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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20212022
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) 444-8550
(Registrant’s telephone number, including area code)code(617) 444-8550
Not applicable.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 LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”" “accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐☒Smaller reporting company☒
Accelerated Filerfiler☐Emerging growth company☐
Non-accelerated filer☒☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 196,002,620199,463,645 shares of the registrant's common stock outstanding as of August 2, 20211, 2022.


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SESEN BIO, INC.
Quarterly Report on Form 10-Q for the Quarterly Period endedEnded June 30, 20212022
Table of Contents
  Page
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements.
1
Condensed Consolidated Balance Sheets as of June 30, 20212022 and December 31, 20202021
1
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Six Months endedEnded June 30, 20212022 and 20202021
2
Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021
3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Three and Six Months endedEnded June 30, 20212022 and 20202021
34
Condensed Consolidated Statements of Cash Flows for the Three and Six Months endedEnded
June 30, 20212022 and 20202021
45
Notes to Condensed Consolidated Financial Statements
56
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
2226
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
3941
Item 4.Controls and Procedures.
3941
PART II - OTHER INFORMATION
Item 1.Legal Proceedings.
4043
Item 1A.Risk Factors.
4044
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
4046
Item 3.Defaults Upon Senior Securities.
4046
Item 4.Mine Safety Disclosures.
4046
Item 5.Other Information.
4046
Item 6.Exhibits.
4146
SIGNATURES


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PART I - FINANCIAL INFORMATION
Item 1.         Financial Statements.Statements
SESEN BIO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In thousands, except share and per share data)
June 30,
2021		December 31,
2020		June 30, 2022December 31, 2021
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$151,036 $52,389 Cash and cash equivalents$72,090 $162,636 
Accounts receivable2,303 0 
Short term marketable securitiesShort term marketable securities69,454 — 
Accounts receivablesAccounts receivables73 21,011 
Other receivablesOther receivables14,046 3,482 
Prepaid expenses and other current assetsPrepaid expenses and other current assets21,760 7,478 Prepaid expenses and other current assets757 18,476 
Restricted cash0 3,000 
Total current assetsTotal current assets175,099 62,867 Total current assets156,420 205,605 
Non-current assets:Non-current assets:Non-current assets:
Restricted cashRestricted cash20 20 Restricted cash30 20 
Marketable securitiesMarketable securities19,641 — 
Property and equipment, netProperty and equipment, net109 123 Property and equipment, net30 43 
Intangible assetsIntangible assets46,400 46,400 Intangible assets— 14,700 
GoodwillGoodwill13,064 13,064 Goodwill— 13,064 
Long term prepaid expensesLong term prepaid expenses6,150 0 Long term prepaid expenses— 7,192 
Other assetsOther assets205 349 Other assets42 123 
Total non-current assetsTotal non-current assets65,948 $59,956 Total non-current assets$19,743 $35,142 
Total Assets Total Assets$241,047 $122,823  Total Assets$176,163 $240,747 
Liabilities and Stockholders’ Equity (Deficit)
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$1,228 $3,102 Accounts payable$1,667 $2,853 
Accrued expensesAccrued expenses5,301 3,973 Accrued expenses29,851 8,255 
Deferred revenue1,500 1,500 
Contingent consideration10,300 8,985 
Other current liabilitiesOther current liabilities498 489 Other current liabilities487 460 
Total current liabilitiesTotal current liabilities18,827 18,049 Total current liabilities32,005 11,568 
Non-current liabilities:Non-current liabilities:Non-current liabilities:
Contingent consideration, net of current portion160,300 99,855 
Contingent considerationContingent consideration1,800 52,000 
Deferred tax liabilityDeferred tax liability12,528 12,528 Deferred tax liability— 3,969 
Deferred revenue, net of current portion0 1,500 
Other non-current liabilities43 118 
Deferred revenueDeferred revenue— 1,500 
Total non-current liabilitiesTotal non-current liabilities172,871 114,001 Total non-current liabilities1,800 57,469 
Total liabilities191,698 132,050 
Total Liabilities Total Liabilities33,805 69,037 
Stockholders’ Equity (Deficit):
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at June 30, 2021 and December 31, 2020; 0 shares issued and outstanding at June 30, 2021 and December 31, 20200 0 
Common stock, $0.001 par value per share; 400,000,000 and 200,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively; 188,460,951 and 140,449,647 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively188 140 
Stockholders’ Equity:Stockholders’ Equity:
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at June 30, 2022 and December 31, 2021; no shares issued and outstanding at June 30, 2022 and December 31, 2021Preferred stock, $0.001 par value per share; 5,000,000 shares authorized at June 30, 2022 and December 31, 2021; no shares issued and outstanding at June 30, 2022 and December 31, 2021— — 
Common stock, $0.001 par value per share; 400,000,000 shares authorized at June 30, 2022 and December 31, 2021; 199,463,645 shares issued and outstanding at June 30, 2022 and December 31, 2021Common stock, $0.001 par value per share; 400,000,000 shares authorized at June 30, 2022 and December 31, 2021; 199,463,645 shares issued and outstanding at June 30, 2022 and December 31, 2021199 199 
Additional paid-in capitalAdditional paid-in capital446,036 306,554 Additional paid-in capital491,464 487,768 
Other comprehensive lossOther comprehensive loss(281)— 
Accumulated deficitAccumulated deficit(396,875)(315,921)Accumulated deficit(349,024)(316,257)
Total Stockholders’ Equity (Deficit)49,349 (9,227)
Total Stockholders’ EquityTotal Stockholders’ Equity142,358 171,710 
Total Liabilities and Stockholders’ EquityTotal Liabilities and Stockholders’ Equity$241,047 $122,823 Total Liabilities and Stockholders’ Equity$176,163 $240,747 
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
AND COMPREHENSIVE (LOSS) INCOME
(Unaudited; In thousands, except per share data)
 Three Months ended
June 30,		Six Months ended
 June 30,
 2021202020212020
License and related revenue$2,234 $0 $6,544 $0 
Operating expenses:
Research and development7,228 4,562 13,306 13,429 
General and administrative6,805 3,318 12,098 6,766 
Change in fair value of contingent consideration13,600 18,480 61,760 (35,220)
Total operating expenses27,633 26,360 87,164 (15,025)
(Loss) Income from Operations(25,399)(26,360)(80,620)15,025 
Other (expense) income , net(43)16 (46)195 
Net (Loss) Income and Comprehensive (Loss) Income Before Taxes(25,442)(26,344)(80,666)15,220 
Provision for income taxes0 0 (288)0 
Net (Loss) Income and Comprehensive (Loss) Income After Taxes$(25,442)$(26,344)$(80,954)$15,220 
Net (loss) income attributable to common stockholders - basic$(25,442)$(26,491)$(80,954)$14,751 
Net (loss) income attributable to common stockholders - diluted(25,442)(26,491)(80,954)12,600 
Net (loss) income per common share - basic$(0.15)$(0.24)$(0.49)$0.13 
Weighted-average common shares outstanding - basic175,393 112,569 166,264 111,189 
Net (loss) income per common share - diluted$(0.15)$(0.24)$(0.49)$0.11 
Weighted-average common shares outstanding - diluted175,393 112,569 166,264 111,203 

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 (DEFICIT)
(Unaudited; In thousands, except share data)
 Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Stockholders’
Equity
 SharesAmount
Balance at December 31, 2020140,449,647 $140 $306,554 $(315,921)$(9,227)
Net loss— — — (55,512)(55,512)
Share-based compensation— — 958 — 958 
Exercises of stock options30,610 — 39 — 39 
Exercises of common stock warrants852,840 1 468 — 469 
Issuance of common stock under ATM Offering, net of issuance costs of $2.2 million30,645,702 31 72,512 — 72,543 
Balance at March 31, 2021171,978,799 $172 $380,531 $(371,433)$9,270 
Net loss— — — (25,442)(25,442)
Share-based compensation— — 1,260 — 1,260 
Issuance of common stock under ATM Offering, net of issuance costs of $2.0 million
16,482,152 16 64,245 — 64,261 
Balance at June 30, 2021188,460,951 $188 $446,036 $(396,875)$49,349 


 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 $0.1 million3,187,359 3 3,176 — 3,179 
Balance at March 31, 2020109,991,553 $110 $270,301$(251,960)$18,451 
Net (loss)— — — (26,344)(26,344)
Share-based compensation— — 491 — 491 
Issuance of common stock and common stock warrants, net of issuance costs of $0.1 million6,636,100 6 4,768 — 4,774 
Balance as of June 30, 2020116,627,653 $116 $275,560$(278,304)$(2,628)

Three Months Ended
June 30,		Six Months Ended
 June 30,
2022202120222021
Revenue:
License and related revenue$— $2,234 $— $6,544 
Total revenue— 2,234 — 6,544 
Operating expenses:
Research and development29,944 7,228 34,705 13,306 
General and administrative15,589 6,805 24,564 12,098 
Intangibles impairment charge27,764 — 27,764 — 
Change in fair value of contingent consideration(37,300)13,600 (50,200)61,760 
Total operating expenses35,997 27,633 36,833 87,164 
Loss from Operations$(35,997)$(25,399)$(36,833)$(80,620)
Other income (expense), net162 (43)191 (46)
Loss Before Taxes$(35,835)$(25,442)$(36,642)$(80,666)
Benefit (provision) from income taxes3,875 — 3,875 (288)
Net Loss After Taxes$(31,960)$(25,442)$(32,767)$(80,954)
Net loss attributable to common stockholders - basic and diluted$(31,960)$(25,442)$(32,767)$(80,954)
Net loss per common share - basic and diluted$(0.16)$(0.15)$(0.16)$(0.49)
Weighted-average common shares outstanding - basic and diluted$199,464 $175,393 $199,464 $166,264 
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 FLOWSCOMPREHENSIVE LOSS
(Unaudited; In thousands)
 Six Months ended
 June 30,
 20212020
Cash Flows from Operating Activities:
Net (loss) income$(80,954)$15,220 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation64 61 
Share-based compensation2,217 898 
Change in fair value of contingent consideration61,760 (35,220)
Changes in operating assets and liabilities:
Accounts receivable (net)(2,303)0 
Prepaid expenses and other assets(20,287)2,719 
Accounts payable(1,875)(628)
Accrued expenses and other liabilities1,262 (1,376)
Deferred revenue(1,500)0 
                      Net cash used in operating activities(41,616)(18,326)
Cash Flows from Investing Activities:
Purchases of equipment(49)(8)
                      Net cash used in investing activities(49)(8)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock under ATM Offering, net of
issuance costs		136,804 7,953 
Proceeds from exercises of stock options39 0 
Proceeds from the exercise of common stock warrants469 0 
Proceeds from sale of common stock pursuant to ESPP0 1 
                      Net cash provided by financing activities137,312 7,954 
Net Increase (decrease) in cash, cash equivalents and restricted cash95,647 (10,380)
Cash, cash equivalents and restricted cash - beginning of period55,409 48,141 
Cash, cash equivalents and restricted cash - end of period$151,056 $37,761 
Supplemental cash flow disclosure:
Cash paid for amounts included in the measurement of lease liabilities$87 $75 
Supplemental disclosure of non-cash investing activities:
Purchase of equipment included in accrued expenses$27 $0 
Supplemental disclosure of non-cash financing activities:
Deemed Dividend on adjustment of exercise price on certain warrants$0 $147 
thousands, except per share data)
Three Months Ended
June 30,		Six Months Ended
 June 30,
2022202120222021
Net loss$31,960 $25,442 $32,767 $80,954 
Unrealized loss on marketable securities(281)— (281)— 
Total comprehensive loss$32,241 $25,442 $33,048 $80,954 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited; In thousands, except share data)
Common StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive Loss InvestmentsAccumulated
Deficit		Stockholders'
Equity
SharesAmount
Balance at December 31, 2021199,463,645 $199 $487,768 $— $(316,257)$171,710 
Net loss— — — — (807)(807)
Share-based compensation— — 1,894 — — 1,894 
Balance at March 31, 2022199,463,645 $199 $489,662 $— $(317,064)$172,797 
Net loss— — — — (31,960)(31,960)
Share-based compensation— — 1,802 — — 1,802 
Unrealized loss of investments— — — (281)— (281)
Balance at June 30, 2022199,463,645 $199 $491,464 $(281)$(349,024)$142,358 
Common StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive Loss InvestmentsAccumulated
Deficit		Stockholders’
Equity
SharesAmount
Balance at December 31, 2020140,449,647 $140 $306,554 $— $(315,921)$(9,227)
Net loss— — — — (55,512)(55,512)
Share-based compensation— — 958 — — 958 
Exercises of stock options30,610 — 39 — — 39 
Exercises of common stock warrants852,840 1 468 — — 469 
Issuance of common stock under ATM Offering, net of issuance costs of $2.2 million30,645,702 31 72,512 — — 72,543 
Balance at March 31, 2021171,978,799 $172 $380,531 $— $(371,433)$9,270 
Net loss— — — — (25,442)(25,442)
Share-based compensation— — 1,260 — — 1,260 
Issuance of common stock under ATM Offering, net of issuance costs of $2.0 million16,482,152 16 64,245 — — 64,261 
Balance at June 30, 2021188,460,951 $188 $446,036 $— $(396,875)$49,349 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SESEN BIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; In thousands)
 Six Months Ended
 June 30,
 20222021
Cash Flows from Operating Activities:
Net loss$(32,767)$(80,954)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation13 64 
Share-based compensation3,696 2,217 
Change in fair value of contingent consideration(50,200)61,760 
       Intangibles impairment charge27,764 — 
Changes in operating assets and liabilities:
Accounts receivable (net)20,939 (2,303)
Other receivables(10,565)— 
Prepaid expenses and other current assets17,719 (20,287)
Long term prepaid expenses7,192 — 
Unrealized loss on marketable securities(281)— 
Other assets81 — 
Accounts payable(1,186)(1,875)
Accrued expenses and other liabilities17,654 1,262 
Deferred revenue(1,500)(1,500)
                      Net cash used in operating activities(1,441)(41,616)
Cash Flows from Investing Activities:
Purchase of marketable securities(89,095)— 
Purchases of equipment— (49)
                      Net cash used in investing activities(89,095)(49)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock under ATM Offering, net of
issuance costs		— 136,804 
Proceeds from exercises of stock options— 39 
Proceeds from exercises of common stock warrants— 469 
Net cash provided by financing activities— 137,312 
Net (decrease) increase in cash, cash equivalents and restricted cash(90,536)95,647 
Cash, cash equivalents and restricted cash - beginning of period162,656 55,409 
Cash, cash equivalents and restricted cash - end of period$72,120 $151,056 
Supplemental cash flow disclosure:
Cash paid for amounts included in the measurement of lease liabilities$86 $87 
Supplemental disclosure of non-cash investing activities:
Purchase of equipment included in accrued expenses$— $27 
The accompanying notes are an integral part of Contentsthese condensed consolidated financial statements.


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 focused on advancing targeted fusion protein therapeutics ("TFPTs") for the treatment of patients with cancer. The Company’s most advanced product candidate, VicineumTM, also known as VB4-845, is a locally-administered targeted fusion protein composed of an anti-epithelial cell adhesion molecule ("EpCAM") antibody fragment tethered to a truncated form of Pseudomonas exotoxinAfor the treatment of bacillus Calmette-Guérin ("BCG")-unresponsive non-muscle invasive bladder cancer ("NMIBC"(“NMIBC”). On July 15, 2022, the Company made the strategic decision to voluntarily pause further development of Vicineum in the United States. The decision was based on a thorough reassessment of Vicineum, which included the incremental development timeline and associated costs for an additional Phase 3 clinical trial, following its discussions with the FDA, which are further described below. The Company has an ongoingturned its primary focus to the careful assessment of potential strategic alternatives with the goal of maximizing shareholder value, which it believes will be complete by the end of 2022. Additionally, the Company intends to seek a partner for the further development of Vicineum.
The Company has completed the follow-up stage of its single-arm, multi-center, open-label Phase 3 clinical trial of Vicineum as a monotherapy in patients with BCG-unresponsivebacillus Calmette-Guérin ("BCG")-unresponsive NMIBC (the "VISTA Trial"). The VISTA Trial completed enrollment in April 2018 with a total of 133 patients. On December 18, 2020, the Company submitted its completed Biologics License Application (the "BLA") for Vicineum for the treatment of BCG-unresponsive NMIBC to the United States Food and Drug Administration ("FDA"). On February 12, 2021, the FDA notified the Company that it hashad accepted for filing the BLA.BLA file. The FDA also granted Priority Review for the BLA and theset a target Prescription Drug User Fee Act ("PDUFA") date for a decision on the BLA isof August 18, 2021. In addition toOn August 13, 2021, the file acceptance and granting of Priority Review,Company received a complete response letter (“CRL”) from the FDA also indicatedindicating that the FDA had determined that it iscould not currently planning to hold an advisory committee meeting to discussapprove the BLA for Vicineum. On July 13,Vicineum in its present form and provided recommendations specific to additional clinical/statistical data and analyses in addition to chemistry, manufacturing and controls (“CMC”) issues pertaining to a recent pre-approval inspection and product quality.
In October 2021 and December 2021, the Company participated in a productive Late-Cycle MeetingCMC Type A meeting and a Clinical Type A meeting, respectively, with the FDA regardingto discuss issues raised in the BLACRL and design elements of an additional Phase 3 clinical trial for Vicineum, which the FDA confirmed would be required for a potential resubmission of a BLA. In March 2022, the treatment of BCG-unresponsive NMIBC. InCompany participated in a Type C meeting with the FDA. During the Type C meeting, the FDA confirmed that there is no Advisory Committee meeting planned at this time,agreed to a majority of the Company’s proposed protocol and that no post-marketing requirements, including a confirmatory trial, have been identified at this time. Also in the meeting,statistical analysis plan design elements for an additional Phase 3 clinical trial. On July 11, 2022, the Company andparticipated in a Type B meeting with the FDA discussed remaining questionsto discuss outstanding items related to manufacturing facilities inspection, product quality information requeststhe Company’s proposed protocol and additional information related to chemistry, manufacturing and controls (“CMC”), and a timeline to submit additional supporting information was agreed upon. In the US, the Company believes it remains on trackstatistical analysis plan design elements for an FDA decision on its BLA for Vicineum by the target PDUFA date of August 18, 2021. The Company operates in 1 segment under the direction of its Chief Executive Officer (chief operating decision maker). The Company was formerly known as Eleven Biotherapeutics, Inc. until its name changed in May 2018.

additional Phase 3 clinical trial.
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, who served as a director of the Company until his retirement in July 2019.
In addition, under the Share Purchase Agreement, the Company is obligated to pay to the Selling Shareholders certain post-closing contingent cash payments upon the achievement of specified milestones and based upon net sales, in each case subject to the terms and conditions set forth in the Share Purchase Agreement, including: (i) a one-time milestone payment of $12.5 million payable upon the first sale of Vicineum (the “Purchased Product”), in the United States; (ii) a one-time milestone payment of $7$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$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").country. 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 became employees or members of the Company's board of directors, howeverdirectors. However, as of June 30, 2021,2022, none of these individuals are active employees of the Company or members of the Company's board of directors.
Liquidity and Going Concern
As of June 30, 2021, the Company had cash and cash equivalents of$151.0 million, net working capital of$156.3 million and an accumulated deficit of $396.9 million. The Company incurred negative cash flows from operating activities of $30.8 million for the year ended December 31, 2020 and $41.6 million for the six months ended June 30, 2021. Since its inception, the
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Company has received no revenue from sales of its products, and management anticipates that operating losses will continue as the Company completes the follow-up stage of its ongoing Phase 3 VISTA Trial for Vicineum for the treatment of BCG-unresponsive NMIBC and seeks marketing approval from the FDA and the European Medicines Agency ("EMA"), and if approved, commercializes Vicineum. The Company has financed its operations to date primarily through private placements of its common stock, preferred stock, common stock warrants and convertible bridge notes, venture debt borrowings, its initial public offering ("IPO"), follow-on public offerings, sales effected in "at-the-market" ("ATM") offerings, out-licensing agreements and outside of United States ("OUS") business development partnership agreements, and, to a lesser extent, from a collaboration. See “Note 9. Stockholders’ Equity (Deficit)” below for information regarding the Company’s recently completed equity financings.
Under Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements - Going Concern, management is required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management's plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates the substantial doubt about the Company's ability to continue as a going concern. The mitigating effect of management's plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved by the Company's board of directors before the date that the financial statements are issued.
The Company's future success is dependent on its ability to develop and commercialize Vicineum for the treatment of BCG-unresponsive NMIBC, and ultimately upon its ability to attain profitable operations. In order to commercialize its product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC, the Company needs to complete clinical development and comply with comprehensive regulatory requirements. The Company is subject to a number of risks similar to other late-stage clinical companies, including, but not limited to, successful discovery and development of its product candidates, raising additional capital, development and commercialization by its competitors of new technological innovations, protection of proprietary technology, market acceptance of its products and dependence on third parties for the development and commercialization of Vicineum in certain markets. The successful discovery and development of product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC, requires substantial working capital, and management expects to seek additional funds through equity or debt financings or through additional business development partnerships, collaborations or licensing transactions or other sources. The Company may be unable to obtain equity or debt financings or enter into additional business development partnerships, collaborations or licensing transactions on favorable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include liens or other restrictive covenants limiting the Company's ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If the Company raises additional funds through government or other third-party funding, strategic collaborations, business development partnerships, alliances or licensing arrangements, it may have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable. If the Company is unable to raise additional funds when needed, it may be required to implement cost reduction strategies and delay, limit, reduce or terminate its product development, regulatory approval or future commercialization efforts or grant rights to develop and market products or product candidates that management would otherwise prefer to develop and market.
Management does not believe that the Company's cash and cash equivalents of$151.0 million as of June 30, 2021 are sufficient to fund the Company's current operating plan for at least twelve months after the issuance of these condensed consolidated financial statements. Given the history of significant losses, negative cash flows from operations, limited cash resources currently on hand, and dependence by the Company on its ability - about which there can be no certainty - to obtain additional financing to fund its operations after the current cash resources are exhausted, substantial doubt exists about the Company's ability to continue as a going concern. These condensed consolidated financial statements were prepared under the assumption that the Company will continue as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.


2. BASIS OF PRESENTATION
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The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”("GAAP"). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the ASCAccounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”("ASUs"), promulgated by the Financial Accounting Standards Board (“FASB”("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, which are, in the opinion of management, necessary for a fair presentation of the accompanying condensed consolidated balance sheets and statements of operations and comprehensive (loss) income, stockholders’ equity (deficit) 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 to make the information presented not misleading. These unaudited interim results of operations and cash flows for the six months ended June 30, 20212022 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 15, 2021,February 28, 2022, 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,assets; goodwill and contingent consideration; income taxes (including the valuation allowance for deferred tax assets); and research and development expenses; revenue recognition and going concern considerations.expenses.
Principles of Consolidation
The Company’s condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiary Viventia and its indirect subsidiaries,subsidiary, 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.US dollar.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's complete summary of significant accounting policies can be found in "Item 15. Exhibits and Financial Statement Schedules - Note 3. Summary of Significant Accounting Policies" in the audited annual consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020.

2021.
4. RECENT ACCOUNTING PRONOUNCEMENTS
Adopted in 20212022
In December 2019,August 2020, the FASB issued ASU No. 2019-12,2020-06, Income Taxes (Topic 740)Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Simplifying the Accounting for Income TaxesConvertible Instruments and
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Contracts in an Entity’s Own Equity ("ASU 2020-06"). ("ASU 2019-12"). ASU 2019-122020-06 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 simplifycomplexity associated with applying US GAAP for other areascertain financial instruments with characteristics of Topic 740 by clarifyingboth liability and amending existing guidance.equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. The ASU 2019-12also amends the diluted earnings per share (EPS) guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for public companies 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 to2021, and should be applied varies dependingon a full or modified retrospective basis. The Company adopted this guidance on a modified retrospective basis effective January 1, 2022 and it did not have an impact on the natureCompany's financial position, results of the tax item impacted by amendment.operations including per-share amounts, or cash flows.
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TableIn May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Contents
Freestanding Equity-Classified Written Call Options ("ASU 2021-04"). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, and should be applied on a prospective basis. The Company adopted this guidance effective January 1, 2021,2022 and it did not have a materialan impact on itsthe Company's financial position, results of operations including per-share amounts, or cash flows.

Other recent accounting pronouncements issued, but not yet effective, are not expected to be applicable to the Company or have a material effect on the consolidated financial statements upon future adoption.


5. FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, restricted cash, prepaid expenses and other current assets, and accounts payable on the Company’s condensed consolidated balance sheets approximated their fair values as of June 30, 20212022 and December 31, 20202021 due to their short-term nature.
Certain of the Company’s financial instruments are measured at fair value using a three-level hierarchy that prioritizes the inputs used to measure fair value. This fair value hierarchy prioritizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1:    Inputs are quoted prices for identical instruments in active markets.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 June 30, 20212022 and December 31, 20202021 (in thousands):
June 30, 2022
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:
Marketable securities:
Money market funds
(cash equivalents)		$40,765 $40,765 $40,765 $— $— 
Marketable securities$89,095 $89,095 $— $89,095 $— 
Liabilities:
Contingent consideration$1,800 $1,800 $— $— $1,800 
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June 30, 2021
Fair Value Measurement Based on
Carrying AmountFair ValueQuoted Prices in Active
Markets
(Level 1)		Significant Other Observable
Inputs
(Level 2)		Significant Unobservable
Inputs
(Level 3)
Assets:
Money market funds
(cash equivalents)		$16,379 $16,379 $16,379 $0 $0 
Liabilities:
Contingent consideration - short term$10,300 $10,300 $0 $0 $10,300 
Contingent consideration - long term$160,300 $160,300 $0 $0 $160,300 
December 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)		$16,374 $16,374 $16,374 $0 $0 
Liabilities:
Contingent consideration - short term$8,985 $8,985 $0 $0 $8,985 
Contingent consideration - long term$99,855 $99,855 $0 $0 $99,855 
December 31, 2021
Fair Value Measurement Based on
Carrying AmountFair ValueQuoted Prices in Active
Markets
(Level 1)		Significant Other Observable
Inputs
(Level 2)		Significant Unobservable
Inputs
(Level 3)
Assets:
Money market funds
(cash equivalents)		$16,382 $16,382 $16,382 $— $— 
Liabilities:
Contingent consideration$52,000 $52,000 $— $— $52,000 
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 six months ended June 30, 2021.

2022.
Contingent Consideration
On September 20, 2016, the Company acquired Viventia through the issuance of shares of common stock plus contingent consideration, pursuant to the terms of a Share Purchase Agreement. The Company recorded the acquired assets and liabilities based on their estimated fair values as of the acquisition date and finalized its purchase accounting for the Viventia Acquisition during the third quarter of 2017. The contingent consideration relates to amounts potentially payable to the former shareholders of Viventia under the Share Purchase Agreement. Contingent consideration is measured at its estimated fair value at each reporting period, with fluctuations in value resulting in a non-cash charge to earnings (or loss) during the period. The estimated fair value measurement is based on significant inputs, including internally developed financial forecasts, probabilities of success, and the timing of certain milestone events and achievements, which are not observable in the market, representing a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration requires the use of significant assumptions and judgments, which management believes are consistent with those that would be made by a market participant. Management reviews its assumptions and judgments on an ongoing basis as additional market and other data is obtained, and any future changes in the assumptions and judgments utilized by management may cause the estimated fair value of contingent consideration to fluctuate materially, resulting in earnings volatility.
The estimated 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 tothrough 2033, the level of commercial sales of Vicineum forecasted for the United States,US, Europe, Japan,
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China and other potential markets and discount rates ranging from 6.6% to 6.8%10.2% as of June 30, 20212022 to 8.0% and 8.4% to 8.8%9.3% as of December 31, 2020.2021. There have been no changes to the valuation methods utilized during the six months ended June 30, 2021.2022.
On July 15, 2022, the Company made the strategic decision to voluntarily pause further development in the US of Vicineum. The decision was based on a thorough reassessment of Vicineum, which included the incremental development timeline and associated costs for an additional Phase 3 clinical trial for the treatment of NMIBC, following recent discussions with the FDA and the updated market data obtained through market research during the ongoing BCG shortage. Additionally, the Company intends to seek a partner for the further development of Vicineum. The Company expects that any partner who acquires Vicineum from the Company will be obligated to make any payments that become payable to the former shareholders of Viventia under the Share Purchase Agreement. Accordingly, as of June 30, 2022, the Company no longer expects to pay related milestone and earnout payments to the former shareholders of Viventia, with the exception of the potential 2% earnout payment related to the Greater China region since those territory rights have already been out-licensed.
Therefore, the balance as of June 30, 2022 relates to contingent consideration for projected net sales in the Greater China region as compared to the balance as of December 31, 2021 which was based upon projected world-wide net sales.
The following table sets forth a summary of the change in the fair value of the Company's total contingent consideration liability, measured on a recurring basis at each reporting period for the six months ended June 30, 2021 (in thousands):.
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Balance at December 31, 20202021$$108,84052,000 
Change in fair value of contingent consideration - short term1,315 
Change in fair value of contingent consideration - long term60,445 (50,200)
Balance at June 30, 20212022$170,6001,800 
The fair value of the Company’s contingent consideration iswas determined based on the present value of projected future cash flows associated with sales basedsales-based milestones and earnouts on net sales and is heavily dependent on discount rates to estimate the fair value at each reporting period. Earnouts arewere determined using an earnout rate of2%on all commercial net sales of Vicineum through December 2033. The discount rate applied to the 2% earnout iswas derived from the Company’s estimated weighted-average cost of capital, (“WACC”), which has fluctuated from8.8% 9.3% as of December 31, 20202021 to 6.8%10.2% as of June 30, 2021. Milestone2022. As of December 31, 2021, the balance also reflected potential milestone payments which constitute debt-like obligations, and therefore a high-yield debt index rate iswas applied to the milestones in order to determine the estimated fair value. This index rate changed from 8.4%was 8.0% as of December 31, 2020 to 6.6% as of June 30, 2021. Improvements to the competitive landscape, higher probability of regulatory success, expanded patient population, as well as the refinement of estimated launch timelines for Vicineum, if approved, in certain markets and the aforementioned changes in discounts rates, resulted in an overall $61.8 million increaseThe decrease in the estimated fair value of contingent consideration duringof $50.2 million for the six months ended June 30, 2021. 2022 was driven by the Company's decision to voluntarily pause further development of Vicineum.
6. RECEIVABLES
The current portion of total contingent consideration reflects amounts expected to be paid out within twelve monthsaccounts receivable balance as of June 30, 2022 is $0.1 million compared to $21.0 million as of December 31, 2021. The decrease is driven by the receipt of the $20.0 million milestone from F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (collectively, “Roche”) for the initiation of a Phase II clinical trial in the fourth quarter of 2021.

The other receivable balance as of June 30, 2022 is $14.0 million compared to $3.5 million as of December 31, 2021. The increase is driven by expected insurance recovery of $13.0 million related to the preliminary settlements of the securities and derivative litigation. This was partially offset by the receipt of $2.4 million for German value-added tax ("VAT") recovery in the first half of 2022, related to drug substance sent to Baxter in 2020 and 2019.
6.INTANGIBLE7. PREPAID EXPENSES
The prepaid expenses balance as of June 30, 2022 is $0.8 million compared to $25.7 million as of December 31, 2021. In light of the Company's decision to voluntarily pause further development of Vicineum, the Company evaluated prepaid balances and determined that the prepayments for the manufacturing of Vicineum, including consumables, had no future economic benefit or value. Pursuant to ASC Topic 730, Certain Nonrefundable Advance Payment, the Company expensed $25.2 million of prepaids during the three months ended June 30, 2022.
8. INTANGIBLE ASSETS AND GOODWILL
Intangible AssetsIntangibles
Intangible assets on the Company's condensed consolidated balance sheets are the result of the Viventia Acquisition in September 2016. The following table sets forth the composition of intangible assets as of June 30, 20212022 and December 31, 20202021 (in thousands):
June 30, 2022December 31, 2021
IPR&D intangible assets:
Vicineum European Union rights$—$14,700
Total Intangibles$—$14,700
The fair value of the acquired intangible assets for the European Union ("EU") rights of Vicineum is determined using a risk-adjusted discounted cash flow approach, which includes probability adjustments for projected revenues and operating expenses based on the success rates assigned to each stage of development for each geographical region; as well as discount rates applied to the projected cash flows. In August 2021, the Company received a CRL from the FDA regarding its BLA for Vicineum for the treatment of BCG-unresponsive NMIBC, the Company’s former lead product candidate. In the CRL, the FDA determined that it could not approve the BLA for Vicineum in its present form and provided recommendations specific to additional clinical/statistical data and analyses in addition to CMC issues pertaining to a recent pre-approval inspection and product quality. Also in August 2021, the Company withdrew its marketing authorization application (“MAA”) to the European Medicines Agency (the “EMA”) for Vysyneum™ for the treatment of BCG-unresponsive NMIBC in order to pause its plans to pursue regulatory approval of Vysyneum in the EU until there was more clarity from the FDA on next steps for Vicineum in the United States. Vysyneum is the proprietary brand name that was conditionally approved by the EMA for oportuzumab monatox
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June 30, 2021December 31, 2020
IPR&D intangible assets:
Vicineum United States rights$31,700 $31,700 
Vicineum European Union rights14,700 14,700 
Total Intangibles$46,400 $46,400 
in the EU. Given the inherent uncertainty in the development plans for Vicineum as a result of the CRL and the Company’s withdrawal of its MAA, an impairment analysis was conducted in the third quarter of 2021, which concluded that the carrying value of the Company’s intangible asset of Vicineum US rights was fully impaired as of September 30, 2021. The $31.7 million of impairment charges as of September 30, 2021 were due to delays in the expected start of commercialization and lower probabilities of success, combined with higher operating expenses expected to be incurred prior to commercialization, resulting in lower expected future cash flows estimated in the US market. At that time, management assessed that the carrying value of the Vicineum EU rights was not at significant risk of impairment in the future within the current range of commercialization timelines and probability of success assumptions. This was primarily due to the fact that the EU asset was burdened with significantly less expense than the US asset, as the Company’s strategic operating plan was to sublicense Vicineum to business development partners in all regions outside the US, including the EU, with it earning a potential combination of upfront, milestone, and royalty payments, and the business development partner bearing the majority of regulatory and commercialization costs.
During the second quarter of 2022, the Company observed an evolution of the current market treatment paradigm in NMIBC, with substantial uptake of intravesical chemotherapy (monotherapy and combination therapy) during the ongoing BCG shortage. The Company has also experienced a sustained decline in its share price and a resulting decrease in our market capitalization. On July 15, 2022 the Company made the strategic decision to voluntarily pause further development in the US of Vicineum and intends to seek a partner for the further development of Vicineum. The decision was based on a thorough reassessment of Vicineum, which included the incremental development timeline and associated costs for an additional Phase 3 clinical trial for the treatment of NMIBC, following recent discussions with the FDA and the updated market data obtained through market research during the ongoing BCG shortage. Management updated the discounted cash flow model using the market participant approach and considered preliminary terms of a potential partnering deal to conclude the fair value of EU asset. The Company concluded that the carrying value of the Company’s intangible asset of Vicineum EU rights of $14.7 million was fully impaired and written off as of June 30, 2022. The weighted average cost of capital used in the Company’s most recent impairment test, which was 24.5%, was risk-adjusted to reflect the specific risk profile of the reporting unit. Management used considerable judgment to determine key assumptions, including projected revenue and appropriate discount rates, which are classified as level 3 in fair value measurement.
Goodwill
Goodwill on the Company's condensed consolidated balance sheets is the result of the Viventia Acquisition in September 2016. Goodwill had aDuring the second quarter of 2022 the Company observed continued trends in the Company’s market capitalization as compared to the carrying value of its single reporting unit as well as changes in certain assumptions in the fair value of the business including market share, length and cost of a clinical study, and time to potential market launch. The Company identified these changes as potential impairment indicators and performed a quantitative impairment analysis, in advance of the Company's typical annual assessment date of October 1. The Company reassessed the underlying assumptions used to develop its revenue projections, which were then used as significant inputs to determine the fair value of equity. Management updated its revenue forecast models based on further launch delays in both the US and outside the US ("OUS") regions. The Company also recently observed an evolution of the current treatment paradigm in NMIBC, with substantial uptake of intravesical chemotherapy (monotherapy and combination therapy) during the ongoing BCG shortage resulting in lower projected peak market share for Vicineum. Management also considered other factors including the preliminary valuations of strategic alternatives during the fair value assessment. As a result of the interim impairment test, the Company concluded that the carrying value of its goodwill of $13.1 million was fully impaired as of June 30, 20212022. The weighted average cost of capital used in the Company’s most recent impairment test, which was 24.5%, was risk-adjusted to reflect the specific risk profile of the reporting unit. Management used considerable judgment to determine key assumptions, including projected revenue and appropriate discount rates, which are classified as level 3 in fair value measurement.
The following table sets forth a summary of the change in goodwill as of June 30, 2022 and December 31, 2020.2021 (in thousands).
Balance at December 31, 2021$13,064 
Impairment loss(13,064)
Balance at June 30, 2022$—

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7.9. ACCRUED EXPENSES
The following table sets forth the composition of accrued expenses as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Research and development$1,847 $1,841 
Payroll-related expenses3,099 2,967 
Restructuring charge related394 1,497 
Professional fees507 597 
Legal expenses, including preliminary litigation settlement22,477 1,344 
Other1,527 9 
Total Accrued Expenses$29,851 $8,255 
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company may become subject to legal proceedings, claims, and litigation arising in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible, and the amount involved is material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. The Company is not currently a party to any material legal proceedings, other than as described below.
On August 19, 2021, August 31, 2021, and October 7, 2021, 3 substantially identical securities class action lawsuits captioned Bibb v. Sesen Bio, Inc., et. al., Case No. 1:21-cv-07025, Cizek v. Sesen Bio, Inc., et. al., Case No. 1:21-cv-07309, and Markman v. Sesen Bio, Inc. et al., Case No. 1:21-cv-08308 were filed against the Company and certain of its officers in the US District Court for the Southern District of New York. The 3 complaints alleged violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder based on statements made by the Company concerning its BLA for Vicineum for the treatment of BCG-unresponsive NMIBC. The 3 complaints sought compensatory damages and costs and expenses, including attorneys’ fees. On October 29, 2021, the court consolidated the 3 cases under the caption In re Sesen Bio, Inc. Securities Litigation, Master File No. 1:21-cv-07025-AKH (the “Securities Litigation”), and appointed Ryan Bibb, Rodney Samaan, Lionel Dreshaj and Benjamin Dreshaj (“Lead Plaintiffs”) collectively as the lead plaintiffs under the Private Securities Litigation Reform Act. On November 1, 2021, two stockholders filed motions to reconsider asking the court to appoint a different lead plaintiff. The court has not ruled on those motions at this time. On November 24, 2021, defendants filed a motion to transfer venue to the US District Court for the District of Massachusetts. That motion was fully briefed as of December 13, 2021, but the court has not yet ruled on that motion. On December 6, 2021, the Lead Plaintiffs filed an amended class action complaint (the “Amended Complaint”). The Amended Complaint alleges the same violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder on the same theory as the prior complaints. The defendants moved to dismiss the Amended Complaint on March 7, 2022. The plaintiffs filed their opposition to that motion on April 6, 2022 and Defendants filed their reply in further support of the motion to dismiss on May 6, 2022. After the motion was fully briefed and before the court ruled on the motion, on June 3, 2022, the parties requested that the court hold any decision on the motion to dismiss in abeyance to provide the parties with an opportunity to engage in mediation. The parties engaged in mediation on June 30, 2022.
On September 20, 2021 and September 24, 2021, two substantially similar derivative lawsuits captioned Myers v. Sesen Bio, Inc., et. al., Case No. 1:21-cv-11538 and D’Arcy v. Sesen Bio, Inc., et. al., Case No. 1:21-cv-11577 were filed against the Company’s board of directors and certain of its officers in the US District Court for the District of Massachusetts, with the Company named as a nominal defendant. On January 12, 2022, a third derivative complaint captioned Tang v. Sesen Bio, Inc., et al., was filed in Superior Court in Massachusetts against the Company’s board of directors and certain of its officers (the “State Derivative Litigation”). The 3 derivative complaints allege breach of fiduciary duties, waste of corporate assets, and violations of federal securities laws based on statements made by the Company concerning its BLA for Vicineum for the
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treatment of BCG-unresponsive NMIBC. The D’Arcy complaint further alleges unjust enrichment, abuse of control, gross mismanagement and aiding and abetting thereof. The three derivative complaints seek unspecified damages, restitution and disgorgement of profits, benefits and compensation obtained by the defendants and costs and expenses, including attorneys’ fees. On October 18, 2021, the court consolidated the two federal court cases under the caption In re Sesen Bio, Inc. Derivative Litigation, Lead Case No. 1:21-cv-11538 (the “Federal Derivative Litigation”). On December 22, 2021, the court entered a joint stipulation among the parties to stay the Federal Derivative Litigation until after a ruling on any motion to dismiss filed by defendants in the Securities Litigation. On May 1, 2022, the plaintiffs filed a verified consolidated shareholder derivative complaint in the Federal Derivative Litigation. On May 18, 2022, the court entered a joint stipulation among the parties to stay the State Derivative Litigation until after a ruling on any motion to dismiss filed by defendants in the Securities Litigation.
The Company deemed the settlements of the Securities Litigation, the State Derivative Litigation, the Federal Derivative Litigation, and other potential related derivative claims, probable and amounts reasonably estimable as of June 30, 2022 and accrued $21.6 million to litigation related liability.
The Company, its board of directors and the individual defendants continue to deny all allegations of any wrongdoing, but are seeking to settle the Securities Litigation, the State Derivative Litigation and the Federal Derivative Litigation to avoid the uncertainty, risk, expense and distraction of protracted litigation.
Executive Employment Agreements
The Company has entered into employment agreements or offer letters with certain of its key executives, providing for separation payments and benefits in certain circumstances, as defined in the agreements.
11. LEASES
The Company accounts for operating leases under ASC Topic 842, Leases. AnCompany's lease portfolio includes an operating lease for its 31,100 square foot facility in Winnipeg, Manitoba which consists of manufacturing, laboratory, warehouse and office space. In September 2020, the Company entered into an extension of this lease for an additional two years, through September 2022, with a right to extend the lease for 1 subsequent three year term.2022. The minimum monthly rent under this lease is CAD $18,100 per month (approximately $14,600$14,000 at exchange rates in effect on June 30, 2021)2022). In addition to rent expense, the Company expects to incur CAD $18,200 per month related to operating expenses (approximately $14,700$14,100 at exchange rates in effect on June 30, 2021)2022). Operating lease cost under this lease, including the related operating costs, were $83,000 and $165,000 for the three and six months ended June 30, 2022, respectively, and $84,000 and $166,000 for the three and six months ended June 30, 2021, and $72,000 and $148,000 for the three and six months ended June 30, 2020, respectively.
The asset component of the Company’s operating leases is recorded as operating lease right-of-use assets and reported within other assets on the Company's condensed consolidated balance sheets. The right of use asset total was $41,700 as of June 30, 2022 and $123,300 as of December 31, 2021. The short-term lease liability is recorded in other current
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liabilities and the long termlong-term lease liability is recorded in other liabilities on the Company’s condensed consolidated balance sheets. The short-term lease liability was $41,700 as of June 30, 2022 and $123,300 as of December 31, 2021. There was no long-term operating lease liability as of June 30, 2022 or December 31, 2021. Operating lease cost is recognized on a straight-line basis over the term of the lease.
In addition, the Company has short-term property leases for modular office space for 1) its corporate headquarters in Cambridge, MA and 2) office space in Philadelphia, PA. The short-term leases renew every three months to six months and currently extend through November and December 2021, respectively.are renewed on a month-to-month basis. The minimum monthly rent for these office spaces is $20,100 per month,$2,200 and $21,000, respectively, which is subject to change if and as the Company adds space to or deducts space from the leases. The Company recorded $69,000 and $138,000 in rent expense for the three and six months ended June 30, 2021 and $65,000 and $131,000 three and six months ended June 30, 2020, respectively. The Company's accounting policy election was disclosed in "Item 15. Exhibits and Financial Statement Schedules - Note. 3. Summary of Significant Accounting Policies" in the audited annual consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020.


8. ACCRUED EXPENSES
The following table sets forth the composition of accrued expenses as of June 30, 2021 and December 31, 2020 (in thousands):
June 30,
2021		December 31, 2020
Research and development$1,958 $1,372 
Payroll-related expenses1,798 1,892 
Professional fees876 684 
Commercial expenses620 0 
Other49 25 
Total Accrued Expenses$5,301 $3,973 

9.12. STOCKHOLDERS' EQUITY (DEFICIT)
Equity Financings
ATM Offering
In November 2019, theThe Company has entered into an Open Market Sale Agreement SM (the "Sale Agreement") with Jefferies LLC ("Jefferies"), dated November 29, 2019, as amended by Amendment No. 1 dated October 30, 2020, Amendment No. 2 dated February 17, 2021 and Amendment No. 3, dated June 1, 2021 (as amended, the "Sale Agreement"), under which the Company may issue and sell shares of its common stock, par value $0.001 per share, from time to time for an aggregate sales price of up to $35 millionthrough Jefferies (the "ATM Offering"“ATM Offering”). In October 2020June and FebruaryJuly 2021, the Company entered into Amendments No. 1 and No. 2 to the Sale Agreement, respectively. Amendments No. 1 and No. 2 modified the Sale Agreement to reflect that the Company may issue and sell shares of its common stock from time to time for an aggregate sales price of up to an additional $50 million and $34.5 million, respectively. In June 2021, the Company entered into Amendment No. 3 to the Sale Agreement, which modified the Sale Agreement to remove the maximum dollar amount of shares of common stock that may be sold pursuant to the Sale Agreement and filed a prospectus supplementsupplements with the SEC in connection with the offer and sale of up to $100an aggregate of $200 million of common stock pursuant to the Sale Agreement.Agreement of which $97.8 million of common stock remain available for future issuance as of June 30, 2022. Sales of common stock under the Sale Agreement are made by any method that is deemed to be an ATM offering as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including but not limited to sales made directly on or through the Nasdaq GlobalStock Market or any other existing trading market for ourthe Company's common stock. The Company may sell shares of its common stock efficiently from time to time over the coming months, but has no obligation to sell any of its common stock and may at any time suspend offers under the Sale Agreement or terminate the Sale Agreement. Subject to the terms and
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conditions of the Sale Agreement, Jefferies will use its commercially reasonable efforts to sell common stock from time to time, as the sales agent, based upon the Company’s instructions, which include a prohibition on sales below a minimum price set by the Company from time to time. The Company has provided Jefferies with customary indemnification rights, and Jefferies is entitled to a commission at a fixed rate equal to 3.0% of the gross proceeds for each sale of common stock under the Sale Agreement. The Company did not sell any shares of common stock pursuant to the Sale Agreement during thethree and six months ended June 30, 2022. The Company raised $136.8 million of net proceeds from the sale of 47.1 million shares of common stock at a weighted-average price of $2.99 per share during the six months ended June 30, 2021, compared to $8.0 million of net proceeds from the sale of 9.8 million shares of common stock at a weighted-average price of $0.75 per share during the six months ended June 30, 2020.2021. The Company raised $64.3 million of net proceeds from the sale of 16.5 million shares of common stock at a weighted-average price of $4.02per share during the three months ended June 30, 2021, compared to $4.8 million of net proceeds from the sale of6.6 million shares of common stock at a weighted-average price of $0.69 per share during the three months ended June 30, 2020.2021. Share issueissuance costs, including sales agent commissions, related to the ATM Offering totaled $2.0$2.0 million and $4.2 millionduring the three and six months ended June 30, 2021, respectively.
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Preferred Stock
Pursuant to its Amended and Restated Certificate of Incorporation as amended (the "Certificate of Incorporation"), the Company is authorized to issue 5.0 million shares of "blank check" preferred stock, $0.001 par value per share, which enables its board of directors, from time to time, to create one or more series of preferred stock. Each series of preferred stock issued shall have the rights, preferences, privileges and restrictions as designated by the board of directors. The issuance of any series of preferred stock could affect, among other things, the dividend, voting and liquidation rights of the Company's common stock. The Company had 0no preferred stock issued and outstanding as of June 30, 20212022 and December 31, 2020.2021.
Common Stock
PursuantFollowing approval by the Company’s stockholders on May 3, 2021, an amendment became effective to itsthe Certificate of Incorporation that increased the Company isnumber of authorized to issue 400 million and 200 million shares of common stock from 200 million to 400 million, of which 188approximately 199 million and 140 million shares were issued and outstanding as of June 30, 20212022 and December 31, 2020, respectively.2021. In addition, the Company had reserved for issuance the following numberamounts of shares of its common stock for the purposes described below as of June 30, 20212022 and December 31, 20202021 (in thousands):
June 30,
2021		December 31, 2020
Shares of common stock issued188,461 140,450 
Shares of common stock reserved for issuance for:
Warrants1,394 2,247 
Stock options17,349 10,147 
Shares available for grant under 2014 Stock Incentive Plan12,290 4,863 
Shares available for sale under 2014 Employee Stock Purchase Plan2,300 0 
Total shares of common stock issued and reserved for issuance221,794 157,707 

June 30, 2022December 31, 2021
Shares of common stock issued199,464199,464
Shares of common stock reserved for issuance for:
Warrants199 199 
Stock options17,161 15,703 
Restricted stock units8,063 3,041 
Shares available for grant under 2014 Stock Incentive Plan3,076 8,933 
Shares available for sale under 2014 Employee Stock Purchase Plan2,300 2,300 
Total shares of common stock issued and reserved for issuance230,263 229,640 
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 one1 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.

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Warrants
All of the Company’s outstanding warrants are non-tradeable and permanently classified as equityequity-classified because they meet the derivative scope exception under ASC Topic 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity ("ASC
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815-40"). Equity. The following table sets forth the Company's warrant activity for the sixthree months ended June 30, 20212022 (in thousands):
Year-to-Date Warrant Activity
IssuedExercise
Price		ExpirationDecember 31, 2020Issued(Exercised)(Expired)June 30,
2021
Jun-2019$1.47Jun-20200 0 0 0 0 
Mar-2018$0.55*Mar-20231,705 0 (378)0 1,327 
Nov-2017$0.55*Nov-2022487 0 (475)0 12 
May-2015$11.83Nov-202428 0 0 0 28 
Nov-2014$11.04Nov-202427 0 0 0 27 
2,247 0 (853)0 1,394 

IssuedExercise
Price		ExpirationDecember 31, 2021Issued(Exercised)(Cancelled)June 30, 2022
Mar-2018$0.55*Mar-2023132 — — — 132 
Nov-2017$0.55*Nov-202212 — — — 12 
May-2015$11.83Nov-202428 — — — 28 
Nov-2014$11.04Nov-202427 — — — 27 
199 — — — 199 
*Exercise price shown (i) reflects modification and (ii) is subject to further adjustment based on down round provision added by amendment described in "Item“Item 15. Exhibits and Financial Statement Schedules - Note. 10 Stockholders'Note 12. Stockholders’ Equity (Deficit) Equity"” in the audited annual consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.


2021.
10.13. EARNINGS (LOSS) EARNINGS PER SHARE
A net loss cannot be diluted. Therefore, when the Company is in a net loss position, basic and diluted loss per common share are the same. If the Company achieves profitability, the denominator of a diluted earnings per common share calculation includes both the weighted-average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents potentially include warrants, stock options and non-vestedunvested 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.

Additionally, an entity that presents earnings per share shall recognize the value of the effect of an anti-dilution provision in an equity-classified freestanding financial instrument in the period the anti-dilution provision is triggered. That effect shall be treated as a deemed dividend and as a reduction of income available to common stockholders in basic earnings per share. The deemed dividend is added back to income available to common stockholders when applying the treasury stock method for diluted earnings per share.

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. The two-class method was applied for the six months ended June 30, 2020. The two-class method was not applied for the three and six months ended June 30, 2021 and was not applied for the three months ended June 30, 2020 as the Company’s participating securities do not have any obligation to absorb net losses.

The following table illustrates the determination of (loss) earnings per share for each period presented:
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Three Months ended June 30,Six Months ended June 30,
2021202020212020
(in thousands, except per share amounts)
Basic (Loss) Earnings Per Share:
Numerator:
Net (loss) income$(25,442)$(26,344)$(80,954)$15,220 
Less: Deemed Dividend0 $(147)0 $(147)
Less: Income attributable to participating securities - basic$0 $0 $0 $(322)
Net (loss) income attributable to common stockholders - basic$(25,442)$(26,491)$(80,954)$14,751 
Denominator:
Weighted average common shares outstanding - basic175,393112,569166,264111,189
Net (loss) income per share applicable to common stockholders - basic$(0.15)$(0.24)$(0.49)$0.13 
Dilutive Earnings (Loss) Per Share:
Numerator:
Net (loss) income$(25,442)$(26,344)$(80,954)$15,220 
Less: Deemed Dividend0 $(147)0 $(147)
Less: Income attributable to participating securities - diluted$0 $0 $0 $(2,473)
Net (loss) income attributable to common stockholders - diluted$(25,442)$(26,491)$(80,954)$12,600 
Denominator:
Weighted average shares outstanding175,393 112,569 166,264 111,189 
Dilutive impact from:
Stock options and employee stock purchase plan0 0 0 14 
Weighted average common shares outstanding for diluted175,393 112,569 166,264 111,203 
Net (loss) income per share applicable to common stockholders - diluted$(0.15)$(0.24)$(0.49)$0.11 

The following potentially dilutive securities outstanding as of June 30, 20212022 and 20202021 have been excluded from the denominator of the diluted (loss) incomeloss per share of common stock outstanding calculation as their effect is anti-dilutive(in thousands):
(in thousands):
Three Months ended June 30,Six Months ended
 June 30,
 2021202020212020
Warrants1,394 2,485 1,394 55 
Stock options17,349 9,990 17,349 9,989 
18,743 12,475 18,743 10,044 




Three Months Ended
June 30,		Six Months Ended
 June 30,
2022202120222021
Warrants199 1,394 199 1,394 
Stock options17,161 17,349 17,161 17,349 
RSUs and PSUs8,063 — 8,063 — 
Total25,423 18,743 25,423 18,743 
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11.
14. SHARE-BASED COMPENSATION
The following table sets forth the amount of share-based compensation expense recognized by the Company by line item on its condensed consolidated statementsCondensed Consolidated Statements of operations and comprehensive (loss) incomeOperations for the three and six months ended June 30, 20212022 and 20202021 (in thousands):
 Three Months ended
June 30,		Six Months ended
 June 30,
 2021202020212020
Research and development$207 $91 $386 $171 
General and administrative1,052 400 1,831 727 
$1,259 $491 $2,217 $898 

Three Months Ended
June 30,		Six Months Ended
 June 30,
2022202120222021
Research and development$473 $207 $975 $386 
General and administrative1,329 1,052 2,721 1,831 
Total Share Based Compensation$1,802 $1,259 $3,696 $2,217 
2014 Stock Incentive Plan
The Company's 2014 Stock Incentive Plan, as amended ("2014(the "2014 Plan"), was adopted by its board of directors in December 2013 and subsequently approved by its stockholders in January 2014. The 2014 Plan became effective immediately prior to the closing of the Company's IPO in February 2014 and provides for the grant of incentive and non-qualified stock options, restricted stock awards, and restricted stock units ("RSU"), stock appreciation rights and other stock-based awards, with amounts and terms of grants determined by the Company's board of directors at the time of grant, to the Company's employees, officers, directors, consultants and advisors. Currently there are only stock options outstanding under the 2014 Plan, which generally vest over a four-year period at the rate of 25% of the grant vesting on the first anniversary of the date of grant and 6.25% of the grant vesting at the end of each successive three month period thereafter. Stock options granted under the 2014 Plan are exercisable for a period of ten years from the date of grant. There were approximately 12.4 million stock options outstanding under the 2014 Plan as of June 30, 2021.

At the Annual Meeting of the Company's 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. At the Annual Meeting of the Company’s stockholders in May 2021, the Company’s stockholders approved an amendment to the 2014 Plan that increased by 12 million the number of shares of common stock reserved for issuance under the 2014 Plan. There were approximately 12.33.1 million shares of common stock available for issuance under the 2014 Plan as of June 30, 2021.2022.

Stock options outstanding under the 2014 Plan generally vest over a four-year period at the rate of 25% of the grant vesting on the first anniversary of the date of grant and 6.25% of the grant vesting at the end of each successive three-month period thereafter. Stock options granted under the 2014 Plan are exercisable for a period of ten years from the date of grant. There were approximately 13.6 million stock options outstanding under the 2014 Plan as of June 30, 2022.
On September 9, 2021, the Board of Directors and the Compensation Committee of the Company approved a retention program for all current employees, except for the Chief Executive Officer, pursuant to which the Company will provide certain incentives designed to retain such employees (the “Retention Program”). Pursuant to the Retention Program and effective as of October 1, 2021, the Company’s non-executive employees received a combination of a cash bonus award and a one-time RSU award which will vest in full on September 30, 2022, subject to continued employment through September 30, 2022. Each RSU represents a contingent right to receive 1 share of the Company’s common stock.
Also pursuant to the Retention Program and effective as of October 1, 2021, the Company’s executive officers, except for the Chief Executive Officer, were granted a one-time performance-based restricted stock unit (“PSU”) award equal to the value of approximately 50 percent of then-current base salary. The fair value of PSUs at the grant date was $0.4 million. Each PSU represents a contingent right to receive 1 share of the Company’s common stock upon the satisfaction of pre-determined performance criteria. Subject to continued employment, such awards vest on September 30, 2023 upon the determination by the Compensation Committee of the level of achievement of certain key milestones consisting of a clinical trial milestone, an employee retention milestone and cash management milestones. As of June 30, 2022 achievement was deemed probable for only the cash management milestone, representing $87,000, 20% of the PSU awards. Therefore, $11,000 and $33,000 have been expensed during the three and six months ended June 30, 2022, respectively and $54,000 remains measured but unrecognized.
2009 Stock Incentive Plan
The Company maintains a 2009 Stock Incentive Plan, as amended and restated ("2009(the "2009 Plan"), which provided for the grant of incentive and non-qualified stock options and restricted stock awards and restricted stock 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
14

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 approximately 0.1 million fully vested stock options outstanding under the 2009 Plan as of June 30, 2021.2022.
Out-of-Plan Inducement Grants
From time to time, the Company has granted equity awards to its newly hired employees, including executives, in accordance with the Nasdaq Stock Market LLC ("Nasdaq") employment inducement grant exemption (Nasdaq Listing Rule 5635(c)(4)). Such grants are made outside of the 2014 Plan and act as an inducement material to the employee's acceptance of employment with the Company. There were approximately 4.83.5 million stock options outstanding which were granted as employment inducement awards outside of the 2014 Plan as of June 30, 2021.2022.

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Stock Options
The following table sets forth a summary of the Company’s total stock option activity, including awards granted under the 2014 Plan and the 2009 Plan and inducement grants made outside of stockholder approved plans, for the six months ended June 30, 2021:
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, 202010,147 $1.268.5$3,160 
Granted7,233 $3.34
Exercised(31)$1.27
Canceled or forfeited0 0
Outstanding at June 30, 202117,349 $2.138.6$43,999 
Exercisable at June 30, 20215,719 $1.577.6$18,214 
2022:

Number of Shares under Option
(in thousands)		Weighted-Average
Exercise Price		Weighted-Average Remaining
Contractual 
Life
(in years)		Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 202115,703 $1.938.03$82 
Granted1,511 $0.72
Exercised— —
Canceled or forfeited(53)1.20
Outstanding at June 30, 202217,161 $1.837.72$218 
Exercisable at June 30, 20229,555 $1.727.11$64 
The Company recognized share-based compensation expense, related to stock options, of $1.3$1.2 million and $2.2$2.5 million for the three and six months ended June 30, 2021,2022, respectively and $0.5 million and $0.9 million for the $1.3 millionand$2.2 millionfor the three and six months ended June 30, 2020,2021, respectively. As of June 30, 2021,2022, there was $17.1$8.6 million of total unrecognized compensation cost related to non-vestedunvested stock options which the Company expects to recognize over a weighted-average period of 3.32.36 years. The weighted-average grant-date fair value of stock options granted was $2.17 per option forduring the six months ended June 30, 2021.and $0.55 per option for the six months ended June 30, 2020. The total intrinsic value of2022 and 2021 were $0.46 and $2.17, respectively. No stock options were exercised during the six months ended June 30, 2021 was de minimis.2022.
For the six months ended June 30, 20212022 and 2020,2021, the grant-date fair value of stock options was determined using the following weighted-average inputs and assumptions in the Black-Scholes option pricing model:
June 30,
2021		June 30,
2020
Fair market value$3.34$0.87
Grant exercise price$3.34$0.87
Expected term (in years)6.046.02
Risk-free interest rate0.91.4
Expected volatility74.771.3
Dividend yield0%0%
June 30, 2022June 30, 2021
Fair market value$0.72$3.34
Grant exercise price$0.72$3.34
Expected term (in years)6.06.04
Risk-free interest rate2.1%0.9%
Expected volatility71.8%74.7%
Dividend yield—%—%


12.
15

Restricted Stock Units and Performance Stock Units
The following table sets forth a summary of the Company's RSU and PSU activity for the six months ended June 30, 2022:
Restricted Stock Units
(in thousands)		Weighted Average Grant Date Fair Value
Unvested at December 31, 20213,041 $0.80
Granted RSU4,161 $0.68
Cancelled RSU(143)$0.75
Granted PSU1,004 $0.67
Unvested at June 30, 20228,063 $0.72
The Company did not grant any RSUs or PSUs during the six months ended June 30, 2021.
The share-based compensation expense related to RSUs and PSUs for the three and six months ended June 30, 2022 was $0.6 million and $1.2 million, respectively. There was no shared-based compensation expense related to RSUs and PSUs for the three and six months ended June 30, 2021. As of June 30, 2022, there was $3.0 million of total unrecognized compensation cost related to unvested RSUs and PSUs.
15. EMPLOYEE BENEFIT PLANS
2014 Employee Stock Purchase Plan
The Company's 2014 Employee Stock Purchase Plan ("2014 ESPP") was adopted by its board of directors in December 2013 and subsequently approved by its stockholders in January 2014. The 2014 ESPP became effective immediately prior to the closing of the Company's IPO in February 2014 and established an initial reserve of 0.2 million shares of the Company's common stock for issuance to participating employees. At the Annual Meeting of the Company's stockholders in May 2021, the Company's stockholders approved an amendment to the 2014 ESPP that increased by 2.3 million the number of shares of common stock reserved for issuance under the 2014 ESPP. The purpose of the 2014 ESPP is to enhance employee interest in the success and progress of the Company by encouraging employee ownership of common stock of the Company. The 2014 ESPP provides employees with the opportunity to purchase shares of common stock at a 15% discount to the market price through payroll deductions or lump sum cash investments. The Company estimates the number of shares to be issued at the end of an offering period and recognizes expense over the requisite service period. Shares of the common stock issued and sold pursuant to the 2014 ESPP are shown on the condensed consolidated statements of changes in stockholders' equity (deficit). As of June 30, 2021,2022, there were 2.3 million shares of common stock available for sale under the 2014 ESPP.


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The Company did not sell any shares under the ESPP during the six months ended June 30, 2022 and 2021.
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.US employees. Employees are eligible to participate immediately uponon 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 of $4,000 per year. The expenses incurred for the periods presented were de minimis.minimis amount for each of the six months ended June 30, 2022 and 2021, respectively.
Canada - Defined Contribution Plan
The Company maintains a defined contribution plan for its Canadian employees. Participants may contribute a percentage of their annual compensation to this plan, subject to statutory limitations. The Company contributes up to the first 4% of eligible compensation for its Canadian-based employees to the retirement plan. The expenses incurred for the periods presented were de minimis.minimis amount for each of the six months ended June 30, 2022 and 2021, respectively.
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13.16. INCOME TAXES
The following table sets forth the components of the Company's loss before income taxes by country (in thousands):
 Six Months Ended
June 30,
 20222021
Country:
United States$(55,939)$(21,210)
Canada19,297 (59,456)
Total Loss before Income Taxes$(36,642)$(80,666)
The Company's tax benefit (provision) is comprised of the following components (in thousands):
Six Months Ended
June 30,
 20222021
Current tax benefit (provision)
     Foreign$3,875 $(288)
           Total current benefit (provision)$3,875 $(288)
The Company's deferred tax liability is comprised of the following:
June 30, 2022December 31, 2021
Deferred tax liabilities
IPR&D$— $3,969 
           Total deferred tax liabilities$—$3,969
For the six months ended June 30, 2022, the Company recorded a benefit from income taxes of $3.9 million. In the second quarter of 2022, the Company determined that the fair value of the Vicineum EU rights was zero, which resulted in an impairment charge of $14.7 million. In connection with this impairment charge, the Company reversed the associated deferred tax liability by $4.0 million as an income tax benefit, partially offset by $0.1 million income tax paid to foreign jurisdictions pursuant to the exclusive license agreement with Qilu Pharmaceutical Co., Ltd. (“Qilu”) (the “Qilu License Agreement”). Please refer to Note 8, "Intangible Assets and Goodwill," for further information regarding the impairment charge. For the six months ended June 30, 2021, the Company recorded a provision for income taxes of $0.3 million. This provision consisted of income taxes paid to foreign jurisdictions pursuant to the Qilu License Agreement.
17. LICENSE AGREEMENTS
In-License Agreements
License Agreement with Zurich
The Company has a License Agreementlicense 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.same (the “Zurich License Agreement”). These patents cover some key aspects of Vicineum. The Company may be obligated to pay $0.50 million in milestone paymentsCompany's receipt of the CRL regarding the BLA for Vicineum for the first product candidate that achieves applicable clinical development milestones. Based on current status,treatment of BCG-unresponsive NMIBC triggered a $0.5 million milestone payment to Zurich. Under the Company anticipates that these milestones may be triggered by Vicineum's clinical development pathway. As part of the consideration,Zurich License Agreement, 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.rights, which includes Vicineum. 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. The Company recorded an expense of $0.3 million and $0.5 million
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related to achievement ofmeeting a development milestone, in the three months ended December 31, 2020 due to the(the submission of the Company'sCompany’s BLA application with the FDA in December 2020.

2020), in the fourth quarter of 2020, and a regulatory milestone, (the Company’s receipt of the CRL from the FDA in August 2021), in the third quarter of 2021, respectively.
License Agreement with Micromet
The Company has a License Agreement with Micromet AG ("Micromet"), now part of Amgen, Inc., which grants it nonexclusive rights, with certain sublicense rights, for know-how and patents allowing exploitation of certain single chain antibody products.products (the “Micromet License Agreement”). These patents cover some key aspects of Vicineum. Under the terms of the Micromet License Agreement, with Micromet, as of June 30, 2021,2022, the Company may be obligated to pay up to €2.4 million in milestone payments for the first product candidate that achieves applicable regulatory and sales-based development milestones (approximately $2.9$2.5 million at exchange rates in effect on June 30, 2021)2022). Based on current development status, the Company anticipates that certain of these milestones may be triggered by the development pathway of Vicineum. The Company is also required to pay up to a 3.5% royalty on the net sales for products covered by the agreement, which includes Vicineum. The royalty rate owed to Micromet in a particular country will be reduced to 1.5% if there are no valid claims covering the product in that country. The obligation to pay royalties in a particular country expires upon the later of the expiration date of the last valid claim covering the product and the tenth anniversary of the first commercial sale of the product in such country. Finally, the Company is required to pay to Micromet an annual license maintenance fee of €50,000 (approximately $59,420$52,148 at exchange rates in effect as of June 30, 2021)2022), whichthat can be credited towards any royalty payment the Company owes to Micromet. The Company recorded an expense of €0.7 million ($0.9 million) related to achievement of a development milestonesmilestone in the three months ended December 31, 2020, due to the submission of the Company's BLA for Vicineum with the FDA in DecemberDecember 2020. The Company recorded an expense of €0.5 million (approximately $0.6($0.6 million) related to the submission of the Marketing Authorization Application (“MAA”)MAA to the European Medicines Agency (“EMA”)EMA for VicineumVysyneum™ in the first quarter of 2021.



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License Agreement with XOMA
The Company has a License Agreementlicense 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.systems (the “XOMA License Agreement”). These patents and related know-how cover some key aspects of Vicineum. Under the terms of the XOMA License Agreement, with XOMA, the Company is required to pay up to $0.25 million in milestone payments for a product candidate that incorporates know-how under the license and achieves applicable clinical development milestones. Based on current clinical status, the Company anticipates that these milestones may be triggered by Vicineum’s clinical development pathway. The Company is also required to pay a 2.5% royalty on the net sales for products incorporating XOMA’s technology, which includes Vicineum. The Company has the right to reduce the amount of royalties owed to XOMA on a country-by-country basis by the amount of royalties paid to other third parties, provided that the royalty rate to XOMA may not be less than 1.75% of net sales. In addition, the foregoing royalty rates are reduced by 50% with respect to products that are not covered by a valid patent claim in the country of sale. The obligation to pay royalties in a particular country expires upon the later of the expiration date of the last valid claim covering the product and the tenth anniversary of the first commercial sale of the product in such country.
Out-License Agreements
Roche License Agreement
In June 2016, the Company entered into the license agreement with Roche (the “Roche License Agreement with F. Hoffmann-LA Roche Ltd and Hoffman-La Roche Inc. (collectively, "Roche"Agreement”), pursuant to which the Company granted Roche an exclusive, worldwide license, including the right to sublicense, to its patent rights and know-how related to the Company’s monoclonal antibody EBI-031 and all other IL-6 anti-IL-6 antagonist monoclonal antibody technology owned by the Company (collectively, the "Roche Licensed Intellectual Property"). Under the Roche License Agreement, with Roche, Roche is required to continue developing, at its cost, EBI-031 and any other product made from the Roche Licensed Intellectual Property that contains an IL-6 antagonist anti-IL monoclonal antibody (“Roche Licensed Product”) and pursue ongoing patent prosecution, at its cost.
Financial Terms
The Company received from Roche an upfront license fee of $7.5 million in August 2016 upon the effectiveness of the Roche License Agreement with Roche following approval by the Company's stockholders, and Roche agreed to pay up to an additional $262.5 million upon the achievement of specified regulatory, development and commercialization milestones with respect to up to two unrelated indications. Specifically, an aggregate amount of up to $197.5 million is payable to the Company for the achievement of specified milestones with respect to the first indication, consisting of (i) $72.5 million in development milestones, the next of which is $20.0$30 million for initiation of the first Phase II study,III clinical trial, (ii) $50 million in regulatory milestones and (iii) $75 million in commercialization milestones. Additional amounts of up to $65 million are payable upon the achievement of specified development and regulatory milestones in a second indication.
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 amountsIn December 2021, a $20 million milestone was achieved due to Roche initiating a Phase II clinical trial. Management evaluated the milestone under the
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provisions of up to $65Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606”), and determined it is probable that a significant revenue reversal will not occur in future periods, which was not the case in previous periods. Accordingly, the Company invoiced Roche $20 million are payable uponwith payment terms of 30 days following the achievement of specified developmentthe corresponding milestone event, pursuant to the Roche License Agreement and regulatory milestones$20 million was recorded as license revenue and accounts receivables in a second indication.the fourth quarter of 2021. In January 2022, the payment of $20 million was received.
In addition, the Company is entitled to receive royalty payments in accordance with a tiered royalty rate scale, with rates ranging from 7.5% to 15% of net sales of potential future products containing EBI-031 and up to 50% of these rates for net sales of potential future products containing other IL-6 compounds, with each of the royalties subject to reduction under certain circumstances and to the buy-out options of Roche.
Buy-Out Options
The Roche License Agreement with Roche provides for 2 “option periods” during which Roche may elect to make a one-time payment to the Company and, in turn, terminate its diligence, milestone and royalty payment obligations under the Roche License Agreement. Specifically, (i) Roche may exercise a buy-out option following the first dosing (“Initiation”) in the first Phase 2 study for a Roche Licensed Product until the day before Initiation of the first Phase 3 study for a Roche Licensed Product, in which case Roche is required to pay the Company $135 million within 30 days after Roche's exercise of such buy-out option and receipt of an invoice from the Company, or (ii) Roche may exercise a buy-out option following the day after Initiation of the first Phase 3 study for a Roche 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 Roche Licensed Product in either the United States or in the E.U.,EU, in which case Roche is required to pay the Company, within 30 days after Roche’s exercise of such buy-out option and receipt of an invoice from the Company, $265 million, which amount would be reduced to $220 million if none of the Company’s patent rights containing a composition of matter claim covering any compound or Roche Licensed Product has issued in the E.U.


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EU.
Termination
Either the Company or Roche may each terminate the Roche License Agreement with Roche if the other party breaches any of its material obligations under the agreementRoche License Agreement and does not cure such breach within a specified cure period. Roche may terminate the Roche License Agreement with Roche following effectiveness by providing advance written notice to the Company or by providing written notice if the Company is debarred, disqualified, suspended, excluded, or otherwise declared ineligible from certain federal or state agencies or programs. The Company may terminate the Roche License Agreement with Roche if, prior to the first filing of a BLA for a Roche Licensed Product, there is a period of twelve months where Roche is not conducting sufficient development activities with respect to the products made from the Roche Licensed Intellectual Property.
Subsequent to June 30, 2022, the Company executed an asset purchase agreement with Roche pursuant to which Roche purchased all patent rights and know-how related to the monoclonal antibody EBI-031 and all other IL-6 antagonist monoclonal antibody technology owned by the Company for up to $70 million. See further discussion in Note 19. "Subsequent Events".
OUS Business Development Partnership Agreements

Qilu License Agreement
On July 30, 2020, the Company and its a wholly-owned subsidiary, Viventia Bio, Inc., entered into an exclusive license agreement withthe Qilu Pharmaceutical Co., Ltd. (“Qilu”)License Agreement pursuant to which the Company granted Qilu an exclusive, sublicensable, royalty-bearing license, under certain intellectual property owned or exclusively licensed by the Company, to develop, manufacture and commercialize Vicineum (the “Licensed“Qilu Licensed Product”) for the treatment of NMIBC and other types of cancer (the “Field”) in China, Hong Kong, Macau and Taiwan ("Greater China”). The Company also granted Qilu a non-exclusive, sublicensable, royalty-bearing sublicense, under certain other intellectual property licensed by the Company to develop, manufacture and commercialize the Qilu Licensed Product in the Greater China. The Company retains (i) development, and commercialization rights in the rest of the world excluding Greater China, the Middle East and North Africa region ("MENA”) and Turkey and (ii) manufacturing rights with respect to Vicineum in the rest of the world excluding China.

In consideration for the rights granted by the Company, Qilu agreed to pay to the Company a one-time upfront cash payment of $12 million, and milestone payments totaling up to $23 million upon the achievement of certain technology transfer, development and regulatory milestones. All payments were to be inclusive of value-added tax ("VAT"),VAT, which can be withheld by Qilu upon payment, and for which future recovery of such taxes may be available.

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

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

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

The Qilu License Agreement with Qilu is subject to the provisions of Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"), which was adopted effective January 1, 2018.606. In 2020, the initial transaction price was estimated to be $11.2 million and was based on the up-front fixed consideration of $12 million less amounts withheld for VAT. The Company concluded that its promisesagreements under the Qilu License Agreement with Qilu represented one bundled performance obligation that had been achieved as of September 30, 2020. As such, $11.2 million of the total $11.2 million transaction price
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was considered earned and the Company recorded $11.2 million of revenue during the three-month period ended September 30, 2020.

The Investigational New Drug application for Vicineum submitted by Qilu to the Center for Drug Evaluation of the NMPA was accepted for review in January 2021 and approved in March 2021, resulting in a $3 million dollar milestone payment from Qilu, the first milestone payment out of the $23 million in potential milestone payments. The Company recorded $2.8 million (net of VAT) as license revenue during the three-month period ended March 31, 2021. The Company recorded the outstanding $2.8 million to accounts receivables as of March 31,2021 and received the payment as of June 30,in 2021.

In June 2021, the Qilu License Agreement was recognized by Shandong Province, Bureau of Science and Technology as a "Technology Transfer". An agreement that is designated as a Technology Transfer shall be entitled to a tax incentive of VAT recovery. As such, the Company recorded $0.9 million of revenue during the three months ended June 30, 2021 for additional purchase price resulting from Qilu's obligation to pay Sesen an amount equal to its recovery of VAT. The Company will not be subject to VAT on future potential milestone payments.
Other OUS Business Development Partnership Agreementspayments from Qilu.

MENA License Agreement
On November 30, 2020, the Company entered into a license agreement with a third party pursuant to which the Company granted an exclusive, sublicensable, royalty-bearing license, under certain intellectual property owned or exclusively licensed by the Company, to commercialize Vicineum in the MENA region, ("the MENA License Agreement"). The Company retains development and commercialization rights in the rest of the world excluding Greater China, Turkey and MENA. In consideration for the rights granted by the Company, the counterparty to the MENA License Agreement agreed to pay to the Company an upfront payment of $3 million, which would be subject to certain tax withholdings. In addition, the counterparty agreed to pay to the Company milestone payments upon the achievement of certain sales-based milestones as well as a royalty based upon annual net sales in the MENA region for the term of the MENA License Agreement.

The MENA License Agreement is also subject to the provisions of ASC 606. The initial transaction price was estimated by management as $1.5 million as of December 31, 2020 and was based on 50% of the upfront payment, or the amount not subject to a refund if certain regulatory approvals in MENA are not obtained. The remaining upfront payment ($1.5 million) is subject to a refund if certain regulatory approvals in MENA are not obtained within the stated timeline and was initially recorded as deferred revenue. During the second quarter of 2022, the Company changed assumptions in the clinical study design which resulted in longer clinical trial and further delay in regulatory approval in the MENA region. Therefore, the Company reclassed $1.5 million of deferred revenue to short-term accrued liability as of June 30, 2022. The Company also concluded that its promisesagreements under the MENA License Agreement represented two distinct performance obligations, the first of which is a bundled performance obligation related to the delivery of the license, associated know-how and certain documentation. The second performance obligation relates to the delivery of manufactured product. The first performance obligation (delivery of the license, associated know-how and certain documentation) was achieved during the quarter ended March 31, 2021; as such, revenue of $1.5 million has been recognized.was recognized in the first quarter of 2021. Additional variable consideration, determined to be
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allocated entirely to the bundled license performance obligation, to be paid to the Company based upon future sales levels will be recognized as revenue when the underlying sales of the licensed product occurs. In addition, variable consideration related to any future delivery of product will be recognized in future periods as the product is delivered. As of June 30, 2021,2022, none of these additional amounts were reasonably certain to be achieved due to the nature and timing of the underlying activities.

Subsequent to
14. SUBSEQUENT EVENTS

June 30
On July 13, 2021,, 2022, the Company participated interminated the MENA License Agreement as a productive Late-Cycle Meeting with the FDA regarding the BLA for Vicineum for the treatment of BCG-unresponsive NMIBC. In the meeting, the FDA confirmed that there is no Advisory Committee meeting planned at this time, and that no post-marketing requirements, including a confirmatory trial, have been identified at this time. Also in the meeting, the Company and the FDA discussed remaining questions related to manufacturing facilities inspection, product quality information requests and additional information related to CMC, and a timeline to submit additional supporting information was agreed upon. In the US, the Company believes it remains on track for an FDA decision on its BLA for Vicineum by the target PDUFA date of August 18, 2021.

On July 14, 2021, the Company filed a prospectus supplement with the SEC in connection with the offer and sale of up to $100 million of sharesresult of the Company’s common stock, par value $0.001 per share, from timestrategic decision to time pursuant tovoluntarily pause further development of Vicineum in the previously disclosed Open Market Sale Agreement with Jefferies LLC, as sales agent. The Company may sell this amount efficiently from time to time over the coming months.US. See further discussion in Note 19. "Subsequent Events."

EIP License Agreement
On July 21, 2021, the Company announced the appointments of Dr. Peter K Honig, MPH, former Senior Vice President and Head of Global Regulatory Affairs and Group Head of Development China and Japan at Pfizer, and Dr. Michael A.S. Jewett, FRCSC, FACS, a practicing Oncologist and global Key Opinion Leader (KOL) to the Sesen Bio Board of Directors.

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On August 5, 2021, the Company entered into an exclusive license agreement with Eczacibasi Pharmaceuticals MarketingEİP Eczacıbaşı İlaç Pazarlama A.Ş., (“EIP”) pursuant to which the Companyit granted EIP an exclusive license to register and commercialize Vicineum for the treatment of BCG-unresponsive NMIBC in Turkey and Northern Cyprus.Cyprus (the “EIP License Agreement"). Under the terms of the licensing agreement,EIP License Agreement, the Company is entitled to receive an upfront payment of $1.5 million,million. The Company and EIP have amended the license agreement to defer EIP's payment of the upfront payment to coincide with the potential FDA approval of Vicineum. The Company is eligible to receive additional regulatory and commercial milestone payments of $2.0 million and is also entitled to receive a 30% royalty on net sales in Turkey.Turkey and Northern Cyprus. The EIP License Agreement is subject to the provisions of ASC 606 and as of June 30, 2022, none of these amounts have been received by the Company. No initial transaction price was estimated by management; therefore, no revenue was recorded as of June 30, 2022. The Company also concluded that its promises under the EIP License Agreement represented two distinct performance obligations, the first of which is a bundled performance obligation related to the delivery of the license and associated know-how. The second performance obligation relates to the delivery of manufactured product. Additional variable consideration, determined to be allocated entirely to the bundled license performance obligation, to be paid to the Company based upon future regulatory milestones will be recognized as achievement of those milestones. In addition, variable consideration related to any future delivery of product will be recognized in future periods as the product is delivered. As of June 30, 2022, none of these additional amounts were reasonably certain to be achieved due to the nature and timing of the underlying activities.
Subsequent to June 30, 2022, the Company terminated the EIP License Agreement as a result of the Company’s strategic decision to voluntarily pause further development of Vicineum in the US. See further discussion in Note 19. "Subsequent Events."
18. RESTRUCTURING AND RELATED ACTIVITIES
On August 30, 2021, the Company approved a restructuring plan to reduce operating expenses and better align its workforce with the needs of its business following receipt of the CRL from the FDA regarding the BLA for Vicineum for the treatment of BCG-unresponsive NMIBC (the “2021 Restructuring Plan”).
The 2021 Restructuring Plan included a reduction in the Company’s workforce by 18 positions (or approximately 35% of the Company’s workforce as of the date of the 2021 Restructuring Plan), as well as additional cost-saving initiatives intended to preserve capital while the Company continues development of Vicineum. The following is a summary of accrued restructuring costs related to the 2021 Restructuring Plan, (in thousands):
Balance as of December 31, 2021$1,497 
Cash payments(1,103)
Balance at June 30, 2022$394 
The Company expects that substantially all of the accrued restructuring costs as of June 30, 2022 will be paid in cash by the end of September 2022.
Subsequent to June 30, 2022, the Company approved a restructuring plan to reduce operating expenses and better align its workforce with the needs of its business following the decision to voluntarily pause further development of Vicineum in the US. See further discussion in Note 19. "Subsequent Events."
19. SUBSEQUENT EVENTS
Vicineum
On July 11, 2022, the Company participated in a Type B meeting with the FDA to discuss outstanding items related to the Company’s proposed protocol and statistical analysis plan design elements for an additional Phase 3 clinical trial for Vicineum for the treatment of NMIBC.
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On July 15, 2022, the Company made the strategic decision to voluntarily pause further development of Vicineum in the US. The decision was based on a thorough reassessment of Vicineum, which included the incremental development timeline and associated costs for an additional Phase 3 clinical trial, following its discussions with the FDA. The Company has turned its primary focus to assessing potential strategic alternatives with the goal of maximizing shareholder value. Additionally, the Company intends to seek a partner for the further development of Vicineum.
In connection with our decision to voluntarily pause further development of Vicineum, we have commenced the process to wind down our manufacturing operations by terminating the Master Bioprocessing Services Agreement with Fujifilm Diosynth Biotechnologies U.S.A. and the Commercial Manufacturing and Supply Agreement with Baxter on July 17, 2022 and July 20, 2022, respectively. We requested that Fujifilm and Baxter cease all work under the respective agreements and refrain from incurring any additional costs or expenses. As a result of the termination, and in accordance with the terms of the Fujifilm MSA, we have the responsibility to pay Fujifilm for certain non-manufacturing stage services and current Good Manufacturing Practice batches of drug substance of Vicineum. The Company is in the process of assessing the estimated impact of the termination of the Fujifilm MSA and the Baxter CMSA.
On July 21, 2022, the Company terminated its Cooperative Research and Development Agreement with the National Cancer Institute for the development of Vicineum in combination with AstraZeneca’s immune checkpoint inhibitor durvalumab for the treatment of BCG-unresponsive NMIBC.
OUSBusiness Development Partnerships
In connection with the Company’s decision to voluntarily pause further development of Vicineum in the US, the Company has commenced the process to wind down its OUS business development partnerships in MENA and Turkey by providing notice of termination for the MENA License Agreement and EIP License Agreement on July 20, 2022.
2022 Restructuring Plan
On July 15, 2022, the Company approved a restructuring plan to reduce operating expenses and better align its workforce with the needs of its business following the decision to pause further development of Vicineum in the US (the “2022 Restructuring Plan”). Execution of the 2022 Restructuring Plan is expected to be substantially complete by the end of the fourth quarter of 2022. The 2022 Restructuring Plan includes an incremental reduction in the Company’s workforce as well as additional cost-saving initiatives intended to preserve capital while the Company continues to assess potential strategic alternatives with the goal of maximizing shareholder value and seek a potential partner for the further development of Vicineum. As of the filing of this Quarterly Report on Form 10-Q, the Company estimates that it will incur in the third and fourth quarters of 2022 severance and other employee-related costs of approximately $8 million.
The Company also expects to incur one-time cash costs associated with the termination of certain contracts and all other activities under the 2022 Restructuring Plan, and is in the process of assessing the estimated impact.
Sale of Legacy Technology to Roche
On July 15, 2022, the Company executed an asset purchase agreement (the “Roche Asset Purchase Agreement”) with Roche pursuant to which Roche purchased all patent rights and know-how related to the monoclonal antibody EBI-031 and all other IL-6 antagonist monoclonal antibody technology owned by the Company for up to $70 million. As a result of the Roche Asset Purchase Agreement, the Roche License Agreement was terminated resulting in no further diligence, milestone or royalty payment obligations under the Roche License Agreement. Pursuant to the Roche Asset Purchase Agreement, Roche made a $40 million payment to the Company upon execution of the Roche Asset Purchase Agreement. The Roche Asset Purchase Agreement also provides that Roche will make an additional $30 million payment to the Company upon Roche’s initiation of a Phase 3 clinical trial with EBI-031 for a defined indication if initiated prior to December 31, 2026.
Securities and Derivative Litigation
On June 30, 2022 and July 6, 2022, the Company and the plaintiffs in the Securities Litigation engaged in in-person mediation sessions in an attempt to resolve the litigation and continued to discuss a potential settlement over the following weeks. On July 19, 2022, the parties reached an agreement in principle to settle the Securities Litigation. Pursuant to that agreement, the Company and the individual defendants will pay or cause to be paid to members of the class who submit timely and valid proofs of claims. In exchange, the Lead Plaintiffs will dismiss the action and all class members who do not timely and validly opt-out of the settlement will provide broad customary releases to the Company and the individual defendants. On August 3, 2022, the parties entered into a Stipulation and Agreement of Settlement to settle the Securities Litigation, which is subject to court approval.
On July 6, 2022, the Company and the plaintiffs to the Federal Derivative Litigation and the State Derivative Litigation engaged in an in-person mediation session in an attempt to resolve the litigation, with settlement discussions continuing over the following days. On July 19, 2022, the parties reached an agreement in principle to settle the Federal Derivative Litigation, the State Derivative Litigation and other potential related derivative claims. Pursuant to that agreement, the individual defendants
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will cause the Company to adopt certain enhancements to the Company’s corporate governance policies and procedures. In exchange, the plaintiffs will dismiss the complaints and, on behalf of the Company, provide broad customary releases to the individual defendants. The agreement is subject to the execution of a definitive stipulation of settlement and, after notice to the Company’s stockholders, court approval.
Transfer to Nasdaq Capital Market
On July 26, 2022, the Company received approval from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) to transfer the listing of the Company’s common stock from the Nasdaq Global Market to the Nasdaq Capital Market (the “Approval”). As a result of the Approval, the Company has been granted a second 180-day grace period, or until January 23, 2023, to regain compliance with the minimum bid price requirement.
As previously disclosed, on January 24, 2022, the Company received written notice from Nasdaq indicating that the Company was 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). The Company was given until July 25, 2022, to regain compliance with the minimum bid price requirement. In response, the Company submitted an application to transfer the listing of its common stock from the Nasdaq Global Market to the Nasdaq Capital Market.
The Company’s common stock was transferred to the Nasdaq Capital Market effective at the opening of business on July 28, 2022 and will continue to trade under the symbol “SESN”. The Nasdaq Capital Market operates in substantially the same manner as the Nasdaq Global Market and requires that listed companies meet certain financial and liquidity requirements and comply with Nasdaq’s corporate governance requirements.
To regain compliance with the minimum bid price requirement and qualify for continued listing on the Nasdaq Capital Market, the minimum bid price per share of the Company’s common stock must be at least $1.00 for at least ten consecutive business days during the second 180-day grace period. If the Company does not regain compliance during this second grace period, its common stock would be subject to delisting by Nasdaq. As part of its transfer application, the Company notified Nasdaq that if its stock price does not recover sufficiently during the second grace period, it would implement a reverse stock split, if necessary.
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Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto appearing elsewhere herein and our audited annual consolidated financial statements and related notes thereto and “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2020,2021, included in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 15, 2021.February 28, 2022. 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 (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, the impact of the COVID-19 pandemic, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “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 include, among other things, statements about:
•our plans and ability to commercialize VicineumTM forcontinue to assess potential strategic alternatives with the treatmentgoal of bacillus Calmette-Guérin (“BCG”)maximizing shareholder value;
unresponsive non-muscle invasive bladder cancer (“NMIBC”), if approved;
•the expectation that the United States Food and Drug Administration (“FDA”), will makeour intentions to seek a decision regarding our
Biologics License Application (“BLA”) for Vicineumpartner for the treatmentfurther development of BCG-unresponsive NMIBC on or before the
target Prescription Drug User Fee Act (“PDUFA”) date of August 18, 2021;
•the expectation that the FDA will not hold an advisory committee meeting to discuss the BLA for Vicineum;
•the expectation thatexpected timing of implementing and completing our restructuring plan following the FDA will not identify any post-marketing requirements, including a confirmatory trial, for Vicineum;decision to pause further development of Vicineum in the US (the “2022 Restructuring Plan”);
•the resolution of remaining questions fromexpected timing for incurring costs associated with the FDA regarding our BLA for Vicineum related to manufacturing facilities inspection, product quality information requests and additional information related to chemistry, manufacturing and controls (“CMC”);2022 Restructuring Plan;
•our expectationability to preserve capital while we continue to assess potential strategic alternatives and seek a potential partner for the potential commercial launchfurther development of Vicineum for the treatment of BCG-unresponsive NMIBC inVicineum;
the U.S., if approved, by the fourth quarter of 2021;
•the potential impact of the COVID-19 pandemic on our business;
•our expected future lossability to identify and accumulated deficit levels;
•the difficultiesassess potential strategic alternatives and expenses associated with obtaining and maintaining regulatory approval of Vicineumseek a partner for the
treatment further development of BCG-unresponsive NMIBC in the United States and other foreign jurisdictions, and the labeling under
any approval we may obtain;Vicineum;    
•our projected financial position and estimated cash burn rate;position;
•our estimates regarding expenses, future revenues, capital requirements and needs for, and ability to obtain, additional
financing;
•our ability to continue as a going concern;
•our need to raise substantial additional capital to fund our operations;
•the potential impairment of our goodwillobtain and indefinite lived-intangible assets;
•the success, cost and timing of our pre-clinical studies and clinical trials in the United States and other foreign
jurisdictions;
•the potential that results of pre-clinical studies and clinical trials indicate our product candidates are unsafe or
ineffective;
•our dependence on third parties, including contract research organizations (“CROs”) in the conduct of our pre-clinical
studies and clinical trials;
•the timing and costs associated with our manufacturing process and technology transfer to FUJIFILM Diosynth
Biotechnologies U.S.A., Inc. (“Fujifilm”) for the production of Vicineum drug substance, and our reliance on Fujifilm
to perform under our agreement with Fujifilm;
•the timing and costs associated with our manufacturing process and technology transfer to Baxter Oncology GmbH
(“Baxter”) for the production of Vicineum drug product, and our reliance on Baxter to perform under our agreement
with Baxter;
•the timing and costs associated with our manufacturing process and technology transfer to Qilu Pharmaceutical Co.,
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Ltd. (“Qilu”) for the production of Vicineum drug substance and drug product, and our reliance on Qilu to perform
under our agreement with Qilu;
•our expectation that the FDA will determine that the commercial supply of Vicineum is comparable to the clinical
supply of Vicineum, and that no additional clinical trials are warranted;
•market acceptance of our product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC, the
size and growth of the potential markets for our product candidates, and our ability to serve those markets;
•obtaining and maintainingmaintain intellectual property protection for our product candidates and our proprietary technology;
•the successful developmentour beliefs regarding key advantages of our commercialization capabilities, including salestargeted fusion protein therapeutics (“TFPT”) platform; and marketing capabilities, for
Vicineum for the treatment of BCG-unresponsive NMIBC in the United States;
•our expectation that the European Medicines Agency (“EMA”), will potentially approve our marketing authorization
application for Vicineum (under the proprietary brand name VysyneumTM, which has been conditionally approved by
the EMA) for the treatment of BCG-unresponsive NMIBC in 2022;
•our expectations regarding the amount and timing of future milestone and royalty payments pursuant to our out-license
agreements and business development partnership agreements, including our license agreementAsset Purchase Agreement with F. Hoffmann-La
Roche Ltd and Hoffmann-La Roche Inc. (collectively, “Roche”), (the “Roche Asset Purchase Agreement”) and any future milestone or royalty payments pursuant our exclusive license agreement with Qilu Pharmaceutical Co., Ltd. (“Qilu”) for the
development, manufacture and commercialization of Vicineum in China, Hong Kong, Macau and Taiwan ("Greater China;
•our plans to seek additional business development partnerships; and
•the success of competing therapies and products that are or become available.

China") (the “Qilu License Agreement”).
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 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, including, among others, the following:
•the FDAwe may not approve our BLA for Vicineum for the treatment of BCG-unresponsive NMIBC withinbe successful in identifying one or more strategic alternatives or ultimately pursuing a strategic alternative that delivers the anticipated timeframe,benefits or at all;enhances shareholder value;
•we may not achieve profitable operations or access needed capital;be successful in identifying a partner for the further development of Vicineum;
•clinical trialsour exploration and evaluation of Vicineum for the treatment of BCG-unresponsive NMIBCstrategic alternatives may not demonstrate safety and efficacycause our stock price to fluctuate significantly;
the satisfaction of the FDA or other foreign regulatory authorities or otherwise produce favorable results;
•we may not obtain marketing approval of Vicineum forbe able to implement the treatment of BCG-unresponsive NMIBC in2022 Restructuring Plan as currently anticipated or within the Unitedtiming currently anticipated;
States or other foreign jurisdictions;
•Vicineumthe workforce reduction in connection with the 2022 Restructuring Plan may not gain market acceptance for the treatment of BCG-unresponsive NMIBC in the United States orhave a negative impact on our business;
other foreign jurisdictions;
•market opportunity for Vicineumour cost saving initiatives in connection with the 2022 Restructuring Plan may not be limited to those patients who are ineligible for established therapies or forsuccessful;
whom prior therapies have failed;
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•we may experience issueshave unanticipated difficulties with preserving capital or delaysunanticipated difficulties in terminating certain contracts and arrangements in connection with implementation of commercial-scale manufacturing of Vicineum;the 2022 Restructuring Plan;
•we may be unable to establish sales, marketing and distribution capabilities or scale up and validate external
manufacturing capabilitiesincur unanticipated charges as a result of Vicineum (including completing the manufacturing process and technology transfer to
any third-party manufacturers) for the treatment of BCG-unresponsive NMIBC in the United States;2022 Restructuring Plan;
•our competitorsthe risk that the respective courts may discover, develop or commercialize products before, or more successfully than, we do;not approve any settlements agreed to by the parties to the ongoing securities litigation and the derivative litigation;
•we may be unable to obtain, maintain, defend and enforce patent claims and other intellectual property rights;
•we may failbe unable to comply with all regulatory requirementsdefend against pending or experience unanticipated problems with our products;threatened litigation, which may be costly and time-consuming;
•we may not meet the Nasdaq minimum bid price requirement during any compliance period or in the future; and
•such other factors described in “Risk Factors” and “Management’sthroughout Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations and in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q and throughout Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K.

10-K for the year ended December 31, 2021.
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 factorsrisks and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to the “Company,” “Sesen,” “we,” “us,” and “our” include Sesen Bio, Inc. and its subsidiaries.
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Overview
We are a late-stage clinical company focused on advancing targeted fusion protein therapeutics ("TFPTs") for the treatment of patients with cancer. We genetically fuse the targeting antibody fragment and the cytotoxic protein payload into a single molecule that is produced through our proprietary one-step, microbial manufacturing process. We target tumor cell surface antigens with limited expression on normal cells. Binding of the target antigen by the TFPT allows for rapid internalization into the targeted cancer cell. We have designed our targeted proteins to overcome the fundamental efficacy and safety challenges inherent in existing antibody-drug conjugates ("ADCs") where a payload is chemically attached to a targeting antibody.
Our most advanced product candidate, Vicineum, also known as VB4-845, is a locally-administered targeted fusion protein composed of an anti-epithelial cell adhesion molecule ("EpCAM") antibody fragment tethered to a truncated form of Pseudomonas exotoxin A for the treatment of BCG-unresponsive NMIBC.non-muscle invasive bladder cancer (“NMIBC”).
On July 15, 2022, we made the strategic decision to voluntarily pause further development of Vicineum in the US. The decision was based on a thorough reassessment of Vicineum, which included the incremental development timeline and associated costs for an additional Phase 3 clinical trial, following our discussions with the United States Food and Drug Administration ("FDA"), which are further described below. We have turned our primary focus to assessing potential strategic alternatives with the goal of maximizing shareholder value. Additionally, we intend to seek a partner for the further development of Vicineum.
Recent Events
Assessment of Potential Strategic Alternatives
On May 3, 2022, we announced that we initiated a process to review strategic alternatives with the goal of maximizing shareholder value. Potential strategic alternatives to be explored and evaluated during the review process may include the sale of our company, a merger, acquisition or other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of some of our proprietary technologies. We are actively working with an investment bank in this assessment process.
2022 Restructuring Plan
On July 15, 2022, we approved a restructuring plan to reduce operating expenses and better align our workforce with the needs of our business following the decision to pause further development of Vicineum in the US. Execution of the 2022 Restructuring Plan is expected to be substantially complete by the end of the fourth quarter of 2022. The 2022 Restructuring Plan includes an incremental reduction in our workforce as well as additional cost-saving initiatives intended to preserve capital while we continue to assess potential strategic alternatives with the goal of maximizing shareholder value and seek a potential partner for the further development of Vicineum. As of the filing of this Quarterly Report on Form 10-Q, we estimate that we will incur in the third and fourth quarters of 2022 severance and other employee-related costs of approximately $8 million.
We also expect to incur one-time cash costs associated with the termination of certain contracts and all other activities under the 2022 Restructuring Plan, and are in the process of assessing the estimated impact.
Sale of Legacy Technology to Roche
On July 15, 2022, we executed an asset purchase agreement with Roche pursuant to which Roche purchased all patent rights and know-how related to the monoclonal antibody EBI-031 and all other IL-6 antagonist monoclonal antibody technology
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owned by us for up to $70 million. As a result of the Roche Asset Purchase Agreement, the exclusive license agreement between Roche and us was terminated resulting in no further diligence, milestone or royalty payment obligations under such license agreement. Pursuant to the Roche Asset Purchase Agreement, Roche made a $40 million payment to us upon execution of the Roche Asset Purchase Agreement. The Roche Asset Purchase Agreement also provides that Roche will make an additional $30 million payable to us upon Roche’s initiation of a Phase 3 clinical trial with EBI-031 for a defined indication if initiated prior to December 18,31, 2026.
Regulatory Update
In December 2020, we submitted our completed BLA for Vicineum for the treatment of BCG-unresponsive NMIBC to the FDA. On February 12, 2021,FDA, which was accepted for filing by the FDA notified us that it had accepted our BLA filing.in February 2021. The FDA also granted Priority Review for the BLA and theset a target PDUFA date for a decision on the BLA isof August 18, 2021. In addition to the file acceptance and granting of Priority Review,On August 13, 2021, we received a CRL from the FDA also indicatedindicating that the FDA had determined that it iscould not currently planning to hold an advisory committee meeting to discussapprove the BLA for Vicineum in its present form and provided recommendations specific to additional clinical/statistical data and analyses in addition to chemistry, manufacturing and controls (“CMC”) issues pertaining to a recent pre-approval inspection and product quality. On August 20, 2021, we withdrew our marketing authorization application (“MAA”) to the European Medicines Agency (the “EMA”) for Vysyneum for the treatment of BCG-unresponsive NMIBC in order to pause our plans to pursue regulatory approval of Vysyneum in the EU until there is more clarity from the FDA on next steps for Vicineum in the United States. Vysyneum is the proprietary brand name that was conditionally approved by the EMA for oportuzumab monatox in the EU. In October 2021, the EMA issued its Withdrawal Assessment Report relating to our MAA for Vysyneum, as is consistent with the EMA’s standard practice when an MAA is withdrawn. The EMA Withdrawal Assessment Report reflects the initial assessment and corresponding questions from the EMA and identifies major objections in the areas of quality, good clinical practice, efficacy and safety.
In October 2021 and December 2021, we participated in a CMC Type A meeting and a Clinical Type A meeting, respectively, with the FDA to discuss issues raised in the CRL and design elements of an additional Phase 3 clinical trial for Vicineum, which the FDA confirmed would be required for a potential resubmission of a BLA. In March 2022, we participated in a Type C meeting with the FDA. During the Type C meeting, the FDA agreed to a majority of our proposed protocol and statistical analysis plan design elements for an additional Phase 3 clinical trial. On July 11, 2022, we participated in a Type B meeting with the FDA to discuss outstanding items related to our proposed protocol and statistical analysis plan design elements for an additional Phase 3 clinical trial.
On July 15, 2022, we made the strategic decision to voluntarily pause further development of Vicineum in the US. The decision was based on a thorough reassessment of Vicineum, which included the incremental development timeline and associated costs for an additional Phase 3 clinical trial, following our discussions with the FDA. As a result of this decision, we no longer plan to pursue regulatory approval of Vicineum for NMIBC in the EU. We have turned our primary focus to assessing potential strategic alternatives with the goal of maximizing shareholder value. Additionally, we intend to seek a partner for the further development of Vicineum.
Prior Phase 3 Clinical Trial – VISTA Trial
In August 2019,the third quarter of 2015 in the United States and Canada, through our subsidiary Viventia, we reported updated preliminary efficacy data fromcommenced our ongoing single-arm, multi-center, open-label Phase 3 clinical trial of Vicineum as a monotherapy(“VISTA Trial”) in patients with BCG-unresponsive NMIBC (the "VISTA Trial"who have received adequate BCG and whose disease is now BCG-unresponsive, and for whom the then-current standard of care was a radical cystectomy. Based on safety and efficacy data observed with the longer 12-week induction in our Phase 2 clinical trial, the FDA agreed to our plan to employ more frequent dosing in the VISTA Trial, in which the primary endpoints were complete response (“CR”). As and duration of response (“DoR”) in patients with CIS whose disease is BCG-unresponsive. In November 2016, the FDA issued draft guidance regarding appropriate clinical trial design for new drugs and biologics for BCG-unresponsive NMIBC, including the use of single-arm trials. The FDA finalized this guidance in February 2018 and retained many of the May 29, 2019 data cutoff date,recommendations from the preliminary complete response rates ("CRRs") in evaluable carcinoma in situ ("CIS") patients following three, six, nine and 12 months of treatment in the2016 draft guidance regarding clinical trial weredesign, including the use of single-arm trials. We believe that our VISTA Trial design was consistent with those observed inthese aspects of the previouslyFDA’s guidance. In May 2022, we completed Phase 1 and Phase 2 Vicineum clinical trials for the treatmentfollow-up phase of NMIBC. the VISTA Trial.
The VISTA Trial completed enrollment in April 2018 with a total of 133 patients across three cohorts based on histology and time to disease recurrence after adequate BCG treatment (under 2018 FDA guidance on treatment of NMIBC, adequate BCG is defined as at least two courses of BCG with at least five doses in an initial induction course of treatment, plus at least two doses in a second course of treatment):treatment:
•Cohort 1 (n=86): Patients with CISwith or without papillary disease that werewas determined to be refractoryrefractory or recurred within six months of their last course of adequate BCG;
•Cohort 2 (n=7): Patients with CIS with or without papillary disease that recurred after six months, but less than 11 months, after their last course of adequate BCG; and
•Cohort 3 (n=40): Patients with high-risk (Ta or T1) papillary disease without CIS that was determined to be refractory or recurred within six months of their last course of adequate BCG.
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The primary endpoints of the VISTA Trial were CRR at 3 months in patients with CIS (with or without papillary disease) whose disease is BCG-unresponsive and duration of response ("DoR")DoR for BCG-unresponsive CIS patients who experience a complete response ("CR").CR.
As of the May 29, 2019 data cutoff date, preliminary primary and secondary endpoint data for each of the trial cohorts were as follows:
Cohort 1 (n=86) Evaluable Population (n=82) Complete Response Rate, for CISCIS:
Time PointEvaluable Patients*
Complete Response Rate
(95% Confidence Interval)
3-monthsn=8239% (28%-50%)
6-monthsn=8226% (17%-36%)
9-monthsn=8220% (12%-30%)
12-monthsn=8217% (10%-27%)
*Response-evaluable population includes any modified intention-to-treat ("mITT")mITT patient who completed the induction phase.


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Cohort 2 (n=7) Evaluable Population (n=7) Complete Response Rate, for CISCIS:
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 patient who completed the induction phase.

Pooled Cohorts 1 and 2 (n=93) Evaluable Population (n=89) Complete Response Rate, for CISCIS:
Time PointEvaluable Patients*
Complete Response Rate
(95% Confidence Interval)
3-monthsn=8940% (30%-51%)
6-monthsn=8928% (19%-39%)
9-monthsn=8921% (13%-31%)
12-monthsn=8917% (10%-26%)
*Response-evaluable population includes any mITT patient who completed the induction phase.

Phase 3 Pooled Complete Response Rate vs. Phase 2 Pooled Complete Response RateRate:
Time Point
Preliminary Phase 3 Pooled CRR
(95% (95% Confidence Interval)
Phase 2 Pooled CRR
(95% (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.
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*Response-evaluable population includes any mITT patient who completed the induction phase.

Duration of Response: The median DoR for patients in Cohort 1 and Cohort 2 combined (n=93) is 287 days (lower 95% confidence interval ("CI") = 154 days, upper 95% confidence interval is not estimable ("NE") due to the limited number of events occurring beyond the median)(95% CI, 154-NE), 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.endpoints. These additional preliminary data include the following:
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•Time to Cystectomy: Across all 133 patients treated with Vicineum in the VISTA Trial, greater than 75% of all patients are estimated to remain cystectomy-free at 3 years, using the Kaplan-Meier method. Additional ad hoc analysis shows that approximately 88% of responders are estimated to remain cystectomy-free at 3 years. Time to cystectomy is defined as the time from the date of first dose of study treatment to surgical bladder removal. The first 2018 FDA guidance on treatment of BCG-unresponsive NMIBC patients states that the goal of therapy in such patients is to avoid cystectomy. Therefore, time to cystectomy iswas a key secondary endpoint in the VISTA Trial.
•Time to Disease Recurrence: High-grade papillary (Ta or T1) NMIBC is associated with higherhigh rates of progression and recurrence. The median time to disease recurrence for patients in Cohort 3 (n=40) is 402 days (95% CI, 170-NE), using the Kaplan-Meier method. Time to disease recurrence is defined as the time from the date of the first dose of study treatment to the first occurrence of treatment failure or death on or prior to treatment discontinuation.
•Progression-Free Survival ("PFS"): 90% of all 133 patients treated with Vicineum in the VISTA Trial are estimated to remain progression-free for 2 years or greater, using the Kaplan-Meier method. PFS is defined as the time from the date of first dose of study treatment to the first occurrence of disease progression (e.g., T2 or more advanced disease) or death on or prior to treatment discontinuation.
•Event-Free Survival: 29% of all 133 patients treated with Vicineum in the VISTA Trial are estimated to remain event-free at 12 months, using the Kaplan-Meier method. Event-free survival is defined as the time from the date of first dose of study treatment to the first occurrence of disease recurrence, progression or death on or prior to treatment discontinuation.
◦•Overall Survival ("OS"): 96% of all 133 patients treated with Vicineum in the VISTA Trial are estimated to have an overall survival of 2 years or greater, using the Kaplan-Meier method. OS is defined as the time from the date of first dose of study treatment to death from any cause.

Data areis as of the May 29, 2019 data cut from the Phase III VISTA trial.Trial. The clinical data shown are based on the data submitted in the BLA on December 18, 20202020. On August 13, 2021, the FDA issued a CRL for the BLA that included requests for additional clinical and are currently under review by the FDA. Final numbers are pending.statistical data.
Preliminary Safety Results
As of the May 29, 2019 data cutoff date, in patients across all cohorts (n=133) of our Phase 3 VISTA Trial of Vicineum for the treatment of BCG-unresponsive 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)5 or death). There were no age-related increases in adverse events observed in the VISTA Trial.
Other Vicineum Activity
On December 18, 2020, we submitted the completed BLA, including Module 3 (CMC), to the FDA. After we submitted the BLA to the FDA, we participated in a successful Application Orientation Meeting, that is available in certain Center for Drug Evaluation and Research review divisions, at the review team’s discretion, for priority applications where early action is expected and/or desired. The objectives of the Application Orientation Meeting were to familiarize the FDA with application datasets, discussing scientific aspects including clinical risk-benefit, and establishing early communication between applicants and the FDA.
On February 12, 2021, the FDA notified us that it had accepted our BLA filing. The FDA also granted Priority Review for the BLA and a target PDUFA date for a decision on the BLA of August 18, 2021. In addition to the file acceptance and granting of Priority Review, the FDA also indicated that it was not planning to hold an advisory committee meeting to discuss the BLA for Vicineum.
On March 5, 2021, we submitted the Marketing Authorization Application (“MAA”) to the EMA for Vicineum (oportuzumab monatox) for the treatment of BCG-unresponsive NMIBC under the EMA’s centralized procedure. We received notice on March 25, 2021 from the EMA that our MAA for Vicineum was found to be valid and that the review procedure had officially started.

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On March 31, 2021, we were informed that the Committee for Medicinal Products for Human Use of the EMA has conditionally accepted the proprietary brand name VYSYNEUM for our product candidate, oportuzumab monatox, in the European Union. The name VYSYNEUM has identical pronunciation to the U.S. proprietary brand name VICINEUM and was developed in accordance with the criteria outlined in the EMA’s Guideline on the acceptability of names for human medicinal products. The MAA for VYSYNEUM is currently under review with the EMA with potential approval expected in 2022.

On July 13, 2021, we participated in a productive Late-Cycle Meeting with the FDA regarding the BLA for Vicineum for the treatment of BCG-unresponsive NMIBC. In the meeting, the FDA confirmed that there is no Advisory Committee meeting planned at this time, and that no post-marketing requirements, including a confirmatory trial, have been identified at this time. Also in the meeting, we and the FDA discussed remaining questions related to manufacturing facilities inspection, product quality information requests and additional information related to CMC, and a timeline to submit additional supporting information was agreed upon. In the US, we believe we remain on track for an FDA decision on our BLA for Vicineum by the target PDUFA date of August 18, 2021.

Manufacturing

In October 2018, we entered into a Master Bioprocessing Services Agreement with Fujifilm Diosynth Biotechnologies U.S.A., Inc. (“Fujifilm”) (the "Fujifilm MSA") for the manufacturing process and technology transfer of Vicineum drug substance production.

In April 2019, the first full, commercial-scale current Good Manufacturing Practice (“cGMP”) run was completed at Fujifilm. Full quality release testing was completed and all Phase 3 release specifications were met, supporting Fujifilm’s ability to produce the bulk drug substance form of Vicineum for commercial purposes if we receive regulatory approval to market Vicineum for the treatment of BCG-unresponsive NMIBC.

In November 2019, we entered into a Commercial Manufacturing and Supply Agreement with Baxter (the “Baxter CMSA”) for the manufacturing process and technology transfer of Vicineum drug product production.

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 was completed and all quality acceptance criteria were met.

On August 4, 2020, we completed manufacturing of the drug substance PPQ batches at Fujifilm and in September 2020, we successfully completed the final of three drug product PPQ batches at Baxter. All of the completed drug substance PPQ batches and drug product PPQ batches met all quality acceptance criteria.

In December 2020, we received and analyzed all of the analytical comparability test results from the drug substance and drug product PPQ batches. For analytical comparability, we conducted testing across four categories: release testing, biophysical characterization, forced degradation studies, and stability studies. This approach is in alignment with requirements of the FDA, the EMA and the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use. The test results for product intended for commercial use were found to be highly comparable to our clinical supply of Vicineum. Based on these results, we are optimistic that the FDA will determine that the commercial supply of Vicineum is comparable to the clinical supply of Vicineum, and that no additional clinical trials are warranted. The comparability data from the PPQ campaigns for both drug substance and drug product were the final material components of our completed BLA, which was submitted to the FDA on December 18, 2020.

In December 2020, we entered into a commercial manufacturing and supply framework agreement with Qilu (the "Qilu Framework Agreement") for Qilu to be a contract manufacturer for the global commercial supply of Vicineum.

In January 2021, we signed a Scope of Work (" SOW #10") with Fujifilm under the Fujifilm MSA for the manufacturing of commercial batches of Vicineum in 2021.

In June 2021, we amended and replaced the Qilu Framework Agreement and entered into a Global Supply Agreement with Qilu pursuant to which Qilu will be part of the manufacturing network for, if approved, global commercial supply of Vicineum drug substance and drug product.

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OutsideIn connection with our decision to voluntarily pause further development of Vicineum, we have commenced the process to wind down our manufacturing operations by terminating the Fujifilm MSA and Baxter CMSA on July 17, 2022 and July 20, 2022, respectively. We requested that Fujifilm and Baxter cease all work under the respective agreements and refrain from incurring any additional costs or expenses. As a result of the termination, and in accordance with the terms of the Fujifilm MSA, we have the responsibility to pay Fujifilm for certain non-manufacturing stage services and current Good Manufacturing Practice batches of drug substance of Vicineum. We are in the process of assessing the estimated impact of the termination of the Fujifilm MSA and the Baxter CMSA.
In-License Agreements
We have a license agreement with the University of Zurich (“Zurich”) which grants us exclusive license rights, with the right to sublicense, to make, have made, use and sell under certain patents primarily directed to our targeting agent, including an EpCAM chimera and related immunoconjugates and methods of use and manufacture of the same (the “Zurich License Agreement”). These patents cover some key aspects of Vicineum.
We have a License Agreement with Micromet AG (“Micromet”), now part of Amgen, Inc., which grants us nonexclusive rights, with certain sublicense rights, for know-how and patents allowing exploitation of certain single chain antibody products (the “Micromet License Agreement”). These patents cover some key aspects of Vicineum.
We have a license agreement with XOMA Ireland Limited (“XOMA”) which grants us 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 (the “XOMA License Agreement”). These patents and related know-how cover some key aspects of Vicineum.
Notwithstanding our decision to voluntarily pause further development of Vicineum, we have not taken steps to terminate the above mentioned in-license agreements because our outside the United States ("OUS"(“OUS”) business development partners have been granted sublicenses to the intellectual property licensed to us under these in-license agreements.
OUS Business Development Partnering

In connection with our decision to voluntarily pause further development of Vicineum, we have commenced the process to wind down our OUS business development partnerships in the Middle East and North Africa region (“MENA”) and Turkey by providing notice of termination for the MENA License Agreement and EIP License Agreement on July 20, 2022. In connection with the termination of our exclusive license agreement with our partner in MENA, we are required to refund the $3 million upfront payment paid to us.
Greater China
On July 30, 2020, we and our wholly-owned subsidiary, Viventia Bio, Inc., entered into an exclusive license agreement withthe Qilu Pharmaceutical, Co., Ltd. ("Qilu")License Agreement pursuant to which we granted Qilu an exclusive, sublicensable, royalty-bearing license,
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under certain intellectual property owned or exclusively licensed by us, to develop, manufacture and commercialize Vicineum for the treatment of BCG-unresponsive NMIBC and other types of cancer in China, Hong Kong, Macau and Taiwan ("Greater China"). We also granted Qilu a non-exclusive, sublicensable, royalty-bearing sublicense, under certain other intellectual property licensed by us to develop, manufacture and commercialize Vicineum in Greater China. We retain (i) development and commercialization rights in the rest of the world excluding Greater China the Middle East and North Africa region (“MENA”) and Turkey and (ii) manufacturing rights with respect to Vicineum in the rest of the world excluding Greater China.
During 2020, we received a total of $10 million in net proceeds associated with the Qilu License Agreement. We are also entitled to receive up to an additional $23 million upon the achievement of certain technology transfer, development and regulatory milestones, as well as a 12% royalty based upon annual net sales of Vicineum in Greater China. The royalties are payable upon the first commercial sale of Vicineum in a region and continuing until the latest of (i) twelve years after the first commercial sale of Vicineum in such region, (ii) the expiration of the last valid patent claim covering or claiming the composition of matter, method of treatment, or method of manufacture of Vicineum in such region, and (iii) the expiration of regulatory or data exclusivity for Vicineum in such region. The royalty rate is subject to reduction under certain circumstances, including when there is no valid claim of a licensed patent that covers Vicineum in a particular region or no data or regulatory exclusivity of Vicineum in a particular region.
The Investigational New Drug application ("IND") for Vicineum submitted by Qilu to the Center for Drug Evaluation of the China National Medical Products Administration was accepted for review in January 2021 and approved in March 2021, resulting in a $3 million milestone payment from Qilu, the first milestone payment out of the $23 million in potential milestone payments. We recorded $2.8 million (net of VAT) as license revenue during the three monththree-month period ended March 31, 2021.

In June 2021, the Qilu License Agreement was recognized by Shandong Province, Bureau of Science and Technology as "Technology Transfer". An agreement that is designated as a Technology Transfer shall be entitled to a tax incentive of value-added tax ("VAT") recovery. As such, we recorded $0.9 million of revenue during the three months ended June 30, 2021, for
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additional purchase price resulting from Qilu's obligation to pay Sesen an amount equal to its recovery of VAT. We will not be subject to VAT on future potential milestone payments.
MENApayments to Qilu.
On November 30, 2020,July 20, 2021 we entered into an exclusive license agreement with Hikma Pharmaceuticals LLC ("Hikma") (the “Hikma License Agreement”) pursuantand Qilu announced the enrollment of the first patient in China in a Phase 3 clinical trial to which we granted Hikma an exclusive, sublicensable, royalty-bearing license, under certain intellectual property owned or exclusively licensed by us, to commercializeassess the efficacy and safety of Vicineum in patients with BCG-unresponsive NMIBC. The open-label, single-arm, multi-center bridging trial will evaluate the MENA region. We retain developmentefficacy and commercialization rights in the restsafety of the world excluding Greater China and MENA. In consideration for the rights granted by us, Hikma agreed to pay to us an upfront payment, sales related milestones payments, and royalties and on net sales in the MENA region for the term of the Hikma License Agreement. We continue to work closely with our partner, Hikma Pharmaceuticals, to submit marketing authorization applications for Vicineum in 2021approximately 53 patients with carcinoma in seven key markets in the region: the Kingdomsitu (CIS) with or without papillary disease, high-grade Ta papillary disease or T1 papillary disease of Saudi Arabia, Jordan, Morocco, Egypt, Lebanon, Kuwait and Algeria. These seven markets represent a significant opportunity in the MENA region, as Saudi Arabia, Jordan and Morocco have some of the most advanced healthcare systems in the region while Egypt is the second largest economy in Africa. We anticipate the first wave of potential country approvals for Vicineum in the MENA region as early as 2022.

On August 5, 2021, we entered into an exclusive license agreement with Eczacibasi Pharmaceuticals Marketing (“EIP”) pursuant to which we granted EIP an exclusive license to register and commercialize Vicineum for the treatment of BCG-unresponsive NMIBC in Turkey and Northern Cyprus. Under the terms of the licensing agreement, we are entitled to receive an upfront payment of $1.5 million, are eligible to receive additional regulatory and commercial milestone payments and are also entitled to receive a 30% royalty on net sales in Turkey.


Liquidity and Going Concern
As of June 30, 2021, we had cash and cash equivalents of $151.0 million, net working capital (current assets less current liabilities) of $156.3 million and an accumulated deficit of $396.9 million. We incurred negative cash flows from operating activities of $30.8 million for the year ended December 31, 2020 and $41.6 million for the six months ended June 30, 2021. Since our inception, we have received no revenue from sales of our products, and we anticipate that operating lossesany grade. Patients will continue as we complete the follow-up stage of our ongoing Phase 3 VISTA Trial of Vicineum for the treatment of BCG-unresponsive NMIBC and seek marketing approval from the FDA and EMA, and if approved, commercialize Vicineum. 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 "at-the-market" ("ATM") offerings, out-license and OUS business development partnership agreements 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 board of directors before the date that our financial statements are issued.
Our future success is dependent on our ability to develop, and if approved, commercialize our product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC, and ultimately upon our ability to attain profitable operations. In order to commercialize our product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC, we need to complete clinical development and comply with comprehensive regulatory requirements. We are subject to a number of risks similar to other late-stage clinical companies, including, but not limited to, successful discovery and development of our product candidates, raising additional capital, development and commercialization by our competitors of new technological innovations, protection of proprietary technology and market acceptance of our products. The successful discovery and development of product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC, requires substantial working capital, and we expect to seek additional funds through equity or debt financings or through additional OUS business development partnerships, collaborations, licensing transactions or other sources. We may be unable to obtain equity or debt financings or enter into additional OUS business development partnerships, collaborations 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, OUS business development, partnerships, alliances or licensing arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable. If we are unable to raise additional funds when needed, we may be required to implement cost reduction strategies and delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market.
We continue to monitorhave failed previous treatment with BCG for inclusion in the effect oftrial. The primary endpoints are the outbreak of a novel strain of coronavirus ("COVID-19"). 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-19complete response rate (for CIS patients) and the actions implemented to combatrecurrence-free rate (for papillary patients) at six months, with the virus throughoutcomplete response rate and the world.
We do not believe that our cashrecurrence-free rate at three months, safety and cash equivalents of $151.0 milliontolerability as of June 30, 2021 is sufficient to fund our current operating plan for at least twelve months after the issuance of our condensed consolidated financial statements.secondary endpoints. Based on our current operating plan, we anticipate having sufficient cash and cash equivalents to fund our operations throughthe second quarterQilu License Agreement, the trial is being run at the sole cost of 2022; 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, and dependence on our ability - about which there can be no certainty - to obtain additional financing to fund our operations after the current cash resources are exhausted, substantial doubt exists about our ability to continue as a going concern. The condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q were prepared under the assumption that we will continue as a going concern and 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.Qilu.
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Components of Our Results of Operations
License and Related Revenue
License revenue consists of revenue recognized pursuant to our OUS business developmentcommercialization partnership agreements, including the Qilu License Agreement, for which is assessed under ASC 606.Topic 606, Revenue ("ASC 606"). In the future, we may generate revenue from a combination of up-front payments, milestone payments and royalties in connection with our OUS business development partnership agreements, including the Qilu License Agreement.
Research and Development
Research and development expenses consist primarily of costs incurred for the development of Vicineum for the treatment of BCG-unresponsive NMIBC, which include:
•employee-related expenses, including salaries, benefits, travel and share-based compensation expense;
•expenses incurred under agreements with contract researchresource organizations ("CROs"(“CROs”) and investigative sites that conduct our clinical trials;
•expenses associated with developing manufacturing capabilities;
•expenses associated with transferring manufacturing capabilities to contract manufacturing organizations ("CMOs") for commercial-scale production;
•facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies;
•expenses associated with regulatory activities; and
•expenses associated with license milestone feesfees.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.
The successful development and commercialization of Vicineum for the treatment of BCG-unresponsive NMIBC is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
•the scope, progress, outcome and costs of our clinical trials and other research and development activities;
•the efficacy and potential advantages of Vicineum for the treatment of BCG-unresponsive NMIBC compared to alternative treatments, including any standard of care;
•the market acceptance of Vicineum for the treatment of BCG-unresponsive NMIBC;
•the cost and timing of the implementation of commercial-scale manufacturing of Vicineum;
•obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
•significant and changing government regulation;
•the impact of the COVID-19 pandemic; and
•the timing, receipt and terms of any marketing approvals.
A change in the outcome of any of these variables with respect to the development of Vicineum for the treatment of BCG-unresponsive NMIBC could mean a significant change in the costs and timing associated with the development of Vicineum for the treatment of BCG-unresponsive NMIBC. For example, if the FDA, EMA or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently contemplate will be required for the completion of clinical development of Vicineum for the treatment of BCG-unresponsive NMIBC, we could be required to expend significant additional financial resources and time on the completion of clinical development of Vicineum for the treatment of BCG-unresponsive 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, costs related to manufacturing or purchasing clinical trial materials and technology transfer and license milestone fees, to specific product programs. We do not allocate employee and contractor-related costs, costs associated with our platform and facility expenses, including depreciation or other indirect costs, to specific product programs because these costs may be deployed across multiple product programs under research and development and, as such, are separately classified. The table below provides research and development expenses incurred for Vicineum for the treatment of BCG-unresponsive NMIBC and other expenses by category. We have deferredexpect to significantly reduce our research and development expenses as we turn our primary focus to assessing potential strategic alternatives with the goal of maximizing shareholder value and seek a partner for the further development of Vicineum for the treatment of squamous cell carcinoma of the head and neck and VB6-845d in order to focus our efforts and our resources on our ongoing development and, if approved, commercialization of Vicineum for the treatment of BCG-unresponsive NMIBC.Vicineum.
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We did not allocate research and development expenses to any other specific product program during the periods presented (in thousands):
 Three Months ended
June 30,		Six Months ended
 June 30,
 2021202020212020
Programs:
Vicineum for the treatment of BCG-unresponsive NMIBC$4,332 $3,135 $7,898 $10,499 
Total direct program expenses4,332 3,135 7,898 10,499 
Personnel and other expenses:
Employee and contractor-related expenses2,389 1,207 4,660 2,374 
Platform-related lab expenses64 35 114 80 
Facility expenses143 103 268 213 
Other expenses300 82 366 263 
Total personnel and other expenses2,896 1,427 5,408 2,930 
Total Research and Development$7,228 $4,562 $13,306 $13,429 
Three Months Ended
June 30,		Six Months Ended
 June 30,
2022202120222021
Programs:
Vicineum for the treatment of NMIBC$27,432 $4,332 $28,892 $7,898 
Total direct program expenses27,432 4,332 28,892 $7,898 
Personnel and other expenses:
Employee and contractor-related expenses2,113 2,389 5,080 4,660 
Platform-related lab expenses22 64 96 114 
Facility expenses123 143 277 268 
Other expenses254 300 360 366 
Total personnel and other expenses2,512 2,896 5,813 5,408 
Total Research and Development$29,944 $7,228 $34,705 $13,306 
General and Administrative
General and administrative expenses consist primarily of salaries and related costs for personnel, including share-based compensation and benefits, in executive, operational, finance, legal, business development and human resource functions. Other general and administrative expenses include facility-related costs, professional fees for legal, estimated payments to settle litigation, insurance, investment banking fees, patent, consulting and accounting services, commercial market research and pre-commercial United States pre-launch market readiness. Future reporting periodsresearch. Our general and administrative expenses may include selling costs pursuantincrease due to our commercialization strategy.increases in professional and advisory fees as we assess potential strategic alternatives.
Change in Fair Value of Contingent Consideration
In connection with the acquisition of Viventia Bio, Inc. ("Viventia")Acquisition in September 2016, we recorded contingent consideration pertaining to the amounts potentially payable to the formerViventia's shareholders of Viventia pursuant to the terms of the Share Purchase Agreement among us, Viventia and the other signatories thereto (the "Share Purchase Agreement") and are based on launch timingregulatory approval in certain markets and future revenue levels. The fair value of contingent consideration is assessed at each balance sheet date and changes, if any, to the fair value are recognized in earnings (or loss) for the period.
Other Income, (Expense), Net
Other income, (expense), net consists primarily of interest income earned on cash and cash equivalents and, to a lesser extent, any gains or losses on foreign exchange.
Provision for Income Taxes
Benefit for income taxes is driven by the intangible impairment charge, changing the value of deferred tax liabilities. Provision for income taxes consists of income taxes incurred to foreignnon-US jurisdictions pursuant to our OUS business development partnership agreements, including the Qilu License Agreement.
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Our Results of Operations
Comparison of the Three Monthsthree months ended June 30, 20212022 and 2020
 Three Months ended
June 30,		Increase/(Decrease)
 20212020DollarsPercentage
 (in thousands, except percentages)
License and related revenue$2,234 $— $2,234 — 
Operating expenses:
Research and development$7,228 $4,562 $2,666 58 %
General and administrative6,805 3,318 3,487 105 %
Change in fair value of contingent consideration
13,600 18,480 (4,880)(26)%
Total operating expenses27,633 26,360 1,273 5 %
(Loss) Income from operations(25,399)(26,360)961 (4)%
Other (expense) income, net:
Other (expense) income, net(43)16 (59)(369)%
Net (Loss) Income and Comprehensive (Loss) Income Before Taxes$(25,442)$(26,344)$902 (3)%
Provision for income taxes$— $— $— — 
Net (Loss) Income and Comprehensive (Loss) Income After Taxes$(25,442)$(26,344)$902 (3)%
2021

 Three Months Ended
June 30,		Increase/(Decrease)
 20222021DollarsPercentage
 (in thousands, except percentages)
Revenue:
License and related revenue$— $2,234 $(2,234)(100)%
Total revenue— 2,234 (2,234)(100)%
Operating expenses:
Research and development$29,944 $7,228 $22,716 314 %
General and administrative15,589 6,805 8,784 129 %
Intangibles impairment charge27,764 — 27,764 — 
Change in fair value of contingent consideration(37,300)13,600 (50,900)(374)%
Total operating expenses35,997 27,633 8,364 30 %
Loss from Operations(35,997)(25,399)(10,598)42 %
Other income (expense):
Other income (expense), net162 (43)205 (477)%
Loss Before Taxes$(35,835)$(25,442)$(10,393)41 %
Benefit from income taxes3,875 — 3,875 — 
Net Loss After Taxes$(31,960)$(25,442)$(6,518)26 %
License and Related Revenue
We did not record any revenue for the three months ended June 30, 2022. Revenue for the three months ended June 30, 2021 was $2.2 million, which was due toto clinical supply revenue resulting from the delivery of drug product to Qilu, our OUS business development partner for Greater Chinaand license revenue for additional purchase price due to the recovery of VAT by our OUS business development partner for Greater China. We did not record any revenue for the three months ended June 30, 2020.Qilu.
Research and Development
Research and development expenses were $29.9 million for the three months ended June 30, 2022, compared to $7.2 million for the three months ended June 30, 2021 compared2021. The increase of $22.7 million was primarily due to $4.6the expense of prepaid balances related to consumables and manufacturing reservations as the balances were evaluated and deemed to have no future value ($25.2 million). This increase was partially offset by lower costs associated with manufacturing ($2.5 million).
General and Administrative
General and administrative expenses were $15.6 million for the three months ended June 30, 2020. The increase of $2.7 million was due2022, compared to increased costs associated with technology transfer and manufacturing ($1.0 million), professional services in support of regulatory activity ($0.7 million), employee-related compensation ($0.7 million), and other increases ($0.3 million).
General and Administrative
General and administrative expenses were $6.8 million for the three months ended June 30, 2021 compared to $3.3 million for the three months ended June 30, 2020.2021. The increase of $3.5$8.8 million was primarily due primarily to increasesan increase in saleslegal expense ($10.3 million). This increase was driven by the preliminary settlements of the securities and marketing expense for Vicineum pre-commercial launch planningderivative litigation net of expected insurance recovery ($1.68.6 million), employee-related compensation drivenrelated legal fees ($0.9 million), legal fees related to the internal review ($0.3 million) and other legal expenses ($0.5 million). This increase was partially offset by increased headcounta decrease in marketing and commercial expenses, which were incurred in the second quarter of 2021 in preparation for potential commercial launch but were discontinued as parta result of the commercial buildComplete Response Letter received in August 2021 ($1.31.5 million), andother increases for commercial launch preparation ($0.6 million).
Change in Fair Value of Contingent Consideration
The non-cash change in fair value of contingent consideration was a $13.6income of $37.3 million loss for the three months ended June 30, 20212022, compared to an $18.5 milliona loss for the three months ended June 30, 2020. The increase in the fair value of contingent consideration of $13.6 million for the three months ended June 30, 2021was primarily attributable to decreased discount rates to future cash outflows related to the contingent payment obligations, and these discount rates continue to fluctuate each period.2021. 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 decreased from 17.9% of March 31, 2020, to 14.5% as of June 30, 2020 and from 7.4% as of March 31, 2021, to 6.6% as of June 30, 2021. The discount rate applied to the 2% earnout payment due on forecasted Vicineum revenues is derived from our estimated weighted-average cost of capital ("WACC"), and this WACC-derived discount rate decreased from 14.7% as of March 31, 2020 to 13.2% as of June 30, 2020, and from 7.8% as of March 31, 2021 to 6.8% as of June 30, 2021.
The changedecrease in the fair value of contingent consideration was an $18.5of $37.3 million loss for the three months ended June 30, 2020.2022 was driven by our strategic decision to
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voluntarily pause further development of Vicineum. The decision was based on a thorough reassessment of Vicineum, which included the incremental development timeline and associated costs for an additional Phase 3 clinical trial for the treatment of NMIBC, following recent discussions with the FDA and the updated market data obtained through market research during the ongoing BCG shortage. We intend to seek a partner for the further development of Vicineum. We expect that any partner who acquires Vicineum from us will be obligated to make any payments to the former shareholders of Viventia under the Share Purchase Agreement.
The change in fair value of contingent consideration was a loss of $13.6 million for the three months ended June 30, 2021. This was primarily attributable to significant decreaseschanges in applicable discount rates,the competitive landscape, higher probability of regulatory success, expanded patient population, and to a lesser extent by refinement of timelines in certain markets outside the United States, which was prior to the receipt of a CRL from the FDA.
Benefit (Provision) from Income Taxes
For the three months ended June 30, 2022, we recorded a benefit from income taxes of $3.9 million. In the second quarter of 2022, we determined that the fair value of the Vicineum EU rights was zero, which resulted in an impairment charge of $14.7 million. In connection with this impairment charge, in the second quarter of 2022, we wrote-down the associated deferred tax liability by $4.0 million as a resultbenefit, partially offset by $0.1 million income tax paid to foreign jurisdictions pursuant to the Qilu License Agreement. Please refer to Note 8, "Intangible Assets and Goodwill," for further information regarding the impairment charge. No provision for income taxes was recorded for the three months ended June 30, 2021.
Net loss
For the three months ended June 30, 2022, net loss was $32.0 million, compared to net loss of $25.4 million for the three months ended June 30, 2021. The change was primarily attributable to increases in R&D and G&A expense ($31.5 million), primarily driven by the reduction of prepaid balances related to consumables and manufacturing reservations and the preliminary settlements of the extreme volatilitysecurities and derivative litigation. Additionally, license and related revenue recognized decreased ($2.2 million). This was partially offset by favorable changes in non-cash related expenses of financial markets as global economies shut down in order to contain the spread of COVID-19.$27.0 million (including tax benefit).
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Our Results of Operations
Comparison of the Six Monthssix months ended June 30, 20212022 and 20202021
Six Months ended
 June 30,		Increase/(Decrease) Six Months Ended
 June 30,		Increase/(Decrease)
20212020DollarsPercentage 20222021DollarsPercentage
(in thousands, except percentages) (in thousands, except percentages)
Revenue:Revenue:
License and related revenueLicense and related revenue$6,544 $— $6,544 — License and related revenue$— $6,544 $(6,544)(100)%
Total revenueTotal revenue— 6,544 (6,544)(100)%
Operating expenses:Operating expenses:Operating expenses:
Research and developmentResearch and development$13,306 $13,429 $(123)(1)%Research and development$34,705 $13,306 $21,399 161 %
General and administrativeGeneral and administrative12,098 6,766 5,332 79 %General and administrative24,564 12,098 12,466 103 %
Restructuring chargeRestructuring charge— — — — 
Intangibles impairment chargeIntangibles impairment charge27,764 — 27,764 — 
Change in fair value of contingent consideration
Change in fair value of contingent consideration
61,760 (35,220)96,980 (275)%Change in fair value of contingent consideration(50,200)61,760 (111,960)(181)%
Total operating expensesTotal operating expenses87,164 (15,025)102,189 (680)%Total operating expenses36,833 87,164 (50,331)(58)%
(Loss) Income from operations(80,620)15,025 (95,645)(637)%
Other (expense) income, net:
Other (expense) income, net(46)195 (241)(124)%
Net (Loss) Income and Comprehensive (Loss) Income Before Taxes$(80,666)$15,220 $(95,886)(630)%
Provision for income taxes$(288)$— $(288)— 
Net (Loss) Income and Comprehensive (Loss) Income After Taxes$(80,954)$15,220 $(96,174)(632)%
Loss from OperationsLoss from Operations(36,833)(80,620)43,787 (54)%
Other income (expense), netOther income (expense), net191 (46)237 (515)%
Loss Before TaxesLoss Before Taxes(36,642)(80,666)44,024 (55)%
Benefit (provision) from income taxesBenefit (provision) from income taxes3,875 (288)4,163 (1,445)%
Net Loss After TaxesNet Loss After Taxes$(32,767)$(80,954)$48,187 (60)%
License and Related Revenue
We did not record any revenue for the six months ended June 30, 2022. Revenue for the six months ended June 30, 2021 was $6.5 million, which was due to achieving the IND milestone in China pursuant to the Qilu License Agreement, clinical supply revenue resulting from the delivery of drug product to Qilu, our OUS partner for Greater China,and license revenue for additional purchase price due to the recovery of VAT by our OUS businessQilu.
Research and Development
Research and development partner for Greater China. We did not record any revenueexpenses were $34.7 million for the six months ended June 30, 2020.
Research and Development
Research and development expense was2022, compared to $13.3 million for the six months ended June 30, 2021 which2021. The increase of $21.4 million was consistentprimarily due to the expense of prepaid balances related to consumables and manufacturing reservations as the balances were deemed to have no future value ($25.2 million). This increase was partially offset by lower costs associated with the $13.4manufacturing ($3.7 million).
General and Administrative
General and administrative expenses were $24.6 million expensed for the six months ended June 30, 2020

General and Administrative

General and administrative expenses were2022, compared to $12.1 million for the six months ended June 30, 2021. The increase of $12.5 million was primarily due to an increase in legal expense ($13.3 million) driven by the preliminary settlements of the securities and derivative litigation net of expected insurance recovery ($8.6 million), related legal fees ($1.2 million), legal fees related to the internal review ($3.2 million) and other legal expenses ($0.3 million). In addition, employee-related compensation, primarily driven by increased headcount and the retention program implemented in the fourth quarter of 2021 compared to $6.8($1.2 million) and increased insurance expense ($0.3 million). This was partially offset by decreases in marketing and commercial expenses ($1.7 million) and consultant fees ($0.9 million), which were incurred during the first half of 2021 in preparation for potential commercial launch but were discontinued as a result of the Complete Response Letter received in August 2021 and other general expenses ($0.1 million).

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Change in Fair Value of Contingent Consideration
The non-cash change in fair value of contingent consideration was income of $50.2 million for the six months ended June 30, 2020.2022, compared to a loss of $61.8 million for the six months ended June 30, 2021. The increasedecrease in the fair value of $5.3contingent consideration of $50.2 million for the six months ended June 30, 2022 was due primarily to increases in employee-related compensation driven by increased headcount as partour strategic decision to voluntarily pause further development of Vicineum. The decision was based on a thorough reassessment of Vicineum, which included the commercial build ($2.1 million), salesincremental development timeline and marketing expenseassociated costs for an additional Phase 3 clinical trial for the treatment of NMIBC, following recent discussions with the FDA and the updated market data obtained through market research during the ongoing BCG shortage. We intend to seek a partner for the further development of Vicineum. We expect that any partner who acquires Vicineum pre-commercial launch planning ($1.7 million), legal fees relatedfrom us will be obligated to regulatory and commercial launch support ($0.7 million), professional fees relatedmake any payments to commercial launch preparation ($0.4 million), and other increases ($0.4 million).the former shareholders of Viventia under the Share Purchase Agreement

Change in Fair Value of Contingent Consideration

The non-cash change in fair value of contingent consideration was a loss of $61.8 million for the six months ended June 30, 2021,compared to income of $35.2 million for the six months ended June 30, 2020. The increase in the fair value of contingent
consideration of $61.8 million for the six months ended June 30, 20212021. This was primarily attributable to changes in the competitive landscape, higher probability of regulatory success, expanded patient population, and to a lesser extent by the refinement of estimated launch timelines for Vicineum, if approved, in certain markets. In addition,markets outside the estimated fair value of contingent consideration is determined by applying appropriate discount rates to future cash outflows relatedUnited States, which was prior to the contingent payment obligations. The milestone payments constitute debt-like obligations, andreceipt of a CRL from the high-yield debt index rate applied to the milestones in order to determine the estimated fair value fluctuated from 11.8% as of December 31, 2019 to 14.5% as of June 30, 2020 and from 8.4% as of December 31, 2020 to 6.6% as of June 30, 2021. The discount rate applied to the 2% earnout payment due on forecasted Vicineum revenues is derived from our estimated WACC, and this WACC-derived discount rate fluctuated from 5.6% as of December 31, 2019 to 13.2% as of June 30, 2020 and from 8.8% as of December 31, 2020, to 6.8% as of June 30, 2021.FDA.

Provision for Income Taxes
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The change in fair value of contingent consideration was a $35.2 million decrease forFor the six months ended June 30, 2020. The decrease in2022, we recorded a benefit from income taxes of $3.9 million. In the second quarter of 2022, we determined that the fair value of contingent considerationthe Vicineum EU rights was zero, which resulted in an impairment charge of $35.2$14.7 million. In connection with this impairment charge, in the second quarter of 2022, we wrote-down the associated deferred tax liability by $4.0 million as a benefit, partially offset by $0.1 million income tax paid to foreign jurisdictions pursuant to the Qilu License Agreement. Please refer to Note 8, "Intangible Assets and Goodwill," for further information regarding the impairment charge. For the six months ended June 30, 2021, we recorded a provision for income taxes of $0.3 million. This provision consisted of income taxes paid to foreign jurisdictions pursuant to the Qilu License Agreement.
Net Loss
For the six months ended June 30, 2022 net loss was $32.8 million, compared to net loss of $81.0 million, for the six months ended June 30, 2020 was primarily attributable to significant increases in applicable discount rates, as a result of the extreme volatility of financial markets as global economies shut down in order to contain the spread of COVID-19.

Other (Expense) Income, Net

Other expense, net was de minimis for the six months ended June 30, 2021, compared to $0.2 million for the six months ended June 30, 2020.2021. The decrease of $0.2$48.2 million was primarily due to decreases in operating expense ($50.3 million) and the tax provision ($4.2 million) partially offset by a decrease in license and related revenue recognized ($6.5 million). The decrease in operating expense ($50.3 million) was driven by non-cash adjustments ($84.2 million), partially offset by a $33.9 million increase in expense. This increase was primarily due to lower interest income.the reduction of our prepaid balances related to consumables and manufacturing reservations and the preliminary settlements of the securities and derivative litigation.
Liquidity and Capital Resources
Overview
As of June 30, 2021,2022, we had cash, and cash equivalents and marketable securities of $151.0$161.2 million, net working capital of $156.3$124.4 million andand an accumulatedaccumulated deficit of $396.9$349.0 million. We incurred negative cash flows from operating activities of $30.8$1.4 million for for the yearsix months ended December 31, 2020 andJune 30, 2022, compared to negative cash flows of $41.6 million for the six months ended June 30, 2021. 2021.We believe that, based on our current operating plans and financial forecasts, our cash, cash equivalents and marketable securities of $161.2 million as of June 30, 2022, are sufficient to fund our current operating plan for at least twelve months from the date of this Form 10-Q filing, August 8, 2022.
Since our inception, we have received no revenue from sales of our products, and we anticipate that operating losses will continue for the foreseeable future as we complete the follow-up stage of our ongoing Phase 3 VISTA Trial of Vicineum for the treatment of BCG-unresponsive NMIBC and seek marketing approval from the FDA and the EMA and, if approved, commercialize Vicineum.continue to assess any potential strategic alternatives that we may pursue. 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 ATM offerings, our OUS business development partnerships and license agreements and, to a lesser extent, from a collaboration.
In November 2019, weWe have entered into an Open Market Sale Agreement SM (the "Sale Agreement") with Jefferies LLC ("Jefferies") dated November 29, 2019, as amended by Amendment No. 1 dated October 30, 2020, Amendment No. 2 dated February 17, 2021 and Amendment No. 3, dated June 1, 2021 (as amended, the "Sale Agreement"), under which we may issue and sell shares of our common stock, par value $0.001 per share from time to time for an aggregate sales price of up to $35 million through Jefferies (the "ATM Offering"). In October 2020June and FebruaryJuly 2021, we entered into Amendments No. 1 and No. 2 to the Sale Agreement, respectively. Amendments No. 1 and No.2 modified the Sale Agreement to reflect that we may issue and sell shares of its common stock from time to time for an aggregate sales price of up to an additional $50.0 million and $34.5 million, respectively. In June 2021, we entered into Amendment No. 3 to the Sale Agreement, which modified the Sale Agreement to remove the maximum dollar amount of shares of common stock that may be sold pursuant to the Sale Agreement Agreement and filed a prospectus supplementsupplements with the SEC in connection with the offer and sale of up to $100.0an aggregate of $200 million of our common stock pursuant to the Sale Agreement. In July 2021, we filed a prospectus supplement with the SEC in connection with the offer and saleAgreement of up to $100.0which $97.8 million of our common stock pursuant to the Sale Agreement. Saleshares remain available for future issuance as of June 30, 2022. Sales of common stock under the Sale Agreement are made by any method that is deemed to be an ATM offering as defined in Rule 415(a)(4) of the Securities Act of 1933, including but not limited to sales made directly on or through the Nasdaq GlobalStock Market or any other existing trading market for our common stock. We may sell shares of our common stock efficiently from time to time over the coming months, but have no obligation to sell any of our common stock and may at any time suspend offers under the Sale Agreement or terminate the Sale Agreement. Subject to the terms and conditions of the Sale Agreement, Jefferies will use its commercially
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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 under the Sale Agreement. We did not sell any shares of common stock pursuant to the Sale Agreement during the six months ended June 30, 2022. We raised $136.8 million of net proceeds from the sale of 47.1 million shares of common stock at a weighted-average price of $2.99 per share during the six months ended June 30, 2021, including $64.3 million of net proceeds from the sale of 16.5 million shares of common stock at a weighted-average price of $4.02 per share during the three months ended June 30, 2021. We raised $8.0 million of net proceeds from the sale of 9.8 million shares of common stock at a weighted-average price of $0.75 per share during the six months ended June 30, 2020, including $4.8 million of net proceeds from the sale of 6.6 million shares of common stock at a weighted-average price of $0.69 per share during the three months ended June 30, 2020. Share issue costs, including sales agent commissions, related to the ATM Offering totaled $2.0 million and $4.2 million for the three and six months ended June 30, 2021, compared to $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively.
We continue to monitor the effect of the outbreak of COVID-19. 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 $151.0 million as of June 30, 2021 is sufficient to fund our current operating plan for at least twelve months after the issuance of our condensed consolidated financial statements. Based on our current operating plan, we anticipate having sufficient cash and cash equivalents to fund our operations through the second quarter of 2022; 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, and dependence on our ability - about which there can be no certainty - to obtain additional financing to fund our operations after the current cash resources are exhausted, substantial doubt exists about our
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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.

Funding Requirements
Our future success is dependent on our ability to develop, and if approved, commercialize our product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC,identify and ultimately uponconsummate a strategic transaction. Potential strategic alternatives to be explored and evaluated during the review process may include the sale of our ability to attain profitable operations. In order to commercializecompany, a merger, acquisition or other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of some of our product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC, we need to complete clinical development and complyproprietary technologies. We are actively working with comprehensive regulatory requirements. an investment bank in this assessment process.
We are subject to a number of risks similar to other late-stage clinical companies that have determined to focus primarily on pursuing a strategic transaction, including, but not limited to, successful discovery and developmentthose which are described under Part II Item 1A. Risk Factors 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, development and, if approved, commercialization of product candidates, including Vicineum for the treatment of BCG-unresponsive NMIBC, requires substantial working capital, and we expect to seek additional funds through equity or debt financings or through additional OUS business development partnerships, collaborations, licensing transactions or other sources. We may be unable to obtain equity or debt financings or enter into additional OUS business development partnerships, collaborations or licensing transactions at favorable terms, or at all, and, if necessary, we may be required to implement cost reduction strategies.this Quarterly Report on Form 10-Q.
We will incur substantial expenses if and as we:
•completeaddress our follow-up stage of our Phase 3 VISTA Trial for Vicineum for the treatment of BCG-unresponsive NMIBC;
•seek marketing approvals for Vicineum for the treatment of BCG-unresponsive NMIBC;
•establishongoing securities litigation and implement sales, marketing and distribution capabilities and scale up and validate external manufacturing capabilities (including completing the manufacturing process and technology transfer to any third-party manufacturers) to commercialize Vicineum for the treatment of BCG-unresponsive NMIBC, if approved;derivative litigation;
•maintain, expand and protect our intellectual property portfolio;
•addreduce our personnel and incur related severance and employee-related costs;
•wind down and dispose of the equipment and physical infrastructure that had been used to support our research and development;development activities;
•hire additional clinical, regulatory, quality control, scientific and management personnel;terminate contracts with our CMOs;
•expandterminate our operational, financialproperty leases in Winnipeg, Manitoba, Cambridge, Massachusetts and management systems and personnel;Philadelphia, Pennsylvania;
•conduct research and pre-clinical and clinical development of Vicineum forrestore our Winnipeg manufacturing facility to the treatment of BCG-unresponsive NMIBC, less-than-adequate BCG and our other product candidates;
•seek to discover and develop additional product candidates;state in which it was originally leased; and
•in-license or acquireexplore, evaluate and pursue any strategic alternatives in connection with the rights to other products, product candidates or technologies.review process we have initiated.
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 Vicineum for the treatment of BCG-unresponsive NMIBC and our other product candidates;
•the costoutcome and timing of any new clinical trialspending or studies of Vicineum for the treatment of BCG-unresponsive NMIBC;
•the ongoing COVID-19 pandemic and its impact onfuture litigation involving us or our business;
•the outcome and timing of the process we have initiated to review strategic alternatives, which may include the sale of our ability to establish additional OUScompany, a merger, acquisition or other business development partnerships, collaborationscombination, a strategic partnership with one or more parties, or the licensing, arrangements on favorable terms, if at all, particularly manufacturing, marketing and distribution arrangements forsale or divestiture of some of our product candidates;proprietary technologies;
•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 of Vicineum;
•the costs and timing of establishing and implementing sales, marketing and distribution capabilities for Vicineum for the treatment of BCG-unresponsive 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; and
•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, EMA and comparable foreign regulatory authorities for Vicineum for the treatment of BCG-unresponsive NMIBC, including the potential for the FDA, EMA or comparable foreign regulatory authorities 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 our out-license and OUS business development partnership agreements
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•the effect of competing technological and market developments; and
•the revenue, if any, received from commercial sales of Vicineum for the treatment of BCG-unresponsive NMIBC, if approved.agreements.
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, or government or other third-party funding strategic collaborations, OUS business development partnership agreements, partnerships, 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 and the License Agreement with Qilu. 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 OUS business development partnerships, collaborations, 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 rightsassessment of strategic alternatives. If we do not successfully consummate a strategic alternative, our board of directors may decide to developpursue a dissolution and market products or product candidates that we would otherwise preferliquidation of our company.
Contractual and Other Obligations
For information related to developour cash requirements from known contractual and market ourselves.other obligations, see the description of Contingent Consideration in Note 5 “Fair Value Measurement and Financial Instruments,” as well as the description of our leases in Note 11 “Leases”, and the description of our license agreement and collaborations in Note 17, “License Agreements” of Part I - Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements.
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.
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Cash Flows
The following table sets forth a summary of our cash flows for the six months ended June 30, 20212022 and 20202021 (in thousands):
 Six Months ended
 June 30,
 20212020
Net Cash Used in Operating Activities$(41,616)$(18,326)
Net Cash Used in Investing Activities(49)(8)
Net Cash Provided by Financing Activities137,312 7,954 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash$95,647 $(10,380)

Six Months Ended
 June 30,
 20222021
Net Cash Used in Operating Activities$(1,441)$(41,616)
Net Cash Used in Investing Activities(89,095)(49)
Net Cash Provided by Financing Activities— 137,312 
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash$(90,536)$95,647 
Net Cash Used in Operating Activities
Net cash used in operating activities was $1.4 million for the six months ended June 30, 2022 and consisted primarily of a net loss of $32.8 million, adjusted for non-cash items including, a decrease in the fair value of contingent consideration ($50.2 million), intangible impairment charge ($27.8 million), share-based compensation ($3.7 million), and a net increase in operating assets and liabilities ($50.1 million).
Net cash used inin operating activities was $41.6 million for the six months ended June 30, 2021 and consisted primarily of a net loss of $81.0 million,which includes $6.5 million of revenue recognized pursuant to certain of our licenseout-license agreements, adjusted for non-cash items, including share-based compensation of $2.2 million,($2.2 million), an increase in the fair value of contingent consideration of $61.8 million($61.8 million) and a net decrease in operating assets and liabilities of $24.7 million.($24.7 million).
Net Cash Used in Investing activities
Net cash used in operatinginvesting activities was $18.3$89.1 million for the six months ended June 30, 20202022 and consisted primarily of net income of $15.2 million, adjusted for non-cash items, including share-based compensation of $0.9 million, a decrease in the fair value of contingent consideration of $35.2 million and a net increase in operating assets and liabilities of $0.7 million.
Net Cash Used in Investing Activitiesmarketable security purchases.
Net cash used in investing activities wasconsisted of de minimis purchases and sales or property and equipment during the six months ended June 30, 2020 and June 30, 2021.
Net Cash Provided by Financing Activitiesactivities
Net cash provided by financing activities was zero for the six months ended June 30, 2022.
Net cash provided by financing activities was $137.3 million and $8.0 million for the six months ended June 30, 2021 and June 30, 2020, respectively, and consisted primarily of $136.8 million net proceeds from the sale of common stock under the ATM Offering and, with respect to the six months ended June 30, 2020, sales of common stock under our 2014 ESPP.Offering.


Critical Accounting Policies and Use of Estimates
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The preparation of our condensed consolidated financial statements in accordance with United States generally accepted accounting principlesGAAP 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 condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Our critical accounting policies are those policies which require the mostinvolve a significant judgmentslevel of estimation uncertainty and estimates in the preparationhave had or are reasonably likely to have a material impact on our financial condition or results of our consolidated financial statements.operations. Management has determined that our most critical accounting policies are those relating to the fair value of indefinite-lived intangible assets, goodwill andgoodwill; contingent consideration; income taxes (including the valuation allowance for deferred tax assets);revenue recognition; development and regulatory milestone payments and other costs; and research and development costs; revenue recognition and going concern considerations.costs.
Fair Value of Indefinite-Lived Intangible Assets
Our intangible assets consist of indefinite-lived, acquired in-process research and development ("IPR&D")&D worldwide product rights to Vicineum as a result of the acquisition of Viventia in 2016. IPR&D assets acquired in a business combination are considered indefinite-lived until the completion or abandonment of the associated research and development efforts. Amortization over the estimated useful life will commence at the time of Vicineum's launch in the respective markets, if approved. If regulatory approval to market Vicineum for the treatment of BCG-unresponsive NMIBC is not obtained, we will immediately expense the related capitalized cost.
Indefinite-lived intangible assets are 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 estimate the future discounted cash flows of an asset 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. We recognize an impairment loss when and to the extent that the estimated fair value of an intangible 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 events
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or changes in circumstances have occurred which could indicate that the carrying value of our intangible assets was not recoverable. If an impairment indicator is identified, an interim impairment assessment is performed. Basedperformed.
During the second quarter of 2022, we observed an evolution of the current market treatment paradigm in NMIBC, with substantial uptake of intravesical chemotherapy (monotherapy and combination therapy) during the ongoing BCG shortage. We have also experienced a sustained decline in share price and a resulting decrease in our market capitalization. On July 15, 2022, we made the strategic decision to voluntarily pause further development in the US of our lead asset, Vicineum, and intend to seek a partner for the further development of Vicineum. The decision was based on a thorough reassessment of Vicineum, which included the annual testingincremental development timeline and quarterly reviews performed, weassociated costs for an additional Phase 3 clinical trial for the treatment of NMIBC, following recent discussions with the FDA and the updated market data obtained through market research during the ongoing BCG shortage. We updated the discounted cash flow model using the market participant approach and considered preliminary terms of potential partnering deal to conclude the fair value of EU asset. We concluded that the carrying value of our intangible assetsasset of Vicineum EU rights of $14.7 million was notfully impaired as of June 30, 2021 and December 31, 2020.2022.
Goodwill
Goodwill on our condensed consolidated balance sheets 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 acquired under the acquisition method of accounting. Goodwill is not amortized; rather than recording periodic amortization, goodwill is 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 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 have occurred which could have a material adverse effect on the estimated fair value of each reporting unit and thus indicate a potential impairment of the goodwill carrying value. If an impairment indicator is identified, an interim impairment assessment is performed. Based
During the second quarter of 2022, we observed continued trends in our market capitalization as compared to the carrying value of our single reporting unit as well as changes in certain assumptions in the fair value of the business including market share, length and cost of a clinical study, and time to potential market launch. The Company identified these changes as potential impairment indicators and performed a quantitative impairment analysis in advance of our typical annual assessment date of October 1. We reassessed the underlying assumptions used to develop our revenue projections, which were then used as significant inputs to determine the fair value of equity. We updated our revenue forecast models based on further expected launch delays in both US and OUS regions. We also recently observed an evolution of the annual testingcurrent treatment paradigm in NMIBC, with substantial uptake of intravesical chemotherapy (monotherapy and quarterly reviews performed,combination therapy) during the ongoing BCG shortage resulting in lower projected peak market share for Vicineum. We also considered other factors including the preliminary valuations of strategic alternatives during the fair value assessment. As a result of the interim impairment test, we concluded that therethe carrying value of our goodwill of $13.1 million was no goodwill impairmentfully impaired as of June 30, 2021 and December 31, 2020.2022.
Contingent Consideration
Contingent consideration on our condensed consolidated balance sheetsheets is the result of our acquisition of Viventia in September 2016 and represents the discounted present value of future commercial launch milestones and net sales royaltiesearnout payments due to the former shareholders of Viventia pursuant to the Share Purchase 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, 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 unobservable inputs (Level 3 within the fair value 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 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
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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 estimated fair value of our contingent consideration was determined using probabilities of successful achievement of regulatory milestones and commercial sales, the period in which these milestones and sales were expected to be achieved through 2033, the level of commercial sales of Vicineum forecasted for the US, Europe, Japan, China and other potential markets. Earnouts were determined using an earnout rate of 2% on all commercial net sales of Vicineum through December
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2033. The discount rate applied to the 2% earnout was derived from our estimated weighted-average cost of capital, which has fluctuated from 9.3% as of December 31, 2021 to 10.2% as of June 30, 2022. Milestone payments constitute debt-like obligations, and therefore a high-yield debt index rate was applied to the milestones in order to determine the estimated fair value. This index rate was 8.0% as of December 31, 2021.
On July 15, 2022, we made the strategic decision to voluntarily pause further development in the US of Vicineum. The decision was based on a thorough reassessment of Vicineum, which included the incremental development timeline and associated costs for an additional Phase 3 clinical trial for the treatment of NMIBC, following recent discussions with the FDA and the updated market data obtained through market research during the ongoing BCG shortage. Additionally, we intend to seek a partner for the further development of Vicineum. We expect any partner who acquires Vicineum from us will be obligated to make any payments to the former shareholders of Viventia under the Share Purchase Agreement. Accordingly, as of June 30, 2022, we no longer expect to pay related milestone and earnout payments, with the exception of the potential 2% earnout payment related to the Greater China region since those territory rights have already been out-licensed. Therefore, the June 30, 2022 balance relates to contingent consideration related to projected net sales in the Greater China region as compared to the December 31, 2021 balance which was based upon projected world-wide net sales.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and research and development credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to 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 is recorded to the extent it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2022, we reduced our deferred tax liabilities by $4.0 million as a result of intangibles impairment charge, driven by the decision to pause the development of Vicineum.
Unrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in the financial statements. We recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. 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 income tax expense in our condensed consolidated statements of operations. As of June 30, 20212022 and December 31, 2020,2021, we did not have any uncertain tax positions.
Revenue
We record revenue from our out-license agreements and OUS business development partnership agreements, including the License Agreement with Roche and Qilu. Under each of these agreements, we granted the counterparty an exclusive license to develop and commercialize the underlying licensed product. These agreements contain up-front license fees, development and regulatory milestone payments, sales-based milestone payments, and sales-based royalty payments.
We determine whether our out-license agreements and OUS business development partnership agreements are in scope of ASC 606, which we adopted as of January 1, 2018. Under ASC 606, in determining the appropriate amount of revenue to be recognized as we fulfill our obligations under these agreements, we perform the following steps:

1) Identification of the contract;
2) Determination of whether the promised goods or services are performance obligations including whether they are distinct in      the context of the contract;
3) Measurement of the transaction price, including the constraint on variable consideration;
4) Allocation of the transaction price to the performance obligations;
5) Recognition of revenue when or as the Company satisfies each performance obligation.

Development and Regulatory Milestones and Other Payments

At the inception of an arrangement that includes development milestone payments, we evaluate whether the development milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated development milestone value is included in the transaction price. Development milestone payments that are not within our control or the licensee's control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. For payments pursuant to sales milestones and royalty payments, we will note recognize revenue until the subsequent sale of a licensed product occurs. For arrangements with one than one performance obligations, the milestones are generally allocated entirely to the license performance obligation, as (1) the terms of milestone and royalty payments relate specifically to the license and (2) allocating milestones and royalties to the license performance obligation is consistent with the overall allocation objective, because management’s estimate of milestones and royalties approximates the standalone selling price of the license.
Research and Development Costs
Research 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 efforts required to develop a product candidate. Internal research and development consist primarily of personnel costs, including salaries, benefits and share-based compensation, facilities leases, research-related overhead, pre-approval regulatory and clinical trial costs, manufacturing and other contracted services, license fees and other external costs.
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In certain circumstances, we 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 recorded as prepaid assets and expensed when the activity has been performed or when the goods have been received.
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” of this Quarterly Report on Form 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.
The information under this item is not required to be 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
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accumulated and communicated to our management, including our principal executive officer and principleprincipal 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 the period covered by this Quarterly Report on Form 10-Q. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021.2022.
Limitations on Effectiveness of Controls and Procedures
A control system, no 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 their costs. Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all control issues 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 mistake. 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 system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with the policies and 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 disclosure controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives. We conduct periodic evaluations of our system of controls to enhance, where necessary, our control policies and procedures.
Changes in Internal Control Over Financial Reporting
During the three months ended June 30, 2021,2022, there were no changes in our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1.    Legal Proceedings.
We areOn August 19, 2021, August 31, 2021, and October 7, 2021, three substantially identical securities class action lawsuits captioned Bibb v. Sesen Bio, Inc., et. al., Case No. 1:21-cv-07025, Cizek v. Sesen Bio, Inc., et. al., Case No. 1:21-cv-07309 and Markman v. Sesen Bio, Inc. et al., Case No. 1:21-cv-08308 were filed against us and certain of our officers in the US District Court for the Southern District of New York. The three complaints alleged violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, based on statements made by us concerning the BLA for Vicineum for the treatment of BCG-unresponsive NMIBC. The three complaints sought compensatory damages and costs and expenses, including attorneys’ fees. On October 29, 2021, the court consolidated the three cases under the caption In re Sesen Bio, Inc. Securities Litigation, Master File No. 1:21-cv-07025-AKH (the “Securities Litigation”), and appointed Ryan Bibb, Rodney Samaan, Lionel Dreshaj and Benjamin Dreshaj (“Lead Plaintiffs”) collectively as the lead plaintiffs under the Private Securities Litigation Reform Act. On November 1, 2021, two stockholders filed motions to reconsider asking the court to appoint a different lead plaintiff. The court has not currentlyruled on those motions at this time. On November 24, 2021, defendants filed a motion to transfer venue to the US District Court for the District of Massachusetts. That motion was fully briefed as of December 13, 2021, but the court has not yet ruled on that motion. On December 6, 2021, the Lead Plaintiffs filed an amended class action complaint (the “Amended Complaint”). The Amended Complaint alleges the same violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder on the same theory as the prior complaints. The defendants moved to dismiss the Amended Complaint on March 7, 2022. The plaintiffs filed their opposition to that motion on April 6, 2022 and Defendants filed their reply in further support of the motion to dismiss on May 6, 2022. After the motion was fully briefed and before the court ruled on the motion, on June 3, 2022, the parties requested that the court hold any decision on the motion to dismiss in abeyance to provide the parties with an opportunity to engage in mediation. On June 30, 2022 and July 6, 2022, the Company and the plaintiffs in the Securities Litigation engaged in in-person mediation sessions in an attempt to resolve the litigation and continued to discuss a potential settlement over the following weeks. On July 19, 2022, the parties reached an agreement in principle to settle the Securities Litigation. Pursuant to that agreement, the Company and the individual defendants will pay or cause to be paid to members of the class who submit timely and valid proofs of claims. In exchange, the Lead Plaintiffs will dismiss the action and all class members who do not timely and validly opt-out of the settlement will provide broad customary releases to the Company and the individual defendants. On August 3, 2022, the parties entered into a Stipulation and Agreement of Settlement to settle the Securities Litigation, which is subject to court approval.
On September 20, 2021 and September 24, 2021, two substantially similar derivative lawsuits captioned Myers v. Sesen Bio, Inc., et. al., Case No. 1:21-cv-11538 and D’Arcy v. Sesen Bio, Inc., et. al., Case No. 1:21-cv-11577 were filed against our board of directors and certain of our officers in the US District Court for the District of Massachusetts, with us named as nominal defendant. On January 12, 2022, a third derivative complaint captioned Tang v. Sesen Bio, Inc., et al., was filed in Superior Court in Massachusetts against our board of directors and certain of our officers (the “State Securities Litigation”). The three derivative complaints allege breach of fiduciary duties, waste of corporate assets and violations of federal securities laws, based on statements made by us concerning the BLA for Vicineum for the treatment of BCG-unresponsive NMIBC. The D’Arcy complaint further alleges unjust enrichment, abuse of control, gross mismanagement and aiding and abetting thereof. The three derivative complaints seek unspecified damages, restitution and disgorgement of profits, benefits and compensation obtained by the defendants and costs and expenses, including attorneys’ fees. On October 18, 2021, the court consolidated the two federal court cases under the caption In re Sesen Bio, Inc. Derivative Litigation, Lead Case No. 1:21-cv-11538 (the “Federal Derivative Litigation”). On December 22, 2021, the court entered a joint stipulation among the parties to stay the Federal Derivative Litigation until after a ruling on any material legal proceedings.motion to dismiss filed by defendants in the Securities Litigation. On May 1, 2022, the plaintiffs filed a verified consolidated shareholder derivative complaint in the Federal Derivative Litigation. On May 18, 2022, the court entered a joint stipulation among the parties to stay the State Derivative Litigation until after a ruling on any motion to dismiss filed by defendants in the Securities Litigation. On July 6, 2022, the Company and the plaintiffs to the Federal Derivative Litigation and the State Derivative Litigation engaged in an in-person mediation session in an attempt to resolve the litigation, with settlement discussions continuing over the following days. On July 19, 2002, the parties reached an agreement in principle to settle the Federal Derivative Litigation, the State Derivative Litigation and other potential related derivative claims. Pursuant to that agreement, the individual defendants will cause the Company to adopt certain enhancements to the Company’s corporate governance policies and procedures. In exchange, plaintiffs will dismiss the complaints and, on behalf of the Company, provide broad customary releases to the individual defendants. The agreement is subject to the execution of a definitive stipulation of settlement and, after notice to the Company’s stockholders, court approval.
The Company, its board of directors and the individual defendants continue to deny all allegations of any wrongdoing, but are seeking to settle the Securities Litigation, the State Derivative Litigation and the Federal Derivative Litigation to avoid the uncertainty, risk, expense and distraction of protracted litigation.
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Item 1A.    Risk Factors.
[During the six months ended June 30, 2021,2022, 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, 2020.2021. You should carefully consider the information described therein and in this Quarterly Report on Form 10-Q, which could materially affect our businessfinancial condition, results of operations and cash flows.]
Our exploration of strategic alternatives may not result in entering into or completing a transaction, and the process of reviewing strategic alternatives or its conclusion could adversely affect our stock price.
We have initiated a process to review strategic alternatives with the goal of maximizing shareholder value. Potential strategic alternatives to be explored and evaluated during the review process may include the sale of our company, a merger, acquisition or other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of some of our proprietary technologies. We are actively working with an investment bank in this assessment process, which we believe will be complete by the end of 2022. On July 15, 2022, we made the strategic decision to voluntarily pause further development in the US of Vicineum. This decision enables us to conserve cash while we continue to assess potential strategic alternatives. Additionally, we intend to seek a partner for the further development of Vicineum.
There can be no assurance any transaction will result from the Company’s evaluation of strategic alternatives. Any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us, obtaining stockholder approval and the availability of financing to us or third parties in a potential transaction with us on reasonable terms. The process of reviewing strategic alternatives may be time consuming and may involve the dedication of significant resources and may require us to incur significant costs and expenses. It could negatively impact our ability to attract, retain and motivate key employees, and expose us to potential litigation in connection with this process or any resulting transaction. If we are unable to effectively manage the process, our financial condition and results of operations could be adversely affected. In addition, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of our company could cause our stock price to fluctuate significantly. Further, any strategic alternative that may be pursued and completed ultimately may not deliver the anticipated benefits or enhance shareholder value. There can be no guarantee that the process of evaluating strategic alternatives will result in our company entering into or completing a potential transaction within the anticipated timing or at all.
If we do not successfully complete a strategic transaction, our board of directors may decide to pursue a dissolution and liquidation of our company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.
There can be no guarantee that the process to identify a strategic transaction will result in a successfully completed transaction. If no transaction is completed, our board of directors may decide that it is in the best interest of our stockholders to dissolve our company and liquidate our assets. In that event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as we fund our operations and evaluate our strategic alternatives. In addition, if our board of directors were to approve and recommend, and our stockholders were to approve, a dissolution of our company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation of our company. If a dissolution and liquidation were pursued, our board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a dissolution, liquidation or winding up of our company.
If we are unable to regain compliance with the listing requirements of the Nasdaq Capital Market, our common stock may be delisted from the Nasdaq Capital Market which could have a material adverse effect on our business and could make it more difficult for you to sell your shares.
Our common stock is listed on the Nasdaq Capital Market, and we are therefore subject to its continued listing requirements, including requirements with respect to the market value of publicly-held shares, market value of listed shares, minimum bid price per share, and minimum stockholders' equity, among others, and requirements relating to board and committee independence. If we fail to satisfy one or more of the requirements, we may be delisted from the Nasdaq Capital Market.
On January 24, 2022, we received notice (the "Notice") from the Nasdaq Stock Market LLC ("Nasdaq") that we were not currently 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). The Notice indicated that, consistent with Nasdaq Listing Rule 5810(c)(3)(A), we
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had 180 calendar days, or until July 25, 2022, to regain compliance with the minimum bid price requirement by having the closing bid price of our common stock meet or exceed $1.00 per share for at least ten consecutive business days. On July 26, 2022, we received approval from the Listing Qualifications Department of Nasdaq to transfer the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market. As a result, we were granted a second 180-day grace period, or until January 23, 2023, to regain compliance with the minimum bid price requirement.
If we do not regain compliance by January 23, 2023, we will receive notification from Nasdaq that our common stock is subject to delisting. At that time, we may then appeal the delisting determination to a Nasdaq hearings panel. Such notification will have no immediate effect on our listing on the Nasdaq Capital Market, nor will it have an immediate effect on the trading of our common stock pending such hearing. There can be no assurance, however, that we will be able to regain compliance with Nasdaq’s minimum bid price requirement. If we regain compliance with Nasdaq’s minimum bid price requirement, there can be no assurance that we will be able to maintain compliance with the continued listing requirements for the Nasdaq Capital Market or that our common stock will not be delisted from the Nasdaq Capital Market in the future. In addition, we may be unable to meet other applicable listing requirements of the Nasdaq Capital Market, including maintaining minimum levels of stockholders’ equity or market values of our common stock in which case, our common stock could be delisted notwithstanding our ability to demonstrate compliance with the minimum bid price requirement.
Delisting from the Nasdaq Capital Market may limit the range and attractiveness of strategic alternatives that we are able to consider, adversely affect our ability to raise additional financing through the public or private sale of equity securities, significantly affect the ability of investors to trade our securities, or negatively affect the value and liquidity of our common stock. Delisting also could have other negative results, including the potential loss of employee confidence, the loss of institutional investors or interest in business development opportunities.
If we are delisted from Nasdaq and we are not able to list our common stock on another exchange, our common stock could be quoted on the OTC Bulletin Board or in the “pink sheets.” As a result, we could face significant adverse consequences including, among others:
•a limited availability of market quotations for our securities;
•a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
•a limited amount of news and little or no analyst coverage for us;
•we would no longer qualify for exemptions from state securities registration requirements, which may require us to comply with applicable state securities laws; and
•a decreased ability to issue additional securities (including pursuant to short-form Registration Statements on Form S-3) or obtain additional financing in the future.
Our restructuring plans and the associated headcount reductions may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.
On August 30, 2021, we approved a restructuring plan to reduce operating expenses and better align our workforce with the needs of our business following receipt of the CRL from the FDA regarding our BLA for Vicineum for the treatment of BCG-unresponsive NMIBC (the “2021 Restructuring Plan”). On July 15, 2022, we approved a restructuring plan to reduce operating expenses and better align our workforce with the needs of our business following our decision to pause further development of Vicineum in the US (the “2022 Restructuring Plan”). Execution of the 2021 Restructuring Plan was substantially completed by the end of 2021. Execution of the 2022 Restructuring Plan is expected to be substantially completed by the end of 2022. The 2022 Restructuring Plan includes an incremental reduction in the Company’s workforce as well as additional cost-saving initiatives intended to preserve capital while the Company continues to assess potential strategic alternatives with the goal of maximizing shareholder value and seek a potential partner for the further development of Vicineum. As of the filing of this Quarterly Report on Form 10-Q, the Company estimates that it will incur in the third and fourth quarters of 2022 severance and other employee-related costs of approximately $8 million.
The Company also expects to incur one-time cash costs associated with the termination of certain contracts and all other activities under the 2022 Restructuring Plan, and is in the process of assessing the estimated impact.
We may not realize, in full or in part, the anticipated benefits, savings and improvements in our cost structure from our restructuring efforts due to unforeseen difficulties, delays or unexpected costs. For example, we may incur unanticipated charges not currently contemplated as a result of the restructuring plans. If we are unable to realize the expected operational cost savings from the restructuring, our operating results and financial condition would be adversely affected.
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Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds.
We did not issue any unregistered equity securities during the six months ended June 30, 2021.2022.

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
10.1
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Amendment No. 2 to the Sesen Bio, Inc. 2014 Stock Incentive Plan. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed May 3, 2021 (File No. 001-36296).


10.210.1*


10.3


31.1*
31.2*
32.1**
32.2**
101101*Interactive Data File (Form 10-Q for the Quarterly Period ended June 30, 20212022 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 tags are embedded within the Inline XBRL document.
104104*Cover Page Interactive Data File (embedded within the(formatted as Inline XBRL document and includedcontained in Exhibit 101).
*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:August 9, 20218, 2022By:/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)


Date:August 8, 2022By:/s/ Monica Forbes    
Name:Monica Forbes
Title:Chief Financial Officer
(Principal Financial Officer)







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