Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019 March 31, 2020
OR
[ ]☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36296

Sesen Bio, Inc.
(Exact name of registrant as specified in its charter)

Delaware26-2025616
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)

245 First Street, Suite 1800
Cambridge, MA
02142
(Address of principal executive offices)(Zip Code)
(617) (617) 444-8550
(Registrant’s telephone number, including area code)
Not applicable.
(Former name, former address and former fiscal year, if changed since last report)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueSESNThe Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer[ ]☐Smaller reporting company[X]☒
Accelerated filerFiler[X]☒Emerging growth company[X]☐
Non-accelerated filer[ ]☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]☐ No [X]☒    
There were 104,679,391110,416,298 shares of the registrant's common stock outstanding as of November 7, 2019.
May 4, 2020.



Table of Contents
SESEN BIO, INC.
Quarterly Report on Form 10-Q for the Quarterly Period ended September 30, 2019March 31, 2020
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements.
1
Condensed Consolidated Balance Sheets as of September 30, 2019March 31, 2020 and December 31, 20182019
1
Condensed Consolidated Statements of OperationsIncome (Operations) and Comprehensive LossIncome (Loss) for the Three and Nine Months ended September 30,March 31, 2020 and 2019 and 2018
2
Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months ended September 30,March 31, 2020 and 2019 and 2018
3
Condensed Consolidated Statements of Cash Flows for the NineThree Months ended September 30,
    March 31, 2020 and 2019 and 2018
54
Notes to Condensed Consolidated Financial Statements
65
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
20
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
3334
Item 4.Controls and Procedures.
3334
PART II - OTHER INFORMATION
Item 1.Legal Proceedings.
35
Item 1A.Risk Factors.
35
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
35
Item 3.Defaults Upon Senior Securities.
35
Item 4.Mine Safety Disclosures.
35
Item 5.Other Information.
35
Item 6.Exhibits.
3637
SIGNATURES




Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.   Financial Statements.
SESEN BIO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In thousands, except share and per share data)
March 31,
2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents$42,463  $48,121  
Prepaid expenses and other current assets2,420  6,326  
Total current assets44,883  54,447  
Restricted cash20  20  
Property and equipment, net of accumulated depreciation
    of $789 and $758, respectively
207  238  
Intangible assets46,400  46,400  
Goodwill13,064  13,064  
Other assets91  196  
Total Assets$104,665  $114,365  
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable$2,068  $1,902  
Accrued expenses4,893  6,169  
Other current liabilities405  446  
Total current liabilities7,366  8,517  
Contingent consideration66,320  120,020  
Deferred tax liability12,528  12,528  
Total Liabilities$86,214  $141,065  
Commitments and contingencies
Stockholders’ Equity (Deficit):
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at March 31, 2020 and December 31, 2019; 0 shares issued and outstanding at March 31, 2020 and December 31, 2019—  —  
Common stock, $0.001 par value per share; 200,000,000 shares authorized at March 31, 2020 and December 31, 2019; 109,991,553 and 106,801,409 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively110  107  
Additional paid-in capital270,301  266,717  
Accumulated deficit(251,960) (293,524) 
Total Stockholders’ Equity (Deficit)18,451  (26,700) 
Total Liabilities and Stockholders’ Equity (Deficit)$104,665  $114,365  
 September 30,
2019		 December 31, 2018
Assets
 
Current assets:
 
Cash and cash equivalents$57,865
 $50,422
Prepaid expenses and other current assets1,547
 1,334
Total current assets59,412
 51,756
Restricted cash20
 20
Property and equipment, net of accumulated depreciation
    of $4,519 and $4,355, respectively
294
 321
Intangible assets46,400
 46,400
Goodwill13,064
 13,064
Other assets208
 —
Total Assets$119,398
 $111,561
Liabilities and Stockholders’ Equity
 
Current liabilities:
 
Accounts payable$2,583
 $1,367
Accrued expenses6,350
 4,746
Other current liabilities159
 —
Total current liabilities9,092
 6,113
Contingent consideration95,000
 48,400
Deferred tax liability12,528
 12,528
Other liabilities311
 313
Total Liabilities$116,931
 $67,354
Commitments and contingencies
 
Stockholders’ Equity:
 
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at September 30, 2019 and December 31, 2018; no shares issued and outstanding at September 30, 2019 and December 31, 2018—
 —
Common stock, $0.001 par value per share; 200,000,000 shares authorized at September 30, 2019 and December 31, 2018; 101,267,578 and 77,456,180 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively101
 77
Additional paid-in capital262,337
 230,154
Accumulated deficit(259,971) (186,024)
Total Stockholders’ Equity2,467
 44,207
Total Liabilities and Stockholders’ Equity$119,398
 $111,561

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

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SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS INCOME (OPERATIONS)
AND COMPREHENSIVE LOSSINCOME (LOSS)
(Unaudited; In thousands, except per share data)
 
Three Months ended
September 30,		 Nine Months ended
September 30,		 Three Months ended
March 31,
2019
2018 2019
2018 20202019
Operating expenses:       Operating expenses:
Research and development$6,613
 $3,372
 $19,243

$9,406
Research and development$8,867  $4,686  
General and administrative3,238
 3,825
 8,910

8,128
General and administrative3,448  3,055  
Change in fair value of contingent consideration3,600
 7,200
 46,600

9,900
Change in fair value of contingent consideration(53,700) (1,000) 
Total operating expenses13,451
 14,397
 74,753
 27,434
Total operating expenses(41,385) 6,741  
Loss from Operations(13,451) (14,397) (74,753) (27,434)
Income (Loss) from OperationsIncome (Loss) from Operations41,385  (6,741) 
Other income (expense):       Other income (expense):
Other income, net319
 382
 806

498
Other income, net179  261  
Net Loss and Comprehensive Loss$(13,132) $(14,015) $(73,947) $(26,936)
Net Income (Loss) and Comprehensive Income (Loss)Net Income (Loss) and Comprehensive Income (Loss)$41,564  $(6,480) 
       
Net loss per common share - basic and diluted$(0.13) $(0.18) $(0.85) $(0.48)
Weighted-average common shares outstanding - basic and diluted101,266
 77,030
 86,575
 56,526
Net income (loss) attributable to common stockholders - basicNet income (loss) attributable to common stockholders - basic$34,407  $(6,480) 
Net income (loss) attributable to common stockholders - dilutedNet income (loss) attributable to common stockholders - diluted$34,408  $(6,480) 
Net income (loss) per common share - basicNet income (loss) per common share - basic$0.31  $(0.08) 
Weighted-average common shares outstanding - basicWeighted-average common shares outstanding - basic109,808  77,458  
Net income (loss) per common share - dilutedNet income (loss) per common share - diluted$0.31  $(0.08) 
Weighted-average common shares outstanding - dilutedWeighted-average common shares outstanding - diluted109,823  77,458  

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

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SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited; In thousands, except share data)
 Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Stockholders’
Equity
 SharesAmount
Balance at December 31, 2019106,801,409  $107  $266,717  $(293,524) $(26,700) 
Net income—  —  —  41,564  41,564  
Share-based compensation—  —  407  —  407  
Sales of common stock under 2014 ESPP2,785  —  1  —  1  
Issuance of common stock under ATM Offering, net of issuance costs of $98k3,187,359  3  3,176  —  3,179  
Balance at March 31, 2020109,991,553  $110  $270,301  $(251,960) $18,451  
 Common Stock 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Stockholders’
Equity
 Shares Amount 
Balance at December 31, 201877,456,180
 $77
 $230,154
 $(186,024) $44,207
Net loss—
 —
 —
 (6,480) (6,480)
Share-based compensation—
 —
 326
 —
 326
Sales of common stock under 2014 ESPP8,601
 —
 7
 —
 7
Balance at March 31, 201977,464,781
 77
 230,487
 (192,504) 38,060
Net loss—
 —
 —
 (54,335) (54,335)
Share-based compensation—
 —
 356
 —
 356
Exercises of stock options30,000
 —
 45
 —
 45
Exercises of common stock warrants3,361,115
 4
 3,430
 —
 3,434
Issuance of common stock and common stock warrants, net of issuance costs of $2,19320,410,000
 20
 27,789
 —
 27,809
Balance at June 30, 2019101,265,896
 101
 262,107
 (246,839) 15,369
Net loss—
 —
 —
 (13,132) (13,132)
Share-based compensation—
 —
 229
 —
 229
Sales of common stock under 2014 ESPP1,682
 —
 1
 —
 1
Balance at September 30, 2019101,267,578
 $101
 $262,337
 $(259,971) $2,467


 Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Stockholders’
Equity
 SharesAmount
Balance at December 31, 201877,456,180  $77  $230,154  $(186,024) $44,207  
Net loss—  —  —  (6,480) (6,480) 
Share-based compensation—  —  326  —  326  
Sales of common stock under 2014 ESPP8,601  —  7  —  7  
Balance at March 31, 201977,464,781  $77  $230,487  $(192,504) $38,060  

SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)
(Unaudited; In thousands, except share data)
 Common Stock 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Stockholders’
Equity
 Shares Amount 
Balance at December 31, 201734,702,565
 $35
 $170,330
 $(152,331) $18,034
Net loss—
 —
 —
 (3,963) (3,963)
Share-based compensation—
 —
 401
 —
 401
Sales of common stock under 2014 ESPP9,565
 —
 10
 —
 10
Exercises of stock options and vestings of restricted stock awards4,430
 —
 —
 —
 —
Exercises of common stock warrants420,778
 —
 336
 —
 336
Issuance of common stock and common stock warrants, net of issuance costs of $9597,968,128
 8
 9,032
 —
 9,040
Balance at March 31, 201843,105,466
 43
 180,109
 (156,294) 23,858
Net loss—
 —
 —
 (8,958) (8,958)
Share-based compensation—
 —
 285
 —
 285
Exercises of stock options and vestings of restricted stock awards55,259
 —
 29
 —
 29
Exercises of common stock warrants8,294,718
 8
 6,910
 —
 6,918
Issuance of common stock and common stock warrants, net of issuance costs of $4,07025,555,556
 26
 41,906
 —
 41,932
Balance at June 30, 201877,010,999
 77
 229,239
 (165,252) 64,064
Net loss—
 —
 —
 (14,015) (14,015)
Share-based compensation—
 —
 249
 —
 249
Sales of common stock under 2014 ESPP11,427
 —
 11
 —
 11
Exercises of stock options and vestings of restricted stock awards16,144
 —
 27
 —
 27
Exercises of common stock warrants50,000
 —
 59
 —
 59
Balance at September 30, 201877,088,570
 $77
 $229,585
 $(179,267) $50,395

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



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SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; In thousands)
 Three Months ended March 31,
 20202019
Cash Flows from Operating Activities:
Net income (loss)$41,564  $(6,480) 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation31  49  
Share-based compensation407  326  
Change in fair value of contingent consideration(53,700) (1,000) 
Changes in operating assets and liabilities:
Prepaid expenses and other assets4,011  (1,912) 
Accounts payable166  316  
Accrued expenses and other liabilities(1,317) 709  
Net Cash Used in Operating Activities(8,838) (7,992) 
Cash Flows from Investing Activities:
Net Cash Used in Investing Activities—  —  
Cash Flows from Financing Activities:
Proceeds from issuance of common stock under ATM Offering, net of issuance costs3,179  —  
Proceeds from sales of common stock under 2014 ESPP1  7  
Net Cash Provided by Financing Activities3,180  7  
Net Decrease in Cash, Cash Equivalents and Restricted Cash(5,658) (7,985) 
Cash, Cash Equivalents and Restricted Cash - Beginning of Period48,141  50,442  
Cash, Cash Equivalents and Restricted Cash - End of Period$42,483  $42,457  
Supplemental disclosure of non-cash operating activities:
Right-of-use assets related to the adoption of ASC 842$—  $236  
Cash paid for amounts included in the measurement of lease liabilities$38  $38  
 Nine Months ended
September 30,
 2019
2018
Cash Flows from Operating Activities:   
Net loss$(73,947) $(26,936)
Adjustments to reconcile net loss to net cash used in operating activities:   
Depreciation164
 156
Share-based compensation911
 935
Change in fair value of contingent consideration46,600
 9,900
Gain on sale of equipment—
 (5)
Changes in operating assets and liabilities:   
Prepaid expenses and other assets(421) (1,169)
Accounts payable1,216
 484
Accrued expenses and other liabilities1,761
 1,453
Net Cash Used in Operating Activities(23,716) (15,182)
Cash Flows from Investing Activities:   
(Purchases) sales of equipment(137) 5
Net Cash (Used in) Provided by Investing Activities(137) 5
Cash Flows from Financing Activities:   
Proceeds from issuance of common stock and common stock warrants, net of issuance costs27,809
 50,971
Proceeds from exercises of common stock warrants3,434
 7,315
Proceeds from exercises of stock options45
 56
Proceeds from sales of common stock under 2014 ESPP8
 21
Net Cash Provided by Financing Activities31,296
 58,363
Net Increase in Cash, Cash Equivalents and Restricted Cash7,443
 43,186
Cash, Cash Equivalents and Restricted Cash - Beginning of Period50,442
 14,690
Cash, Cash Equivalents and Restricted Cash - End of Period$57,885
 $57,876
    
Supplemental disclosure of non-cash operating activities:   
Right-of-use assets related to the adoption of ASC 842$236
 $—
Cash paid for amounts included in the measurement of lease liabilities$115
 $—

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

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SESEN BIO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS
Sesen Bio, Inc. ("Sesen" or the “Company”), a Delaware corporation formed in February 2008, is a late-stage clinical company developing targeted fusion protein therapeutics ("TFPTs") composed of an anti-cancer antibody fragment tethered to a protein toxin for the treatment of patients with cancer. The Company genetically fuses the cancer-targeting antibody fragment and the cytotoxic protein payload into a single molecule which is produced through the Company's proprietary one-step, microbial manufacturing process. The Company targets tumor cell surface antigens with limited expression on normal cells. Binding of the target antigen by the TFPT allows for rapid internalization into the targeted cancer cell. The Company has designed its targeted fusion proteins to overcome the fundamental efficacy and safety challenges inherent in existing antibody-drug conjugates ("ADCs"), where a payload is chemically attached to a targeting antibody.
The Company’s most advanced product candidate, VB4-845,Vicinium®, also known as Vicinium®,VB4-845, is a locally-administered targeted fusion protein composed of an anti-EpCAM, or epithelialanti-epithelial cell adhesion molecule ("EpCAM") antibody fragment tethered to a truncated form of Pseudomonas exotoxin A for the treatment of high-risk, non-muscle invasive bladder cancer ("NMIBC"). The Company has an ongoing single-arm, multi-center, open-label Phase 3 clinical trial of Vicinium as a monotherapy in patients with high-risk, bacillus Calmette-Guérin ("BCG") unresponsive NMIBC, called the VISTA Trial.-unresponsive non-muscle invasive bladder cancer ("NMIBC") (the "VISTA Trial"). The VISTA Trial completed enrollment in April 2018 with a total of 133 patients, and in December 2019, the Company initiated submission of the Biologics License Application ("BLA") for Vicinium to the United States Food and Drug Administration ("FDA") under Rolling Review, which enables individual modules to be submitted and reviewed on an ongoing basis, rather than waiting for all sections to be completed before submission. The Company operates in 1 segment under the direction of its Chief Executive Officer (chief operating decision maker).
Viventia Acquisition
In September 2016, the Company entered into a Share Purchase Agreement with Viventia Bio, Inc., a corporation incorporated under the laws of the Province of Ontario, Canada ("Viventia"), the shareholders of Viventia named therein (the “Selling Shareholders”) and, solely in its capacity as seller representative, Clairmark Investments Ltd., a corporation incorporated under the laws of the Province of Ontario, Canada (“Clairmark”) (the “Share Purchase Agreement”), pursuant to which the Company agreed to and simultaneously completed the acquisition of all of the outstanding capital stock of Viventia from the Selling Shareholders (the “Viventia Acquisition”). In connection with the closing of the Viventia Acquisition, the Company issued 4.0 million shares of its common stock to the Selling Shareholders, which at that time represented approximately 19.9% of the voting power of the Company as of immediately prior to the issuance of such shares. Clairmark is an affiliate of Leslie L. Dan, a director of the Company until his retirement in July 2019.
In addition, under the Share Purchase Agreement, the Company is continuingobligated to collectpay to the Selling Shareholders certain post-closing contingent cash payments upon the achievement of specified milestones and assessbased upon net sales, in each case subject to the trial data.terms and conditions set forth in the Share Purchase Agreement, including: (i) a one-time milestone payment of $12.5 million payable upon the first sale of Vicinium (the “Purchased Product”), in the United States; (ii) a one-time milestone payment of $7.0 million payable upon the first sale of the Purchased Product in any one of certain specified European countries; (iii) a one-time milestone payment of $3.0 million payable upon the first sale of the Purchased Product in Japan; and (iv) quarterly earn-out payments equal to 2% of net sales of the Purchased Product during specified earn-out periods. Such earn-out payments are payable with respect to net sales in a country beginning on the date of the first sale in such country and ending on the earlier of (i) December 31, 2033 and (ii) fifteen years after the date of such sale, subject to early termination in certain circumstances if a biosimilar product is on the market in the applicable country (collectively, the "Contingent Consideration"). Under the Share Purchase Agreement, the Company, its affiliates, licensees and subcontractors are required to use commercially reasonable efforts, for the first seven years following the closing of the Viventia Acquisition, to achieve marketing authorizations throughout the world and, during the applicable earn-out period, to commercialize the Purchased Product in the United States, France, Germany, Italy, Spain, United Kingdom, Japan, China and Canada. Certain of these payments are payable to individuals or affiliates of individuals that were previously employees or members of the Company's board of directors.
Liquidity and Going Concern
As of September 30, 2019,March 31, 2020, the Company had cash and cash equivalents of $57.9$42.5 million, net working capital of $50.3$37.5 million and an accumulated deficit of $260.0$252.0 million. The Company incurred negative cash flows from operating activities of $22.8$37.5 million for the year ended December 31, 20182019 and $23.7$8.8 million for the ninethree months ended September 30, 2019.March 31, 2020. Since its inception, the Company has received no revenue from sales of its products, currently under development, and management anticipates that operating losses will continue for the foreseeable future as the Company continues its ongoing Phase 3 clinical trialVISTA Trial for Vicinium for the treatment of high-risk NMIBC and seeks marketing approval from the United States Food and Drug Administration ("FDA").FDA. The Company has financed its operations to date primarily through private placements of its common stock, preferred stock, common stock warrants and convertible bridge notes, venture debt borrowings, its initial public offering ("IPO"), follow-on public offerings, sales effected in an "at-the-market" ("ATM") offering andofferings, a License Agreement with F. Hoffmann-La Roche Ltd and Hoffman-La Roche Inc. (collectively, "Roche") (the "License Agreement"Agreement with Roche"). and, to a lesser extent, from a collaboration. See “Note 8.9. Stockholders’ Equity” below for information regarding the Company’s recently completed equity financings.
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Under Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements - Going Concern, management is required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management's plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates the substantial doubt about the Company's ability to continue as a going concern. The mitigating effect of management's plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved by the Company's Boardboard of Directorsdirectors before the date that the financial statements are issued.
The Company's future success is dependent on its ability to develop its product candidates, including Vicinium for the treatment of high-risk NMIBC, and ultimately upon its ability to attain profitable operations. In order to commercialize its product candidates, including Vicinium for the treatment of high-risk NMIBC, the Company needs to complete clinical development and comply with comprehensive regulatory requirements. The Company is subject to a number of risks similar to other late-stage clinical companies, including, but not limited to, successful discovery and development of its product candidates, raising additional capital, development and commercialization by its competitors of new technological innovations, protection of proprietary technology and market acceptance of its products. The successful discovery and development of product candidates, including Vicinium for the treatment of high-risk NMIBC, requires substantial working capital, and management expects to seek additional funds through equity or debt financings or through additional collaboration, licensing transactions or other sources. The Company may be unable to obtain equity or debt financings or enter into additional collaboration or licensing transactions at favorable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include liens or other restrictive covenants limiting the Company's ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If the Company raises additional funds

through government or other third-party funding, strategic collaborations and alliances or licensing arrangements, it may have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable. If the Company is unable to raise additional funds when needed, it may be required to implement cost reduction strategies and delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market products or product candidates that management would otherwise prefer to develop and market.
The Company's management does not believe that its cash and cash equivalents of $57.9$42.5 million as of September 30, 2019March 31, 2020 is sufficient to fund the Company's current operating plan for at least twelve months after the issuance of these condensed consolidated financial statements. TheGiven the history of significant losses, the negative cash flows from operations, the limited cash resources currently on hand, the ongoing COVID-19 pandemic and the dependence by the Company on its ability - about which there can be no certainty - to obtain additional financing to fund its operations after the current cash resources are exhausted, raises substantial doubt exists about the Company's ability to continue as a going concern. These condensed consolidated financial statements were prepared under the assumption that the Company will continue as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.


2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the ASC and Accounting Standards Updates (“ASUs”), promulgated by the Financial Accounting Standards Board (“FASB”).
Interim Financial Statements
The accompanying unaudited interim condensed consolidated financial statements have been prepared from the books and records of the Company in accordance with GAAP for interim financial information and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”), which permit reduced disclosures for interim periods. All adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the accompanying condensed consolidated balance sheets and statements of operationsincome (operations) and comprehensive loss,income (loss), stockholders’ equity and cash flows have been made. Although these interim financial statements do not include all of the information and footnotes required for complete annual financial statements, management believes the disclosures are adequate
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to make the information presented not misleading. These unaudited interim results of operations and cash flows for the three and nine months ended September 30, 2019March 31, 2020 are not necessarily indicative of the results that may be expected for the full year. These unaudited interim condensed consolidated financial statements and footnotes should be read in conjunction with the Company’s audited annual consolidated financial statements and footnotes included in its Annual Report on Form 10-K, as filed with the SEC on March 1, 2019,16, 2020, wherein a more complete discussion of significant accounting policies and certain other information can be found.
Use of Estimates
The preparation of financial statements in accordance with GAAP and the rules and regulations of the SEC requires the use of estimates and assumptions, based on judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience, known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although management believes its estimates and assumptions are reasonable when made, they are based upon information available at the time they are made. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, makes adjustments. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions, and given the subjective element of the estimates and assumptions made, actual results may differ from estimated results. The most significant estimates and judgments impact the fair value of intangible assets, goodwill and contingent consideration; income taxes (including the valuation allowance for deferred tax assets); research and development expenses; and going concern considerations.
Principles of Consolidation
The Company’s consolidated financial statements include the accounts of the Company, its wholly owned subsidiary Viventia Bio, Inc. ("Viventia"), and its indirect subsidiaries, Viventia Bio USA Inc. and Viventia Biotech (EU) Limited. All intercompany transactions and balances have been eliminated in consolidation.
Foreign Currency Translation
The functional currency of the Company and each of its subsidiaries is the U.S. dollar.
Reclassifications
On the Company's condensed consolidated statements of cash flows, proceeds from exercises of common stock warrants is now shown separately from proceeds from issuance of common stock and common stock warrants, net of issuance costs.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's complete summary of significant accounting policies can be found in "Item 15. Exhibits and Financial Statement Schedules - Note 2.3. Summary of Significant Accounting Policies" in the audited annual consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018. The lease accounting policy shown below was not included there due to its adoption effective on January 1, 2019.
Leases
Effective January 1, 2019, the Company adopted ASC Topic 842, Leases (“ASC 842”) using the optional transition method outlined in ASU No. 2018-11, Leases (Topic 842), Targeted Improvements. The adoption of ASC 842 represents a change in accounting principle that aims to increase transparency and comparability among organizations by requiring the recognition of right-of-use assets and lease liabilities on the balance sheet for both operating and finance leases. In addition, the standard requires enhanced disclosures that meet the objective of enabling financial statement users to assess the amount, timing, and uncertainty of cash flows arising from leases. The reported results for the three and nine months ended September 30, 2019 reflect the application of ASC 842 guidance, while the reported results for prior year periods were prepared in accordance with the previous ASC Topic 840, Leases ("ASC 840") guidance. The adoption of ASC 842 resulted in the recognition of operating lease right-of-use assets and corresponding lease liabilities of $0.2 million on the Company’s consolidated balance sheet. The adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or cash flows; however, the adoption did result in significant changes to the Company’s financial statement disclosures.
As part of the adoption of ASC 842, the Company utilized certain practical expedients outlined in the guidance. These practical expedients include:
Accounting policy election to use the short-term lease exception by asset class;
Election of the practical expedient package during transition, which includes:
–An entity need not reassess whether any expired or existing contracts are or contain leases;
–An entity need not reassess the classification for any expired or existing leases. As a result, all leases that were classified as operating leases in accordance with ASC 840 are classified as operating leases under ASC 842, and all leases that were classified as capital leases in accordance with ASC 840 are classified as finance leases under ASC 842; and
–An entity need not reassess initial direct costs for any existing leases.
The Company’s lease portfolio as of the adoption date includes: a property lease for its manufacturing facility, a property lease for its headquarters in Cambridge, MA, and a property lease for office space in Philadelphia, PA. The Company determines if an arrangement is a lease at the inception of the contract and has made a policy election to not separate out non-lease components from lease components, for all classes of underlying assets. The asset components of the Company’s operating leases are recorded as operating lease right-of-use assets and reported within other assets on the Company's consolidated balance sheet. The short-term and long-term liability components are recorded in other current liabilities and other liabilities, respectively, on the Company’s consolidated balance sheet. As of September 30, 2019, the Company did not have any finance leases.
Right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. Existing leases in the Company’s lease portfolio as of the adoption date were valued as of January 1, 2019. The Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, if an implicit rate of return is not provided with the lease contract. Operating lease right-of-use assets are adjusted for incentives received.
Operating lease costs are recognized on a straight-line basis over the lease term, in accordance with ASC 842, and also include variable operating costs incurred during the period. Lease costs also include amounts related to short-term leases.

4. RECENT ACCOUNTING PRONOUNCEMENTS
JOBS Act Accounting Election
The Company is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to "opt out" of this provision and, as a result, will adopt any new or revised accounting standards issued by the FASB when they required to be adopted by public companies.
Adopted in 20192020
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. The Company adopted this guidance effective January 1, 2019, and it did not have a material impact on the Company’s financial position, results of operations or cash flows.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718) (“Topic 718”): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees, and as a result, the accounting for share-based payments to non-employees will be substantially aligned. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this guidance effective January 1, 2019, and it did not have a material impact on the Company’s financial position, results of operations or cash flows.
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements (“ASU 2018-09”). ASU 2018-09 provides amendments to a wide variety of topics in the FASB’s ASC, which applies to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance are based on the facts and circumstances of each amendment. Some of the amendments in ASU 2018-09 do not require transition guidance and were effective upon the issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company adopted this guidance effective January 1, 2019, and it did not have a material impact on the Company’s financial position, results of operations or cash flows.
Pending Adoption
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU 2016-13 eliminate the probable threshold for initial recognition of a credit loss in current GAAP and reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 is effective for interimannual and annual reportinginterim periods beginning January 1, 2020 and is to be applied using a modified retrospective transition method. Earlier adoption is permitted. While theThe Company is continuing to evaluate the impact of adoption,adopted this guidance effective January 1, 2020, and it doesdid not currently expect the adoption of ASU 2016-13 to have a material impact on the Company'sCompany’s financial position, results of operations or cash flows.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements ("ASU 2018-13"). ASU 2018-13 modifies fair value measurement disclosure requirements. The effective date for ASU 2018-13 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. BecauseThe Company adopted this ASU changes only the disclosure requirementsguidance effective January 1, 2020, and although it resulted in some additional footnote disclosures, it did not the underlying accounting, the Company does not expect the adoption of ASU 2018-13 to have a material impact on the Company'sCompany’s disclosures. For the new disclosures regarding our Level 3 instruments, please read Note 5, Fair Value Measurements and Financial Instruments, to these condensed consolidated financial position, results of operations or cash flows.statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to
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follow the internal-use software guidance to determine which implementation costs to defer and recognize as an asset. The effective date for ASU 2018-15 is for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. WhileThe Company adopted this guidance effective January 1, 2020, and it did not have a material impact on the Company’s financial position, results of operations or cash flows.
Pending Adoption
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments in ASU 2019-12 also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The method with which the amendments in this ASU are to be applied varies depending on the nature of the tax item impacted by amendment. Because the Company is continuing to evaluate the impact of adoption,generates losses and pays no income taxes, it does not currently expect the adoption of ASU 2016-132019-12 to have a material impact on the Company's financial position, results of operations or cash flows.


5. FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, restricted cash, prepaid expenses and other current assets, and accounts payable on the Company’s consolidated balance sheets approximated their fair values as of September 30, 2019March 31, 2020 and December 31, 20182019 due to their short-term nature.
Certain of the Company’s financial instruments are measured at fair value using a three-level hierarchy that prioritizes the inputs used to measure fair value. This fair value hierarchy prioritizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1:
Level 1: Inputs are quoted prices for identical instruments in active markets.
Level 2: Inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3: Inputs are unobservable and reflect the Company’s own assumptions, based on the best information available, including the Company’s own data.
Inputs are quoted prices for identical instruments in active markets,
Level 2:
Inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3:
Inputs are unobservable and reflect the Company’s own assumptions, based on the best information available, including the Company’s own data.
The following tables set forth the carrying amounts and fair values of the Company's financial instruments measured at fair value on a recurring basis as of September 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
March 31, 2020
Fair Value Measurement Based on
Carrying AmountFair ValueQuoted Prices in Active
Markets
(Level 1)		Significant other Observable
Inputs
(Level 2)		Significant Unobservable
Inputs
(Level 3)
Assets:
Money market funds
(cash equivalents)		$31,276  $31,276  $31,276  $—  $—  
Liabilities:
Contingent consideration$66,320  $66,320  $—  $—  $66,320  

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 September 30, 2019
     Fair Value Measurement Based on
 Carrying Amount Fair Value 
Quoted Prices in Active
Markets
(Level 1)
 
Significant other Observable
Inputs
(Level 2)
 
Significant Unobservable
Inputs
(Level 3)
Assets:         
Money market funds
(cash equivalents)
$30,995
 $30,995
 $30,995
 $—
 $—
Liabilities:         
Contingent consideration$95,000
 $95,000
 $—
 $—
 $95,000
December 31, 2018December 31, 2019
    Fair Value Measurement Based onFair Value Measurement Based on
Carrying Amount Fair Value 
Quoted Prices in Active
Markets
(Level 1)
 
Significant other Observable
Inputs
(Level 2)
 
Significant Unobservable
Inputs
(Level 3)
Carrying AmountFair ValueQuoted Prices in Active
Markets
(Level 1)		Significant other Observable
Inputs
(Level 2)		Significant Unobservable
Inputs
(Level 3)
Assets:         Assets:
Money market funds
(cash equivalents)
$40,365
 $40,365
 $40,365
 $—
 $—
Money market funds
(cash equivalents)		$31,146  $31,146  $31,146  $—  $—  
Liabilities:         Liabilities:
Contingent consideration$48,400
 $48,400
 $—
 $—
 $48,400
Contingent consideration$120,020  $120,020  $—  $—  $120,020  
The Company evaluates transfers between fair value levels at the end of each reporting period. There were no transfers of assets or liabilities between fair value levels during the ninethree months ended September 30, 2019.March 31, 2020.
Contingent Consideration
On September 20, 2016, the Company acquired Viventia through the issuance of common stock plus contingent consideration, pursuant to the terms of a Share Purchase Agreement (the "Acquisition").Agreement. The Company recorded the acquired assets and liabilities based on their estimated fair values as of the acquisition date and finalized its purchase accounting for the Viventia Acquisition during the third quarter of 2017. The contingent consideration relates to amounts potentially payable to Viventia'sthe former shareholders of Viventia under the Share Purchase Agreement. Contingent consideration is measured at its estimated fair value at each reporting period, with fluctuations in value resulting in a non-cash charge to earnings (or loss) during the period. The estimated fair value measurement is based on significant inputs, including internally developed financial forecasts, probabilities of success, and the timing of certain

milestone events and achievements, which are not observable in the market, representing a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration requires the use of significant assumptions and judgments, which management believes are consistent with those that would be made by a market participant. Management reviews its assumptions and judgments on an ongoing basis as additional market and other data is obtained, and any future changes in the assumptions and judgments utilized by management may cause the estimated fair value of contingent consideration to fluctuate materially, resulting in earnings volatility.
The following table sets forth a summary of the change in the fair value of the Company's contingent consideration liability, measured on a recurring basis at each reporting period, for the ninethree months ended September 30, 2019March 31, 2020 (in thousands):
Balance at December 31, 2018$48,400
Change in fair value of contingent consideration(1,000)
Balance at March 31, 201947,400
Change in fair value of contingent consideration(1)
44,000
Balance at June 30, 201991,400
Change in fair value of contingent consideration(2)
3,600
Balance at September 30, 2019$95,000
Balance at December 31, 2019$120,020 
Change in fair value of contingent consideration(53,700)
Balance at March 31, 2020$66,320 
The fair value of the Company’s contingent consideration was determined using probabilities of successful achievement of regulatory milestones and commercial sales, the period in which these milestones and sales are expected to be achieved ranging from 2021 to 2033, and the level of commercial sales of Vicinium forecasted for the United States, Europe, Japan and other potential markets, and discount rates ranging from 6.6% to 13.7% as of December 31, 2018 and 5.8% to 12.2% as of September 30, 2019.markets. There have been no changes to the valuation methods utilized during the ninethree months ended September 30, 2019.
(1) During the quarter ended June 30, 2019, management reassessed the total addressable global market for NMIBC and determined that both the global market size and the estimated potential Vicinium commercial sales within the global market were likely higher than the Company’s previous estimates. Specific driversMarch 31, 2020. Because of the increased revenue estimates includebusiness environment uncertainty created by the expectation that Vicinium could achieve peak market penetration earlier than previously estimated and the expectation that Vicinium sales outside the United States could be two to three times the expected sales volumes in the United States. As contingent consideration incorporates a royalty rateongoing COVID-19 pandemic, management carefully reviewed as of 2% onMarch 31, 2020 all commercial net sales of Vicinium through December 2033, an increase in expected future net sales correlated to a $44.0 million increase in the estimated fair value of the Company’s contingent consideration asfinancial forecast assumptions related to probability, timing and anticipated level of June 30, 2019.
(2) The $3.6 million increase incommercial sales, which were used to determine the estimated fair value of contingent consideration was primarily attributableas of December 31, 2019, and determined that no financial forecast changes were currently required. Given the evolving and uncertain nature of the COVID-19 pandemic, management will continue to closely monitor developments in order to timely determine if any financial forecast changes may be required. Changes to probabilities of success, timing of certain milestones and achievements, and level of commercial sales could materially affect the valuation of contingent consideration.
However, the estimated fair value of contingent consideration is also determined by applying appropriate discount rates to future cash outflows related to the contingent payment obligations, and these discount rates have increased significantly as a slightly lowerresult of the extreme volatility of financial markets as global economies shut down in order to contain the spread of COVID-19. The milestone payments constitute debt-like obligations, and the high-yield debt index rate applied to the milestones in order to determine the estimated fair value increased from 11.8% as of December 31, 2019 to 17.9% as of March 31, 2020. The discount rate basedapplied to the 2% royalty due on prevailing market conditionsforecasted Vicinium revenues is derived from the Company’s estimated weighted-average cost of capital (“WACC”), and this WACC-derived discount rate increased from 5.6% as of September 30,December 31, 2019 to 14.7% as of March 31, 2020. These significant increases in the applicable discount rates resulted in a $53.7 million decrease in the estimated
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fair value of contingent consideration as of March 31, 2020. Changes to the earnout royalty payments potentially payablediscount rates could materially affect the valuation of the contingent consideration.

6. INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
Intangible assets on the Company's consolidated balance sheet are the result of the Viventia Acquisition in September 2016. The following table sets forth the composition of intangible assets as of March 31, 2020 and December 31, 2019 (in thousands):
March 31, 2020December 31, 2019
IPR&D intangible assets:
Vicinium United States rights$31,700  $31,700  
Vicinium European Union rights14,700  14,700  
Total Intangibles$46,400  $46,400  
Goodwill
Goodwill on the Company's consolidated balance sheet is the result of the Viventia Acquisition in September 2016. Goodwill had a carrying value of $13.1 million as of March 31, 2020 and December 31, 2019.
Quantitative Impairment Testing
Because of the business environment uncertainly created by the ongoing COVID-19 pandemic, which resulted in the application of higher discount rates to Viventia's shareholders under the Share Purchase Agreement.Company's financial forecasts as discussed above, management performed an interim quantitative impairment test as of March 31, 2020. Based on this quantitative testing, management concluded that the carrying values of the Company's intangible assets and goodwill were not impaired as of March 31, 2020.

6.
7. LEASES
On January 1, 2019, the Company adopted ASC 842 using the optional transition method. The Company’s lease portfolio includes:
1.An operating lease for its manufacturing facility in Winnipeg, Manitoba, which consists of a 31,100 square foot manufacturing, laboratory, warehouse and office facility, under a five-year renewable lease through September 2020 with a right to renew the lease for one subsequent five-year term. The minimum monthly rent under this lease is $12,600 per month. In addition to rent expense, the Company expects to incur $12,300 per month in related operating expenses. Operating lease cost under this lease, including the related operating costs, was $76,000 and $222,000 for the three and nine months ended September 30, 2019, respectively. Previously under ASC 840, rent expense for this lease, including related operating costs, was $78,000 and $239,000 for the three and nine months ended September 30, 2018, respectively.
2.A short-term property lease for its current corporate headquarters in Cambridge, MA that extends through December 31, 2019. The minimum monthly rent for this office space is $7,900 per month. The Company recorded $24,000 and $75,000 in short-term lease cost for the three and nine months ended September 30, 2019, respectively. Previously under ASC 840, the Company recorded $35,000 and $97,000 in rent expense for the three and nine months ended September 30, 2018, respectively, for this lease; and
3.A short-term property lease for office space in Philadelphia, PA that extends through December 31, 2019. Currently, the minimum monthly rent under this lease is $11,000 per month. The Company recorded $35,000 and $113,000 in short term lease cost for the three and nine months ended September 30, 2019, respectively. Previously under ASC 840, the Company recorded $36,000 and $92,000 in rent expense for the three and nine months ended September 30, 2018, respectively, for this lease.

1.An operating lease for its 31,100 square foot facility in Winnipeg, Manitoba which consists of manufacturing, laboratory, warehouse and office space, under a five-year renewable lease through September 2020 with a right to renew the lease for 1 subsequent five-year term. The minimum monthly rent under this lease is $12,800 per month. In addition to rent expense, the Company expects to incur $12,500 per month in related operating expenses. Operating lease cost under this lease, including the related operating costs, was $76,000 and $75,000 for the three months ended March 31, 2020 and 2019, respectively;
2.Short-term property leases for modular office space for 1) its current corporate headquarters in Cambridge, MA and 2) office space in Philadelphia, PA. The short-term leases renew every four to six months and currently extend through October 2020. The minimum monthly rent for these office spaces is currently $21,400 per month, which is subject to change if and as the Company adds or deducts space to or from the leases. The Company recorded $66,000 and $76,000 in rent expense for the three months ended March 31, 2020 and 2019, respectively, for these leases.
The asset component of the Company’s operating leases is recorded as operating lease right-of-use assets and reported within other assets on the Company's consolidated balance sheet. The short-term liability is recorded in other current liabilities on the Company’s consolidated balance sheet. Operating lease cost is recognized on a straight-line basis over the lease term.
The components of lease cost for the three and nine months ended September 30, 2019 are as follows (in thousands):
Lease Cost:Three Months ended September 30, 2019 Nine Months ended September 30, 2019
Operating lease (including related operating costs)$76
 $222
Short-term property leases59
 188
Total lease costs$135
 $410
Supplemental Information:Nine Months ended September 30, 2019
Weighted-average remaining lease term - operating leases (in years)

1.0
Weighted-average discount rate - operating leases

12%
Future minimum lease payments under non-cancelable operating leases as of September 30, 2019 are as follows (in thousands):
Years ending December 31,Minimum Lease Payments
2019(1)
$38
2020113
Total future minimum lease payments151
Less: Amounts representing present value adjustment6
Operating lease liabilities as of September 30, 2019145
Less: Current portion of operating lease liabilities145
Operating lease liabilities, net of current portion$—
(1) Represents remainder of 2019.
7.8. ACCRUED EXPENSES
The following table sets forth the composition of accrued expenses as of September 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
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September 30,
2019		 December 31, 2018March 31,
2020		December 31, 2019
Research and development$4,203
 $2,928
Research and development$3,517  $3,688  
Payroll-related expenses1,044
 1,045
Payroll-related expenses627  1,638  
Severance to former Executives and other employees613
 278
Severance to former Executives and other employees155  378  
Professional fees466
 464
Professional fees544  378  
Other24
 31
Other50  87  
Total Accrued Expenses$6,350
 $4,746
Total Accrued Expenses$4,893  $6,169  

Management Changes
On August 26, 2019, the Company announced that Richard Fitzgerald departed as itsthe Company's Chief Financial Officer, effective immediately.Officer. In connection with his separation from the Company, Mr. Fitzgerald and the Company entered into a Separation Agreement and General Release dated as of September 9, 2019 (the “Fitzgerald Separation Agreement”), pursuant to which the Company provided Mr. Fitzgerald with twelve months of separation payments and benefits. The Company recorded $0.3 million of expense, which will be paid through the normal payroll cycle through August 2020.
On August 2, 2019, Dennis Kim, M.D., MPH departed as the Company's Chief Medical Officer, effective immediately.Officer. In connection with his separation from the Company, Dr. Kim and the Company entered into a Separation Agreement and General Release dated as of August 2, 2019 (the “Kim Separation Agreement”), pursuant to which the Company provided Dr. Kim with six months of separation payments in the amount of $0.2 million. In addition, Dr. Kim and the Company entered into a Consulting Agreement

dated as of August 3, 2019 (the "Kim Consulting Agreement"), pursuant to which the Company agreed to pay Dr. Kim $0.1 million in consulting fees and transition expenses over the following three months endingended November 2, 2019. The Company recorded $0.3 million of expenses related to these agreements.agreements in 2019. The Kim Consulting Agreement payments will bewere made in a lump sum when the agreement concludesconcluded in November 2019. The separation payments will bewere paid through the normal payroll cycle through January 2020.
On August 7, 2018,2020, when the Company announced that Stephen A. Hurly departed asconcluded its President and Chief Executive Officer, effective immediately. obligations under the Kim Separation Agreement.

9. STOCKHOLDERS' EQUITY (DEFICIT)
Equity Financings
ATM Offering
In connection with his separation from the Company, Mr. Hurly andNovember 2019, the Company entered into a Separationan Open Market Sale Agreement and General Release dated as of September 28, 2018SM (the “Hurly Separation Agreement”"Sales Agreement") with Jefferies LLC ("Jefferies"), pursuant tounder which the Company provided Mr. Hurly with twelve monthsmay issue and sell shares of separation payments and benefits.its common stock from time to time for an aggregate sales price of up to $35.0 million through Jefferies (the "ATM Offering"). Sales of common stock under the Sales Agreement are made by any method that is deemed to be an ATM offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including but not limited to sales made directly on or through the Nasdaq Global Market or any other existing trading market for the common stock. The Company recorded $0.6 millionhas no obligation to sell any of expense, consistingits common stock and may at any time suspend offers under the Sales Agreement or terminate the Sales Agreement. Subject to the terms and conditions of Mr. Hurly’s base salarythe Sales Agreement, Jefferies will use its commercially reasonable efforts to sell common stock from time to time, as the sales agent, based upon the Company’s instructions, which include a prohibition on sales below a minimum price set by the Company from time to time. The Company has provided Jefferies with customary indemnification rights, and Jefferies is entitled to a commission at a fixed rate equal to 3.0% of the timegross proceeds for each sale of his departure of $0.4 million plus his target annual bonus for 2018 ofcommon stock. The Company incurred $0.2 million which was paid through the normal payroll cycle through August 2019, when the Company completed its obligationsin legal, accounting and printing costs related to the Hurly Separation Agreement.commencement of the ATM Offering. From its inception in November 2019 through March 31, 2020, the Company raised $5.1 million of net proceeds from the sale of 5.2 million shares of common stock at a weighted-average price of $1.06 per share under the ATM Offering, including $3.2 million of net proceeds from the sale of 3.2 million shares of common stock at a weighted-average price of $1.02 per share during the three months ended March 31, 2020. Share issue costs, including sales agent commissions, related to the ATM Offering totaled $0.1 million during the three months ended March 31, 2020.
The remaining amounts of accrued severance as of September 30,June 2019 relate to terminations of other employees during 2019.Financing
8. STOCKHOLDERS' EQUITY
Equity Financings
In June 2019, the Company raised $27.8 million of net proceeds from the sale of 20.4 million shares of common stock and accompanying warrants to purchase an additional 20.4 million shares of common stock in an underwritten public offering (the "June 2019 Financing"). The combined purchase price for each share of common stock and accompanying warrant was $1.47. Subject to certain ownership limitations, the warrants issued in the June 2019 Financing were exercisable immediately upon issuance at an exercise price of $1.47 per share, of common stock, subject to adjustments as provided under the terms of such warrants, and have a one-yearone-year term expiring on June 21, 2020.
In June 2018, the Company raised $41.9 million
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Table of net proceeds from the sale of 25.6 million shares of common stock at a price of $1.80 per share in an underwritten public offering.Contents
In March 2018, the Company raised $9.0 million of net proceeds from the sale of 8.0 million shares of common stock at a price of $1.13 per share in a registered direct public offering and the sale of warrants to purchase 8.0 million shares of the Company's common stock with an exercise price of $1.20 per share (the "2018 Warrants"), at a sale price of $0.125 per warrant, in a concurrent private placement (collectively, the “March 2018 Financing”). Subject to certain ownership limitations, the warrants issued in the March 2018 Financing were exercisable immediately upon issuance at an exercise price of $1.20 per share of common stock, subject to adjustments as provided under the terms of such warrants, and have a five year term expiring on March 23, 2023.
Preferred Stock
Pursuant to its Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation"), the Company is authorized to issue 5.0 million shares of "blank check" preferred stock, $0.001 par value per share, which enables its Boardboard of Directors,directors, from time to time, to create one or more series of preferred stock. Each series of preferred stock issued shall have the rights, preferences, privileges and restrictions as designated by the Boardboard of Directors.directors. The issuance of any series of preferred stock could affect, among other things, the dividend, voting and liquidation rights of the Company's common stock. The Company had no0 preferred stock issued and outstanding as of September 30, 2019March 31, 2020 andDecember 31, 2018.

2019.
Common Stock
Pursuant to its Certificate of Incorporation, the Company is authorized to issue 200.0 million shares of common stock, $0.001 par value per share, of which 101.3110.0 million and 77.5106.8 million shares were issued and outstanding as of September 30, 2019March 31, 2020 andDecember 31, 2018,2019, respectively. In addition, the Company had reserved for issuance the following amounts of shares of its common stock for the purposes described below as of September 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
March 31, 2020December 31, 2019
Shares of common stock issued109,992  106,801  
Shares of common stock reserved for issuance for:
Warrants22,895  22,895  
Stock options9,704  6,236  
Shares available for grant under 2014 Stock Incentive Plan5,370  8,753  
Shares available for sale under 2014 Employee Stock Purchase Plan25  28  
Total shares of common stock issued and reserved for issuance147,986  144,713  
 September 30, 2019 December 31, 2018
Shares of common stock issued101,268
 77,456
Shares of common stock reserved for issuance for:  

Warrants to purchase common stock26,307
 9,258
Stock options6,450
 3,942
Shares available for grant under 2014 Stock Incentive Plan8,599
 2,001
Shares available for sale under 2014 Employee Stock Purchase Plan28
 38
Total shares of common stock issued and reserved for issuance142,652
 92,695

The voting, dividend and liquidation rights of holders of shares of common stock are subject to and qualified by the rights, powers and preferences of holders of shares of preferred stock. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company's stockholders; provided, however, that, except as otherwise required by law, holders of common stock shall not be entitled to vote on any amendment to the Company’s Certificate of Incorporation that relates solely to the terms of one or more outstanding series of preferred stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more such series, to vote thereon. There shall be no cumulative voting.
Dividends may be declared and paid on the common stock from funds lawfully available thereof as and when determined by the board of directors and subject to any preferential dividend or other rights of any then-outstanding preferred stock. The Company has never declared or paid, and for the foreseeable future does not expect to declare or pay, dividends on its common stock.
Upon the dissolution or liquidation of the Company, whether voluntary or involuntary, holders of common stock will be entitled to receive all assets of the Company available for distribution to its stockholders, subject to any preferential or other rights of any then-outstanding preferred stock.
Warrants
All of the Company’s outstanding warrants are non-tradeable and permanently classified as equity because they meet the derivative scope exception under ASC Topic 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity ("ASC 815-40"). The following table sets forth the Company's warrant activity for the ninethree months ended September 30, 2019March 31, 2020 (in thousands):
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 Year-to-Date Warrant ActivityYear-to-Date Warrant Activity
Issued 
Exercise
Price
 Expiration December 31, 2018 Issued (Exercised) September 30, 2019Issued
Exercise
Price (1)
ExpirationDecember 31, 2019Issued(Exercised)March 31, 2020
Jun-2019 $1.47 Jun-2020 —
 20,410
 —
 20,410
Jun-2019$1.47Jun-202020,410  —  —  20,410  
Mar-2018 $1.20 Mar-2023 7,211
 —
 (1,861) 5,350
Mar-2018$0.95*Mar-20231,943  —  —  1,943  
Nov-2017 $0.80 Nov-2022 1,992
 —
 (1,500) 492
Nov-2017$0.55*Nov-2022487  —  —  487  
May-2015 $11.83 Nov-2024 28
 —
 —
 28
May-2015$11.83Nov-202428  —  —  28  
Nov-2014 $11.04 Nov-2024 27
 —
 —
 27
Nov-2014$11.04Nov-202427  —  —  27  
 9,258
 20,410
 (3,361) 26,307
22,895  —  —  22,895  
During the nine months ended September 30, 2019, the Company received proceeds(1) As of $3.4 million from the exercise of 3.4 million outstanding warrantsMarch 31, 2020.
* Exercise price shown subject to purchase common stock issued in connection with (i) its underwritten public offering in November 2017 (the "November 2017 Financing") and (ii) the March 2018 Financing.further adjustment based on down round provision added by amendment.
During the nine months ended September 30, 2018, the Company received proceeds of $7.3 million from the exercise of 8.7 million outstanding warrants to purchase common stock issued in connection with (i) the November 2017 Financing and (ii) the March 2018 Financing.
See "Note 14. Subsequent Event" for additional information related to the Company's outstanding warrants.
9. LOSS10. EARNINGS (LOSS) PER SHARE
The Company’s basic loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. A net loss cannot be diluted, sodiluted. Therefore, when the Company is in a net loss position, basic and diluted loss per common share are the same. If in the future the Company achieves profitability, the denominator of a diluted earnings per common share calculation will includeincludes both the weighted-average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents potentially include warrants, stock options and non-vested restricted stock awards and units using the treasury stock method, along with the effect, if any, from outstanding convertible securities. The majority of the Company’s outstanding warrants to purchase common stock have participation rights to any dividends that may be declared in the future and are therefore considered to be participating securities. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of income. During periods of loss, no loss is allocated to the participating securities since the holders have no contractual obligation to share in the losses of the Company.

For periods with net income, diluted net earnings per share is calculated by either (i) adjusting the weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period as determined using the treasury stock method or (ii) the two-class method considering common stock equivalents, whichever is more dilutive. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders.
Accordingly, the Company applied the two-class method to calculate basic and diluted net earnings per share of common stock for the three months ended March 31, 2020. The two-class method was not applied for the three months ended March 31, 2019 as the Company’s participating securities do not have any obligation to absorb net losses.

For purposes of the diluted net loss per share calculation, common stock equivalents are excluded from the calculation if their effect would be anti-dilutive.

The following table illustrates the determination of earnings (loss) per share for each period presented:
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March 31,
20202019
(in thousands, except per share amounts)
Basic Earnings (Loss) Per Share:
Numerator:
Net income (loss)$41,564  $(6,480) 
Income attributable to participating securities - basic$7,157  $—  
Net income (loss) attributable to common stockholders - basic$34,407  $(6,480) 
Denominator:
Weighted average common shares outstanding - basic109,808  77,458  
Net income (loss) per share applicable to common stockholders - basic$0.31  $(0.08) 
Dilutive Earnings (Loss) Per Share:
Numerator:
Net income (loss)$41,564  $(6,480) 
Income attributable to participating securities - diluted$7,156  $—  
Net income (loss) attributable to common stockholders - diluted$34,408  $(6,480) 
Denominator:
Weighted average shares outstanding109,808  77,458  
Dilutive impact from:
Stock options and employee stock purchase plan15  —  
Weighted average common shares outstanding for diluted109,823  77,458  
Net income (loss) per share applicable to common stockholders - diluted$0.31  $(0.08) 

The following potentially dilutive securities outstanding as of September 30,March 31, 2020 and 2019 and 2018 have been excluded from the denominator of the diluted loss per share of common stock outstanding calculation as their effect is anti-dilutive (in thousands):
March 31,
 20202019
Warrants55  9,258  
Stock options9,703  5,689  
9,758  14,947  

 September 30,
 2019 2018
Stock options6,450
 4,568
Warrants26,307
 9,258
 32,757
 13,826
10.11. SHARE-BASED COMPENSATION
The following table sets forth the amount of share-based compensation expense recognized by the Company by line item on its consolidated statements of operationsincome (operations) for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018 is as follows (in thousands):
 Three Months ended
March 31,
 20202019
Research and development$79  $52  
General and administrative328  274  
$407  $326  
 Three Months ended
September 30,		 Nine Months ended
September 30,
 2019 2018 2019 2018
Research and development$(20) $99
 $119
 $387
General and administrative249
 149
 $792
 548
 $229
 $248
 $911
 $935

2014 Stock Incentive Plan
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The Company's 2014 Stock Incentive Plan, as amended ("2014 Plan"), was adopted by its Boardboard of Directorsdirectors in December 2013 and subsequently approved by its stockholders in January 2014. The 2014 Plan became effective immediately prior to the closing of the Company's IPO in February 2014 and provides for the grant of incentive and non-qualified stock options, restricted stock awards and units, stock appreciation rights and other stock-based awards, with amounts and terms of grants determined by the Company's Boardboard of Directorsdirectors at the time of grant, to the Company's employees, officers, directors, consultants and advisors. Currently there are only stock options outstanding under the 2014 Plan, which generally vest over a four-yearfour-year period at the rate of 25% of the grant vesting on the first anniversary of the date of grant and 6.25% of the grant vesting at the end of each successive three-month period thereafter. Stock options granted under the 2014 Plan are exercisable for a period of ten years from the date of grant. There were 4.39.6 million stock options outstanding under the 2014 Plan as of September 30, 2019.
At the Annual Meeting of Stockholders in June 2019, the Company's stockholders approved an amendment to the 2014 Plan that (i) increased by 7.9 million the number of shares of common stock reserved for issuance under the 2014 Plan and (ii) eliminated the “evergreen” or automatic replenishment provision of the 2014 Plan, pursuant to which the number of shares of common stock authorized for issuance under the 2014 Plan was automatically increased on an annual basis. As of September 30, 2019, thereMarch 31, 2020. There were 8.65.4 million shares of common stock available for issuance under the 2014 Plan as of March 31, 2020.
2009 Stock Incentive Plan
The Company maintains a 2009 Stock Incentive Plan, as amended and restated ("2009 Plan"), which provided for the grant of incentive and non-qualified stock options and restricted stock awards and units, with amounts and terms of grants determined by the Company's board of directors at the time of grant, to its employees, officers, directors, consultants and advisors. Upon the closing of its IPO in February 2014, the Company ceased granting awards under the 2009 Plan and all shares (i) available for issuance under the 2009 Plan at such time and (ii) subject to outstanding awards under the 2009 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased without having been fully exercised or resulting in any common stock being issued were carried over to the 2014 Plan. Stock options granted under the 2009 Plan are exercisable for a period of ten years from the date of grant. There were 0.1 million fully vested stock options outstanding under the 2009 Plan as of March 31, 2020.
Out-of-Plan Inducement Grants
From time to time, the Company has granted equity awards to its newly hired executives in accordance with Nasdaq'sthe Nasdaq Stock Market LLC ("Nasdaq") employment inducement grant exemption (Listing(Nasdaq Listing Rule 5635(c)(4)). Such grants are made outside of the 2014 Plan and act as an inducement material to the executive's acceptance of employment with the Company. As of September 30, 2019, there There were 2.12.2 million stock options outstanding which were granted as employment inducement awards outside of the 2014 Plan.

Plan as of March 31, 2020.
Stock Options
The following table summarizessets forth a summary of the Company’s total stock option activity, including awards granted under the 2014 Plan and 2009 Plan and inducement grants made outside of the 2014 Plan,stockholder approved plans, for the ninethree months ended September 30, 2019:March 31, 2020:
Number of Shares under Option
(in thousands)		Weighted-average Exercise Price per OptionWeighted-average Remaining Contractual Life
(in years)		Aggregate Intrinsic Value
(in thousands)
Outstanding at December 31, 20196,236  $1.528.8$358  
Granted3,468  $0.89
Exercised—  $0.00
Canceled or forfeited—  $0.00
Outstanding at March 31, 20209,704  $1.299.0$—  
Exercisable at March 31, 20202,284  $2.118.0$—  
 
Number of Shares under Option
(in thousands)
 Weighted-average Exercise Price per Option 
Weighted-average Remaining Contractual Life
(in years)
 
Aggregate Intrinsic Value
(in thousands)
Outstanding at December 31, 20183,942
 $2.12 9.1 $57
Granted3,986
 $1.02    
Exercised(30) $1.50    
Canceled or forfeited(1,448) $1.76    
Outstanding at September 30, 20196,450
 $1.52 9.1 $680
Exercisable at September 30, 20191,744
 $2.42 8.1 $84

The Company recognized $0.2 million and $0.2 million of share-based compensation expense related to stock options of $0.4 million and $0.3 million for the three months ended September 30,March 31, 2020 and 2019, and 2018, respectively, and $0.9 million and $0.9 million for the nine months ended September 30, 2019 and 2018, respectively. At September 30, 2019,As of March 31, 2020, there was $3.5$2.9 million of total unrecognized compensation expensecost related to unvestednon-vested stock options for employees and non-employee consultants which the Company expects to recognize over a weighted-average period of 3.12.7 years. The weighted-average grant-date fair value of stock options granted during the ninethree months ended September 30, 2019March 31, 2020 was estimated at $0.69$0.56 per option. The total intrinsic value of stock options exercised during the ninethree months ended September 30, 2019March 31, 2020 was de minimis.minimus.
For the ninethree months ended September 30, 2019,March 31, 2020, the grant-date fair value of stock options was estimated at the time of grantdetermined using the following weighted-average inputs and assumptions in the Black-Scholes option pricing model:
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Fair value of common stock$0.690.56
Exercise price$1.020.89
Expected term (in years)5.98
Risk-free interest rate2.1%1.5
Expected volatility78.1%71.1
Dividend yield—%
In October 2017, the Company issued stock option awards to certain employees which contained performance vesting conditions. These options vested in installments based on the achievement of certain strategic and clinical milestones. In January 2018, March 2018, June 2018 and July 2019, the Compensation Committee determined that certain performance milestones were met. Share-based compensation expense associated with these performance-based stock options was recognized over the service and performance period for performance conditions considered probable of achievement using management’s best estimate. The Company recognized de minimis expense related to these performance-based awards for the three and nine months ended September 30, 2019. There was no unrecognized compensation expense remaining related to these performance-based awards as of September 30, 2019. The Company recognized $(43,000) and $0.2 million of expense related to these performance-based awards for the three and nine months ended September 30, 2018, respectively. The negative expense was attributable to awards granted to the Company's former President and Chief Executive Officer which were canceled following his separation from the Company.
11.12. EMPLOYEE BENEFIT PLANS
2014 Employee Stock Purchase Plan
The Company's 2014 Employee Stock Purchase Plan ("2014 ESPP") was adopted by its Boardboard of Directorsdirectors in December 2013 and subsequently approved by its stockholders in January 2014. The 2014 ESPP became effective immediately prior to the closing of the Company's IPO in February 2014 and established an initial reserve of 0.2 million shares of the Company's common stock for issuance to participating employees. The purpose of the 2014 ESPP is to enhance employee interest in the success and progress of the Company by encouraging employee ownership of common stock of the Company. The 2014 ESPP provides employees with the opportunity to purchase shares of the Company’s common stock at a 15% discount to the market price through payroll deductions or lump sum cash investments. The Company estimates the number of shares to be issued at the end of an offering period and recognizes expense over the requisite service period. Shares of the Company's common stock issued and sold pursuant

to the 2014 ESPP are shown on the consolidated statements of changes in stockholders' equity. As of September 30, 2019,March 31, 2020, there were approximately 28,00025,000 shares of the Company's common stock available for sale under the 2014 ESPP.
401(k) Defined Contribution Plans
United States - 401(k) Plan
The Company maintains a 401(k) defined contribution retirement plan which covers all of its U.S. employees. Employees are eligible to participate on the first of the month following their date of hire. Under the 401(k) plan, participating employees may defer up to 100% of their pre-tax salary, subject to certain statutory limitations. Employee contributions vest immediately. The plan allows for a discretionary match per participating employee up to a maximum $4,000 per year. The expenses incurred for the periods presented were de minimis.
Canada - Defined Contribution Plan
12.The Company maintains a defined contribution plan for its Canadian employees. Participants may contribute a percentage of their annual compensation to this plan, subject to statutory limitations. The Company contributes up to the first 4% of eligible compensation for its Canadian-based employees to the retirement plan. The expenses incurred for the periods presented were de minimis.

13. LICENSE AGREEMENT WITH ROCHEAGREEMENTS
OnVicinium License Agreements
License Agreement with Zurich
The Company has a License Agreement with the University of Zurich ("Zurich") which grants the Company exclusive license rights, with the right to sublicense, to make, have made, use and sell under certain patents primarily directed to the Company's targeting agent, including an EpCAM chimera and related immunoconjugates and methods of use and manufacture of the same. These patents cover some key aspects of Vicinium. The Company may be obligated to pay $0.75 million in milestone payments for the first product candidate that achieves applicable clinical development milestones. Based on current status, the Company anticipates that these milestones may be triggered by Vicinium's clinical development pathway. As part of the consideration, the Company is also obligated to pay up to a 4% royalty on the net product sales for products covered by or manufactured using a method covered by a valid claim in the Zurich patent rights. Royalties owed to Zurich will be reduced if the total royalty rate owed by the Company to Zurich and any other third party is 10% or greater, provided that the royalty rate to Zurich may not be less than 2% of net sales. The obligation to pay royalties in a particular country expires upon the expiration or termination of the last of the Zurich patent rights that covers the manufacture, use or sale of a product. There is no obligation to pay royalties in a country if there is no valid claim that covers the product or a method of manufacturing the product.
License Agreement with Micromet
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The Company has a License Agreement with Micromet AG ("Micromet"), now part of Amgen, Inc., which grants it nonexclusive rights, with certain sublicense rights, for know-how and patents allowing exploitation of certain single chain antibody products. These patents cover some key aspects of Vicinium. Under the terms of the License Agreement with Micromet, the Company may be obligated to pay up to €3.6 million in milestone payments for the first product candidate that achieves applicable clinical development milestones. Based on current clinical status, the Company anticipates that certain of these milestones may be triggered by Vicinium’s clinical development pathway. The Company is also required to pay up to a 3.5% royalty on the net sales for products covered by the agreement, which includes Vicinium. The royalty rate owed to Micromet in a particular country will be reduced to 1.5% if there are no valid claims covering the product in that country. The obligation to pay royalties in a particular country expires upon the later of the expiration date of the last valid claim covering the product and the tenth anniversary of the first commercial sale of the product in such country. Finally, the Company is required to pay to Micromet an annual license maintenance fee of €50,000, which can be credited towards any royalty payment the Company owes to Micromet.
License Agreement with XOMA
The Company has a License Agreement with XOMA Ireland Limited ("XOMA") which grants it non-exclusive rights to certain XOMA patent rights and know-how related to certain expression technology, including plasmids, expression strains, plasmid maps and production systems. These patents and related know-how cover some key aspects of Vicinium. Under the terms of the License Agreement with XOMA, the Company is required to pay up to $0.25 million in milestone payments for a product candidate that incorporates know-how under the license and achieves applicable clinical development milestones. Based on current clinical status, the Company anticipates that these milestones may be triggered by Vicinium’s clinical development pathway. The Company is also required to pay a 2.5% royalty on the net sales for products incorporating XOMA’s technology, which includes Vicinium. The Company has the right to reduce the amount of royalties owed to XOMA on a country-by-country basis by the amount of royalties paid to other third parties, provided that the royalty rate to XOMA may not be less than 1.75% of net sales. In addition, the foregoing royalty rates are reduced by 50% with respect to products that are not covered by a valid patent claim in the country of sale. The obligation to pay royalties in a particular country expires upon the later of the expiration date of the last valid claim covering the product and the tenth anniversary of the first commercial sale of the product in such country.
Other License Agreements
License Agreement with Roche
In June 10, 2016, the Company entered into the License Agreement with Roche, pursuant to which became effective on August 16, 2016. Under the License Agreement, the Company granted Roche an exclusive, worldwide license, including the right to sublicense, to its patent rights and know-how related to the Company’s monoclonal antibody EBI-031 orand all other IL-6 antagonistic anti-IL-6 antagonist monoclonal antibodies, to make, have made, use, have used, register, have registered, sell, have sold, offer for sale, import and export any product containing such an antibody or any companion diagnostic used to predict or monitor response to treatment with such a product.
During 2016,technology owned by the Company (collectively, the "Licensed Intellectual Property"). Under the License Agreement with Roche, Roche is required to continue developing, at its cost, EBI-031 and any other product made from the Licensed Intellectual Property that contains an IL-6 antagonist anti-IL monoclonal antibody (“Licensed Product”) and pursue ongoing patent prosecution, at its cost.
Financial Terms
The Company received from Roche an upfront license fee of $7.5 million in August 2016 upon the effectiveness of the License Agreement with Roche following approval by the Company's stockholders, and a milestone payment of $22.5 million. The Company is entitledRoche agreed to receivepay up to $240.0an additional $262.5 million in additional consideration upon the achievement of specified regulatory, development and commercial milestones.commercialization milestones with respect to up to two unrelated indications. Specifically, an aggregate amount of up to $175.0$197.5 million is payable to the Company for the achievement of specified milestones with respect to the first indication: $50.0indication, consisting of $72.5 million in development milestones, $50.0 million in regulatory milestones and $75.0 million in commercialization milestones. In September 2016, Roche paid the Company the first development milestone of $22.5 million as a result of the Investigational New Drug application for EBI-031 becoming effective on or before September 15, 2016. Additional amounts of up to $65.0 million are payable upon the achievement of specified development and regulatory milestones in a second indication.
In addition, the Company is entitled to receive royalty payments in accordance with a tiered royalty rate scale, with rates ranging from 7.5% to 15% of net sales of potential future products containing EBI-031 and up to 50% of these rates onfor net sales of potential future products containing other IL-6 compounds, with each of the royalties subject to reduction under certain circumstances and to the buy-out options.options of Roche.
Buy-Out Options
The License Agreement is subjectwith Roche provides for 2 “option periods” during which Roche may elect to the provisions of ASC 606, Revenue from Contracts with Customers ("ASC 606"), which was adopted effective January 1, 2018 utilizingmake a modified retrospective method. The Company concluded that all performance obligations had been achieved as of the adoption date and therefore the full transaction price was considered earned. The transaction price was determined to be the $30.0 million received in 2016. Additional consideration to be paidone-time payment to the Company uponand, in turn, terminate its diligence, milestone and royalty payment obligations under the achievement of certain milestones will be included if it is expected thatLicense Agreement with Roche. Specifically, (i) Roche may exercise a buy-out option following the amounts will be received andfirst dosing (“Initiation”) in the amounts would not be subject tofirst Phase 2 study for a constraint. AsLicensed Product until the day before Initiation of the datefirst Phase 3 study for a Licensed Product, in which case Roche is required to pay the Company $135.0 million within 30 days after Roche's exercise of such buy-out option
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and receipt of an invoice from the Company, or (ii) Roche may exercise a buy-out option following the day after Initiation of the adoption, no amounts were expectedfirst Phase 3 study for a Licensed Product until the day before the acceptance for review by the FDA or other regulatory authority of a BLA or similar application for marketing approval for a Licensed Product in either the United States or in the E.U., in which case Roche is required to be receivedpay the Company, within 30 days after Roche’s exercise of such buy-out option and receipt of an invoice from the achievementCompany, $265.0 million, which amount would be reduced to $220.0 million if none of the Company’s patent rights containing a composition of matter claim covering any milestones duecompound or Licensed Product has issued in the E.U.
Termination
Either the Company or Roche may each terminate the License Agreement with Roche if the other party breaches any of its material obligations under the agreement and does not cure such breach within a specified cure period. Roche may terminate the License Agreement with Roche following effectiveness by providing advance written notice to the nature ofCompany or by providing written notice if the milestones andCompany is debarred, disqualified, suspended, excluded, or otherwise declared ineligible from certain federal or state agencies or programs. The Company may terminate the development status of the product candidates at the time of the adoption. As a result, there were no amounts required to be recorded as a cumulative adoption adjustment as the consideration recognized under ASC 606 was consistentLicense Agreement with the amounts recognized under the previous accounting literature.
During the three and nine months ended September 30, 2019 and 2018, there were no adjustmentsRoche if, prior to the transaction price required and no revenue was recognized because all performance obligationsfirst filing of the Company had previously been satisfied and management dida BLA for a Licensed Product, there is a period of 12 months where Roche is not expect any amounts to be received from any milestones within the License Agreement. This is dueconducting sufficient development activities with respect to the nature ofproducts made from the milestones and the development status of the product candidates as of the end of each reporting period.Licensed Intellectual Property.

13.
14. RELATED PARTY TRANSACTIONS
The Company leases its facility in Winnipeg, Manitoba facility from an affiliate of Leslie L. Dan, a director of the Company until his retirement effectivein July 16,2019. For each of the three months ended March 31, 2020 and 2019, under a five-year renewable lease through September 2020 with a right to renew the lease for one subsequent five-year term. Operating lease costs under this lease,Company paid $0.1 million of rent, which includeincludes the related operating expenses, were $76,000 and $222,000 for the three and nine months ended September 30, 2019, respectively. Previously under ASC 840, rent expenses for this lease were $78,000 and $239,000 for the three and nine months ended September 30, 2018, respectively.expenses.
The Company pays fees under an intellectual property license agreement to Protoden Technologies Inc. (“Protoden”), a company owned by Clairmark, Investments Ltd. (“Clairmark”), an affiliate of Mr. Dan. Pursuant to this licensethe agreement, the Company has an exclusive, perpetual, irrevocable and non-royalty bearing license, with the right to sublicense, underto certain patents and technology to make, use and sell products that utilize such patents and technology for antechnology. The annual fee ofis $0.1 million. Upon expiration of the term on January 1, 2025,December 31, 2024, the licenses granted to the Company will require no further payments to Protoden. DuringFor each of the ninethree months ended September 30, 2019March 31, 2020 and 2018, $0.1 million was paid to Clairmark.

14. SUBSEQUENT EVENT
Modifications to Outstanding Warrants
In November 2017, as part of an underwritten public offering, the Company issued warrants to purchase 10.0 million shares of common stock with an exercise price of $0.80 per share (the "2017 Warrants"), of which 0.5 million warrants remained outstanding as of September 30, 2019. On October 29, 2019, the Company announced that it had entered into transactions with holders of its outstanding 2018 Warrants and 2017 Warrantspaid $0.1 million under this agreement.
Mr. Dan was not deemed a related party during the three months ended March 31, 2020; as such, only payments made during the three months ended March 31, 2019 are considered payments to purchase the Company's common stock. The following table sets forth the Company's warrant activity subsequent to September 30, 2019 which resulted from the exercises and modifications described below:a related party.

      Subsequent Event Warrant Activity
Issued Exercise
Price		 Expiration September 30, 2019 (Exercised) October 31, 2019
Jun-2019 $1.47 Jun-2020 20,410
 —
 20,410
Mar-2018 $0.95* Mar-2023 5,350
 (3,407) 1,943
Nov-2017 $0.55* Nov-2022 492
 (5) 487
May-2015 $11.83 Nov-2024 28
 —
 28
Nov-2014 $11.04 Nov-2024 27
 —
 27
      26,307
 (3,412) 22,895
* Exercise price shown (i) reflects modification described below and (ii) subject to further adjustment based on down round provision added by amendment described below.
2018 Warrants15. SUBSEQUENT EVENTS
On October 28, 2019,March 2, 2020, the Company entered into transactionsreceived written notice (the “Notice”) from The Nasdaq Stock Market, LLC (“Nasdaq”) indicating that the Company is not in compliance with the holders of its outstanding 2018 Warrants pursuant to which such holders either (i) exercised their warrants pursuant to a Warrant Exercise Agreement (the "2018 Warrant Exercise Agreements") or (ii) amended their warrants pursuant to a Warrant Amendment Agreement (the "2018 Warrant Amendment Agreements"). As consideration$1.00 minimum bid price requirement for those holders executing the 2018 Warrant Exercise Agreements,continued listing on The Nasdaq Global Market, as set forth in Nasdaq Listing Rule 5450(a)(1).
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company reducedhad a period of 180 calendar days, or until August 31, 2020, to regain compliance with the exerciseminimum bid price requirement. To regain compliance, the closing bid price of the warrants from $1.20 to $0.60Company’s common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period.
On April 17, 2020, the Company'sCompany received written notice from Nasdaq that the 180-day grace period to regain compliance with the $1.00 minimum bid price requirement has been extended in response to the COVID-19 pandemic and related extraordinary market conditions. As a result of this extension, the Company now has until November 12, 2020, to regain compliance with the minimum bid price requirement.
If the Company is not in compliance by November 12, 2020, the Company may be afforded a second 180 calendar day period to regain compliance. To qualify, the Company would be required to apply to have its common stock resulting in proceedslisted on the Nasdaq Capital Market and meet the continued listing requirement for market value of $2.0 million frompublicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the exerciseminimum bid price requirement, and will need to provide written notice to Nasdaq of 3.4 million warrants. Pursuantits intention to cure the 2018 Warrant Amendment Agreements,deficiency during the prohibition on certain variable rate transactions included insecond compliance period, by effecting a reverse stock split, if necessary. If the 2018 Warrants was amendedCompany does not qualify for the second compliance period or fails to exclude ATM offerings andregain compliance during the exercisesecond 180-day period, then Nasdaq will notify the Company of its determination to delist the common stock, at which point the Company would have an opportunity to appeal the delisting determination to a Nasdaq hearings panel.

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The Company intends to monitor the closing bid price of the warrants was reduced from $1.20 to the lesser of (a) $0.95 per share ofits common stock and (b) the exercise price as determined from timemay, if appropriate, consider implementing available options to time pursuant to the anti-dilution provisions in the 2018 Warrant Amendment Agreements.
In connectionregain compliance with the 2018 Warrant Exercise Agreements and 2018 Warrant Amendment Agreements, the Company entered into an amendment to the Securities Purchase Agreement dated March 21, 2018 related to the March 2018 Financing, by and among the Company and each purchaser identified on the signature pages thereto, with certain holders representing greater than 50.1% of the securities issued based on initial subscription amounts, pursuant to which the prohibition on variable rate transactions, including ATM offerings, contained in section 4.12(b) was deleted in its entirety.
2017 Warrants
On October 28, 2019, the Company entered into transactions with the holders of its outstanding 2017 Warrants pursuant to which such holders either (i) exercised their warrants pursuant to a Warrant Exercise Agreement (the "2017 Warrant Exercise Agreements") or (ii) amended their warrants pursuant to a Warrant Amendment Agreement (the "2017 Warrant Amendment Agreements"). As consideration for those holders executing the 2017 Warrant Exercise Agreements, the Company reduced the exerciseminimum bid price of the warrants from $0.80 to $0.55 per share of the Company's common stock. Pursuant to the 2017 Warrant Amendment Agreements, the prohibition on certain variable rate transactions included in the 2017 Warrants was amended to exclude ATM offerings and the exercise price of the warrants was reduced from $0.80 to the lesser of (a) $0.55 per share of common stock and (b) the exercise price as determined from time to time pursuant to the anti-dilution provisions in the 2017 Warrant Amendment Agreements.
Accounting Implications
The Company is currently reviewing the accounting implications of the modifications to its 2018 Warrants and 2017 Warrants, which will be reflected in the Company's fourth quarter results included in the Annual Report on Form 10-K for the year ended December 31, 2019. ASU No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round Features ("ASU 2017-11") was effective for public companies beginning on January 1, 2019. The amendments in ASU 2017-11 changed the classification analysis of certain equity-linked financial instruments with down round features. Prior to ASU 2017-11, warrants with down round features were not considered indexed to an entity's own stockrequirement under the derivative scope exception in ASCNasdaq Listing Rules, including effecting a reverse stock split.

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815-40, resulting in classification as a liability that must be remeasured at fair value at each reporting period. Under the new guidance, when determining whether certain financial instruments should be classified as liabilities or equity under ASC 815-40, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to the entity's own stock. The Company is still required to determine whether its 2018 Warrants and 2017 Warrants should continue to be classified in equity based on the derivative scope exception under the guidance in ASC 815-40, and such determination has not yet been made. Additionally, under ASU 2017-11, when a down round feature is included in an equity-classified freestanding financial instrument, the value
Table of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic earnings per share calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument.Contents

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto appearing elsewhere herein and our audited annual consolidated financial statements and related notes thereto and “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2018,2019, included in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 1, 2019.16, 2020. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.amended ("Exchange Act"). All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, the impact of the COVID-19 pandemic, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties, assumptions and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to the “Company,” “Sesen,” “we,” “us,” and “our” include Sesen Bio, Inc. and its subsidiaries.
Overview
We are a late-stage clinical company developingadvancing targeted fusion protein therapeutics ("TFPTs") composed of an anti-cancer antibody fragment tethered to a protein toxin for the treatment of patients with cancer. We genetically fuse the cancer-targetingtargeting antibody fragment and the cytotoxic protein payload into a single molecule which is produced through our proprietary one-step, microbial manufacturing process. We target tumor cell surface antigens with limited expression on normal cells. Binding of the target antigen by the TFPT allows for rapid internalization into the targeted cancer cell. We have designed our targeted proteins to overcome the fundamental efficacy and safety challenges inherent in existing antibody-drug conjugates ("ADCs,"ADCs") where a payload is chemically attached to a targeting antibody.
Our most advanced product candidate, VB4-845,Vicinium, also known as Vicinium®,VB4-845, is a locally-administered targeted fusion protein composed of an anti-EpCAM, or epithelialanti-epithelial cell adhesion molecule ("EpCAM") antibody fragment tethered to a truncated form of Pseudomonas exotoxin A for the treatment of high-risk non-muscle invasive bladder cancer ("NMIBC"). On December 6, 2019, we initiated our Biologics License Application ("BLA") submission for Vicinium to the United States Food and Drug Administration ("FDA") under Rolling Review. "Rolling Review" of the BLA enables individual modules to be submitted and reviewed on an ongoing basis, rather than waiting for all sections to be completed before submission. The submission consisted of Modules 1, 2, 4 and 5, with information amendments to be submitted to these modules throughout 2020. We have ananticipate completing Module 3 (Chemistry, Manufacturing and Controls ("CMC")) to finalize the BLA submission in the second half of 2020. We may experience disruptions as a result of the COVID-19 pandemic that may impact our expected timeline to finalize the BLA submission, including manufacturing activities of our contract manufacturers due to limitations on work and travel imposed or recommended by federal or state governments, employers and others.
In August 2019, we reported updated preliminary efficacy data from our ongoing single-arm, multi-center, open-label Phase 3 clinical trial of Vicinium as a monotherapy in patients with high-risk, bacillus Calmette-Guérin ("BCG") unresponsive-unresponsive NMIBC called(the "VISTA Trial"). As of the VISTA Trial.May 29, 2019 data cutoff date, we reported the preliminary complete response rates ("CRRs") in evaluable carcinoma in situ ("CIS") patients following three, six, nine and 12 months of treatment in the clinical trial. The results were consistent with the results observed in the previously completed Phase 1 and Phase 2 clinical trials of Vicinium for the treatment of high-risk NMIBC. The VISTA Trial completed enrollment in April 2018 with a total of 133 patients across
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three cohorts based on histology and time to disease recurrence after adequate BCG treatment (at(under 2018 FDA guidance on treatment of NMIBC, adequate BCG is defined as at least two courses of BCG with at least five doses in the firstan initial induction course andof treatment, plus at least two doses in the second)a second course of treatment):
•Cohort 1 (n=86): Patients with carcinoma in situ ("CIS")CISwith or without papillary disease that were determined to be refractory or recurred within six months of their last course of adequate BCG
BCG;
•Cohort 2 (n=7): Patients with CIS with or without papillary disease that was determined to be refractory or recurred after six months, but less than 11 months, after their last course of adequate BCGBCG; and
•Cohort 3 (n=40): Patients with high-risk (Ta or T1) papillary disease without CIS that was determined to be refractory or recurred within six months of their last course of adequate BCGBCG.

As of the end of April 2020, all patients have completed treatment in the VISTA Trial. The primary and secondary endpoints forof the VISTA Trial are as follows:
Dose30 mg of Vicinium (in 50 mL of saline)
Total enrollment133 patients, including 86 CIS patients whose disease is BCG unresponsive
Primary endpoint•Complete response rate at 3 months in patients with CIS (with or without papillary disease) whose disease is BCG unresponsive; and
•Kaplan-Meier estimate of duration of response for BCG unresponsiveCRR at 3 months in patients with CIS (with or without papillary disease) whose disease is BCG-unresponsive and duration of response ("DoR") for BCG-unresponsive CIS patients who experience a complete response.
Patients with CIS will be considered to have a complete response if at the time of any disease status evaluation (per protocol every 13 weeks or any unscheduled evaluation) there is no evidence of high-grade disease (CIS, high-grade Ta or any grade T1 disease) or disease progression (e.g., to muscle invasive disease)("CR"). Low-grade disease is not considered a treatment failure in these patients and they may remain on study treatment following transurethral resection of the bladder tumor.
Secondary endpoints•Event-free survival in all patients;
•Complete response rate in patients at 6, 9, 12, 15, 18, 21, and 24 months in patients with CIS whose disease is BCG unresponsive;
•Time to cystectomy in all patients;
•Time to disease recurrence in papillary patients;
•Progression-free survival in all patients;
•Overall survival in all patients; and
•Safety and tolerability of Vicinium therapy in all patients.
Exploratory endpointTo evaluate biomarkers that may be associated with response or disease progression or treatment failure, which may include, for example, EpCAM status, tumor subtype morphology, furin levels in tumor cell endosomes, presence of a glycosaminoglycan coat, and presence of receptors that could impede a host anti-tumor immune response such as PD-L1.
As of athe May 29, 2019 data cutoff date, preliminary primary and secondary endpoint data for each of the trial cohorts were as follows:
Cohort 1 (n=86) Evaluable Population (n=82) Complete Response Rate, Evaluable Population, for Carcinoma in situ:
CIS:
Time PointEvaluable Patients*
Complete Response Rate

(95% Confidence Interval)
3-monthsn=8239% (28%-50%)
6-monthsn=8226% (17%-36%)
9-monthsn=8220% (12%-30%)
12-monthsn=8217% (10%-27%)
*Response-evaluable population includes any modified intention to treatintention-to-treat ("mITT") subject who completed the induction phase.

Cohort 2 (n=7) Evaluable Population (n=7) Complete Response Rate, Evaluable Population, for Carcinoma in situ:
CIS:
Time PointEvaluable Patients*
Complete Response Rate

(95% Confidence Interval)
3-monthsn=757% (18%-90%)
6-monthsn=757% (18%-90%)
9-monthsn=743% (10%-82%)
12-monthsn=714% (0%-58%)
*Response-evaluable population includes any mITT subject who completed the induction phase.


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

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

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

Duration of Response:The median duration of responseDoR for patients in Cohort 1 and Cohort 2 combined (n=93) is 287 days (95%(lower 95% confidence interval ("CI"), 154-not = 154 days, upper 95% confidence interval is not estimable ("NE")) due to the limited number of events occurring beyond the median), using the Kaplan-Meier method. The Kaplan-Meier method is a non-parametric statistical analysis used to estimate survival times and times to event when incomplete observations in data exist. Additional ad hoc analysis of pooled data for all patients with CIS (Cohorts 1 and 2, n=93) shows that among patients who achieved a complete response at 3 months, 52% remained disease-free for a total of 12 months or longer after starting treatment, using the Kaplan-Meier method.
DoR is defined as the time from first occurrence of complete response to documentation of treatment failure or death.
We have conducted additional analyses for secondary endpoints based on the May 29, 2019 data cutoff date. These additional preliminary data include the following:
•Time to Disease Recurrence: High-grade papillary (Ta or T1) NMIBC is associatedCystectomy:Across all 133 patients treated with higher ratesVicinium in the VISTA Trial, greater than 75% of progression and recurrence. Therefore, timeall patients are estimated to disease recurrence is a key secondary endpoint for patients with high-risk papillary-only NMIBC. The median time to disease recurrence for patients in Cohortremain cystectomy-free at 3 (n=40) is 402 days (95% CI, 170-NE),years, using the Kaplan-Meier method.
Additional ad hoc analysis shows that approximately 88% of responders are estimated to remain cystectomy-free at 3 years. Time to Cystectomy: cystectomy is defined as the time from the date of first dose of study treatment to surgical bladder removal. The first 2018 United States Food and Drug Administration ("FDA")FDA guidance on treatment of BCG-unresponsive NMIBC patients states that the goal of therapy in such patients is to avoid cystectomy. Therefore, time to cystectomy is a key secondary endpoint in the VISTA Trial. Across all 133
•Time to Disease Recurrence: High-grade papillary (Ta or T1) NMIBC is associated with higher rates of progression and recurrence. The median time to disease recurrence for patients treated with Vicinium in the VISTA Trial, greater than 75% of all patients are estimated to remain cystectomy-free at 2.5 years,Cohort 3 (n=40) is 402 days (95% CI, 170-NE), using the Kaplan-Meier method. Additional ad hoc analysisTime to disease recurrence is defined as the time from the date of responders and non-responders for all patients shows that approximately 88%the first dose of responders are estimatedstudy treatment to remain cystectomy-free at 3 years.
the first occurrence of treatment failure or death on or prior to treatment discontinuation.
•Progression-Free Survival:Survival ("PFS"):90% of all 133 patients treated with Vicinium in the VISTA Trial are estimated to remain progression-free for 2 years or greater, using the Kaplan-Meier method. Progression-freePFS is defined as the time from the date of first dose of study treatment to the first occurrence of disease progression (e.g. T2 or more advanced disease) or death as a first event.
on or prior to treatment discontinuation.
•Event-Free Survival: 29% of all 133 patients treated with Vicinium in the VISTA Trial are estimated to remain event-free at 12 months, using the Kaplan-Meier method. Event-free survival is defined as the time from the date of first dose of study treatment to the first occurrence of disease recurrence, progression or death as a first event.
on or prior to treatment discontinuation.
◦Overall Survival:Survival ("OS"):96% of all 133 patients treated with Vicinium in the VISTA Trial are estimated to have an overall survival of 2 years or greater, using the Kaplan-Meier method. Overall survivalOS is defined as the time from the date of first dose of study treatment to death from any cause.
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Preliminary Safety Results
As of the May 29, 2019 data cut off,cutoff date, in patients across all cohorts (n=133), of our Phase 3 VISTA Trial of Vicinium for the treatment of high-risk NMIBC, 88% experienced at least one adverse event, with 95% of adverse events being Grade 1 or 2. The most commonly reported treatment-related adverse events were dysuria (14%), hematuria (13%) and urinary tract infection (12%) - all of which are consistent with the profile of bladder cancer patients and the use of catheterization for treatment delivery. These adverse events were determined by the clinical investigators to be manageable and reversible, and only four patients (3%) discontinued treatment due to an adverse event. Serious adverse events, regardless of treatment attribution, were reported in 14% of patients. There were four treatment-related serious adverse events reported in three patients including acute kidney injury (Grade 3), pyrexia (Grade 2), cholestatic hepatitis (Grade 4) and renal failure (Grade 5). There were no age-related increases in adverse events observed in the VISTA Trial.
Other Vicinium Development Activity
OnIn August 2018, we received Fast Track designation from the FDA for Vicinium for the treatment of high-risk NMIBC.
In May 2019, we met with the FDA for a Type C meeting for CMC and reached agreement with the FDA on the analytical comparability plan to be used to assess comparability between the drug supply used in clinical trials and the potential commercial drug supply to be produced by Fujifilm. We also confirmed with the FDA that, subject to final comparability data to be provided in the BLA submission, no additional clinical trials were deemed necessary to establish comparability.
In June 6, 2019, we met with the FDA for a Type B Pre-Biologics License Application ("BLA")Pre-BLA meeting regarding the approval pathway for Vicinium for the treatment of patients with high-risk, BCG-unresponsive NMIBC. At the meeting, we reached alignment with the FDA on an Accelerated Approval Pathwayaccelerated approval pathway for Vicinium along with Rolling Review (as defined below), and we expect to initiate submission of the BLA in the fourth quarter of 2019.Review. The FDA also indicated that the clinical data, nonclinical data, clinical pharmacology data, and the safety database arewere sufficient to support a BLA submission, and that no additional clinical trials arewere necessary for a BLA submission. Per the official FDA minutes received post-meeting, the FDA stated that the pre-approval

pre-licensing inspection may be completed at the time of process performance qualification manufacturing, which we believe will benefit the overall review timeline for the BLA.
Rolling Review of the BLA enables individual modules to be submitted and reviewed on an ongoing basis, rather than waiting for all sections to be completed before submission. The final module submission for the BLA will be chemistry, manufacturing, and controls ("CMC"). In addition, the FDA communicated that they expect that a meeting with the FDA’s Oncologic Drugs Advisory Committee ("ODAC") will be required as part of the Accelerated Approval Pathway.accelerated approval pathway. If Vicinium receives marketing approval for treatment of NMIBC, a post-marketing confirmatory trial will also be required.
OnIn November 4, 2019, we met with the FDA for a Type C meeting to discuss the details of a post-marketing confirmatory trial for Vicinium.Vicinium for the treatment of high-risk NMIBC. At that meeting, we reached agreement with the FDA that the post-marketing confirmatory trial for Vicinium will enroll BCG-refractory patients who have received less-than-adequate BCG, which is especially important in light of the ongoing BCG shortage. Under 2018 FDA guidance on treatment of NMIBC, adequate BCG is defined as at least 5 doses in an initial induction course of treatment, plus at least 2 doses in a second course of treatment. This represents a broader patient population than the BCG-intolerant population originally proposed. We anticipate that, if Vicinium is approved by the FDA, the initial indication will be for BCG-unresponsive patients who have received adequate BCG. If the post-marketing confirmatory trial is successful, it could result in an expanded label to include this additional population of patients who have received less-than-adequate BCG. We have a Type B CMC meeting to discuss the content and timing of the CMC module scheduled
On December 4, 2019, we met with the FDA for December 4, 2019.
In addition, we had a Type C CMC in late May 2019 andB pre-BLA meeting for CMC. At that meeting, we reached agreement with the FDA on the analytical comparability planfinal content for Module 3 (CMC) of the BLA.
On December 6, 2019, we initiated our BLA submission for Vicinium to the FDA under Rolling Review. The submission consisted of Modules 1, 2, 4 and 5, with information amendments to be usedsubmitted to assess comparability between the supply used in clinical trials and the potential commercial supply produced by FUJIFILM Diosynth Biotechnologies U.S.A., Inc. ("Fujifilm").these modules throughout 2020. We also confirmed with the FDA that, subjectanticipate completing Module 3 (CMC) to final comparability data to be provided infinalize the BLA submission noin the second half of 2020.
On May 7, 2020, we received clinical Scientific Advice from the Committee for Medicinal Products for Human Use ("CHMP") of the European Medicines Agency ("EMA") stating that the Committee agreed that our nonclinical, clinical pharmacology and safety database are all sufficient to support a marketing authorization application ("MAA"). Furthermore, additional clinical trials were deemed necessarynot requested by the CHMP in support of the MAA submission for Vicinium for the treatment of high-risk NMIBC. Based on the guidance received, we expect to establish comparability.submit the MAA for Vicinium for the treatment of high-risk NMIBC to the EMA in early 2021, with potential approval anticipated in early 2022. We expect to receive Scientific Advice from the CHMP on the CMC program for Vicinium at a later date.

Manufacturing
In October 2018, we entered into a Master Bioprocessing Services Agreement with Fujifilm (the "Fujifilm MSA") for the manufacturing process and technology transfer of Vicinium drug substance production. In April 2019, the first full, commercial-scale GMPcGMP run was completed at Fujifilm. Full quality release testing has been completedFujifilm and all Phase 3 release specificationsquality acceptance criteria were met, supportingmet. This supports Fujifilm’s ability to produce the bulk drug substance form of Vicinium for commercial purposes if we receive regulatory approval to market Vicinium.
In August 2018, we received Fast Track designation from the FDA for Vicinium for the treatment of high-risk NMIBC. In February 2020, manufacturing of the pre-process performance qualification ("pre-PPQ") cGMP batch was completed at Fujifilm. Full quality release testing of the drug substance has been completed and all quality acceptance criteria were met. In addition, the bulk drug substance from the Fujifilm pre-PPQ batch
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has been used to manufacture the first drug product PPQ batch by Baxter Oncology GmbH. Full quality release testing of the first drug product process performance qualification batch is currently underway.
Joint Development
In June 2017, we entered into a Cooperative Research and Development Agreement ("CRADA") with the National Cancer Institute ("NCI") for the development of Vicinium in combination with AstraZeneca’s immune checkpoint inhibitor durvalumab for the treatment of NMIBC. Under the terms of the CRADA, the NCI will conduct a Phase 1 clinical trial in patients with high-risk NMIBC to evaluate the safety, efficacy and biological correlates of Vicinium in combination with durvalumab. This Phase 1 clinical trial is open and is actively recruiting patients.
Vicinium has also been evaluated for the treatment of squamous cell carcinoma of the head and neck ("SCCHN"). Vicinium for the treatment of SCCHN had previously been designated as Proxinium™ProxiniumTM to indicate its different fill volume and vial size as well as its different route for local administration via intratumoral injection. In addition to our locally-administered TFPTs, our pipeline also includes systemically-administered TFPTs that are built around our proprietary de-immunized variant of the plant-derived cytotoxin bouganin ("deBouganin"). One of these products,product candidates, VB6-845d, is a TFPT consisting of an EpCAM targeting FabEpCAM-targeting fragment antigen binding domain ("Fab") genetically linked to deBouganin, a novel plant derived cytotoxic payload that we have optimized for minimal immunogenic potential and is administered by intravenous infusion. We have deferred further development of Vicinium for the treatment of SCCHN and of VB6-845d in order to focus our efforts and our resources on our ongoing development of Vicinium for the treatment of high-risk NMIBC. We are also exploring collaborations for Vicinium for the treatment of SCCHN and for VB6-845d.
We maintain global development, marketing and commercialization rights for all of our TFPT-based product candidates. We intend to explore various commercialization strategies to market our approved products. If we obtain regulatory approval for Vicinium for the treatment of high-risk NMIBC, we mayintend to build a North American specialty urology sales force to market the product orin the United States and Canada. Outside the United States and Canada, we will seek commercialization partners. If we obtain regulatory approval for Vicinium for the treatment of SCCHN or for our other product candidates, including VB6-845d, we may seek partners with oncology expertise in order to maximize the commercial value of each asset or a portfolio of assets.urology expertise. We also own or exclusively license worldwide intellectual property rights for all of our TFPT-based product candidates, covering our key patents with protection ranging from 2018 to 2034.into 2036.
OnLicense Agreement with Roche
In June 10, 2016, we entered into a License Agreement with F. Hoffmann-LaHoffman-La Roche LtdLtd. and Hoffmann-LaHoffman-La Roche Inc. (collectively, "Roche") (the "License Agreement"Agreement with Roche"), pursuant to which we licensedgranted Roche an exclusive, worldwide license, including the right to sublicense, to our patent rights and know-how related to our monoclonal antibody EBI-031 and all other IL-6 antagonistic anti-IL-6anti-IL antagonist monoclonal antibody technology owned by us.us (collectively, the "Licensed Intellectual Property"). Under the License Agreement with Roche, Roche is required to continue developing, at its cost, EBI-031 and any other product made from the Licensed Intellectual Property that contains an IL-6 antagonist anti-IL monoclonal antibody ("Licensed Product") and pursue ongoing patent prosecution, at its cost. At the time of the License Agreement with Roche, EBI-031, which was derived using our previous AMP-Rx platform, was in pre-clinical development as an intravitreal injection for diabetic macular edema and uveitis.
Through September 30, 2019,March 31, 2020, we have received a total of $30.0 million in payments from Roche pursuant to the License

Agreement with Roche, including a $7.5 million upfront payment in August 2016 and a $22.5 million milestone payment in September 2016 as a result of the investigational new drug ("IND") application for EBI-031 becoming effective. We are also entitled to receive up to an additional $240.0 million upon the achievement of other specified regulatory, development and commercial milestones, as well as royalties based onroyalty payments in accordance with a tiered royalty rate scale, with rates ranging from 7.5% to 15% of net sales of potential future products containing EBI-031 or any otherand up to 50% of these rates for net sales of potential future products containing other IL-6 compounds.compounds, with each of the royalties subject to reduction under certain circumstances and to the buy-out options of Roche.
Liquidity and Going Concern
As of September 30, 2019,March 31, 2020, we had cash and cash equivalents of $57.9$42.5 million, net working capital (current assets less current liabilities) of $50.3$37.5 million and an accumulated deficit of $260.0$252.0 million. We incurred negative cash flows from operating activities of $22.8$37.5 million for the year ended December 31, 20182019 and $23.7$8.8 million for the ninethree months ended September 30, 2019.March 31, 2020. Since our inception, we have received no revenue from sales of our products, currently under development, and we anticipate that operating losses will continue for the foreseeable future as we continue our ongoing Phase 3 clinical trialVISTA Trial of Vicinium for Viciniumthe treatment of high-risk NMIBC and seek marketing approval from the FDA. We have financed our operations to date primarily through private placements of our common stock, preferred stock, common stock warrants and convertible bridge notes, venture debt borrowings, our initial public offering ("IPO"), follow-on public offerings, sales effected in an "at-the-market" ("ATM") offering andofferings, our License Agreement with Roche.Roche and, to a lesser extent, from a collaboration.
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Under Accounting Standards Codification Topic 205-40, Presentation of Financial Statements - Going Concern, we are required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of our plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists, we evaluate whether the mitigating effect of our plans sufficiently alleviates the substantial doubt about our ability to continue as a going concern. The mitigating effect of our plans, however, is only considered if both (i) it is probable that our plans will be effectively implemented within one year after the date that our financial statements are issued and (ii) it is probable that our plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that our financial statements are issued. Generally, to be considered probable of being effectively implemented, our plans must have been approved by our Boardboard of Directorsdirectors before the date that our financial statements are issued.
Our future success is dependent on our ability to develop our product candidates, including Vicinium for the treatment of high-risk NMIBC, and ultimately upon our ability to attain profitable operations. In order to commercialize our product candidates, including Vicinium for the treatment of high-risk NMIBC, we need to complete clinical development and comply with comprehensive regulatory requirements. We are subject to a number of risks similar to other late-stage clinical companies, including, but not limited to, successful discovery and development of our product candidates, raising additional capital, development and commercialization by our competitors of new technological innovations, protection of proprietary technology and market acceptance of our products. The successful discovery and development of product candidates, including Vicinium for the treatment of high-risk NMIBC, requires substantial working capital, and management expectswe expect to seek additional funds through equity or debt financings or through additional collaboration, licensing transactions or other sources. We may be unable to obtain equity or debt financings or enter into additional collaboration or licensing transactions at favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include liens or other restrictive covenants limiting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, strategic collaborations and alliances or licensing arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable. If we are unable to raise additional funds when needed, we may be required to implement cost reduction strategies and delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market.
Our management doesIn December 2019, an outbreak of a novel strain of coronavirus ("COVID-19") was identified in Wuhan, China. This virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 200 countries and territories, including the United States disproportionately. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to businesses and capital markets around the world. We are proactively executing risk mitigation strategies to attenuate the impact of COVID-19 on us, and at this time, we have not yet experienced any business disruptions as a result of the pandemic. We are continually assessing the effect of the COVID-19 pandemic on our operations and we are monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world.
We do not believe that our cash and cash equivalents of $57.9$42.5 million as of September 30, 2019March 31, 2020 is sufficient to fund our current operating plan for at least twelve months after the issuance of our condensed consolidated financial statements. Based on our current operating plan, we anticipate having sufficient cash to fund our operations into the fourth quarter of 2020. Our2021; however, we have based this estimate on assumptions that may prove to be wrong, and our capital resources may be utilized faster than we currently expect. Given our history of significant losses, negative cash flows from operations, limited cash resources currently on hand, the ongoing COVID-19 pandemic and dependence on our ability - about which there can be no certainty - to obtain additional financing to fund our operations after the current cash resources are exhausted, raises substantial doubt exists about our ability to continue as a going concern. The condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q were prepared under the assumption that we will continue as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Components of Our Results of Operations
Research and Development
Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:
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•employee-related expenses, including salaries, benefits, travel and share-based compensation expense;
•expenses incurred under agreements with contract research organizations ("CROs") and investigative sites that conduct our clinical trials;
•expenses associated with developing manufacturing capabilities and manufacturing clinical study materials;
•expenses associated with transferring manufacturing capabilities to contract manufacturing organizations ("CMOs") for commercial-scale production;
•facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies; and
•expenses associated with pre-clinical and regulatory activities.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.
The successful development and commercialization of any product candidate is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
•the scope, progress, outcome and costs of our clinical trials and other research and development activities;
•the efficacy and potential advantages of our product candidates compared to alternative treatments, including any standard of care;
•the market acceptance of our product candidates;
•the cost and timing of the implementation of commercial-scale manufacturing of our product candidates;
•obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
•significant and changing government regulation;
•the impact of the COVID-19 pandemic; and
•the timing, receipt and terms of any marketing approvals.
A change in the outcome of any of these variables with respect to the development of any product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently contemplate will be required for the completion of clinical development of any product candidate,Vicinium for the treatment of high-risk NMIBC, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.Vicinium for the treatment of high-risk NMIBC.
We allocate direct research and development expenses, consisting principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials, and costs related to manufacturing or purchasing clinical trial materials and technology transfer, to specific product programs. We do not allocate employee and contractor-related costs, costs associated with our platform and facility expenses, including depreciation or other indirect costs, to specific product programs because these costs may be deployed across multiple product programs under research and development and, as such, are separately classified. The table below provides research and development expenses incurred for Vicinium for the treatment of high-risk NMIBC and other expenses by category. We have deferred further development of Vicinium for the treatment of SCCHN and VB6-845d in order to focus our efforts and our resources on our ongoing development of Vicinium for the treatment of high-risk NMIBC. We expect our research and development expenses for Vicinium for the treatment of high-risk NMIBC will continue to increase during subsequent periods.
We did not allocate research and development expenses to any other specific product program during the periods presented (in thousands):

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Three Months ended
September 30,		 Nine Months ended
September 30,		 Three Months ended
March 31,
2019 2018 2019 2018 20202019
Programs:       Programs:
Vicinium, for the treatment of high-risk NMIBC$4,248
 $1,688
 $12,620
 $5,259
Vicinium for the treatment of high-risk NMIBCVicinium for the treatment of high-risk NMIBC$7,342  $2,362  
Total direct program expenses4,248
 1,688
 12,620
 5,259
Total direct program expenses7,342  2,362  
Personnel and other expenses:       Personnel and other expenses:
Employee and contractor-related expenses1,916
 879
 4,973
 2,723
Employee and contractor-related expenses1,167  1,710  
Platform-related lab expenses51
 53
 464
 153
Platform-related lab expenses45  281  
Facility expenses94
 94
 319
 263
Facility expenses110  110  
Other expenses304
 658
 867
 1,008
Other expenses203  223  
Total personnel and other expenses2,365
 1,684
 6,623
 4,147
Total personnel and other expenses1,525  2,324  
Total Research and Development$6,613
 $3,372
 $19,243
 $9,406
Total Research and Development$8,867  $4,686  
General and Administrative
General and administrative expenses consist primarily of salaries and related costs for personnel, including share-based compensation, in executive, operational, finance, business development and human resource functions. Other general and administrative expenses include facility-related costs, professional fees for legal, patent, consulting and accounting services, commercial market research and U.S.United States pre-launch market readiness.
Change in Fair Value of Contingent Consideration
In connection with the acquisition of Viventia Bio, Inc. ("Viventia") in September 2016, we recorded contingent consideration pertaining to the amounts potentially payable to Viventia'sthe former shareholders of Viventia pursuant to the terms of the share purchase agreement betweenShare Purchase Agreement among us, Viventia and the other signatories thereto (the "Share Purchase Agreement") and are based on regulatory approval in certain markets and future revenue levels. The fair value of contingent consideration is assessed at each balance sheet date and changes, if any, to the fair value are recognized in earnings (or loss) for the period.
Other Income, Net
Other income, net consists primarily of interest income earned on cash and cash equivalents.

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Our Results of Operations
Comparison of the Three Months ended September 30,March 31, 2020 and 2019 and 2018
Three Months ended
September 30,		 Increase/(Decrease) Three Months ended
March 31,		Increase/(Decrease)
2019 2018 Dollars Percentage 20202019DollarsPercentage
(in thousands, except percentages) (in thousands, except percentages)
Operating expenses:       Operating expenses:
Research and development$6,613
 $3,372
 $3,241
 96 %Research and development$8,867  $4,686  $4,181  89 %
General and administrative3,238
 3,825
 (587) (15)%General and administrative3,448  3,055  393  13 %
Change in fair value of contingent consideration

3,600
 7,200
 (3,600) (50)%Change in fair value of contingent consideration
(53,700) (1,000) (52,700) 5,270 %
Total operating expenses13,451
 14,397
 (946) (7)%Total operating expenses(41,385) 6,741  (48,126) (714)%
Loss from Operations(13,451) (14,397) 946
 (7)%
Income (Loss) from OperationsIncome (Loss) from Operations41,385  (6,741) 48,126  (714)%
Other income (expense):       Other income (expense):
Other income, net319
 382
 (63) (16)%Other income, net179  261  (82) (31)%
Net Loss and Comprehensive Loss$(13,132) $(14,015) $883
 (6)%
Net Income (Loss) and Comprehensive Income (Loss)Net Income (Loss) and Comprehensive Income (Loss)$41,564  $(6,480) $48,044  (741)%
Research and Development
Research and development expenses were $6.6$8.9 million for the three months ended September 30, 2019March 31, 2020 compared to $3.4$4.7 million for the three months ended September 30, 2018.March 31, 2019. The increase of $3.2$4.2 million was due primarily to increases inincreased costs associated with technology transfer and manufacturing costs associated with the Fujifilm MSA, increasesscale-up for commercial supply and professional fees in support of regulatory consulting fees and internal and external staffing costs,activities, partially offset by lower employee compensation and lower clinical trial expenses related toas a result of our Phase 3 VISTA Trial.Trial winding down.
General and Administrative
General and administrative expenses were $3.2$3.4 million for the three months ended September 30, 2019March 31, 2020 compared to $3.8$3.1 million for the three months ended September 30, 2018.March 31, 2019. The decreaseincrease of $0.6approximately $0.4 million was due primarily due to decreasesincreases in legal, commercialprofessional services fees and employee compensation, expenses, offset by an increase in professional fees.reduced market research costs.
Change in Fair Value of Contingent Consideration
The non-cash change in fair value of contingent consideration was $3.6$53.7 million for the three months ended September 30, 2019March 31, 2020 compared to $7.2$1.0 million for the three months ended September 30, 2018.March 31, 2019. The increasedecrease in the fair value of $3.6contingent consideration of $53.7 million for the three months ended September 30,March 31, 2020 was attributable to significantly higher discount rates as a result of financial market conditions as of March 31, 2020. Because of the business environment uncertainty created by the ongoing COVID-19 pandemic, we carefully reviewed as of March 31, 2020 all of our financial forecast assumptions related to probability, timing and anticipated level of commercial sales, which were used to determine the estimated fair value of contingent consideration as of December 31, 2019, and determined that no financial forecast changes were currently required. Given the evolving and uncertain nature of the COVID-19 pandemic, we will continue to closely monitor developments in order to timely determine if any financial forecast changes may be required.
However, the estimated fair value of contingent consideration is also determined by applying appropriate discount rates to future cash outflows related to the contingent payment obligations, and these discount rates have increased significantly as a result of the extreme volatility of financial markets as global economies shut down in order to contain the spread of COVID-19. The milestone payments constitute debt-like obligations, and the high-yield debt index rate applied to the milestones in order to determine the estimated fair value increased from 11.8% as of December 31, 2019 to 17.9% as of March 31, 2020. The discount rate applied to the 2% royalty due on forecasted Vicinium revenues is derived from our estimated WACC, and this WACC-derived discount rate increased from 5.6% as of December 31, 2019 to 14.7% as of March 31, 2020. These significant increases in the applicable discount rates resulted in a $53.7 million decrease in the estimated fair value of contingent consideration as of March 31, 2020.
The decrease in the fair value of contingent consideration of $1.0 million for the three months ended March 31, 2019 was attributable primarily attributable to a slightly lowerhigher discount rate, based on prevailing market conditions in existence as of September 30,March 31, 2019, applicable to the earnout royalty payments potentially payable to Viventia'sthe former shareholders of Viventia under the Share Purchase Agreement. The increase
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Table of $7.2 million for the three months ended September 30, 2018 was attributable to both higher forecasted revenue based on a change in the pricing assumptions utilized by management and the effect of a lower discount rate, based on prevailing market conditions as of September 30, 2018, applicable to the earnout royalty payments potentially payable to Viventia's shareholders under the Share Purchase Agreement. Contents
Changes in forecast assumptions, including the probability of regulatory approvals and Vicinium pricing and sales volumes, as well as changes in the discount raterates utilized based on prevailing market conditions, could result in materially different fair value estimates.
Other Income, Net
Other income, net was $0.2 million for the three months ended March 31, 2020 compared to $0.3 million for the three months ended September 30, 2019 compared to $0.4 million for the three months ended September 30, 2018.March 31, 2019. The change of $0.1 million was due to lower interest income on cash balances.

Comparison of the Nine Months ended September 30, 2019 and 2018
 Nine Months ended
September 30,		 Increase/(Decrease)
 2019 2018 Dollars Percentage
 (in thousands, except percentages)
Operating expenses:       
Research and development$19,243
 $9,406
 $9,837
 105%
General and administrative8,910
 8,128
 782
 10%
Change in fair value of contingent consideration

46,600
 9,900
 36,700
 371%
Total operating expenses74,753
 27,434
 47,319
 172%
Loss from Operations(74,753) (27,434) (47,319) 172%
Other income (expense):       
Other income, net806
 498
 308
 62%
Net Loss and Comprehensive Loss$(73,947) $(26,936) $(47,011) 175%
Research and Development
Research and development expenses were $19.2 million for the nine months ended September 30, 2019 compared to $9.4 million for the nine months ended September 30, 2018. The increase of $9.8 million was due primarily to increases in technology transfer and manufacturing costs associated with the Fujifilm MSA, increases in regulatory consulting and employee-related compensation, partially offset by lower expenses related to our Phase 3 VISTA Trial.
General and Administrative
General and administrative expenses were $8.9 million for the nine months ended September 30, 2019 compared to $8.1 million for the nine months ended September 30, 2018. The increase of $0.8 million was due primarily to increases in commercial market research, employee-related compensation, and professional and audit fees, offset by a decrease in legal costs.
Change in Fair Value of Contingent Consideration
The change in fair value of contingent consideration was $46.6 million for the nine months ended September 30, 2019 compared to $9.9 million for the nine months ended September 30, 2018. During the quarter ended June 30, 2019, we reassessed the total addressable global market for NMIBC and determined that both the global market size and estimated potential Vicinium commercial net sales within the global NMIBC market were likely higher than the Company’s previous estimates. Specific drivers of the increased revenue estimates include the expectation that Vicinium could achieve peak market penetration earlier than previously estimated and the expectation that Vicinium sales outside the United States could be two to three times the expected sales volumes in the United States. As contingent consideration incorporates a royalty rate of 2% on all commercial net sales reported through December 2033, an increase in expected future net sales correlates to an increase in the fair value of our potential contingent consideration. Accordingly, our contingent consideration at September 30, 2019 was adjusted to reflect our updated view of the NMIBC market and the potential sales volumes of Vicinium in that market. The change in the nine months ended September 30, 2019 was therefore due to changes in assumptions related to Vicinium pricing and projected sales volumes in both the U.S. and outside the U.S. ("OUS") markets compared to prior assumptions utilized as of December 31, 2018. The increase of $9.9 million for the nine months ended September 30, 2018 was attributable to both higher forecasted revenue based on a change in the pricing assumptions utilized by management and the effect of a lower discount rate, based on prevailing market conditions as of September 30, 2018, applicable to the earnout royalty payments potentially payable to Viventia's shareholders under the Share Purchase Agreement. Changes in forecast assumptions, including the probability of regulatory approvals and Vicinium pricing and sales volumes, as well as changes in the discount rate utilized based on prevailing market conditions, could result in materially different fair value estimates.
Other Income, Net
Other income, net was $0.8 million for the nine months ended September 30, 2019 compared to $0.5 million for the nine months ended September 30, 2018. The change of $0.3 million was due to increased interest income on higher cash balances as a result of the equity financings.used to fund current operations.

Liquidity and Capital Resources
Overview
As of September 30, 2019,March 31, 2020, we had cash and cash equivalents of $57.9$42.5 million, net working capital of $50.3$37.5 million and an accumulated deficit of $260.0$252.0 million. We incurred negative cash flows from operating activities of $22.8$37.5 million for the year ended December 31, 20182019 and $23.7$8.8 million for the ninethree months ended September 30, 2019.March 31, 2020. Since our inception, we have received no revenue from sales of our products, currently under development, and we anticipate that operating losses will continue for the foreseeable future as we continue our ongoing Phase 3 VISTA Trial of Vicinium for Viciniumthe treatment of high-risk NMIBC and seek marketing approval from the FDA. We have financed our operations to date primarily through private placements of our common stock, preferred stock, common stock warrants and convertible bridge notes, venture debt borrowings, our IPO, follow-on public offerings, sales effected in an ATM offering andofferings, our License Agreement with Roche.Roche and, to a lesser extent, from a collaboration.
In JuneNovember 2019, we entered into an Open Market Sale Agreement SM (the "Sales Agreement") with Jefferies LLC ("Jefferies"), under which we may issue and sell shares of our common stock from time to time for an aggregate sales price of up to $35.0 million through Jefferies (the "ATM Offering"). Sales of common stock under the Sales Agreement are made by any method that is deemed to be an ATM offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including but not limited to sales made directly on or through the Nasdaq Global Market or any other existing trading market for our common stock. We have no obligation to sell any of our common stock and may at any time suspend offers under the Sales Agreement or terminate the Sales Agreement. Subject to the terms and conditions of the Sales Agreement, Jefferies will use its commercially reasonable efforts to sell common stock from time to time, as the sales agent, based upon our instructions, which include a prohibition on sales below a minimum price set by us from time to time. We have provided Jefferies with customary indemnification rights, and Jefferies is entitled to a commission at a fixed rate equal to 3.0% of the gross proceeds for each sale of common stock. We incurred $0.2 million in legal, accounting and printing costs related to the commencement of the ATM Offering. During the three months ended March 31, 2020, we raised $27.8$3.2 million of net proceeds from the sale of 20.43.2 million shares of common stock at a weighted average price of $1.02 per share under the ATM Offering. Share costs, including sales agent commissions, related to the ATM Offering totaled $0.1 million during the three months ended March 31, 2020.
In December 2019, an outbreak of COVID-19 was identified in Wuhan, China. This virus continues to spread globally, has been declared a pandemic by the World Health Organization and accompanying warrantshas spread to purchase an additional 20.4 million sharesover 200 countries and territories, including the United States disproportionately. The impact of common stockthis pandemic has been and will likely continue to be extensive in an underwritten public offering. Additionally, from January 1, 2019 through September 30, 2019,many aspects of society, which has resulted in and will likely continue to result in significant disruptions to businesses and capital markets around the world. We are proactively executing risk mitigation strategies to attenuate the impact of COVID-19 on us, and at this time, we received $3.4 million in proceeds fromhave not yet experienced any business disruptions as a result of the exercisepandemic. We are continually assessing the effect of outstanding warrantsthe COVID-19 pandemic on our operations and we are monitoring the spread of COVID-19 and the actions implemented to purchase common stock issued in connection with (i) our underwritten public offering in November 2017 and (ii) our March 2018 registered direct public offering and concurrent private placement.combat the virus throughout the world.
Our management doesWe do not believe that our cash and cash equivalents of $57.9$42.5 million as of September 30, 2019March 31, 2020 is sufficient to fund our current operating plan for at least twelve months after the issuance of our interimcondensed consolidated financial statements. Based on our current operating plan, we anticipate having sufficient cash to fund our operations into the fourth quarter of 2020. Our2021; however, we have based this estimate on assumptions that may prove to be wrong, and our capital resources may be utilized faster than we currently expect. Given our history of significant losses, negative cash flows from operations, limited cash resources currently on hand, the impact of the ongoing COVID-19 pandemic on the capital markets and dependence on our ability - about which there can be no certainty - to obtain additional financing to fund our operations after the current cash resources are exhausted, raises substantial doubt exists about our ability to continue as a going concern. The interimcondensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q were prepared under the assumption that we will continue as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Nasdaq Notice

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On March 2, 2020, we received written notice (the “Notice”) from The Nasdaq Stock Market, LLC (“Nasdaq”) indicating that we are not in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Global Market, as set forth in Nasdaq Listing Rule 5450(a)(1).
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we had a period of 180 calendar days, or until August 31, 2020, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period.

On April 17, 2020, we received written notice from Nasdaq that the 180-day grace period to regain compliance with the $1.00 minimum bid price requirement has been extended in response to the COVID-19 pandemic and related extraordinary market conditions. As a result of this extension, we now have until November 12, 2020, to regain compliance with the minimum bid price requirement.

If we are not in compliance by November 12, 2020, we may be afforded a second 180 calendar day period to regain compliance. To qualify, we would be required to apply to have our common stock listed on the Nasdaq Capital Market and meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the minimum bid price requirement, and will need to provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If we do not qualify for the second compliance period or we fail to regain compliance during the second 180-day period, then Nasdaq will notify us of its determination to delist the common stock, at which point we would have an opportunity to appeal the delisting determination to a Nasdaq hearings panel.
We intend to monitor the closing bid price of our common stock and may, if appropriate, consider implementing available options to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules, including effecting a reverse stock split.

Funding Requirements
Our future success is dependent on our ability to develop our product candidates, including Vicinium for the treatment of high-risk NMIBC, and ultimately upon our ability to attain profitable operations. In order to commercialize our product candidates, including Vicinium for the treatment of high-risk NMIBC, we need to complete clinical development and comply with comprehensive regulatory requirements. We are subject to a number of risks similar to other late-stage clinical companies, including, but not limited to, successful discovery and development of our product candidates, raising additional capital, with favorable terms, development and commercialization by our competitors of new technological innovations, protection of proprietary technology and market acceptance of our products. The successful discovery and development of product candidates, including Vicinium for the treatment of high-risk NMIBC, requires substantial working capital, and we expect to seek additional funds through equity or debt financings or through additional collaboration, licensing transactions or other sources. We may be unable to obtain equity or debt financings or enter into additional collaboration or licensing transactions at favorable terms, or at all, and, if necessary, we may be required to implement cost reduction strategies.
We will incur substantial expenses if and as we:
•continue our Phase 3 clinical trialVISTA Trial for Vicinium for the treatment of high-risk NMIBC;
•seek marketing approvals for any product candidates that successfully complete clinical trials;Vicinium for the treatment of high-risk NMIBC;
•establish sales, marketing and distribution capabilities and scale up and validate external manufacturing capabilities (including initiating and completing the manufacturing process and technology transfer to any third-party manufacturers) to commercialize any productsVicinium for which we may obtain marketing approval;the treatment of high-risk NMIBC, if approved;
•maintain, expand and protect our intellectual property portfolio;
•add equipment and physical infrastructure to support our research and development;
•hire additional clinical, regulatory, quality control, scientific and management personnel;
•expand our operational, financial and management systems and personnel;
•conduct research and pre-clinical and clinical development of Vicinium for the treatment of high-risk NMIBC and our other product candidates;
•seek to discover and develop additional product candidates; and
•in-license or acquire the rights to other products, product candidates or technologies.
Our future capital requirements will depend on many factors, including:
•the scope, initiation, progress, timing, costs and results of pre-clinical development and laboratory testing and clinical trials for Vicinium for the treatment of high-risk NMIBC and our other product candidates;
•the cost and timing of any new clinical trials or studies of Vicinium for the treatment of high-risk NMIBC;
•the ongoing COVID-19 pandemic and its impact on our product candidates;business;
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•our ability to establish collaborations or licensing arrangements on favorable terms, if at all, particularly manufacturing, marketing and distribution arrangements for our product candidates;

•the costs and timing of the implementation of commercial-scale manufacturing activities, including those associated with the manufacturing process and technology transfer to third-party manufacturers to facilitate such commercial-scale manufacturing;manufacturing of Vicinium;
•the costs and timing of establishing sales, marketing and distribution capabilities for any product candidatesVicinium for which we may receive regulatory approval;the treatment of high-risk NMIBC, if approved;
•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;
•our obligation to make milestone, royalty and other payments to third-party licensors under our licensing agreements;
•the extent to which we in-license or acquire rights to other products, product candidates or technologies;
•the outcome, timing and cost of regulatory review by the FDA and comparable foreign regulatory authorities for Vicinium for the treatment of high-risk NMIBC, including the potential for the FDA or comparable foreign regulatory authorities, including Health Canada, to require that we perform more studies than those that we currently expect to perform;
•our ability to achieve certain future regulatory, development and commercialization milestones under the License Agreement with Roche;
•the effect of competing technological and market developments; and
•the revenue, if any, received from commercial sales of any product candidatesVicinium for which we receive regulatory approval.the treatment of high-risk NMIBC, if approved.
Until such time, if ever, as we can generate substantial product revenues from commercial sales, we expect to finance our cash needs through a combination of equity offerings, debt financings, government or other third-party funding, strategic collaborations and alliances, and licensing arrangements. We do not have any committed external source of funds other than the amounts payable under the License Agreement with Roche. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include liens or other restrictive covenants limiting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, strategic collaborations and alliances or licensing arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
The COVID-19 pandemic has negatively impacted the global economy, disrupted business operations and created significant volatility and disruption to financial markets. Significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and on the global economy as a whole. The extent and duration of the pandemic could continue to disrupt global markets and may affect our ability to raise additional capital in the future.
Cash Flows
The following table sets forth a summary of our cash flows for the ninethree months ended September 30,March 31, 2020 and 2019 and 2018 (in thousands):
 Three Months ended March 31,
 20202019
Net Cash Used in Operating Activities$(8,838) $(7,992) 
Net Cash Used in Investing Activities—  —  
Net Cash Provided by Financing Activities3,180  7  
Net Decrease in Cash, Cash Equivalents and Restricted Cash$(5,658) $(7,985) 
 Nine Months ended
September 30,
 2019 2018
Net Cash Used in Operating Activities$(23,716) $(15,182)
Net Cash (Used in) Provided by Investing Activities(137) 5
Net Cash Provided by Financing Activities31,296
 58,363
Net Increase in Cash, Cash Equivalents and Restricted Cash$7,443
 $43,186

Net Cash Used in Operating Activities
Net cash used in operating activities was $23.7$8.8 million for the ninethree months ended September 30, 2019March 31, 2020 and consisted primarily of a net lossincome of $73.9$41.6 million, adjusted for non-cash items, including share-based compensation of $0.9$0.4 million, a changedecrease in the fair value of contingent consideration of $46.6$53.7 million and a net increase in operating assets and liabilities of $2.6$2.9 million.
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Because of the business environment uncertainty created by the ongoing COVID-19 pandemic, we carefully reviewed as of March 31, 2020 all of our financial forecast assumptions related to probability, timing and anticipated level of commercial sales, which were used to determine the estimated fair value of contingent consideration as of December 31, 2019, and determined that no financial forecast changes were currently required. Given the evolving and uncertain nature of the COVID-19 pandemic, we will continue to closely monitor developments in order to timely determine if any financial forecast changes may be required.
However, the estimated fair value of contingent consideration is also determined by applying appropriate discount rates to future cash outflows related to the contingent payment obligations, and these discount rates have increased significantly as a result of the extreme volatility of financial markets as global economies shut down in order to contain the spread of COVID-19. The milestone payments constitute debt-like obligations, and the high-yield debt index rate applied to the milestones in order to determine the estimated fair value increased from 11.8% as of December 31, 2019 to 17.9% as of March 31, 2020. The discount rate applied to the 2% royalty due on forecasted Vicinium revenues is derived from our estimated WACC, and this WACC-derived discount rate increased from 5.6% as of December 31, 2019 to 14.7% as of March 31, 2020. These significant increases in the applicable discount rates resulted in a $53.7 million decrease in the estimated fair value of contingent consideration as of March 31, 2020.
Net cash used in operating activities was $15.2$8.0 million for the ninethree months ended September 30, 2018March 31, 2019 and consisted primarily of a net loss of $26.9$6.5 million, adjusted for non-cash items, including share-based compensation of $0.9$0.3 million, a changedecrease in the fair value of contingent consideration of $9.9$1.0 million and a net increasedecrease in operating assets and liabilities of $0.8$0.9 million.
Net Cash (Used in) Provided byUsed in Investing Activities
Net cash (used in) provided byused in investing activities consisted ofwas de minimis purchases and sales of property and equipment during each of the ninethree months ended September 30, 2019March 31, 2020 and 2018.

2019.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $3.2 million for the ninethree months ended September 30, 2019March 31, 2020 and consisted of (i) $27.8 million in net proceeds from the June 2019 Financingsale of common stock under the ATM Offering and (ii) $3.4 million in proceeds from the exercisesales of warrants to purchasecommon stock under our common stock.2014 ESPP.
Net cash provided by financing activities was de minimis for the ninethree months ended September 30, 2018March 31, 2019 and consisted of (i) $8.7 million in net proceeds from the March 2018 salesales of 8.0 million shares of our common stock in a registered direct public offering; (ii) $0.3 million in net proceeds from the sale of warrants to purchase 8.0 million shares ofunder our common stock in the March 2018 Private Placement; (iii) $41.9 million in net proceeds from the sale of 25.6 million shares of our common stock in an underwritten public offering in connection with our June 2018 Financing; and (iv) $7.3 million in proceeds from the exercise of warrants to purchase our common stock.2014 ESPP.
Critical Accounting Policies and Use of Estimates
The preparation of our consolidated financial statements in accordance with United States generally accepted accounting principles and the rules and regulations of the SEC require the use of estimates and assumptions, based on complex judgments considered reasonable, and affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our consolidated financial statements. Management has determined that our most critical accounting policies are those relating to the fair value of intangible assets, goodwill and contingent consideration; income taxes (including the valuation allowance for deferred tax assets); research and development expenses;costs; and going concern considerations.
Indefinite-Lived Intangible Assets
In accordance with ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”), during the period that an asset is consideredOur intangible assets consist of indefinite-lived, such asacquired in-process research and development (“("IPR&D”&D"), it is not amortized. Acquired worldwide product rights to Vicinium as a result of the acquisition of Viventia in 2016. IPR&D representsassets acquired in a business combination are considered indefinite-lived until the fair value assigned tocompletion or abandonment of the associated research and development efforts. Amortization over the estimated useful life will commence at the time of Vicinium's launch in the respective markets, if approved. If regulatory approval to market Vicinium for the treatment of high-risk NMIBC is not obtained, we will immediately expense the related capitalized cost.
Indefinite-lived intangible assets that have not reached technological feasibility. The value assignedare quantitatively tested for impairment at least annually during the fourth quarter of the fiscal year, or more often if indicators of impairment are present. Impairment testing of indefinite-lived intangible assets requires management to acquired IPR&D is determined by estimatingestimate the costsfuture discounted cash flows of an asset using assumptions believed to develop the acquired technology into commercially viable products, estimating the resulting revenuebe reasonable, but which are unpredictable and inherently uncertain. Actual future cash flows may differ from the projects, and discounting the net cash flows to present value. The revenue and cost projections used to value acquired IPR&D are, as applicable, reduced based on the probability of success of developing a new drug. Additionally, the projections consider the relevant market sizes and growth factors, expected trends in technology, and the nature and expected timing of new product introductions by the Company and its competitors. The rates utilized to discount the net cash flows to their present value are commensurate with the stage of development of the projects and uncertainties in the economic estimates used in impairment testing. We recognize an impairment loss when and to the projections. Uponextent that the acquisitionestimated fair value of IPR&D, the Company completes an assessmentintangible asset is less than its carrying value. In addition, on a quarterly basis, we perform a qualitative review of our business operations to determine whether its acquisition constitutes the purchase of a single asset or a group of assets. Multiple factors are considered in this assessment, including the nature of the technology acquired, the presence or absence of separate cash flows, the development process and stage of completion, quantitative significance and the rationale for entering into the transaction. Indefinite-lived assets are maintained on the Company’s consolidated balance sheet until either the project underlying it is completed or the asset becomes impaired. Indefinite-lived assets are tested for impairment on an annual basis, or whenever events or changes in circumstances have occurred which could indicate the reduction in the fair value of the IPR&D asset is below its respective carrying amount. If the Company determines that an impairment has occurred, a write-down of the carrying value andof our intangible assets was not recoverable. If an impairment charge to operating expenses inindicator is identified, an interim impairment assessment is performed. Based on the periodannual testing and quarterly reviews performed, we concluded that the determination is made is recorded. When developmentcarrying value of an IPR&D asset is complete, it is deemed finite-livedour intangible assets was not impaired as of March 31, 2020 and then amortized over its estimated useful life at that point.December 31, 2019.
Goodwill
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Goodwill on our consolidated balance sheet is the result of our acquisition of Viventia in September 2016 and represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for usingacquired under the purchaseacquisition method of accounting. Goodwill is not amortized, butamortized; rather than recording periodic amortization, goodwill is reviewed for impairment. The Company tests its goodwillquantitatively tested for impairment at least annually during the fourth quarter of the fiscal year, or whenevermore often if indicators of impairment are present. Impairment testing of goodwill requires management to estimate the future discounted cash flows of a reporting unit using assumptions believed to be reasonable, but which are unpredictable and inherently uncertain. Actual future cash flows may differ from the estimates used in impairment testing. If the fair value of the equity of a reporting unit exceeds the reporting unit’s carrying value, including goodwill, then goodwill is considered not to be impaired. We recognize a goodwill impairment when and to the extent that the fair value of the equity of a reporting unit is less than the reporting unit's carrying value, including goodwill. We have only one reporting unit. In addition, on a quarterly basis, we perform a qualitative review of our business operations to determine whether events or changes in circumstances indicate an impairment may have occurred by comparing its carrying value to its implied fair value in accordance with ASC 350. Impairment may result from, among other things, deterioration inwhich could have a material adverse effect on the performance of the acquired asset, adverse market conditions, adverse changes in applicable laws or regulations and a variety of other circumstances. If the Company determines that an impairment has occurred, a write-down of the carrying value and an impairment charge to operating expenses in the period the determination is made is recorded. In evaluating the carrying value of goodwill, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of each reporting unit and thus indicate a potential impairment of the reporting unit. Changes in strategy or market conditions could significantly impact those judgments ingoodwill carrying value. If an impairment indicator is identified, an interim impairment assessment is performed. Based on the futureannual testing and require an adjustment to the recorded balances.quarterly reviews performed, we concluded that there was no goodwill impairment as of March 31, 2020 and December 31, 2019.
Contingent Consideration
In connection withContingent consideration on our consolidated balance sheet is the result of the our acquisition of Viventia Bio Inc.,in September 2016 and represents the Company recorded contingent consideration pertainingdiscounted present value of future launch milestones and net sales royalties due to the amounts potentially payable toformer shareholders of Viventia Bio Inc.'s selling shareholders pursuant to the Share Purchase Agreement .Agreement. For additional information, see "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 1. Description of Business" of this Quarterly Report on Form 10-Q. Contingent consideration is measured at its estimated fair value on a recurring basis at each reporting period, andwith fluctuations in value resulting in a non-cash charge to earnings (or loss) during the period. The estimated fair value measurement is based on significant unobservable inputs not observable in the

market, which represents a Level(Level 3 measurement within the fair value hierarchy.hierarchy), including internally developed financial forecasts, probabilities of success and timing of certain milestone events and achievements, which are unpredictable and inherently uncertain. Actual future cash flows may differ from the assumptions used to estimate the fair value of contingent consideration. The valuation of contingent consideration usesrequires the use of significant assumptions the Companyand judgments, which management believes are consistent with those that would be made by a market participant. The Company assesses these estimatesManagement reviews its assumptions and judgments on an ongoing basis as additional market and other data impactingis obtained, and any future changes in the assumptions is obtained. Any changes inand judgments utilized by management may cause the estimated fair value of contingent consideration are charged to fluctuate materially, resulting in earnings in the period they are determined.
Contingent consideration may change significantly as development progresses and additional data are obtained, impacting the Company’s assumptions regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates.volatility.
Income Taxes
The Company providesIncome taxes are accounted for income taxes usingunder the asset and liability method. Under this method, deferredDeferred tax assets and liabilities are determined based onrecognized for the future tax consequences attributable to differences between the financial statement carrying amounts and the tax bases of theexisting assets and liabilities and their respective tax bases and net operating loss ("NOL") and research and development credit ("R&D credit") carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates in effectexpected to apply to taxable income in the years in which thethose temporary differences are expected to reverse.be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance against deferred tax assets is recorded if, based onto the weight of the available evidence,extent it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company accounts for uncertainUnrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in accordance with the provisions of ASC 740, Income Taxes. When uncertain tax positions exist,financial statements. We recognize the Company recognizes the tax benefit of an income tax positions to the extent that the benefit willposition only if it is more likely than not be realized. The determination as to whether(greater than 50%) that the tax benefitposition will more likely than not be realized issustained upon tax examination, based uponsolely on the technical merits of the tax positionposition. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize accrued interest and penalties related to uncertain tax positions as well as considerationincome tax expense in our consolidated statements of the available facts and circumstances.operations. As of September 30, 2019March 31, 2020 and December 31, 2018, the Company2019, we did not have any significant uncertain tax positions.
Research and Development Costs
Expenditures relating to researchResearch and development activities are expensed in the period incurred. Research and development expenses consist of both internal and external costs associated with all basic research activities, clinical development activities and technical effortefforts required to develop a new product or service. Thecandidate. Internal research and development consist primarily of personnel costs, include personnel-related costs,including salaries, benefits and share-based compensation, facilities leases, research-related overhead, pre-approval regulatory and clinical trial costs, manufacturing costs and other contracted services, license fees and other external costs. Estimates of incurred but unbilled research and development services performed by third parties, including CROs and CMOs, are required to be made at each reporting period.
In certain circumstances, the Company iswe are required to make advance payments to vendors for goods or services that will be received in the future for use in research and development activities. In such circumstances, the advance payments are deferredrecorded as prepaid assets and are expensed when the activity has been performed or when the goods have been received.
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Recently Issued Accounting Standards
Recently issued accounting standards are discussed in “Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4. Recent Accounting Pronouncements” above.
Commitments and Contractual Obligations
As of September 30, 2019, there were no material changes to our commitments and contractual obligations as set forth in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Commitments and Contractual Obligations" of our Annualthis Quarterly Report on Form 10-K for the year ended December 31, 2018.10-Q.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
Our cashThe information under this item is held on deposit in demand accounts at a large financial institution in amounts in excess of the Federal Deposit Insurance Corporation ("FDIC") insurance coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category.
Financial instruments that potentially subject us to concentrations of credit risk principally consist of cash equivalents. We limit our credit risk associated with cash equivalents by placing investments in highly-rated money market funds.
Inflationary factors, such as increases in our operating expenses, may adversely affect our operating results. Although we do not believe inflation has had a material impact on our financial condition, results of operations or cash flows to date, a high rate of inflation in the future may have an adverse effect on our ability to manage our operating expenses.
Foreign Currency Risk
Because our functional currency is in U.S. Dollars, we face foreign exchange rate risk as a result of entering into transactions denominated in currencies other than U.S. dollars. As a result of our Viventia subsidiary in Winnipeg, Manitoba, our primary foreign currency exposure is to fluctuations in the Canadian dollar relative to the U.S. dollar. A hypothetical 10% change in average foreign currency exchange rates during any of the preceding periods presented would not have a material effect on our net loss. Foreign exchange rates may continuerequired to be a factor in future periods as we continue to expand and grow our business. We do not engage in any foreign currency hedging activities, or any other hedging activities.provided by smaller reporting companies.

Item 4.   Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), that are designed to ensure information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principle financial officer, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as the end of September 30, 2019. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosedperiod covered by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.this Quarterly Report on Form 10-Q. Based on theupon this evaluation, of our disclosure controls and procedures as of September 30, 2019, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Notwithstanding our assessment that, as noted below, our internal control over financial reporting was not effective as of December 31, 2018 related to accounting for business combinations, our management concluded that our disclosure controls and procedures were effective at the reasonable assurance level. The material weakness in our internal control over financial reporting was attributable primarily to our lacklevel as of expertise in our finance and accounting group related to the accounting for business combinations.March 31, 2020.
As more fully discussed in "Part II - Item 9A.Limitations on Effectiveness of Controls and Procedures" of our Annual Report on Form 10-K for the year ended December 31, 2018, to remediate the material weakness referenced above, we have implemented or have plans to implement the remediation initiatives described therein and will continue to evaluate the remediation and plan to implement additional measures in the future.Procedures
Previously Identified Material Weakness
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internalA control system, was designedno matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are achieved. Further, the design of a control system must be balanced against resource constraints, and therefore, the benefits of controls must be considered relative to provide reasonable assurance to our management and our board of directors regardingtheir costs. Given the preparation and fair presentation of published financial statements. Because of its inherent limitations internalin all systems of controls, no evaluation of controls can provide absolute assurance all control over financial reporting may not preventissues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or detect misstatements. Projectionsmistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls. The design of any evaluationsystem of effectiveness tocontrols is also based in part upon certain assumptions about the likelihood of future periods are subject to the riskevents, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or that the degree of compliance with the policies orand procedures may deteriorate.
Accordingly, given the inherent limitations in a cost-effective system of controls, financial statement misstatements due to error or fraud may occur and may not be detected. Our management assessed the effectivenessdisclosure controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives. We conduct periodic evaluations of our internalsystem of controls to enhance, where necessary, our control over financial reporting as of December 31, 2018. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2018.
As of December 31, 2018, there was a material weakness, identified in 2016, in our controls over the financial reporting process related to business combinations. As a result of inexperience in our financepolicies and accounting group related to the accounting for

business combinations, we lacked sufficient review of assumptions used and conclusions reached from the perspective of a typical market participant used in the acquisition valuation model. While we implemented processes and controls in 2017 and 2018 to remediate the material weakness over the review of assumptions related to business combinations, the remediation effort was ongoing. As a result, our management concluded that our internal control over financial reporting was not effective as of December 31, 2018.
Remediation Status
As more fully discussed in "Part II - Item 9A. Controls and Procedures" of our Annual Report on Form 10-K for the year ended December 31, 2018, to remediate the material weaknesses referenced above, we have implemented or have plans to implement the remediation initiatives described therein. We also continue to engage independent consultants to aid in the review of our financial reporting process and continue to evaluate steps to remediate the previously identified material weakness.procedures.
Changes in Internal Control Over Financial Reporting
During the three and nine monthsquarter ended September 30, 2019, management continued to implement certain remediation initiatives discussedMarch 31, 2020, there were no changes in "Part II - Item 9A. Controls and Procedures" of our Annual Report on Form 10-K for the year ended December 31, 2018. However, there was no change to our internal control over financial reporting, during the period covered by this Quarterly Report on Form 10-Q that hasas defined in Exchange Act Rules 13a-15(f) and 15d-15(f), which materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION
Item 1.   Legal Proceedings.
We are not currently subject to any material legal proceedings.

Item 1A.Risk Factors.
You should carefully considerItem 1A. Risk Factors.
During the information described in “Risk Factors”quarter ended March 31, 2020, other than as set forth below, there were no material changes to the "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2018. There2019. You should carefully consider the information described therein and in this Quarterly Report on Form 10-Q, which could materially affect our business condition, results of operations and cash flows.
The COVID-19 coronavirus could adversely impact our business.
In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. Since then, the COVID-19 coronavirus has spread to multiple countries, including the United States, and has caused significant disruptions around the world. We may experience disruptions as a result of the COVID-19 pandemic that could severely impact our business, including:
•difficulties in raising additional capital needed to commercialize Vicinium for the treatment of high-risk NMIBC due to the slowing of our economy and near term and/or long term negative effects of the pandemic on the financial, banking and capital markets;
•delays in necessary interactions with regulators and other important agencies and contractors due to limitations in employee resources, travel restrictions or forced furlough of government employees;
•interruption of key business activities due to illness and/or quarantine of key individuals and delays associated with recruiting, hiring and training new temporary or permanent replacements for such key individuals, both internally and at our third party service providers;
•changes in local regulations as part of a response to the COVID-19 coronavirus outbreak that may require us to change the ways in which operate, which may result in unexpected costs;
•interruption of key commercialization, manufacturing, and related activities due to limitations on work and travel imposed or recommended by federal or state governments, employers and others; and
•delays or difficulties related to any future clinical trials that may be required, including delays in clinical trial sites receiving the supplies and materials needed to conduct clinical trials, difficulties in recruiting clinical site investigators and clinical site staff and difficulties in enrolling patients or treating patients in active trials.

The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the virus. The full impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel and transports, and shelter-in-place, social distancing, and similar measures, all of which are uncertain and difficult to predict. The broad-based business and economic disruptions caused by the pandemic could materially affect our business condition, results of operations and cash flows, including our ability to raise additional capital.
The price of our common stock may fluctuate substantially.
The stock market in general has recently experienced relatively large price and volume fluctuations, particularly in response to the COVID-19 pandemic. If the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business condition, results of operations and cash flows. In particular, the market prices of securities of smaller biotechnology companies have experienced dramatic fluctuations that often have been no material changesunrelated or disproportionate to the risk factors described therein.operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. In addition, price volatility may increase if the trading volume of our common stock declines.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
We did not issue any unregistered equity securities during the ninethree months ended September 30, 2019.March 31, 2020.
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Item 3.   Defaults Upon Senior Securities.
Not applicable.

Item 4.   Mine Safety Disclosures.
Not applicable.

Item 5.   Other Information.
None.

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Item 6.  Exhibits.
Exhibit Index
Exhibit
No.
Description
3.1


3.2
3.3
3.4
4.1




4.2
4.3
4.4
4.5


4.6
4.7
4.8
10.1*31.1*
10.2
Employment Agreement, dated August 26, 2019, by and between Monica Forbes and Sesen Bio, Inc. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on August 26, 2019 (File No. 001-36296).
10.3*
Stock Option Award Agreement, dated August 1, 2019, by and between Sesen Bio, Inc. and Monica Forbes.

31.1*
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
32.1**
32.2**
101.INS101Interactive Data File (Form 10-Q for the Quarterly Period ended March 31, 2020 filed in XBRL). The financial information contained in the XBRL-related documents is "unaudited" and "unreviewed." The instance document does not appear in the interactive file because its XBRL Instance Documenttags are embedded within the Inline XBRL document.
101.SCH104Cover Page Interactive File (embedded within the Inline XBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Documentdocument).

*Filed herewith.
**This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SESEN BIO, INC.
(Registrant)
Date:May 11, 2020SESEN BIO, INC.
By:(Registrant)
Date:November 12, 2019By:/s/ Thomas R. Cannell, D.V.M.
Name:Thomas R. Cannell, D.V.M.
Title:President and Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)



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