our lenzilumab clinical trial activities related to COVID-19 as well as to manufacture BDS and DP for a potential launch of lenzilumab in anticipation of an EUA in 2021. The Company has also entered into agreements for packaging of the drug. These agreements represent large commitments, including upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and include payments for technology transfer. As of March 31, 2021, the Company estimates that its commitments remaining to be incurred during 2021 will amount to approximately $169 million. The agreements contain customary cancellation clauses.

7. Stockholders’ Equity

Reverse Stock Split

Effective 4:30 p.m. Eastern Time on September 11, 2020 (the “Effective Time”Date”), the Company amended its charter to effect a reverse stock split at a ratio of 1-for-5 (the “Split Ratio”). No fractional shares were issued in connection with the reverse stock split. Stockholders of record otherwise entitled to receive fractional shares of common stock received cash (without interest or deduction) in lieu of such fractional share interests.

The reverse stock split reduced the total number of shares of the Company’s common stock outstanding as of the Effective Time from approximately 210.9 million shares to approximately 42.2 million shares. The par value per share and other terms of the Company’s common stock were not affected by the reverse stock split, and the number of authorized shares of the Company’s common stock remains at 225,000,000.

The reverse stock split resulted in a proportionate adjustment in the number of shares reserved for issuance under the Humanigen, Inc. 2020 Omnibus Incentive Compensation Plan (the “2020 Equity Plan”), such that a total of 7,000,000 shares of the Company’s common stock were reserved for issuance under the 2020 Equity Plan following the Effective Time. In addition, proportionate adjustments were made to the number of shares covered by, and the exercise price applicable to, each outstanding stock option award under the Humanigen, Inc. 2012 Equity Incentive Plan (the “2012 Equity Plan”) and outstanding warrants issued by the Company, in each case to give effect to the Split Ratio and the reverse stock split.

The reverse stock split was accounted for retroactively and is reflected in our common stock, stock option and warrant activity as of and during the year ended December 31, 2019 and the periods ended September 30, 2020 and 2019. Unless stated otherwise, all share data in this Quarterly Report on Form 10-Q have been adjusted, as appropriate, to reflect the reverse stock split.

2. Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies since those previously disclosed in the 2019 Form 10-K.

3. Potentially Dilutive Securities

The Company’s potentially dilutive securities, which include stock options and warrants, have been excluded from the computation of diluted net loss per common share as the effect of including those securities would be to reduce the net loss per common share and be antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in each period presented.

The following outstanding potentially dilutive securities have been excluded from the computations of diluted net loss per common share:

4. Debt

Notes Payable to Vendors

On June 30, 2016, the Company issued promissory notes in an aggregate principal amount of approximately $1.2 million to certain claimants in accordance with the Company’s Plan of Reorganization (the “Plan”) filed with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) (Case No. 15-12628 (LSS) (the “Bankruptcy Case”) which became effective June 30, 2016, at which time the Company emerged from its Chapter 11 bankruptcy proceedings. The notes were unsecured, accrued interest at 10% per annum and became due and payable in full, including principal and accrued interest on June 30, 2019. In July and August, 2019, following the receipt of proceeds from the 2019 Bridge Notes, the Company used approximately $0.5 million of the proceeds to retire a portion of these notes, including accrued interest. After giving effect to these payments, the aggregate principal amount and accrued but unpaid interest on these notes approximated $1.1 million as of December 31, 2019 and the Company had accrued $0.3 million in interest expense. In June and July 2020, the Company used the proceeds from the Private Placement (as defined below) to repay the remaining outstanding principal including accrued and unpaid interest on these notes and the notes were extinguished. As of September 30, 2020, all the notes have been repaid.

Advance Notes

In June, July and August, 2018 the Company received an aggregate of $0.9 million of proceeds from advances made to the Company (the “Advance Notes”) by four different lenders including Dr. Cameron Durrant, the Company’s Chairman and Chief Executive Officer; Cheval Holdings, Ltd. (“Cheval”), an affiliate of Black Horse Capital, L.P. (“BHC”), the Company’s controlling stockholder at the time; and Ronald Barliant, a director of the Company. The Advance Notes accrued interest at a rate of 7% per year, compounded annually.

In accordance with their terms, on May 30, 2019, in connection with the Company’s announcement of the Collaboration Agreement with Kite, the lenders converted the amounts due under the Advance Notes into the Company’s common stock at the conversion price of $2.25 per share. The Company issued a total of 435,924 shares of common stock in connection with the conversion.

2018 Convertible Notes

Commencing September 19, 2018, the Company delivered a series of convertible promissory notes (the “2018 Notes”) evidencing an aggregate of $2.5 million of loans made to the Company by six different lenders, including an affiliate of BHC, the Company’s controlling stockholder at the time. The 2018 Notes accrued interest at a rate of 7% per annum and, in general, were set to mature twenty-four months from the date the 2018 Notes were signed. The Company used the proceeds from the 2018 Notes for working capital.

The 2018 Notes were convertible into equity securities of the Company in three different scenarios, including if the Company sold its equity securities on or before the date of repayment of the 2018 Notes in any financing transaction that resulted in gross proceeds to the Company of less than $10 million (a “Non-Qualified Financing”). In connection with a Non-Qualified Financing, the noteholders were able to convert their remaining 2018 Notes into either (i) such equity securities as the noteholder would acquire if the principal and accrued but unpaid interest thereon (the “Conversion Amount”) were invested directly in the financing on the same terms and conditions as given to the financing investors in the Non-Qualified Financing, or (ii) common stock at a conversion price equal to $2.25 per share (subject to ratable adjustment for any stock split, stock dividend, stock combination or other recapitalization occurring subsequent to the date of the Notes).

The Company’s sales of shares pursuant to the ELOC Purchase Agreement with Lincoln Park Capital Fund, LLC (“LPC”) constituted a Non-Qualified Financing. Commencing on April 2, 2020, the holders of the 2018 Notes notified the Company of their exercise of their conversion rights under the 2018 Notes. See “2019 Convertible Notes” for additional information regarding the conversion of 2018 Notes by the holders.

As of December 31, 2019, the Company had accrued $0.2 million in interest related to these promissory notes. Interest expense recorded during the three and nine months ended September 30, 2020 was approximately $0 and $817 thousand, respectively.

2019 Convertible Notes

Commencing on April 23, 2019, the Company delivered a series of convertible promissory notes (the “2019 Notes” and together with the 2018 Notes, the “Convertible Notes”) evidencing an aggregate of $1.3 million of loans made to the Company. The 2019 Notes accrued interest at a rate of 7.5% per annum and, in general, were set to mature twenty-four months from the date the 2019 Notes were signed. The Company used the proceeds from the 2019 Notes for working capital.

The 2019 Notes were convertible into equity securities of the Company in four different scenarios, including if the Company sold its equity securities on or before the date of repayment of the 2019 Notes in any financing transaction that resulted in gross proceeds to the Company of less than $10 million (a “Non-Qualified Financing”). In connection with a Non-Qualified Financing, the noteholders were able to convert their remaining 2019 Notes into either (i) such equity securities as the noteholder would acquire if the Conversion Amount were invested directly in the financing on the same terms and conditions as given to the financing investors in the Non-Qualified Financing, or (ii) common stock at a conversion price equal to $6.25 per share (subject to ratable adjustment for any stock split, stock dividend, stock combination or other recapitalization occurring subsequent to the date of the 2019 Notes).

The Company’s sales of shares pursuant to the ELOC Purchase Agreement with LPC constituted a Non-Qualified Financing. Commencing on April 2, 2020, holders of the Convertible Notes, including Cheval, an affiliate of BHC, the Company’s controlling stockholder at the time, notified the Company of their exercise of their conversion rights under the Convertible Notes. Pursuant to the exemption from registration afforded by Section 3(a)(9) under the Securities Act, the Company issued an aggregate of 2,397,915 shares of its common stock upon the conversion of $4.3 million in aggregate principal and interest on the Convertible Notes that were converted, which obligations were retired. Of these, the Company issued 316,666 shares to Cheval. Dr. Dale Chappell, who was serving as the Company’s ex-officio chief scientific officer at the time and currently serves as its Chief Scientific Officer, controls BHC and reports beneficial ownership of all shares held by it and its affiliates, including Cheval. After giving effect to the shares issued upon such conversions, no convertible notes issued in 2018 or 2019 were outstanding as of September 30, 2020.

As of December 31, 2019, the Company had accrued $0.1 million in interest related to the 2019 Notes. Interest expense related to the 2019 Notes, recorded during the three and nine months ended September 30, 2020, was approximately $0 and $219 thousand, respectively.

The Advance Notes, the 2018 Notes and the 2019 Notes had an optional voluntary conversion feature in which the holder could convert the notes in the Company’s common stock at maturity at a conversion rate of $2.25 per share for the Advance Notes and the 2018 Notes and at a conversion rate of $6.25 for the 2019 Notes. The intrinsic value of this beneficial conversion feature was $1.8 million upon the issuance of the Advance Notes, the 2018 Notes and the 2019 Notes and was recorded as additional paid-in capital and as a debt discount which is accreted to interest expense over the term of the Advance Notes and Notes. Interest expense includes debt discount amortization of $0 and $785 thousand for the three and nine months ended September 30, 2020, respectively.

The Company evaluated the embedded features within the Advance Notes, the 2018 Notes and the 2019 Notes to determine if the embedded features are required to be bifurcated and recognized as derivative instruments. The Company determined that the Advance Notes, the 2018 Notes and the 2019 Notes contain contingent beneficial conversion features (“CBCF”) that allow or require the holder to convert the Advance Notes, the 2018 Notes and the 2019 Notes, as applicable, to Company common stock at a conversion rate of $2.25 per share for the Advance Notes and the 2018 Notes and $6.25 for the 2019 Notes, but did not contain embedded features requiring bifurcation and recognition as derivative instruments. Upon the occurrence of a CBCF that results in conversion of the Advance Notes, the 2018 Notes or the 2019 Notes to Company common stock, the remaining unamortized discount will be charged to interest expense. Upon conversion of the Advance Notes on May 30, 2019, the remaining unamortized discount was charged to interest expense. Upon the conversion of the Convertible Notes in April 2020, the remaining related unamortized discount was charged to interest expense.

2020 Convertible Redeemable Notes

On March 13, 2020 and March 19, 2020 (the “Issuance Dates”), the Company delivered two convertible redeemable promissory notes (the “2020 Notes”) evidencing loans with an aggregate principal amount of $518,333 made to the Company.

The 2020 Notes accrued interest at a rate of 7.0% per annum and were set to mature on March 13, 2021 and March 19, 2021, respectively. The 2020 Notes contained an original issue discount of $33,000 and $18,833, respectively. The Company used the proceeds from the 2020 Notes for working capital.

The notes could be redeemed by the Company at any time before the 270^th day following issuance, at a redemption price equal to the principal and accrued but unpaid interest on the notes to the date of redemption, plus a premium that increases on day 61 and day 121 from the issuance date. Accordingly, the notes were repaid in June 2020 with proceeds from the Private Placement, and the notes were extinguished.

The Company evaluated the embedded features within the 2020 Notes and determined that the embedded features are required to be bifurcated and recognized as stand-alone derivative instruments. The variable-share settlement features within the 2020 Notes qualify as redemption features and meet the net settlement criterion for qualification as a stand-alone derivative. In determining the fair value of the bifurcated derivative, the Company evaluated the likelihood of conversion of the 2020 Notes to Company stock.  As the Company believed it would have adequate funding prior to the six month anniversary of the 2020 Notes, the first conversion option for the holders of the 2020 Notes, and it had the intent to either begin making amortizing payments or to pay off the 2020 Notes in their entirety prior to that date, the fair value was determined to be $0. The original issue discount was accreted to Interest expense and the remaining balance was charged to Interest expense upon payoff.

Interest expense related to the 2020 Notes, recorded during the three and nine months ended September 30, 2020, was approximately $0 and $165 thousand, respectively.

Interest expense includes the original issue discount amortization of approximately $0 and $52 thousand for the three and nine months ended September 30, 2020, respectively.

Bridge Notes

On June 28, 2019, the Company issued three short-term, secured bridge notes (the “June Bridge Notes”) evidencing an aggregate of $1.7 million of loans made to the Company by three parties: Cheval , an affiliate of BHC, the Company’s controlling stockholder at the time, lent $750,000; Nomis Bay LTD, the Company’s second largest stockholder, lent $750,000; and Dr. Cameron Durrant, the Company’s Chief Executive Officer and Chairman of the Board of Directors (the “Board”), lent $200,000. The proceeds from the June Bridge Notes were used to satisfy a portion of the unsecured obligations incurred in connection with the Company’s emergence from bankruptcy in 2016 and for working capital and general corporate purposes. Of the $1.7 million in proceeds received, $950,000 was received on June 28, 2019 and was recorded as Advance notes in the Condensed Consolidated Balance Sheet as of June 30, 2019. The remaining proceeds of $750,000 were received July 1, 2019 and recorded accordingly.

The June Bridge Notes accrued interest at a rate of 7.0% per annum and after giving effect to multiple extensions, were set to mature on December 31, 2020. The June Bridge Notes could become due and payable at such earlier time as the Company raised more than $3,000,000 in a bona fide financing transaction or upon a change in control. Accordingly, the June Bridge Notes were repaid in June 2020 with proceeds from the Private Placement, and the June Bridge Notes were extinguished.

On November 12, 2019, the Company issued two short-term, secured bridge notes (the “November Bridge Notes” and together with the June Bridge Notes, the “2019 Bridge Notes”) evidencing an aggregate of $350,000 of loans made to the Company by two parties: Cheval, an affiliate of BHC, our controlling stockholder at the time, lent $250,000; and Dr. Cameron Durrant, our Chief Executive Officer and Chairman of our Board, lent $100,000. The proceeds from the November Bridge Notes were used for working capital and general corporate purposes.

The November Bridge Notes ranked on par with the June Bridge Notes and possessed other terms and conditions substantially consistent with those notes. The November Bridge Notes accrued interest at a rate of 7.0% per annum and after giving effect to multiple extensions, were set to mature on December 31, 2020. The November Bridge Notes could become due and payable at such earlier time as the Company raised more than $3,000,000 in a bona fide financing transaction or upon a change in control. Accordingly, the November Bridge Notes were repaid in June 2020 with proceeds from the Private Placement.

In April 2020, the Company issued two short-term, secured bridge notes (the “April Bridge Notes” and together with the June Bridge Notes and the November Bridge Notes, the “Bridge Notes”) evidencing an aggregate of $350,000 of loans made to the Company: Cheval, an affiliate of BHC, the Company’s controlling stockholder at the time, loaned $100,000, and Nomis Bay, the Company’s second largest stockholder, loaned $250,000. The proceeds from the April Bridge Notes were used for working capital and general corporate purposes.

The April Bridge Notes ranked on par with the June Bridge Notes and the November Bridge Notes and possessed other terms and conditions substantially consistent with them. The notes accrued interest at a rate of 7.0% per annum and were set to mature on December 31, 2020. The April Bridge Notes could become due and payable at such earlier time as the Company raised more than $10,000,000 in a bona fide financing transaction or upon a change in control. Accordingly, these April Bridge Notes were repaid in June 2020 with proceeds from the Private Placement, and these bridge notes were extinguished.

The Bridge Notes were secured by a lien on substantially all the Company’s assets, which liens have been released.

Interest expense related to the Bridge Notes, recorded during the three and nine months ended September 30, 2020, was approximately $0 and $66 thousand, respectively.

5. Commitments and Contingencies

Contractual Obligations and Commitments

As of September 30, 2020, other than the retirement and conversion of certain debt described in Note 4 and the license agreements described in Note 7, there were no material changes to the Company’s contractual obligations from those set forth in the 2019 Form 10-K.

Guarantees and Indemnifications

The Company has certain agreements with service providers with which it does business that contain indemnification provisions pursuant to which the Company typically agrees to indemnify the party against certain types of third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. The Company would also accrue for estimated incurred but unidentified indemnification issues based on historical activity. As the Company has not incurred any indemnification losses to date, there were no accruals for, or expenses related to, indemnification issues for any period presented.

6. Stockholders’ Equity

Reverse Stock Split

Effective as of 4:30 p.m. Eastern Time on September 11, 2020 (the “Effective Time”), the Company amended its charter to effect a reverse stock split at a ratio of 1-for-5 (the “Split Ratio”). No fractional shares were issued in connection with the reverse stock split. Stockholders of record otherwise entitled to receive fractional shares of common stock received cash (without interest or deduction) in lieu of such fractional share interests.

The reverse stock split reduced the total number of shares of the Company’s common stock outstanding as of the Effective TimeDate from approximately 210.9 million shares to approximately 42.2 million shares. The par value per share and other terms of the Company’s common stock were not affected by the reverse stock split, and the number of authorized shares of the Company’s common stock remains at 225,000,000.

The reverse stock split resulted in a proportionate adjustment in the number of shares reserved for issuance under the 2020 Equity Plan, such that a total of 7,000,000 shares of the Company’s common stock were reserved for issuance under the 2020 Equity Plan following the Effective Time.Date. In addition, proportionate adjustments were made to the number of shares covered by, and the exercise price applicable to, each outstanding stock option award under the 2012 Equity Plan and outstanding warrants issued by the Company, in each case to give effect to the Split Ratio and the reverse stock split.

The reverse stock split was accounted for retroactively and is reflected in our common stock, stock option and warrant activity as of and during the period ended December 31, 20192020 and the periods ended September 30, 2020March 31, 2021 and 2019.2020. Unless stated otherwise, all share data in this Quarterly Report on Form 10-Q have been adjusted, as appropriate, to reflect the reverse stock split.

Lincoln Park Capital Purchase AgreementControlled Equity Offering

On November 8, 2019,December 31, 2020, the Company entered into a purchase agreementControlled Equity Offering^SM Sales Agreement (the “ELOC Purchase“Sales Agreement”) and a registration rights agreement with LPC, pursuant toCantor Fitzgerald & Co. (“Cantor”), under which the Company had the right tocould issue and sell to LPC up to $20,000,000 infrom time-to-time shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”), subjecthaving an aggregate gross sales price of up to certain limitations and conditions set forth in the ELOC Purchase Agreement.

In connection with the signing of the ELOC Purchase Agreement on November 8, 2019,$100 million through Cantor, as sales agent. Through March 31, 2021, the Company issued 141,318and sold 1,796,858 shares of its common stock to LPC. The issuance ofunder the shares was recorded as debt issuance costs in Common stock and Additional paid-in capital with noSales Agreement for net effect on Stockholders’ equity (deficit).

During the months of December 2019 and January 2020, the Company issued a total of 140,000 shares for aggregate proceeds of $0.3 million under the ELOC Purchase Agreement.

On June 2, 2020, following completion of the Private Placement described below, the Company notified LPC of its decision to terminate the ELOC Purchase Agreement. The termination of the ELOC Purchase Agreement became effective on June 3, 2020.$36.1 million.

2020 Private Placement2021 Underwritten Public Offering

On June 1, 2020, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”) to complete a private placement of our common stock (the “Private Placement”). The closing of the Private Placement occurred on June 2, 2020 (the “Closing Date”). At the closing, the Company issued and sold 16,505,743 shares of its common stock (the “Shares”) at a purchase price of $4.35 per share, for aggregate gross proceeds of approximately $71.8 million. The Company used a portion of the proceeds to retire certain indebtedness, as further described in Note 4 - Debt. See Note 9 for information regarding two complaints filed against us in connection with the Private Placement.

On the Closing Date, the Company and the Investors also entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which the Company agreed to prepare and file a registration statement (the “Resale Registration Statement”) for the resale of the Shares with the Securities and Exchange Commission (the “SEC”).

Subject to certain limitations and an overall cap, the Company may be required to pay liquidated damages to the investors at a rate of 2% of the invested capital for each occurrence (and continuation forMarch 30, consecutive days thereafter) of a breach by the Company of certain of its obligations under the Registration Rights Agreement.

The Purchase Agreement also required that the Company use its commercially reasonable efforts to achieve a listing of the Common Stock on a national securities exchange, subject to certain limitations set forth in the Purchase Agreement. On July 6, 2020, the Company applied to have its common stock approved for listing on the Nasdaq Capital Market. On September 18, 2020, the Company’s common stock commenced trading on the Nasdaq Capital Market under the symbol “HGEN.”

2020 Underwritten Public Offering

On September 17, 2020,2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with J.P. MorganJefferies LLC, Credit Suisse Securities (USA) LLC and Jefferies LLC,Cantor, as representatives of the severalseveral` underwriters (the “Underwriters”), in connection with the public offering of 8,000,0005,000,000 shares of the Company’s shares of common stock. Pursuant to the Underwriting Agreement, the Company granted the underwriters a 30-day option to purchase an additional 1,200,000750,000 shares of common stock, which option was exercised in full by the underwriters on September 18, 2020.stock. See Note 11 for additional information.

As a result of the pricing of the public offering, the Company’s common stock commenced trading on the Nasdaq Capital Market under the symbol “HGEN.”

The aggregate gross proceeds from the sale of the full 9,200,000 shares in the offering were approximately $78.2 million. The Company expects to use the proceeds from the offering to support its manufacturing, production and commercial preparation activities relating to lenzilumab as a potential therapy for COVID-19 patients and for working capital and other general corporate purposes.

2020 Equity Plan

On July 27, 2020, the Board unanimously approved, and recommended that the Company’s stockholders approve, the 2020 Equity Plan, to ensure that the Board and its compensation committee (the “Compensation Committee”) will be able to make the types of awards, and covering the number of shares, as necessary to meet the Company’s compensatory needs. On July 29, 2020, the 2020 Equity Plan was approved by the holders of approximately 63% of the Company’s outstanding shares of common stock on that date. The 2020 Equity Plan became effective on September 11, 2020 following the Effective Time of the reverse stock split.

Immediately following the Effective Time, a total of 7,000,000 shares of the Company’s common stock were reserved for issuance under the 2020 Equity Plan. The Board or8. Stock-Based Compensation Committee may grant the following types of awards under the 2020 Equity Plan: stock options, stock appreciation rights, restricted stock, stock awards, restricted stock units, performance shares, performance units, cash-based awards and substitute awards. The 2020 Equity Plan will remain in effect until the tenth anniversary of its effective date, unless terminated earlier by the Board.

2012 Equity Plan

The 2020 Equity Plan replaced the 2012 Equity Plan, under which no further grants will be made. However, any outstanding awards under the 2012 Equity Plan will continue in accordance with the terms of the 2012 Equity Plan and any award agreement executed in connection with such outstanding awards. At the Effective Time of the reverse stock split, proportionate adjustments were made to the number of shares covered by, and the exercise price applicable to, each outstanding stock option award under the 2012 Equity Plan to give effect to the Split Ratio and the reverse stock split.

Under the 2012 Equity Plan, the Company could grant shares, stock units, stock appreciation rights, performance cash awards and/or options to employees, directors, consultants, and other service providers. For options, the per share exercise price could not be less than the fair market value of a Company common share on the date of grant. Awards generally vest and become exercisable over three to four years and expire 10 years from the date of grant. Options generally become exercisable as they vest following the date of grant.

A summary of stock option activity for the ninethree months ended September 30, 2020March 31, 2021 under all the Company’s options plans is as follows:

The weighted average fair value of options granted during the ninethree months ended September 30, 2020March 31, 2021 was $5.13$13.30 per share.

The Company valued the options granted using the Black-Scholes options pricing model and the following weighted-average assumption terms for the ninethree months ended September 30, 2020:March 31, 2021:

Stock-Based Compensation

The Company recorded stock-based compensation expense in the Condensed Consolidated Statements of Operations as follows:follows (in thousands):

At September 30, 2020,March 31, 2021, the Company had $3.8$12.8 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to outstanding stock options that will be recognized over a weighted-average period of 2.42.7 years.

7.9. License and Collaboration Agreements

Kite Agreement

On May 30, 2019, the Company entered into a clinical collaboration agreement (the “Kite Agreement”) with Kite, Pharmaceuticals, Inc., pursuant to which the Company and Kite are conductingproviding in part for conduct of a multi-center Phase 1b/21b study of lenzilumab with Kite’s Yescarta in patients with relapsed or refractory B-cell lymphoma, including diffuse large B-cell lymphoma (“DLBCL”). The primary objectiveDLBCL. On April 19, 2021, the Company announced positive data from this study. As a result of this positive data and the conclusion of the Phase 1b portion of the study, isthe Company elected to determineterminate the effectclinical collaboration agreement with Kite (see Note 11). The Company intends to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab oncombined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the safety of Yescarta.

Pursuantprotocol is being submitted to the Kite Agreement, the Company shall supply lenzilumab to the collaboration for use in the study and will contribute up to approximately $8.0 million towards the out-of-pocket costs of the study, depending on the number of patients enrolled into the study. During the month of September 2020, the Company paid $2.0 million to Kite towards its contribution for the study, which payment was recorded as Research and development expense in the three months ended September 30, 2020.FDA.

Mayo Agreement

On June 19, 2019, the Company entered into an exclusive worldwide license agreement (the “Mayo Agreement”) with the Mayo Foundation for Medical Education and Research (“Mayo”) for certain technologies used to create CAR-T cells lacking GM-CSF expression through various gene-editing tools including CRISPR-Cas9 (GM-CSF knock-out). The license covers various patent applications and know-how developed by Mayo in collaboration with the Company. These licensed technologies complement and broaden the Company’s position in the GM-CSF neutralization space and expand the Company’s discovery platform aimed at improving CAR-T to include gene-edited CAR-T cells.

Pursuant to the Mayo Agreement, the Company agreed to pay $200,000paid $0.2 million to Mayo within six months of the effective date, or upon completion of a qualified financing, whichever is earlier.in June 2020, which payment was accrued in Research and development expense in June 2019. The Mayo Agreement also requires the payment of milestones and royalties upon the achievement of certain regulatory and commercialization milestones. The initial payment was recorded as Research and development expense in June 2019. The Company paid the initial payment in June 2020 subsequent to the closing of the Private Placement.

Zurich Agreement

On July 19, 2019, the Company entered into an exclusive worldwide license agreement (the “Zurich Agreement”) with the University of Zurich (“UZH”) for technology used to prevent or treat Graft versus Host Disease (“GvHD”) through GM-CSF neutralization. The Zurich Agreement covers various patent applications filed by UZH which complement and broaden the Company’s position in the application of GM-CSF and expands the Company’s development platform to include improving allogeneic Hematopoietic Stem Cell Transplantation (“HSCT”).

Pursuant to the Zurich Agreement, the Company paid $100,000$0.1 million to UZH in July 2019. The Zurich Agreement also requires the payment of annual maintenance fees and milestones and royalties upon the achievement of certain regulatory and commercialization milestones. The license payment of $100,000$0.1 million was recorded as Research and development expense in July 2019.

Clinical Trial Agreement with the National Institute of Allergy and Infectious Diseases

On July 24, 2020, the Company entered into a clinical trial agreement (the “Clinical“ACTIV-5 Clinical Trial Agreement”) with the National Institute of Allergy and Infectious Diseases (“NIAID”), part of NIH, which is part of the United StatesU.S. Government Department of Health and Human Services, as represented by the Division of Microbiology and Infectious Diseases. Pursuant to the ACTIV-5 Clinical Trial Agreement, lenzilumab will be an agent to beis being evaluated in the NIAID-sponsored Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV)-5 and Big Effect Trial (“BET”), referred to as ACTIV-5/BET,BET-B in hospitalized patients with COVID-19.

The NIH created the Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV)ACTIV public-private partnership and selected lenzilumab to be evaluated in its ACTIV-5/BET,BET-B, which will compareis comparing lenzilumab in combination with Gilead’s investigational antiviral, remdesivir, versus placebo plus remdesivir in hospitalized COVID-19 patients. The trial is expected to enroll 100 patients in each arm of the study with an interim analysis for efficacy after 50 patients have been enrolled in each arm.study.

Pursuant to the ACTIV-5 Clinical Trial Agreement, NIAID will serve as sponsor and will be responsible for funding, supervising and overseeing ACTIV-5/BET.BET-B. The Company will be responsible for providing lenzilumab to NIAID without charge and in quantities to ensure a sufficient supply of lenzilumab. The ACTIV-5 Clinical Trial Agreement imposes additional obligations on the Company that are reasonable and customary for clinical trial agreements of this nature, including in respect of compliance with data privacy laws and potential indemnification obligations. The Company will have access to data from ACTIV-5/BET-B once concluded.

8. Savant ArrangementsCRADA

On November 5, 2020, the Company and the Department of Defense (“DoD”) Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (“JPEO-CBRND” or “JPEO”) entered into a Cooperative Research and Development Agreement (“CRADA”) in collaboration with the Biomedical Advanced Research and Development Authority (“BARDA”), part of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”) at the U.S. Department of Health and Human Services (“HHS”), in support of Operation Warp Speed (“OWS”), to assist in the development of lenzilumab, in connection with a potential EUA for COVID-19.

On January 22, 2021, the Company announced an expansion of the CRADA that it had previously entered with JPEO on November 5, 2020, was subsequently co-signed by BARDA. This provides the Company with access to manufacturing capacity reserved by BARDA for fill-finish product to accelerate the drug product manufacturing of lenzilumab.

Pursuant to the CRADA, the Company has been provided access to a full-scale, integrated team of OWS manufacturing, and regulatory subject matter experts, leading decision makers and statistical support in anticipation of applying for EUA and subsequently a BLA for lenzilumab as a potential treatment for COVID-19. The CRADA also provides that OWS regulatory experts will work with the Company on FDA communications, meetings and regulatory filings. The CRADA aims to support the lenzilumab Phase 3 clinical trial output, focusing on efficiently generating an EUA and BLA submission. In addition to providing access under EUA, a goal of the CRADA is to ensure lenzilumab receives the benefits provided by Public Law 115-92. The Company may receive advance purchase contracts or other benefits under Public Law 115-92, if FDA issues an EUA or BLA.

10. Litigation

Savant Litigation

On February 29, 2016, the Company entered into a binding letter of intent (the “LOI”) with Savant Neglected Diseases, LLC (“Savant”). The LOI provided that the Company would acquire certain worldwide rights relating to benznidazole from Savant. On June 30, 2016, the Company and Savant Neglected Diseases, LLC (“Savant”) entered into an Agreement for the Manufacture, Development and Commercialization of Benznidazole for Human Use (the “MDC Agreement”), pursuant to which the Company acquired certain worldwide rights relating to benznidazole (the “Compound”).benznidazole. The MDC Agreement consummates the transactions contemplated by the LOI.

In addition, on the Effective DateJune 30, 2016, the Company and Savant also entered into a Security Agreement (the “Security Agreement”), pursuant to which the Company granted Savant a continuing senior security interest in the assets and rights acquired by the Company pursuant to the MDC Agreement and certain future assets developed from those acquired assets.

On June 30, 2016, in connection with the effective date,MDC Agreement, the Company issued to Savant a five-year warrant (the “Warrant”) to purchase 40,000 shares of the Company’s Common Stock, at an exercise price of $11.25 per share, subject to adjustment. As of June 30, 2020, the Warrant was exercisable for 20,000 shares at an exercise price of $11.25 per share. On July 20, 2020, the Company issued to Savant a total of 10,909 shares of its common stock pursuant to a “net exercise” of the Warrant by Savant. The Warrant is not expected to vest or become exercisable for any additional shares of the Company’s common stock.

As a result ofOn May 26, 2017, the Company submitted its benznidazole Investigational New Drug Application (“IND”) to the FDA granting acceleratedwhich became effective on June 26, 2017. The Company recorded expense of $1.0 million during the year ended December 31, 2017 as Research and conditional approval of adevelopment expense related to the milestone achievement associated with the IND being declared effective.

On July 10, 2017, FDA notified the Company that it granted Orphan Drug Designation to benznidazole therapy manufactured by a competitor for the treatment of Chagas disease and awarding such competitor a neglected tropical disease PRV in August 2017, the Company ceased development of benznidazole and re-evaluated the final two vesting milestones and concluded that the probability of achievement of these milestones had decreased to 0%.

In July 2017, the Company commenced litigation against Savant alleging that Savant breached the MDC Agreement and seeking a declaratory judgement. Savant has asserted counterclaims for breaches of contract under the MDC Agreement and the Security Agreement. The dispute primarily concerns the Company’s right under the MDC Agreement to offset certain costs incurred by the Company in excess of the agreed upon budget against payments due Savant. See Note 9, below, for more information regarding the Savant litigation. The aggregate cost overages as of June 30, 2017 that the Company asserts are Savant’s responsibility total approximately $3.4 million, net of a $0.5 million deductible.disease. The Company asserts that it is entitled to offset $2.0recorded expense of $1.0 million in milestone payments due Savant againstduring the cost overages, such thatyear ended December 31, 2017 as of June 30, 2017, Savant owed the Company approximately $1.4 million. As of June 30, 2019, the cost overages totaled $4.1 million such that Savant owed the Company approximately $2.1 million in cost overages. Such cost overages have been charged to Research and development expense as incurred. Recovery of such cost overages, if any, will be recorded as a reduction of Research and development expense inrelated to the period received.milestone achievement associated with Orphan Drug Designation.

The $2.0 million in milestone payments due Savant are included in Accrued expenses in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2020March 31, 2021 and December 31, 2019.

9. Litigation

Savant Litigation2020.

On July 10, 2017, the Company filed a complaint against Savant in the Superior Court for the State of Delaware, New Castle County (the “Delaware Court”). KaloBios Pharmaceuticals, Inc. v. Savant Neglected Diseases, LLC, No. N17C-07-068 PRW-CCLD. The Company asserted breach of contract and declaratory judgment claims against Savant arising under the MDC Agreement. See Note 8 - “Savant Arrangements” for more information about the MDC Agreement. The Company alleges that Savant has breached its MDC Agreement obligations to pay cost overages that exceed a budgetary threshold as well as other related MDC Agreement representations and obligations. In the litigation, the Company has alleged that as of June 30, 2017, Savant was responsible for aggregate cost overages of approximately $3.4 million, net of a $0.5 million deductible under the MDC. The Company asserts that it is entitled to offset $2.0 million in milestone payments due Savant against the cost overages, such that as of June 30, 2017 Savant owed the Company approximately $1.4 million.overages.

On July 12, 2017, Savant removed the case to the Bankruptcy Court, claiming that the action is related to or arises under the Bankruptcy Case from which wethe Company emerged in July 2016. In re KaloBios Pharmaceuticals, Inc., No. 15-12628 (LSS) (Bankr. D. Del.). On July 27, 2017, Savant filed an Answer and Counterclaims. Savant’s filing alleges breaches of contracts under the MDC Agreement and the Security Agreement, claiming that the Company breached its obligations to pay the milestone payments and other related representations and obligations. On August 1, 2017, the Company moved to remand the case back to the Delaware Court (the “Motion to Remand”).

On August 2, 2017, Savant sent a foreclosure notice to the Company, demanding that it provide the Collateral as defined in the Security Agreement for inspection and possession on August 9, 2017, with a public sale to be held on September 1, 2017. The Company moved for a Temporary Restraining Order (the “TRO”) and Preliminary Injunction in the Bankruptcy Court on August 4, 2017. Savant responded on August 7, 2017. On August 7, 2017, the Bankruptcy Court granted the Company’s motion for a TRO, entering an order prohibiting Savant from collecting on or selling the Collateral, entering our premises, issuing any default notices to us, or attempting to exercise any other remedies under the MDC Agreement or the Security Agreement. On August 9, 2017, the parties have stipulated to continue the provisions of the TRO in full force and effect until further order of the appropriate court, which the Bankruptcy Court signed that same day (the “Stipulated Order”).

On January 22, 2018, Savant wrote to the Bankruptcy Court requesting dissolution of the TRO and the Stipulated Order. On January 29, 2018, the Bankruptcy Court granted the Motion to Remand and denied Savant’s request to dissolve the TRO and Stipulated Order, ordering that any request to dissolve the TRO and Stipulated Order be made to the Delaware Court.

On February 13, 2018 Savant made a letter request to the Delaware Court to dissolve the TRO and Stipulated Order. Also, on February 13, 2018, the Company filed its Answer and Affirmative defenses to Savant’s Counterclaims. On February 15, 2018 the Company filed a letter of opposition to Savant’s request to dissolve the TRO and Stipulated Order and requesting a status conference. A hearing on Savant’s request to dissolve the TRO and Stipulated Order was held before the Delaware Court on March 19, 2018. The Delaware Court denied Savant’s request to dissolve the TRO and Stipulated order, which remain in effect.

On April 11, 2018, the Company advised the Delaware Court that it would meet and confer with Savant regarding a proposed case management order and date for trial. On April 26, 2018 the Delaware Court so-ordered a proposed case management order submitted by the Company and Savant. The schedule in the case management order was modified by stipulation on August 24, 2018.

On April 8, 2019, the Company moved to compel Savant to produce documents in response to the Company’s document requests.  The parties thereafter agreed to a discovery schedule through June 30, 2019, which the Superior Court so-ordered,so ordered, and the parties produced documents to each other. 

On June 4, 2019, Savant filed a complaint against the Company and Madison Joint Venture LLC (“Madison”) in the Delaware Court of Chancery (the “Chancery Action”) seeking to “recover as damages that amounts owed to it under the MDC Agreement, and to reclaim Savant’s intellectual property,” among other things.  Savant also requested leave to move to dismiss the Company’s complaint on the grounds that the Company’s transfer of assets to Madison was champertous.  On June 10, 2019, the Company requested by letter that the Superior Court hold a contempt hearing because the Chancery Action violated the TRO entered by the Bankruptcy Court, the terms of which have been extended by stipulation of the parties.  On June 18, 2019, the Superior Court held a telephonic status conference.  The parties agreed that the Chancery Action should be consolidated with the Superior Court action, after which the Superior Court would address the parties’ motions. 

On July 22, 2019, the Company moved for contempt against Savant.  Savant filed its opposition on July 29, 2019.  On August 12, 2019, the Superior Court denied the Company’s motion for contempt. 

On July 23, 2019, Savant moved for summary judgment on the issue of champerty.  The Company filed its response and cross-motion for summary judgment on August 27, 2019.  Savant filed its reply on September 10, 2019 and the Company filed its cross-reply on September 20, 2019.  The motion is fully briefed and was argued at a hearing on February 3, 2020.  The court has not yet ruledOn August 17, 2020 the Superior Court issued a memorandum opinion denying Savant’s motion for summary judgment on the motion.issue of champerty.

On July 26, 2019, the Company moved to modify the previously agreed-upon discovery schedule to extend discovery through December 31, 2019, which the Superior Court granted.  In subsequent orders, the discovery schedule was further extended until the end of June 2020.

On July 30, 2019, the Company filed a motion to dismiss Savant’s Chancery Action.  Savant filed an amended complaint on September 4, 2019, and the Company filed its opening brief in support of its motion to dismiss on October 11, 2019.  That motion is fully briefed and was argued at a hearing on February 3, 2020. The court has not yet ruled onOn August 17, 2020 the motion.Superior Court issued a memorandum opinion denying the Company’s motion to dismiss Savant’s Chancery Action.

On August 19, 2019, Savant moved to dismiss the Company’s amended Superior Court complaint.  On September 27, 2019, the Company filed an opposition to Savant’s motion and, in the alternative, requested leave to file a second amended complaint against Savant.  Savant consented to the filing of the second amended complaint and withdrew their motion to dismiss.  Savant filed a partial motion to dismiss against a co-defendant on October 30, 2019.  That motion is fully briefed and was argued at a hearing on February 3, 2020. At the February 3, 2020 hearing, the Court reserved judgment on the parties’ reciprocal motions. On August 17, 2020, the Superior Court issued a memorandum opinion granting in part and denying in part Savant’s motion to dismiss the Company’s amended Superior Court complaint. The Superior Court found the Company lacked standing because it assigned its interest to its co-plaintiff Madison. However, the Superior Court found that Madison had standing to proceed. Although the Company was dismissed from all counts of the Superior Court Action it continues to possess an interest in the Superior Court Action because of its ownership of Madison and remains a litigant because of Savant’s Chancery Action. Savant’s motion to dismiss the Company’s amended Superior Court complaint was denied in all other respects.

On May 22, 2020, upon the request of the parties, the Superior Court stayed both Delaware actions until July 29, 2020.

On June 30, 2020, Savant exercised 20,000 warrants in a cashless exercise resulting in 10,909 shares being issued to Savant.

On July 24, 2020, the parties submitted a joint status report in the Delaware actions. The parties also requested a status conference with the Court to discuss moving the trial from October 2020 to some later time.

On August 20, 2020, the Court held the requested status conference and ordered that a consolidated trial for the Superior Court Action and Chancery Action would be held in April 2021. The parties subsequently agreed to a five-day trial starting on April 12, 2021.

On September 29, 2020, upon the request of the parties, the Superior Court revised the existing discovery schedule. Under the revised discovery schedule fact discovery closed on November 9, 2020 and expert discovery closed on December 18, 2020.

On October 7, 2020, Savant moved for leave to amend its complaint in the Chancery Action to add a claim for breach of contract related to its exercise of 20,000 warrants.warrants on June 30, 2020. Savant claims that the Company’s issuance of 10,909 shares was insufficient under the warrant. On November 23, 2020, the Superior Court granted Savant’s motion for leave to amend its complaint in the Chancery Action. The Company answered the second amended complaint in the Chancery Action on December 11, 2020.

On November 30, 2020, the Superior Court revised the discovery schedule to permit the Company to take additional discovery regarding Savant’s second amended complaint in the Chancery Action. Under this revised schedule, the Company had until December 18, 2020 to take additional discovery. Further, the deadline to complete expert discovery was moved to January 5, 2021. A consolidated trial for the Superior Court Action and Chancery Action remained scheduled for April 2021.

On December 18, 2020, fact discovery closed.

On January 5, 2021, the Company moved for leave to amend the Superior Court complaint to add Scott Freeman as a defendant. Savant opposed the motion for leave to amend on February 5, 2021. Briefing was completed on March 5, 2021. Further, the deadline for expert discovery closed.

On January 19, 2021, the Company and Savant filed competing motions for summary judgment on their respective claims in the Superior Court Action and Chancery Action. Oppositions to the motions for summary judgment were filed on February 5, 2021 and replies were filed on February 24, 2021.

On March 18, 2021, the Court held a hearing on the summary judgment motions and the Company’s motion for leave to amend. The Court reserved decision on the summary judgment motions, denied the Company’s motion for leave to amend and postponed the April 2021 trial. The Company is awaiting the Court’s availability to proceed with trial.

Private Placement Litigation

On June 15, 2020, a complaint was filed against Humanigenthe Company and Dr. Durrant in the Commercial Division of the Supreme Court of the State of New York. The case caption is Alliance Texas Holdings, LLC et al. v. Humanigen, Inc. et al., Index No. 652490/2020 (“Alliance Texas Holdings Case”). The plaintiffs in the Alliance Texas Holdings Case comprise a group of 17 prospective investors introduced to Humanigen by Noble Capital Markets, Inc. (“Noble”), which had been engaged by the Company as a non-exclusive placement agent in connection with the Private Placement.a private placement of its common stock (the “Private Placement”). The plaintiffs had indicated interest in purchasing shares of common stock in the Private Placement but, due to the strength of demand for shares from other prospective investors, introduced to the company by J.P. Morgan Securities LLC, the lead placement agent for the Private Placement, the plaintiffs were not allocated any investment amount. The plaintiffs allege that the Company and Dr. Durrant breached a contractual obligation to deliver shares of common stock to the plaintiffs. The plaintiffs seek to recover for losses due to alleged fraudulent misstatements and the Company’s failure to deliver shares to them and seek equitable relief in the form of specific performance. The Defendants filed a MotionA motion to Dismissdismiss the Complaintcomplaint in the Alliance Texas Holdings Case on July 24, 2020. The Parties completed briefing on the Motion to Dismiss on September 4, 2020. The Motion to Dismiss is currently being considered by the court.

On June 19, 2020, Noble filed a separate complaint against Humanigen in the Circuit Court of the Fifteenth Judicial Circuit inhas been fully briefed and for Palm Beach County, Florida, also arising from the Private Placement. On July 13, 2020, the Defendants removed Noble’s complaint to United States District Court for the Southern District of Florida. The case caption is Noble Capital Markets, Inc. v. Humanigen, Inc., Case No. 9:20-CV-81131-WPD (the “Noble Case”). Noble’s complaint alleges that Humanigen breached the terms of its engagement letters with Noble by refusing to pay it the sales commissions it would have earned had its prospective investors received the entire allocation of shares sought in the Private Placement, as opposed to the $4 million of shares actually allocated to Noble and its clients. Noble is seeking payment in full of the commission, damages for Humanigen’s alleged tortious interference with Noble’s business relationship with the investors it introduced to Humanigen, but which were not allocated shares in the Private Placement, and attorneys’ fees. The Defendants filed a Motion to Dismiss Counts II-V of the Complaint in the Noble Case on July 20, 2020. The Parties completed briefing on the Motion to Dismiss on August 26, 2020. The Motion to Dismiss is currently being considered by the court.

The Company believes that the claims made in each complaintthe Alliance Texas Holdings Case are without merit, and it is prepared to defend itself vigorously.

10.On April 19, 2021, the Company and Noble entered into a confidential settlement agreement in respect of a separate lawsuit brought by Noble related to the Private Placement (the “Noble Case”) captioned Noble Capital Markets, Inc. v. Humanigen, Inc., Case No. 9:20-CV-81131-WPD, pursuant to which the Noble Case was dismissed with prejudice. 

11. Subsequent Events

On October 5, 2020, the Company’s Compensation Committee determined that the Company had achieved or exceeded the original fiscal year 2020 performance criteria and objectives, previously established in connection with the Company’s 2020 annual incentive plan. As a result, the Board (with Dr. Cameron Durrant, the Company’s Chairman and Chief Executive Officer, abstaining) unanimously approved the acceleration of the payout of a portion of Dr. Durrant’s fiscal year 2020 bonus. Dr. Durrant will remain eligible to receive additional payouts under the 2020 annual incentive plan to the extent the Board determines that the Company has achieved certain additional and stretch goals for 2020.

Based on the Company’s achievement of certain pre-established fiscal year 2020 performance criteria and objectives, Dr. Durrant was awarded a fiscal year 2020 bonus of $1,512,000, with 50% of such bonus being paid in cash and 50% being awarded in stock options. The options were fully vested on the grant date.

On October 13, 2020 the Company announced that the National Institute of Allergy and Infectious Diseases (NIAID), part of NIH, launched its ACTIV-5 "Big Effect Trial" (ACTIV-5/BET), designed to determine whether certain approved therapies or investigational drugs in late-stage clinical development show promise against COVID-19 and, therefore, merit advancement into larger clinical trials. ACTIV-5/BET, which is expected to enroll at as many as 40 US sites, will evaluate lenzilumab with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients with approximately 100 patients expected to be assigned to each study arm. Humanigen is providing lenzilumab for the study, which is fully funded by NIH.

On October 29, 2020,March 30, 2021, the Company entered into an amended and restated employment agreement (the “New Agreement”) with Dr. Durrant. The Newthe Underwriting Agreement replaces Dr. Durrant’s previous employment agreement withproviding for the public offering of 5,000,000 shares of the Company’s common stock. In addition, the Company (the “Prior Agreement”).granted the underwriters a 30-day option to purchase an additional 750,000 shares of its common stock. The initial sale of 5,000,000 shares closed on April 5, 2021. On May 3, 2021, the Company closed on the sale of an additional 427,017 shares of its common stock related to the exercise of the underwriters’ 30-day option.

Consistent withThe net proceeds from this offering, after deducting underwriting discounts and estimated offering costs, are estimated to be approximately $94.1 million. The Company expects to use the terms of the Prior Agreement, the New Agreement provides that Dr. Durrant’s annual base salary will remain at $600,000net proceeds for manufacturing and he will remain eligible for an annual bonus targeted at 60% of his base salary, with Dr. Durrant’s base salary and target bonus subject to review by the Boardinventory costs in connection with its regular reviewefforts to prepare for potential commercialization of the Company’s executive compensation program. The New Agreement provides for a term ending December 31, 2021, with such term extending automatically for successive one year terms thereafter unless either Dr. Durrant or the Company gives six months prior notice of non-renewal.

Under the New Agreement, Dr. Durrant is entitled to receive certain benefits upon termination of employment under certain circumstances. If the Company terminates Dr. Durrant’s employment for any reason other than “Cause”, or if Dr. Durrant resigns for “Good Reason” (each as such term is definedlenzilumab in the New Agreement), Dr. Durrant will receive a lump sum payment equal to the sumevent of (i) his then-current annual salaryreceipt of an EUA or other CMA for use in COVID-19 patients, as well as for working capital and (ii) the amount of the annual bonus earned by Dr. Durrant for the year prior to the year of termination.other general corporate purposes.

The New Agreement additionally provides that if Dr. Durrant resigns for Good Reason orOn April 19, 2021, the Company terminates his employment other than for Cause within the three month period prior to or the two year period following a change in control (as such term is definedannounced positive data with lenzilumab in the New Agreement),Phase 1b study evaluating the efficacy and safety of lenzilumab with Yescarta, the CAR-T therapy developed by Kite in patients with DLBCL. In addition, the Company must pay or causeannounced its successorplans to pay Dr. Durrantinitiate a lump sum cash payment equalrandomized, multicenter, potentially registrational, Phase 2 study to two times (a) his annual salary plus (b)evaluate the aggregate bonus received by Dr. Durrant forefficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. In connection with its announcement of its decision to pursue the year immediately preceding the change in control. In addition, upon such a resignation or termination, Dr. Durrant will also be entitled to be reimbursed for certain monthly health plan continuation premiums for up to 18 months, and all outstanding stock options held by Dr. Durrant will immediately vest and become exercisable.

On November 3, 2020,Phase 2 study, the Company entered into a License Agreement (the “License Agreement”)also announced the termination of the clinical collaboration agreement with KPM Tech Co., Ltd. (“KPM Tech”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM Tech,Kite effective on May 18, 2021, the “Licensee”). Pursuant30^th day following the Company’s notice of termination. The parties are expected to collaborate on the wind down of activities related to the License Agreement, among other things,Phase 1b study as the Company granted the Licenseeprepares to initiate a license under certain patents and other intellectual property to develop and commercialize the Company’s lead product candidate, lenzilumab, for treatment of COVID-19 pneumonia,Company-sponsored Phase 2 study with all commercially available CD19 CAR-T therapies in South Korea and the Philippines, subject to certain reservations and limitations. The Licensee will be responsible for gaining regulatory approval for, and subsequent commercialization of, lenzilumab in those territories.

As consideration for the license, the Licensee has agreed to pay the Company (i) an up-front license fee of $6.0 million, payable promptly following the execution of the License Agreement, (ii) up to an aggregate of $14.0 million in two payments based on achievement by the Company of two specified milestones in the US, and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that the Company will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.

On November 5, 2020, the Company and the Department of Defense (DoD) Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (JPEO-CBRND or JPEO) entered into a Cooperative Research and Development Agreement (“CRADA”) in collaboration with the Biomedical Advanced Research and Development Authority (BARDA), part of the Office of the Assistant Secretary for Preparedness and Response (ASPR) at the U.S. Department of Health and Human Services (HHS), in support of Operation Warp Speed (“OWS”), to assist in the development of lenzilumab in advance of a potential Emergency Use Authorization (“EUA”) for COVID-19.

Pursuant to the CRADA, the Company will be provided access to a full-scale, integrated team of OWS manufacturing, and regulatory subject matter experts, leading decision makers and statistical support in anticipation of applying for EUA and subsequently a Biologics License Application (“BLA”), for lenzilumab as a potential treatment for COVID-19. The CRADA also provides that OWS regulatory experts will work with the Company on U.S. Food and Drug Administration (FDA) communications, meetings and regulatory filings. The CRADA aims to support the ongoing lenzilumab Phase 3 clinical trials, focusing on efficiently generating an EUA and BLA submission. In addition to providing access under EUA, a goal of the CRADA is to ensure lenzilumab receives the benefits provided by Public Law 115-92.DLBCL.

You should read the following discussion and analysis together with our financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our 2019Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020. This Quarterly Report on Form 10-Q contains statements that discuss future events or expectations, projections of results of operations or financial condition, trends in our business, business prospects and strategies and other “forward-looking” information. In some cases, you can identify “forward-looking statements” by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential” or “continue” or the negative of those words and other comparable words. These statements may relate to, among other things, our expectations regarding the scope, progress, timing, expansion, and costs of researching, developing and commercializing our product candidates; our expectations relating to regulatory pathways to emergency use or other conditional marketing authorizations and the opportunity to benefit from various regulatory incentives; expectations for our financial results, revenue, operating expenses and other financial measures in future periods; and the adequacy of our sources of liquidity to satisfy our working capital needs, capital expenditures, and other liquidity requirements. Among the factors that could cause actual results to differ materially are the factors discussed under “Risk Factors” in our most recent Annualthis Quarterly Report on Form 10-K,10-Q, and each subsequently filed Quarterly Report on Form 10-Q. Some additional factors that could cause actual results to differ include:

These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see “Risk Factors” in Item 1A of Part I of our 2019 Form 10-K.II below. You should review these risk factors for a more complete understanding of the risks associated with an investment in our securities. However, we operate in a competitive and rapidly changing environment and new risks and uncertainties emerge, are identified or become apparent from time to time.time-to-time. It is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Form 10-Q. You should be aware that the forward-looking statements contained in this Form 10-Q are based on our current views and assumptions. We undertake no obligation to revise or update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date hereof or to reflect new information or the occurrence of unanticipated events, except as required by law.

Overview

We were incorporated on March 15, 2000 in California and reincorporated as a Delaware corporation in September 2001 under the name KaloBios Pharmaceuticals, Inc. Effective August 7, 2017, we changed our legal name to Humanigen, Inc. During February 2018, we completed the financial restructuring transactions announced in December 2017 and continued our transformation intois a clinical-stageclinical stage biopharmaceutical company, by furtherdeveloping our clinical stageits portfolio of immuno-oncologyanti-inflammatory immunology and immunologyimmuno-oncology monoclonal antibodies.

We are focusing our efforts on the development of our lead product candidate, lenzilumab™, our proprietary Humaneered® (“Humaneered”) anti-human granulocyte-macrophage colony-stimulating factor (“GM-CSF”)GM-CSF monoclonal antibody. Lenzilumab is a monoclonal antibody that has been demonstrated in animal models to neutralize GM-CSF, a cytokine that we believe is of critical importance in the hyperinflammatory cascade, sometimes referred to as cytokine release syndrome (“CRS”)CRS or cytokine storm, associated with COVID-19, chimeric antigen receptor T-cell (“CAR-T”)CAR-T therapy and acute Graft versus Host Disease (“GvHD”)GvHD associated with bone marrow transplants. GM-CSF neutralization with lenzilumab has been shown to reduce downstream inflammatory cytokines, prevent CRSWe believe the results from our Phase 3 study in COVID-19 and reduce its associated neurologic toxicities in-vivoour Phase 1b study in validated preclinical human xenograft models (Blood. 2019 Feb 14;133(7):697-709).CAR-T support the mechanism of action of lenzilumab.

Lenzilumab is currentlyWe believe that we have built a strong intellectual property position in the area of GM-CSF neutralization through multiple approaches and mechanisms, as they pertain to COVID-19, CAR-T, GvHD and multiple other oncology/transplantation, inflammation, fibrosis and autoimmune conditions which may be driven by GM-CSF.

On March 29, 2021, we announced top-line data on the primary endpoint and one secondary endpoint from a phasePhase 3, multi-center, double-blind, placebo-controlled potential registrational trial of lenzilumab (the “LIVE-AIR” study) as a potential therapeutic for newly hospitalized, hypoxic patients with COVID-19 pneumonia. BasedAdditional data from the trial, subsequently published on MedRxiv, a non-peer reviewed journal, on May 5, 2021, support the previously reported primary endpoint, which showed that patients who received lenzilumab and other treatments, including steroids and/or remdesivir, had a 54% greater relative likelihood of survival without ventilation, (“SWOV”), sometimes referred to as “ventilator-free survival” compared with patients receiving placebo and other treatments. Further information about the data generated in the trial and our discussionssubsequent meeting with the FDA including a recent type B meeting, we believe that the phase 3 trial could lead to a potential filing of an Emergency Use Authorization (“EUA”) application if data warrant such a filing. If the EUA were filed and granted, we could begin commercialization. We also intend to file a Biologics license application (“BLA”) in 2021. Based on discussions with FDA, we understand that a BLA will require us to generate and present more clinical data than would be required to support an EUA.is presented below under “—Recent Developments.”

We recently announced the results of an interim analysis of Phase 3 data of lenzilumab in patients hospitalized with COVID-19. This interim analysis suggested that lenzilumab had a clinically meaningful impact on patient recovery, with an estimated 37 percent more recoveries observed in the lenzilumab arm

Lenzilumab is part of the randomized, placebo-controlled, double-blinded study versus current standard of care (SOC). Based on the interim analysis the data safety monitoring board (DSMB) recommended increasing the target number of events (recoveries) from 257Accelerating COVID-19 Therapeutic Interventions and Vaccines (“ACTIV”)-5 and Big Effect Trial (“BET-B”), referred to 402 to maintain the power of the study at 90 percent. The adaptive trial design only allows for the addition of patients if interim data are in the “promising zone” (i.e., achieving or surpassing an average improvement in recoveries of 29 percent (hazard ratio (HR) >1.29) through day 28). The company remains blinded to the data and based on the recommended number of events, the HR was calculated to be 1.37, an average of 37 percent more recoveries observed in the lenzilumab arm compared to the control arm. At the recommendation of the DSMB, we plan to increase enrollment to achieve 402 events (approximately 515 patients). The next interim analysis for efficacy is planned when the study reaches 75 percent events (302 events) which will require approximately 390 patients to be enrolled in the trial. We intend to file for EUA in the first quarter of 2021 either following interim data at 75 percent or at study completion. This Phase 3 trial is enrolling at sites across the U.S. and Latin America. Current enrollment stands at 300 patients.

We recently announced that lenzilumab will be included in the ACTIV-5 “Big Effect Trial” (ACTIV-5/BET).as ACTIV-5/BET-B. This study is sponsored by the National Institutes of Health (“NIH”). ACTIV-5/BETBET-B is designed to determine whether certain approved therapies or investigational drugs in late-stage clinical development show promise against COVID-19 and, therefore, merit advancement into larger clinical trials. ACTIV-5/BET, whichBET-B currently has 27 active U.S. sites enrolling and is expected to enroll at as many as 40 US sites, will evaluateevaluating lenzilumab in combination with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients, with approximately 100 patients expected to be assigned to each study arm. We are providing lenzilumab for the study, which is fully funded by NIH. The ACTIV-5/BET-B Data and Safety Monitoring Board (“DSMB”) met on May 7th and determined that the study should proceed per protocol.

Lenzilumab ishas also beingbeen studied in a multicenter phase 1b/2 potential registrationalmulti-center Phase 1b trial as a sequenced therapy with Yescarta® (axicabtagene ciloleucel) to reduce CRS and neurotoxicity in patients with relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”).DLBCL (NCT04314843), for which we recently announced positive results. Further information about the data generated in the trial is presented below under “—Recent Developments.” This trial is beingwas conducted in partnership with Kite Pharmaceuticals, Inc., a Gilead company (“Kite”), which markets Yescarta. As a result of this positive data and the conclusion of the Phase 1b portion of the study, we elected to terminate the clinical collaboration with Kite. We intend to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the protocol is being submitted to FDA.

We are also in the final planning stages for a Phase 2/3 trial for lenzilumab to treat patients who have undergone allogeneic hematopoietic stem cell therapy (“HSCT”) who are at high and intermediate risk for acute GvHD.GvHD known as the RATinG study. The trial is expected to be conducted by the IMPACT Partnership, a collection of 2322 stem cell transplant centers located in the United Kingdom.Kingdom, and to begin enrollment in the fourth quarter of 2021. We will provide lenzilumab for this study and support certain laboratory tests related to the study. The majority of the study costs will be borne by the partner.

In addition, we are in partnership with SAHMRI and the University of Adelaide to conduct a Phase 2 Trial studying the efficacy of lenzilumab in combination with azacitadine. The study, PREACH-M, is anticipated to begin enrollment in the third quarter of 2021 and to include four sites. We will provide lenzilumab for this study and the majority of the study costs will be borne by the partner.

Our proprietary, patented Humaneered technology platform is a method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies designed for therapeutic use, particularly with acute and chronic conditions. We have developed or in-licensed targets or research antibodies, typically from academic institutions, and then applied our Humaneered technology to produce them. Lenzilumab and our other two product candidates, ifabotuzumab and HGEN005, are Humaneered monoclonal antibodies. Our Humaneered antibodies are closer to human antibodies than chimeric or conventionally humanized antibodies and have a high affinity for their target but low immunogenicity. We believe our Humaneered antibodies offer additional advantages, such as high potency, a slow off-rate and a lower likelihood to induce an inappropriate immune response or infusion related reactions, high potency, and a slow off-rate.reactions.

Effective as of 4:30 p.m. Eastern Time on September 11, 2020 (the “Effective Time”), we amended our charter to effect a reverse stock split at a ratio of 1-for-5. At the Effective Time, each holder of our common stock had its ownership adjusted to reflect ownership of one share of common stock for every five shares of common stock held immediately prior to the Effective Time. No fractional shares were issued in connection with the reverse stock split. Stockholders of record otherwise entitled to receive fractional shares of common stock received cash (without interest or deduction) in lieu of such fractional share interests.

The par value per share and other terms of our common stock were not affected by the reverse stock split, and the number of authorized shares of our common stock will remain at 225,000,000. The reverse stock split reduced the total number of shares of our common stock outstanding as of the Effective Time from approximately 210.9 million shares to approximately 42.2 million shares. Following the Effective Time, the CUSIP number for our common stock changed to 444863203. Unless stated otherwise, all share numbers and share price figures in this Quarterly Report on Form 10-Q have been adjusted, as appropriate, to reflect the reverse stock split.

Our Pipeline

In addition to our programsongoing work with lenzilumab we aredescribed above, our pipeline also exploring the effectiveness of our GM-CSF neutralization technologies (either through the use of lenzilumab as a neutralizing antibody, or through GM-CSF gene knockout) in combination withincludes two other CAR-T, T-cell engaging,monoclonal antibodies, ifabotuzumab and immunotherapy treatments to break the efficacy/toxicity linkage including the prevention and/or treatment of GvHD while preserving graft-versus-leukemia (“GvL”) benefits in patients undergoing allogeneic hematopoietic stem cell therapy (“HSCT”). In this context, GvHD is akin to cytokine storm and we believe this to be a similar mechanism and driven by elevated GM-CSF levels.HGEN005.

We believe that we have builtIfabotuzumab

Ifabotuzumab, a strong intellectual property positionHumaneered monoclonal antibody, formerly referred to as KB004, is a non-fucosylated IgG1κ antibody targeting the EphA3 receptor. EphA3 is a tumor-restricted antigen expressed in the areatumor vasculature and tumor stroma of GM-CSF neutralization through multiple approachesvarious solid tumors including breast, colon, lung, prostate, melanoma, and mechanisms, as they pertain to COVID-19, CAR-T, GvHD and multiple other oncology/transplantation, inflammation, fibrosis and autoimmune conditions which may be driven by GM-CSF.

Our clinical-stage pipeline also comprises a further Phase 1 study which is almost fully enrolled with ifabotuzumab in glioblastoma multiforme (“GBM”) and potentially other, a highly aggressive type of cancer that begins within the brain. On April 10, 2021, we announced positive results from a Phase 1 study of ifabotuzumab in GBM at the American Association for Cancer Research (“AACR”) 2021 Annual Meeting, as described below. We believe that ifabotuzumab, as part of an antibody drug conjugate (“ADC”), has the potential for treating solid cancers and an additional Phase 2 study in CMML. We also have a focus on creating safer and more effective CAR-T therapies intumors, hematologic malignancies and solid tumors via three key modalities:serious pulmonary conditions.

TheseHGEN005

HGEN005 is a Humaneered monoclonal antibody which targets the EMR1, and in which the antibody carbohydrate chains lack fucose, thereby enhancing the targeted cell-killing activity of the antibody. A major limitation of current eosinophil-targeted therapies is incomplete depletion of tissue eosinophils and/or lack of cell selectivity. In preclinical work, HGEN005’s anti-EMR1 activity resulted in dramatically enhanced NK killing of eosinophils from normal and eosinophilic donors and also induced a rapid and sustained depletion of eosinophils in a non-human primate model without any clinically significant adverse events. In 2020, we engaged with NIH to discuss expanding the initial work they have conducted utilizing HGEN005. Given the COVID-19 pandemic the development of HGEN005 and discussions with a leading center in the U.S. to perform the IND- enabling work are on hold.

Except for the potential of lenzilumab for COVID-19 under an EUA or other CMA outside the U.S., our product candidates are in the earlyclinical stage of development and will require substantial time, resources, research and development, and regulatory approval prior to commercialization. Furthermore, none of these product candidates have been approved for marketing and it may be years before such approval is granted,any of our products are approved for use, if at all. Our current pipeline is depicted below:

Lenzilumab in COVID-19

Phase 3 top-line data readout expected Q1 2021

Clinical-Stage Pipeline: Non COVID-19

¹ Phase III may not be necessary for approval in ZUMA-19; precedent is CAR-Ts to date have been approved on Phase II dataUK

² UK

³ US, EU, Australia

⁴ Australia

AsRecent Developments

On March 29, 2021, we announced top-line data on the primary endpoint and one secondary endpoint from the LIVE-AIR study. Additional data from the trial, subsequently published on MedRxiv, a non-peer reviewed journal, on May 5, 2021, support the previously reported primary endpoint that showed lenzilumab improved the likelihood of September 30, 2020,SWOV, sometimes referred to as ”ventilator-free survival”, by 54% in the Company had cashmodified intent-to-treat (“mITT”) population (Hazard Ratio, (“HR”): 1.54; 95%CI: 1.02-2.31, p=0.041) ). New analysis included in the publication showed that lenzilumab improved the likelihood of SWOV aby 90% in the intent-to-treat (“ITT”) population (HR: 1.90; 1.02-3.52, nominal p=0.043) compared to placebo. SWOV also relatively improved by 92% in subjects who received both corticosteroids and cash equivalents of $91.4 million.remdesivir (1.92; 1.20-3.07, nominal p=0.0067); by 2.96-fold in subjects with C-reactive protein (CRP) levels <150 mg/L and age <85 years (2.96; 1.63–5.37, nominal p=0.0003); and by 88% in subjects hospitalized ≤2 days prior to randomization (1.88; 1.13-3.12, nominal p=0.015). Survival was improved by 2.17-fold in subjects with CRP<150 mg/L and age <85 years (2.17; 1.04-4.54, nominal p=0.040). We believe the data published on MedRxiv, generated from the LIVE-AIR study, support the conclusion that lenzilumab significantly improved SWOV in hospitalized, hypoxic subjects with COVID-19 pneumonia over and above treatment with remdesivir and/or corticosteroids. Subjects with CRP<150 mg/L and age <85 years demonstrated an improvement in survival and appeared to derive the greatest benefit from lenzilumab.

We have shared the top-line data on just the primary endpoint and one secondary endpoint (the only data then available while the remaining analysis was pending) with the FDA in a Pre-EUA Type B meeting in mid-April 2021. We are preparing to submit an EUA application at the end of May 2021. As requested by the FDA, the EUA application will include secondary endpoints and supplemental data analysis from LIVE-AIR, including those referenced in the MedRxiv publication, as well as additional stability and compatibility information required for the CMC section of the EUA application. There can be no assurance that the net proceeds from our recent underwritten public offeringdata published on MedRxiv will be sufficient for an EUA or that the FDA will not require additional information in order to fund our planned operations and capital expenditure requirements for at least 12 months. This evaluationgrant an EUA. If the EUA is based on relevant conditions and events that are currently known or reasonably knowable. As a result,granted, we could deplete our available capital resources sooner than we currently expect, and a delay in obtaining or failurebegin to obtain an EUA could further constrain our cash resources. commercialize lenzilumab for the treatment of newly hospitalized COVID-19 pneumonia patients.

We have based these estimates on assumptions that may prove to be wrong,also been in discussion with the Medicines and our operating projections, including our projected net revenue followingHealthcare Products Regulatory Agency (“MHRA”) for the potential receiptuse of an EUA for lenzilumab in COVID-19 patients in the United Kingdom and we plan to initiate a rolling submission for CMA before the end of the second quarter of 2021. We also plan to submit for CMA to the European Medicines Agency (“EMA”) for the use of lenzilumab in the European Union. Further, we are reviewing the possibility of similar submissions for approval or compassionate use in other territories or countries worldwide.

We intend to submit a Biologics License Application (“BLA”) to FDA in 2022, for the use of lenzilumab in hospitalized, hypoxic COVID-19 patients. Since BLAs typically require more than one study, we are currently evaluating the extent to which ACTIV-5/BET-B may changeserve as a basis for a BLA-confirmatory study for lenzilumab.

On March 30, 2021, we entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, Credit Suisse Securities (USA) LLC and Cantor, as representatives of the several underwriters, in connection with the public offering of 5,000,000 shares of our common stock. In addition, we granted the underwriters a 30-day option to purchase an additional 750,000 shares of our common stock. The initial offering closed on April 5, 2021. On May 3, 2021, we closed on the sale of an additional 427,017 shares of our common stock related to the exercise of the underwriters’ 30-day option. The aggregate gross proceeds from the sale of the 5,427,017 shares in the offering, inclusive of the additional shares purchased by the underwriters, were approximately $100.4 million. The net proceeds from this offering, after deducting underwriting discounts and estimated offering costs, will be approximately $94.1 million.

On April 10, 2021, we presented top-line results from the Phase 1 safety and bioimaging trial of ifabotuzumab in patients with GBM at the AACR 2021 Annual Meeting. The Phase 1 study primarily sought to determine the safety and recommended Phase 2 dose of ifabotuzumab in patients with GBM, the most frequent and lethal primary brain neoplasm, with 5-year survival rates of 10%. It is estimated there are more than 18,000 deaths from brain cancer annually in the U.S. The results of the study show in all patients for both doses, that ifabotuzumab demonstrates highly sensitive, specific, and reproducible targeting of the tumor and tumor microenvironment. There were no dose-limiting toxicities observed and all adverse events were readily manageable. Additional studies are being planned to evaluate ifabotuzumab as an antibody-drug conjugate in patients with solid tumors, such as lung, colon, breast, prostate, melanoma and pancreatic cancer.

On April 19, 2021, we announced positive data from the ZUMA-19 study. At the recommended Phase 2 dose of lenzilumab, the Objective Response Rate (“ORR”) was 100% and no patient experienced severe cytokine release syndrome (“CRS”) or severe neurotoxicity (“NT”). This study was a standard 3+3 design with three patients administered 600 mg lenzilumab (“cohort 1”) and three patients administered 1,800 mg lenzilumab (“cohort 2”) just prior to CAR-T. The recommended Phase 2 dose was determined to be 1,800 mg. In the six study patients, the ORR reported was 83% (n=5) which included four complete responses (“CR”). In cohort 1, there was no severe CRS (≥ grade 3). One patient experienced grade 3 NT with a two-day duration. At the recommended Phase 2 dose (cohort 2), ORR was 100% (n=3) and the toxicity-free CR (CRS and NT < grade 2) was 66% (n = 2). There was no severe CRS or severe NT at the recommended Phase 2 dose. There were no adverse events attributed to lenzilumab across the study. Inflammatory markers were correlated with reduced rates of CRS and NT. Lenzilumab dose-dependently reduced myeloid cytokines IL-6, IL-8, MCP-1, and IP-10 (CXCL-10) and systemic inflammatory markers CRP, ferritin, and SAA in the patients studied. As a result of many factors currently unknownthis positive data and the conclusion of the Phase 1b portion of the study, we elected to us. If we are unableterminate the clinical collaboration with Kite. We intend to raise additional capital when needed or on acceptable terms, we would be forcedinitiate a randomized, multi-center, potentially registrational, Phase 2 study to delay, reduce, or eliminate our researchevaluate the efficacy and development programssafety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and commercialization efforts. Alternatively, we might raise funds through strategic collaborations, public or private financings or other arrangements. Such funding, if needed, may not be available on favorable terms, or at all. The financial statements included herein do not include any adjustments that might result from the outcome of this uncertainty.protocol is being submitted to FDA.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States,U.S., or GAAP. The preparation of our financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Our management believes judgment is involved in determining revenue recognition, valuation of financing derivative, the fair value-based measurement of stock-based compensation, accruals and warrant valuations.accruals. Our management evaluates estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements. If our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our statements of operations, liquidity and financial condition.

Until December 31, 2018, we qualified as an emerging growth company (“EGC”) under the JOBS Act. Emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we may not be subject to the same new or revised accounting standards as other smaller reporting companies that are not emerging growth companies.

We ceased to be considered as an EGC as of December 31, 2018. Accordingly, we are required to adopt new accounting standards on the same timeline as other smaller reporting companies.

There were no significant and material changes in our critical accounting policies and use of estimates during the three months ended September 30, 2020,March 31, 2021, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Use of Estimates” in our 20192020 Annual Report on Form 10-K, filed with the SEC on March 16, 2020.10, 2021.

Results of Operations

General

We have not generated net income from operations for any periods presented. At September 30, 2020,March 31, 2021, we had an accumulated deficit of $342.1 $440.0 million primarily as a result of research and development and general and administrative expenses. While we may in the future generate revenue from a variety of sources, including license fees, milestone payments, and research and development payments in connection with strategic partnerships, our product candidates may never be successfully developed or commercialized and we may therefore never realize revenue from any product sales, particularly because most of our product candidates are at an early stage of development. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenue or profits.

Comparison of Three Months Ended March 31, 2021 and 2020

The following table summarizes the results of our operations for the periods indicated (amounts in thousands, except percentages):

Revenue

Revenue represents license revenue under the license agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”).

Research and Development Expenses

Conducting research and development is central to our business model. We expense both internal and external research and development costs as incurred. We track external research and development costs incurred by project for each of our clinical programs. Our external research and development costs consist primarily of:

Other research and development costs consist primarily of internal research and development costs such as salaries and related fringe benefit costs for our employees, (such as workers compensation and health insurance premiums), stock-based compensation charges, travel costs, lab supplies, overhead expenses such as rent and utilities, and externaltravel costs not allocated to one of our clinical programs. Internal research and development costs generally benefit multiple projects and are not separately tracked per project.

Research and development expenses increased by $59.2 million from $0.7 million for the three months ended March 31, 2020 to $59.9 million for the three months ended March 31, 2021. The increase is primarily due to a $7.5 million increase in clinical trial expenses and a $51.4 million increase in lenzilumab manufacturing costs related to the trial in COVID-19, which began in May 2020. We expect our development costs will continue to increase throughout 2021 as a result of securing additional manufacturing capacity, the production of lenzilumab for commercial use and preparation of the materials necessary to file for an EUA in the U.S. and for conditional approval in the UK and Europe. In addition, we anticipate clinical trial costs to increase due to the enrollment of patients in the planned clinical trials.

The following table shows our total research and development expenses for the three and nine months ended September 30, 2020March 31, 2021 and 2019:2020:

General and Administrative Expenses

General and administrative expenses consist principally of personnel-related costs (including stock-based compensation), professional fees for legal and patent expenses, consulting, audit and tax services, investorpublic, governmental and publicinvestor relations costs, rent and other general operating expenses not otherwise included in research and development.

Comparison of Three Months Ended September 30, 2020General and 2019

Research and developmentadministrative expenses increased $21.9by $3.5 million from $0.5$1.4 million for the three months ended September 30, 2019March 31, 2020 to $22.4$4.9 million for the three months ended September 30, 2020.March 31, 2021. The increase is primarily due to increased clinical trial and clinical material manufacturing costs related to the clinical trial in COVID-19. We expect our development costs to continue to increase in the remaining three months of 2020 as a result of securing manufacturing capacity, the production of lenzilumab and the enrollment of patients in the clinical trials for COVID-19 and CAR-T therapy.

Selling, general and administrative expenses increased $6.8 million from $1.5 million for the three months ended September 30, 2019 to $8.3 million for the three months ended September 30, 2020. The increaseMarch 31, 2021, is primarily due to increased compensation costsincreases in consulting and other professional services fees of $2.1$1.8 million, relatedpersonnel-related expenses of $1.0 million attributable to five new hires since the hiringfirst quarter of a new2020, including our Chief Operating Officer and Chief Financial Officer, and a new Chief Accounting and Administrative Officer, as well as an increase in bonus costs for our Chief ExecutiveCommercial Officer, an increase in public and investor relations expenseexpenses of $3.5$0.5 million, which amount includesand business insurance-related expenses of $0.2 million, all in support of our increased operating activities to support the issuance of warrants with a fair value of $1.9 million to certain third party consultants,trial for COVID-19 and an increase in legal fees of $0.6 million, incurred in connection with financing preparations and other corporate actions taken. In the third quarter of 2020, we have also incurred $0.6 million in commercial operations expense related to the hiring of a Chief Commercial Officer and the retention of consultants as we prepare for a potential commercial launch under an EUA in COVID-19. While wecommercialization of lenzilumab. We expect our overall general and administrative costs to decreaseincrease in the remaining three months of 20202021 as compared to the third quarter, we expect that we will continue to scale our support operations in connection with the ongoingadditional clinical trials of lenzilumab in COVID-19development activities, and will increase our commercial operations spending in preparation for potential commercialization under an EUA.EUA or other CMA outside the U.S.

Interest Expense

Interest expense decreased $0.3$0.4 million to $0.0 million$19 thousand for the three months ended September 30, 2020,March 31, 2021, reflecting the payoff of substantially all of our debt with proceeds from the Private Placementprivate placement of our common stock in June 2020, while during2020. On March 10, 2021, we executed a Loan and Security Agreement with Hercules Capital, Inc., (“Hercules”), as agent for its affiliates serving as lenders thereunder. The agreement provides a loan in the aggregate principal amount of $80 million (the “Term Loan”). On March 29, 2021, the Company drew the initial $25.0 million under the Term Loan. After giving effect to payment of fees and expenses associated with the draw, the Company received net proceeds of approximately $24.4 million. See Note 5 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information on the Term Loan.

Other Expense

Other expense increased by $1.2 million for the three months ended September 30, 2019, we were paying interest on outstanding debt.

Comparison of Nine Months Ended September 30, 2020 and 2019

Research and development expenses increased $42.1 million from $2.1 million for the nine months ended September 30, 2019 to $44.2 million for the nine months ended September 30, 2020. The increase isMarch 31, 2021, primarily due to higher enrollment in the clinical trial in COVID-19, increased manufacturing costs for clinical supplies of lenzilumab and reservation fees and the expansion of manufacturing capacity including the addition of contract manufacturing organizations (CMOs) in anticipation of potential commercialization. We expect our development costs to continue to increase in the remaining three months of 2020 as a result of securing additional manufacturing capacity, progressing Chemistry, Manufacturing and Controls (“CMC”) work and continued enrollment of patients in the clinical trials for COVID-19 and CAR-T therapy.

Selling, general and administrative expenses increased $6.6 million from $5.1 million for the nine months ended September 30, 2019 to $11.7 million for the nine months ended September 30, 2020. The increase is primarily due to increased compensation costs of $1.3 million, related to the hiring of a new Chief Operating Officer and Chief financial Officer and a new Chief Accounting and Administrative Officer, as well as an increase in bonus accruals, an increase in public and investor relations expense of $3.6 million, which amount includes the issuance of warrants with a fair value of $1.9 million to certain third party consultants, an increase in legal fees of $0.8 million, primarily incurred in connection with preparation to uplist on Nasdaq and other corporate actions taken and an increase of consulting costs of $0.3 million. We have also incurred $0.6 million in commercial operations expense related to the hiring of a Chief Commercial Officer and the retention of consultants as we prepare for commercial launch under an EUA in COVID-19. While we expect our overall general and administrative costs to decrease in the remaining three months of 2020, we expect that we will continue to scale our support operations in connection with the ongoing clinical trials of lenzilumab in COVID-19 and will increase our commercial operations spending in preparation for potential commercialization under an EUA.

Interest expense increased $0.3 million from $1.0 million recognized for the nine months ended September 30, 2019 to $1.3 million for the nine months ended September 30, 2020. The increase is primarily due to the payoffs of the 2020 Convertible Notes in June 2020 and the conversions of the 2018 and 2019 Convertible Notes in April 2020 and the accretion of the remaining original issue discounts, beneficial conversion factors and prepayment premiums related thereto.

Other expense, net was essentially unchanged for the nine months ended September 30, 2020 as compared to the same period in 2019.litigation settlement costs.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through proceeds from the public offerings of our common stock, private placements of our common and preferred stock, debt financings, interest income earned on cash, and cash equivalents, and marketable securities, and borrowings against lines of credit.credit, and more recently, with the proceeds under the South Korea Agreement. Specifically, under the South Korea Agreement, we received a $6.0 million upfront payment (or $4.5 million, net of withholding taxes and other fees and royalties) in the fourth quarter of 2020 and the first milestone payment of $6.0 million (or $4.5 million, net of withholding taxes and other fees and royalties) which was met in the first quarter of 2021 and received in the second quarter of 2021. At September 30, 2020,March 31, 2021, we had cash and cash equivalents of $91.5$92.9 million.In the second quarter of 2021, we sold an aggregate of 5,427,017 shares of our common stock in connection with an underwritten public offering, raising net proceeds of approximately $94.1 million after deducting underwriting discounts and estimated offering costs.

Primary Sources of and Uses of Cash

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below: