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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~7(a)(2)(B)~~13(a) of the ~~Securities Act ). Yes~~ ☐ NoExchange Act). ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 6, 2017,~~August 14, 2020, the number of shares of ~~Registrant’s~~the registrant’s common stock outstanding was ~~21,428,468.~~3,232,811.

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Aptevo,” and “the Company” refer to Aptevo Therapeutics Inc. and, where appropriate, its consolidated subsidiaries.

ASSETS

September 30, 2017

December 31, 2016

Current assets:

Cash and cash equivalents

$
75,830

$
9,676

Restricted cash

10,400

400

Short-term investments

20,946

44,849

Accounts receivable

528

307

Inventories

1,237

461

Current assets held for sale

—

10,155

Prepaid expenses and other current assets

6,381

5,566

Total current assets

115,322

71,414

Property and equipment, net

6,163

5,910

Intangible assets, net

6,287

6,910

Long-term assets held for sale

—

7,624

Other long-term assets

3,250

—

Total assets

$
131,022

$
91,858

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and other accrued liabilities

$
7,512

$
10,518

Accrued compensation

3,815

4,009

Sales rebates and discounts

378

278

Due to acquirer of  discontinued operations

878

—

Deferred revenue, current portion

—

811

Other short-term liabilities

2,287

—

Current liabilities held for sale

—

3,928

Total current liabilities

14,870

19,544

Deferred revenue, net of current portion

—

2,896

Long-term debt, net

17,484

18,383

Other liabilities

8,358

469

Total liabilities

40,712

41,292

Stockholders' equity:

Preferred stock: $0.001 par value; 15,000,000 shares authorized, zero shares
   issued or outstanding

—

—

Common stock: $0.001 par value; 500,000,000 shares authorized; 21,426,731
   and 20,271,737 shares issued and outstanding at September 30, 2017 and
   December 31, 2016, respectively

21

20

Additional paid-in capital

154,257

151,271

Accumulated other comprehensive loss

(10
)

(33
)
Contribution receivable from former parent

—

(20,000
)
Accumulated deficit

(63,958
)

(80,692
)
Total stockholders' equity

90,310

50,566

Total liabilities and stockholders' equity

$
131,022

$
91,858

	June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	7,599		$	12,448
Restricted cash - current		1,862			—
Royalty receivable		288			—
Prepaid expenses		641			1,078
Held for sale assets - current		—			16,309
Other current assets		98			160
Total current assets		10,488			29,995
Restricted cash - non-current		693			7,498
Property and equipment, net		3,320			3,946
Operating lease right-of-use asset		3,251			3,747
Held for sale assets - non-current		—			7,465
Other assets		757			757
Total assets	$	18,509		$	53,408
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	4,662		$	6,427
Accrued compensation		1,419			2,870
Current portion of long-term debt		—			19,863
Held for sale liabilities - current		—			8,135
Other current liabilities		921			944
Total current liabilities		7,002			38,239
Operating lease liability		2,857			3,327
Total liabilities		9,859			41,566

Stockholders' equity:
Preferred stock: $0.001 par value; 15,000,000 shares authorized, zero shares issued or outstanding		—			—
Common stock: $0.001 par value; 500,000,000 shares authorized; 3,232,811 and 3,234,232 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		45			45
Additional paid-in capital		180,367			179,653
Accumulated deficit		(171,762	)		(167,856	)
Total stockholders' equity		8,650			11,842
Total liabilities and stockholders' equity	$	18,509		$	53,408

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016
Restated

2017

2016
Restated

Revenues:

Product sales

$
2,506

$
2,816

$
8,131

$
7,050

Collaborations

3,666

—

3,709

153

Total revenues

6,172

2,816

11,840

7,203

Costs and expenses:

Cost of product sales

1,872

4,110

3,114

7,387

Research and development

7,175

7,077

19,835

22,759

Selling, general and administrative

7,473

11,141

26,019

27,950

Impairment of goodwill and intangible assets

—

71,013

—

71,013

Loss from operations

(10,348
)

(90,525
)

(37,128
)

(121,906
)
Other income (expense):

Other expense, net

(436
)

(492
)

(1,356
)

(417
)
Total other expense, net

(436
)

(492
)

(1,356
)

(417
)
Loss before income taxes

(10,784
)

(91,017
)

(38,484
)

(122,323
)
Benefit from income taxes

13,768

17,608

15,587

18,590

Net income (loss) from continuing operations

2,984

(73,409
)

(22,897
)

(103,733
)
Discontinued operations (Note 2):

Income from discontinued operations, before income taxes

56,140

3,959

62,706

9,514

Income tax expense

(21,257
)

(2,291
)

(23,076
)

(3,250
)
Income from discontinued operations

34,883

1,668

39,630

6,264

Net income (loss)

$
37,867

$
(71,741
)

$
16,733

$
(97,469
)

Basic net income (loss) per share:

Net loss from continuing operations

$
0.14

$
(3.63
)

$
(1.08
)

$
(5.13
)
Net income from discontinued operations

$
1.63

$
0.08

$
1.87

$
0.31

Net income (loss)

$
1.77

$
(3.55
)

$
0.79

$
(4.82
)
Weighted-average shares used to compute per share
calculation

21,385,381

20,235,987

21,138,332

20,231,910

Diluted net income (loss) per share:

Net loss from continuing operations

$
0.14

$
(3.63
)

$
(1.08
)

$
(5.13
)
Net income from discontinued operations

$
1.61

$
0.08

$
1.87

$
0.31

Net income (loss)

$
1.75

$
(3.55
)

$
0.79

$
(4.82
)
Weighted-average shares used to compute per share
calculation

21,672,269

20,235,987

21,138,332

20,231,910

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Royalty revenue		473			—			473			—
Operating expenses:
Research and development		(4,440	)		(6,125	)		(8,446	)		(12,759	)
General and administrative		(2,840	)		(4,279	)		(6,456	)		(8,807	)
Total operating expenses:		(7,280	)		(10,404	)		(14,902	)		(21,566	)
Other income (expense), net		4			(436	)		(271	)		(1,015	)
Loss on extinguishment of debt		—			—			(2,104	)		—
Net loss from continuing operations	$	(6,803	)	$	(10,840	)	$	(16,804	)	$	(22,581	)
Discontinued operations:
Income (loss) from discontinued operations	$	—		$	(2,492	)	$	12,898		$	(2,769	)
Net income (loss)	$	(6,803	)	$	(13,332	)	$	(3,906	)	$	(25,350	)

Net loss from continuing operations per share	$	(2.10	)	$	(3.37	)	$	(5.14	)	$	(8.69	)
Net income (loss) from discontinued operations per share	$	—		$	(0.77	)	$	3.95		$	(1.07	)
Basic and diluted net loss per basic share	$	(2.10	)	$	(4.14	)	$	(1.19	)	$	(9.76	)
Weighted-average shares used to compute per share calculations		3,232,811			3,221,074			3,269,410			2,598,552

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

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

For the Nine Months Ended September 30,

2017

2016

Operating Activities

Net income (loss)

$
16,733

$
(97,469
)
Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

3,829

2,067

Depreciation and amortization

2,991

2,912

Gain on sale of Hyperimmune Business

(52,538
)

—

Impairment of goodwill and intangible assets

—

55,702

Income taxes

7,489

(506
)
Change in fair value of contingent consideration

—

(261
)
Changes in operating assets and liabilities:

Accounts receivable

(221
)

3,497

Inventories

(776
)

8,748

Income taxes

—

1,376

Prepaid expenses and other current assets

(815
)

(1,475
)
Accounts payable, accrued compensation and other liabilities

(1,941
)

(1,155
)
Change in assets and liabilities held for sale

2,700

—

Due to Soal

4

—

Sales rebates and discounts

100

(208
)
Deferred revenue

(3,707
)

(3,425
)
Net cash used in operating activities

(26,152
)

(30,197
)
Investing Activities

Cash proceeds from sale of Hyperimmune Business

60,477

—

Proceeds from the maturity of investments

53,218

—

Purchases of property and equipment

(1,105
)

(1,933
)
Purchases of investments

(29,291
)

(49,802
)
Net cash provided by (used in) investing activities

83,299

(51,735
)
Financing Activities

Transfer from former parent, prior to spin-off

—

45,000

Settlement of contribution receivable from former parent

20,000

25,549

Proceeds from long-term debt, net of issuance costs

—

18,038

Debt issuance costs

(150
)

—

Proceeds from the exercise of stock options

—

2

Payments for taxes related to net share settlement of equity awards

(843
)

—

Restricted cash

(10,000
)

(400
)
Net cash provided by financing activities

9,007

88,189

Increase cash and cash equivalents

66,154

6,257

Cash and cash equivalents at beginning of period

9,676

4,637

Cash and cash equivalents at end of period

$
75,830

$
10,894

	For the Six Months Ended June 30,
	2020			2019
Operating Activities
Net loss	$	(3,906	)	$	(25,350	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		714			995
Depreciation and amortization		764			1,156
Gain on sale of Aptevo BioTherapeutics		(14,338	)		—
Loss on extinguishment of debt		2,104			—
Non-cash interest expense and other		137			310
Changes in operating assets and liabilities:
Royalty receivable		(288	)		—
Accounts receivable		—			(2,158	)
Inventories		—			(5,182	)
Prepaid expenses and other current assets		499			2,270
Operating lease right of use asset		496			428
Accounts payable, accrued compensation and other liabilities		(3,239	)		(1,246	)
Long-term operating lease liability		(470	)		(607	)
Changes in assets and liabilities held for sale		1,719			—
Sales rebates and discounts		—			(351	)
Net cash used in operating activities		(15,808	)		(29,735	)
Investing Activities
Cash received from sale of Aptevo BioTherapeutics		28,120			—
Purchases of property and equipment		—			(153	)
Net cash (used in) provided by investing activities		28,120			(153	)
Financing Activities
Payment of long-term debt, including exit and other fees		(22,104	)		—
Proceeds of issuance of common stock, warrants, and pre-funded warrants, net		—			20,297
Proceeds from the exercise of pre-funded warrants		—			21
Payment of tax liability for vested equity awards		—			(58	)
Net cash provided by (used in) financing activities		(22,104	)		20,260
Decrease in cash, cash equivalents, and restricted cash		(9,792	)		(9,628	)
Cash, cash equivalents, and restricted cash at beginning of period		19,946			38,083
Cash, cash equivalents, and restricted cash at end of period	$	10,154		$	28,455

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

						Additional						Total
	Common Stock					Paid-In			Accumulated			Stockholders'
	Shares			Amount		Capital			Deficit			Equity
Balance at March 31, 2020		3,232,811		$	45	$	180,066		$	(164,959	)	$	15,152
Stock-based compensation		—			—		301			—			301
Net loss for the period		—			—		—			(6,803	)		(6,803	)
Balance at June 30, 2020		3,232,811		$	45	$	180,367		$	(171,762	)	$	8,650
						Additional						Total
	Common Stock					Paid-In			Accumulated			Stockholders'
	Shares			Amount		Capital			Deficit			Equity
Balance at March 31, 2019		3,220,730		$	45	$	178,511		$	(139,426	)	$	39,130
Common stock issued upon vesting of restricted stock units		616			—		—			—			—
Stock-based compensation		—			—		401			—			401
Net loss for the period		—			—		—			(13,332	)		(13,332	)
Balance at June 30, 2019		3,221,346		$	45	$	178,912		$	(152,758	)	$	26,199
						Additional						Total
	Common Stock					Paid-In			Accumulated			Stockholders'
	Shares			Amount		Capital			Deficit			Equity
Balance at December 31, 2019		3,234,232		$	45	$	179,653		$	(167,856	)	$	11,842
Cancellation of fractional shares arising from reverse stock split		(1,421	)		—		—			—			—
Stock-based compensation		—			—		714			—			714
Net loss for the period		—			—		—			(3,906	)		(3,906	)
Balance at June 30, 2020		3,232,811		$	45	$	180,367		$	(171,762	)	$	8,650
						Additional						Total
	Common Stock					Paid-In			Accumulated			Stockholders'
	Shares			Amount		Capital			Deficit			Equity
Balance at December 31, 2018		1,629,173		$	23	$	157,791		$	(127,408	)	$	30,406
Issuance of common stock, pre- funded warrants and warrants, net		1,571,429			22		20,184			—			20,206
Issuance of commitment shares of common stock, non-cash transaction		13,991			—		—			—			—
Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability)		6,753			—		(58	)		—			(58	)
Stock-based compensation		—			—		995			—			995
Net loss for the period		—			—		—			(25,350	)		(25,350	)
Balance at June 30, 2019		3,221,346		$	45	$	178,912		$	(152,758	)	$	26,199

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

Aptevo Therapeutics Inc. (Aptevo, we, us, or the Company) is a research and development and clinical-stage biotechnology company focused on developing novel ~~oncology (cancer)~~immunotherapies for the treatment of cancer. Our lead clinical candidate, APVO436, and ~~hematology (blood disease) therapeutics to meaningfully improve patients’ lives. Our core~~preclinical candidates, ALG.APV-527 and APVO603 were developed based on the Company’s versatile and robust ADAPTIR™ modular protein technology platform. The ADAPTIR platform is capable of generating highly differentiated bispecific antibodies with unique mechanisms of action for the ~~ADAPTIR™ (modular protein technology) platform.~~ treatment of different types of cancer.

We are currently ~~have one revenue-generating product in~~trading on the ~~area of hematology, as well as various investigational stage product candidates in~~Nasdaq Capital Market under the ~~area of immuno-oncology.~~symbol “APVO.”

On ~~September~~February 28, ~~2017,~~2020, we entered into an LLC Purchase Agreement with Medexus Pharma Inc. (“Medexus”), pursuant to which we sold all of the issued and outstanding limited liability company interests of Aptevo ~~completed~~BioTherapeutics LLC (“Aptevo BioTherapeutics”), a wholly owned subsidiary of Aptevo. As a result of the transaction, Medexus obtained all right, title and interest to the IXINITY product and the related Hemophilia B business and intellectual property. In addition, Aptevo BioTherapeutics personnel responsible for the sale and marketing of ~~its hyperimmune business which consisted~~IXINITY also transitioned to Medexus as part of the ~~following products:~~ ~~WinRho~~^® ~~SDF for autoimmune platelet disorder and hemolytic disease of the newborn; HepaGam B~~^® ~~for the prevention of Hepatitis B following liver transplantation and for treatment following hepatitis B exposure; and VARIZIG~~^® ~~for treatment following exposure to varicella zoster virus for individuals with compromised immune systems (Hyperimmune Business). As of September 30, 2017, the Hyperimmune Business~~transaction. Aptevo BioTherapeutics met all the conditions to be classified as a discontinued operation since the sale of ~~Hyperimmune Business~~Aptevo BioTherapeutics represented a strategic shift that will have a major effect on the Company’s operations and financial results. ~~The Company~~Aptevo will not have further significant involvement in the operations of the discontinued ~~Hyperimmune Business.~~Aptevo BioTherapeutics business. The operating results of ~~the Hyperimmune Business~~Aptevo BioTherapeutics are reported as income (loss) from ~~the~~ discontinued operations, ~~both pre-tax and net of tax,~~ in the condensed consolidated statements of operations for all periods presented. The gain recognized on the sale of ~~the Hyperimmune Business~~Aptevo BioTherapeutics is presented in income (loss) from discontinued operations ~~both pre-tax and net of tax,~~ in the condensed consolidated statement of operations. In addition, on the consolidated ~~and condensed~~ balance ~~sheets~~sheet as of December 31, ~~2016,~~2019, the assets and liabilities held for sale have been presented separately. See Note 2 - Sale of ~~Hyperimmune Business~~Aptevo BioTherapeutics for additional information.

The accompanying ~~unaudited~~financial statements have been prepared on a basis that assumes we will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. We have suffered recurring losses from operations and negative cash flows from operating activities. When considered in aggregate, these factors raised substantial doubt about our ability to continue as a going concern in prior periods. We believe that our existing cash resources, the cash to be generated from future royalty and deferred payments, and the new Credit Agreement of $25 million with Midcap Financial Trust, will be sufficient to meet our projected operating requirements and debt service for at least twelve months from the date of issuance of these financial statements. We expect to raise additional funds to support our operating and capital needs in 2021.

We continue to face significant challenges and uncertainties and, as a result, our available capital resources may be consumed more rapidly than currently expected due to: (a) changes we may make to the business that affect ongoing operating expenses; (b) changes we may make in our business strategy; (c) changes we may make in our research and development spending plans; (d) potential decreases in our expected milestone and deferred payments from Medexus with respect to IXINITY; (e) potential decreases in our expected royalty payments from Pfizer with respect to RUXIENCE; and (f) other items affecting our forecasted level of expenditures and use of cash resources. We may attempt to obtain additional funding through our existing equity sales agreement with Lincoln Park Financial LLC or our Equity Distribution Agreement with Piper Sandler & Co (Piper Sandler), or other public or private financing, collaborative arrangements with strategic partners, or through credit lines or other debt financing sources to increase the funds available to fund operations. However, we may not be able to secure such funding in a timely manner or on favorable terms, if at all. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us. Without additional funds, we may be forced to delay, scale back or eliminate some of our research and development activities or other operations and potentially delay product development in an effort to provide sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development and commercialization goals may be adversely affected. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, we may experience delays or difficulties to the financing environment and raising capital due to economic uncertainty.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). These ~~unaudited interim~~ condensed consolidated financial statements ~~have been prepared on the same basis as the audited financial statements and~~ include all adjustments, which include normal recurring adjustments, necessary for the fair presentation of the Company’s financial position.

On August 6, 2015, Emergent BioSolutions Inc., (Emergent or former parent), announced a plan to separate into two independent publicly traded companies. To accomplish this separation, Emergent created Aptevo Therapeutics Inc. or Aptevo, to be the parent company for the development-based biotechnology business focused on novel oncology and hematology therapeutics. Aptevo was incorporated in Delaware in February 2016 as a wholly owned subsidiary of Emergent. To effect the separation, Emergent made a pro rata distribution of Aptevo’s common stock to Emergent’s stockholders on August 1, 2016. We are currently trading on the NASDAQ Global Market under the symbol “APVO.”

Prior to August 1, 2016, the consolidated financial statements were prepared on a “carve-out” basis for the purpose of presenting Aptevo’s financial position, results of operations, and cash flows, and were derived from Emergent’s consolidated financial statements and accounting records. Aptevo did not operate as a standalone entity in the past and accordingly the selected financial data presented herein is not necessarily indicative of Aptevo’s future performance and does not reflect what Aptevo’s performance would have been had Aptevo operated as an independent publicly-traded company prior to August 1, 2016. The consolidated financial statements reflect Aptevo’s financial position, results of operations, and cash flows as a separately operated business in conformity with GAAP post the August 1, 2016 spin-off.

Prior to August 1, 2016, the consolidated financial statements included an allocation of certain assets and liabilities that have historically been held at the Emergent corporate level but which were specifically identifiable or allocable to Aptevo. All Aptevo intracompany transactions and accounts have been eliminated. All intercompany transactions between Aptevo and Emergent are considered to be effectively settled in the consolidated financial statements at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected in the consolidated statement of cash flows as a financing activity and in the consolidated balance sheet as a net investment from Emergent. As of August 1, 2016, in connection with the separation and distribution, Emergent’s investment in the Company’s business was redesignated as stockholder’s equity and allocated between common stock and additional paid-in capital based on the number of shares issued at the distribution date.

Prior to August 1, 2016, Aptevo’s consolidated financial statements included an allocation of expenses related to certain Emergent corporate functions, including senior management, legal, human resources, finance, information technology, and quality assurance. These expenses were allocated to Aptevo based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata basis of expenses, headcount, square footage, or other measures. Aptevo considers the expense allocation methodology and results to be reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred had Aptevo operated as an independent, publicly-traded company for the periods presented.

Prior to August 1, 2016, the income tax amounts in these consolidated financial statements were calculated based on a separate return methodology and presented as if Aptevo’s operations were a standalone taxpayer in each of its tax jurisdictions.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

~~Accounts Receivable~~The condensed consolidated financial statements include the accounts of the company and its wholly owned subsidiaries: Aptevo Research and Development LLC and Aptevo BioTherapeutics LLC (for the period prior to the sale to Medexus). All intercompany balances and transactions have been eliminated.

~~Aptevo records accounts receivable net~~In March 2020, we effected a 1-for-14 reverse stock split (the “Reverse Split”) of ~~an allowance for doubtful accounts based upon its assessment~~our common stock pursuant to which every 14 shares of ~~collectability,~~our common stock issued and outstanding as of ~~applicable discounts. Aptevo performs ongoing credit evaluations~~March 26, 2020 were automatically combined into one issued and outstanding share of ~~its customers and generally does not require collateral. As~~common stock. No fractional shares were issued as a result of ~~its sale~~the reverse stock split. Stockholders of ~~its Hyperimmune Business~~record who would otherwise have been entitled to receive a fractional share received a cash payment in ~~September 2017, accounts receivable net of an allowance for doubtful accounts has~~lieu thereof. All share and per share information with respect to our common stock have been ~~revised~~restated to reflect the ~~removal~~effect of the Reverse Split for all periods presented. Refer to Note 8 for additional information.

We are entitled to receive royalty revenue from Pfizer related to sales of a rituximab biosimilar product, RUXIENCE^®. The payment from Pfizer relates to an agreement acquired by Aptevo as part of its ~~allowance~~spin-off from Emergent BioSolutions in 2016, which applies a fixed royalty rate of 2.5% on net sales in the United States, European Union, and Japan. The agreement was originally executed by Trubion Pharmaceuticals (which was subsequently acquired by Emergent BioSolutions Inc.,) and Wyeth (a wholly-owned subsidiary of Pfizer). The royalty term runs until the seventh anniversary of the first commercial sale of the CD20 biosimilar. CD20 biosimilar product payments to Aptevo are due within 60 days after the end of each quarter. We do not have future performance obligations under this agreement. We apply the royalty recognition constraint required under the guidance for ~~doubtful accounts, as~~sales-based royalties which requires a sales-based royalty to be recorded no sooner than the ~~prior balance solely~~underlying sale. Therefore, royalties on sales of products commercialized by Pfizer are recognized in the quarter the product is sold. Pfizer generally reports sales information to us within 60 days of quarter end. Unless we receive finalized sales information for the respective quarter, we estimate the expected royalty proceeds based on an analysis of historical experience, analyst expectations, interim data provided by Pfizer, including their publicly announced sales, and other publicly available information. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known, typically the following quarter.

We are entitled to receive future deferred payments and future milestone payments from Medexus. The payments from Medexus constitute contingent consideration related to our sale of IXINITY in 2020, which is treated as a discontinued operation in the ~~Hyperimmune Business. See Note 2, Sale~~accompanying statement of ~~Hyperimmune Business for additional information on the divestiture.~~

operations. We recognize revenue if four basic criteria have been met: (1) there is persuasive evidence of an arrangement, (2) delivery has occurred or services have been rendered, (3) the fee is fixed or determinable, and (4) collectability is reasonably assured. Where the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such timetreat contingent consideration arising from discontinued operations as ~~all criteria are met.~~

~~Aptevo recognized a tax impact due to the restatement of our tax liability (see Note 10 – Restatement), as well as the exception to the Intraperiod Tax Allocation rules~~gain contingencies in accordance with ASC ~~740-20-45-7. The exception required that~~450-30, whereby such gain contingencies usually are not recognized in the financial statements until the period in which all ~~items (including discontinued operations) be considered in determining~~contingencies are resolved and the gain is realized or realizable. As Medexus communicates payment amounts and sales details subsequent to quarter-end and there is uncertainty as to the amount of the ~~tax benefit resulting~~payment before quarter-end, we record deferred payments in the quarter the payment is received.

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, useful lives of equipment, commitments and contingencies, stock-based compensation forfeiture rates, and collectability of receivables. Given the global economic climate and additional or unforeseen effects from the ~~loss~~COVID-19 pandemic, these estimates are becoming more challenging, and actual results could differ materially from those estimates.

Our other significant accounting policies were reported in ~~continuing operations.~~

~~In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), an updated standard~~our Annual Report on revenue recognition. ASU 2014-09 provides enhancements to the quality and consistency of how revenue is reported by companies while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards or GAAP. The main purpose of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element arrangements. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of the new revenue standard for periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than the original effective date. Accordingly, the updated standard is effective for Aptevo in the first quarter of fiscal 2018. Aptevo has assembled a cross functional team to identify the population of contracts with customers and evaluate them under the provisions of ASU No. 2014-09. Aptevo intends to adopt the new standard on a modified retrospective basis. Under this implementation method, Aptevo will recognize the cumulative effect of initially applying the new guidance as an adjustment to the opening retained earnings balance for the annual reporting period of initial application. While Aptevo is continuing its assessment of all the potential impacts of the new standard, it does not expect the implementation of the standard to have a material impact on Aptevo’s consolidated financial position, results of operations or cash flow.

In August 2014, the FASB issued ASU No.2014-15 Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under the new guidance, management is required to assess an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The provisions of this standard are effective for annual periods ending after December 31, 2016, and for annual and interim periods thereafter. Aptevo adopted this guidanceForm 10-K for the year ended December 31, ~~2016 and management believes~~2019 that ~~Aptevo’s existing cash, cash equivalents and short-term investments will be sufficient to fund its operations for twelve months~~was filed with the SEC on March 25, 2020. Our other significant accounting policies have not changed materially from the ~~date of this filing. Aptevo is required to reassess this position on a quarterly basis and future facts and circumstances may yield a different conclusion.~~policies previously reported.

On December 18, 2019 we adopted ASU No. ~~2016-02, Leases~~2019-12, Income Taxes (Topic ~~842). Under~~740), which amended the existing standards for income tax accounting, eliminating the legacy exception on how to allocate income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholder’s equity. We did not adjust comparative periods in our financial statements prior to that period.

Adoption of the new ~~guidance, lessees will be required to recognize~~standard resulted in determining the tax effect of income or loss from continuing operations using a ~~lease liability and~~computation that does not consider the tax effects of items that are not included in continuing operations. As such, we did not record a right-of-use asset for all leases (with the exception of short term leases) at the commencement date. Lessor accounting under ASU 2016-02 is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning ontax expense or after December 15, 2018 and early adoption is permitted. Under ASU 2016-02, lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presentedbenefit in the ~~financial statements. Lessees and lessors may not apply a full retrospective transition approach. The ASU will be effective~~first or second quarter of 2020. Refer to Note 2 for the Company starting on January 1, 2019. Aptevo is continuing to evaluate the impact of the application of this ASU on our consolidated financial statements and disclosures. We expect to recognize right of use assets and lease liabilities.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies the accounting for share-based payment award transactions including the financial statement presentation of excess tax benefits and deficiencies, classification of awards as either equity or liabilities, accounting for forfeitures and classification on the statement of cash flows. Aptevo adopted this standard effective January 1, 2017. Upon adoption of the standard, excess tax benefits and deficiencies resulting from stock-based compensation awards vesting and exercises are now recognized as discrete items in the statement of operations. Aptevo has elected to maintain its current forfeitures policy and will continue to include an estimate of forfeitures when recognizing stock-based compensation expense. Additionally, cash paid by Aptevo when directly withholding shares for tax withholding purposes will continue to be classified as a financing activity in the condensed consolidated statement of cash flows as required by the standard. The adoption of this standard did not have a material impact on Aptevo’s consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which clarifies the classification and presentation of eight specific cash flow issues in the statement of cash flows. This standard is effective beginning January 1, 2018, with early adoption permitted. The new standard requires a retrospective transition. Aptevo is aware the adoption of this standard will have an impact for restricted cash, and evaluating further impacts on its consolidated financial statements.additional information.

On ~~August 31, 2017, Aptevo~~February 28, 2020, we entered into ~~a sale agreement~~an LLC Purchase Agreement with ~~Saol International Limited (Saol) whereby~~Medexus, pursuant to which Aptevo ~~agreed to sell its~~ ~~Hyperimmune Business. The sale was completed on September 28, 2017.~~

~~At the closing~~sold all of the ~~sale, Saol paid an amount equal~~issued and outstanding limited liability company interests of Aptevo BioTherapeutics, a wholly owned subsidiary of Aptevo. As a result of the transaction, Medexus obtained all right, title and interest to ~~$65.0~~the IXINITY product and the related Hemophilia B business and intellectual property.

From the $30 million ~~including $3.3~~payment at closing, Medexus withheld $0.8 million, which ~~was deposited~~we collected in anfull on June 29, 2020, from the escrow account for ~~the purposes of satisfying any indemnification claims brought by Saol pursuant~~working capital adjustments. In addition to the ~~LLC sale agreement. In addition,~~payment received at closing, Aptevo may ~~receive (1)~~also earn milestone and deferred payments from Medexus in the future. We used $22.1 million of the $30 million in proceeds to repay in full our term debt facility with MidCap Financial Trust, including $20 million of principal and $2.1 million in an ~~additional potential milestone payment totaling up to $7.5~~end of facility fee, accrued interest, legal fees and prepayment fees. We recorded a $2.1 million ~~related to~~loss on extinguishment of debt in the ~~achievement~~first quarter of ~~certain gross profit milestones and (2) up to $2.0 million related to collection of certain accounts receivable after the closing.~~

The net gain on sale of ~~the~~ ~~Hyperimmune Business~~Aptevo BioTherapeutics, totaling ~~$52.5~~$14.3 million, was calculated as the difference between the fair value of the consideration received for Aptevo BioTherapeutics, less the ~~Hyperimmune Business, the~~net carrying value of the ~~net~~ assets transferred to ~~Saol,~~Medexus, less the transaction costs incurred and a working capital adjustment. The net gain on sale of the business may be adjusted in future periods by the contingent consideration based upon the achievement of certain gross profit milestones and collection of certain outstanding accounts receivable.

The purchase agreement included a target net working capital of $9.5 million compared to preliminary net working capital sold of $9.1 million. The difference between the target net working capital and the preliminary working capital was due to Medexus. The parties agreed to defer payment of this amount for a period of six months, during which time, the amount will be reduced by the cost of certain transition services performed by Aptevo during the transition service period, as agreed to by both parties (the “Minimum TSA Fund”). At June 30, 2020, we no longer have a future obligation to Medexus related to working capital and the amount due from Medexus in the Minimum TSA Fund was $0.1 million, which we have included in other current assets in the accompanying balance sheet.

~~As a result of Aptevo’s decision to sell the~~ ~~Hyperimmune Business~~, the condensed consolidated balance sheets for the year ended December 31, 2016, the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and September 30, 2017, have been revised to reflect the results from the sale of the ~~Hyperimmune Business, and related assets and liabilities, as discontinued operations. The amounts calculated for the discontinued operations include certain allocations that management believes fairly reflect the~~ ~~Hyperimmune Business~~ ~~operations.~~

The following table presents a reconciliation of the carrying amounts of assets and liabilities of ~~the hyperimmune assets~~Aptevo BioTherapeutics held for sale, net in the unaudited condensed consolidated balance sheet (in thousands):

The following table represents the components attributable to ~~the Hyperimmune Business~~Aptevo BioTherapeutics presented as income (loss) from discontinued operations in the unaudited condensed consolidated statements of operations (in thousands):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Revenues:

Product sales

$
6,380

$
6,589

$
18,886

$
20,462

Total revenues

6,380

6,589

18,886

20,462

Costs and expenses:

Cost of product sales

2,586

2,053

7,730

8,848

Research and development

3

37

44

92

Selling, general and administrative

189

540

944

2,008

Income from operations

3,602

3,959

10,168

9,514

Gain on sale of Hyperimmune Business

52,538

—

52,538

—

Income from discontinued operations, before income taxes

56,140

3,959

62,706

9,514

Income tax expense

(21,257
)

(2,291
)

(23,076
)

(3,250
)
Income from discontinued operations

$
34,883

$
1,668

$
39,630

$
6,264

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2020		2019			2020			2019
Loss from operations	$	—	$	(2,492	)	$	(1,580	)	$	(2,769	)
Gain on sale of Aptevo BioTherapeutics		—		—			14,338			—
Deferred payment from Medexus		—		—			140			—
Income (loss) from discontinued operations	$	—	$	(2,492	)	$	12,898		$	(2,769	)

~~Amortization for~~Medexus communicated their second quarter 2020 net IXINITY sales to Aptevo in July and expects to make a deferred payment, within 45 days after quarter-end per the ~~Hyperimmune Business was $0.3 million and $0.9 million for~~LLC Purchase Agreement, to Aptevo of approximately $0.2 million. As such, we will record the three and nine months ended September 30, 2017 and September 30, 2016, respectively. There was no depreciation, capital expenditures or other significant operating or investing non-cash items for the three and nine months ended September 30, 2017 and 2016.deferred payment amount related to Medexus’ second quarter sales of IXINITY as a gain when collected.

On July 20, 2017, our wholly owned subsidiary Aptevo Research and Development LLC (Aptevo R&D), entered into a collaboration and option agreement (Collaboration Agreement) with Alligator Bioscience AB (Alligator), pursuant to which Aptevo and Alligator will collaboratively develop ALG.APV-527, a lead bispecific antibody candidate simultaneously targeting 4-1BB (CD137), a member of the TNFR superfamily of a costimulatory receptor found on activated ~~T cells,~~T-cells, and 5T4, a tumor antigen widely overexpressed in a number of different types of cancer. ~~This product candidate is built on our novel ADAPTIR platform, which is designed to expand on the utility~~

Alligator and ~~effectiveness of therapeutic antibodies. Under this Collaboration Agreement, Alligator also granted to~~ Aptevo ~~a time-limited option to enter into a second agreement~~have initiated discussions with ~~Alligator~~potential partners for the ~~joint development of a separate bispecific antibody candidate simultaneously targeting 4-1BB (CD137) and 5T4 a tumor antigen that Aptevo R&D and Alligator will collaboratively select.~~

~~In accordance with the terms of the Collaboration Agreement, the parties intend to develop the lead bispecific antibody candidate targeting 4-1BB (CD137) and 5T4 through the completion of Phase II~~ clinical trials in accordance with an agreed upon development plan and budget. Subject to certain exceptions for Aptevo’s manufacturing and platform technologies, the parties will jointly own intellectual property generated in the performance of the development activities under the Collaboration Agreement.

Following the completion of the anticipated development activities under the Collaboration Agreement, the parties intend to seek a third-party commercialization partner for this product candidate, or, in certain circumstances, may elect to enter into a second agreement granting rights to either Aptevo R&D or Alligator to allow such party to continue the development and commercialization of ~~this product candidate. Under~~ALG.APV-527. The parties, Alligator and Aptevo, have delayed moving ALG.APV-527 into the ~~terms~~clinic to focus on partnering efforts.

We assessed the arrangement in accordance with ASC 606 and concluded that the contract counterparty, Alligator, is not a customer. As such the arrangement is not in the scope of ~~this~~ASC 606 and is instead treated as a collaborative agreement under ASC 808. ASU 2018-18, under ASC 808, clarifies the interactions between Topic 808 and 606. ASU 2018-18 is a targeted amendment to ASC 808 that requires that if the counterparty in a collaborative arrangement is a customer for goods and services that is a distinct unit, the transaction should be considered as revenues from customers. We concluded that because the Collaboration Agreement ~~the parties intend~~with Alligator is a cost sharing agreement, there is no revenue and therefore ASU 2018-18 is not applicable to ~~share revenue received from a third-party commercialization partner equally, or, if~~ the ~~development costs are not equally shared under this~~ Collaboration Agreement with Alligator.

For the three and six months ended June 30, 2020, we recorded an immaterial increase in ~~proportion to~~research and development expense. For the three and six months ended June 30, 2019, we recorded a decrease in our research and development ~~costs borne by each party.~~

~~The Collaboration Agreement also contains several points in development at which either party may elect to “opt-out” (i.e., terminate without cause)~~expense of $0.1 million and following a termination notice period, cease paying development costs for this product candidate, which would be borne fully by the continuing party. Following an opt-out by a party, the continuing party will be granted exclusive rights to continue the development and commercialization of the product candidate, subject to a requirement to pay a percentage of revenue received from any future commercialization partner for this product, or, if the continuing party elects to self-commercialize, tiered royalties on the net sales of the product by the continuing party ranging from the low to mid-single digits, based on the point in development at which the ‘opt-out’ occurs. The parties have also agreed on certain technical criteria or ‘stage gates’$0.5 million, respectively, related to the development of this product candidate that, if not met, will cause an automatic termination and wind-down of this Collaboration Agreement and the activities thereunder, provided that the parties do not agree to continue.

~~The Collaboration Agreement contains industry standard termination rights, including for material breach following a specified cure period, and in the case of a party’s insolvency.~~

~~In August 2014, Aptevo entered into a~~ collaboration agreement with MorphoSys AG (MorphoSys Agreement) for the joint development of MOR209/ES414, a targeted immunotherapeutics protein, which activates host T-cell immunity specifically against cancer cells expressing prostate specific membrane antigen, an antigen commonly overexpressed on prostate cancer cells. Effective August 31, 2017, MorphoSys terminated the MorphoSys Agreement. As a result of the termination, Aptevo has no ongoing obligation related to this agreement and therefore recognized the total remaining deferred revenue balance of $3.7 million as Collaborations revenue in the third quarter of 2017.arrangement.

The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The level in the fair value hierarchy within which the fair value measurement is reported is based on the lowest level input that is significant to the measurement in its entirety. The three levels of the hierarchy are as follows:

Level 1— Quoted prices in active markets for identical assets and liabilities;

Level 2— Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

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

~~The Company’s financial assets measured~~At June 30, 2020 and December 31, 2019, we had $5.6 million and $12.5 million in money market funds, respectively. Money market funds are level one balances as they are valued at fair value, ~~consisted of~~which is the ~~following as of September~~closing price reported by the fund sponsor from an actively traded exchange. At June 30, ~~2017~~2020, and December 31, ~~2016:~~

September 30, 2017

(in thousands)

Level 1

Level 2

Level 3

Total

Financial Assets:

Money market funds

$
16,778

$
—

$
—

$
16,778

Corporate bonds

—

8,973

—

8,973

US government and agency debt securities

—

11,973

—

11,973

Total assets

$
16,778

$
20,946

$
—

$
37,724

December 31, 2016

(in thousands)

Level 1

Level 2

Level 3

Total

Financial Assets:

Money market funds

$
5,215

$
—

$
—

$
5,215

Corporate bonds

—

9,951

—

9,951

US government and agency debt securities

—

34,898

—

34,898

Total assets

$
5,215

$
44,849

$
—

$
50,064

~~If quoted market prices in active markets for identical assets are~~2019, we did not available to determine fair value, then the Company uses quoted prices of similar instruments and other significant inputs derived from observable market data obtained from third-party data providers. These investments are included in Level 2 and consist of debt securities of U.S government agencies and corporate bonds. There were no transfers between Levels 1 and 2 during thehave any level two or level three ~~and nine months ended September 30, 2017.~~assets.

Cash held in demand deposit accounts of $69.1 million and $4.4 million is excluded from our fair-value hierarchy disclosure as of September 30, 2017 and December 31, 2016, respectively. The carrying amounts for receivables, accounts payable and other current monetary assets and liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments.

Investments are classified as available-for-sale securities and are carried at fair value with unrealized temporary holding gains and losses excluded from net income or loss and reported in other comprehensive income or loss and also as a net amount in accumulated other comprehensive income or loss until realized. Available-for-sale securities are written down to fair value through income whenever it is necessary to reflect other than temporary impairments. The Company determined that the unrealized losses on its investments as of September 30, 2017 and December 31, 2016 were temporary in nature. The Company currently has the ability but does not intend to sell these investments before recovery of their amortized cost basis. All short-term investments are limited to a final maturity of less than one year from the reporting date.

September 30, 2017

(in thousands)

Amortized
Cost

Gross Unrealized
Holding Gains

Gross Unrealized
Holding (Losses)

Estimated Fair
Value

Cash equivalents:

Money market fund

$
16,778

$
—

$
—

$
16,778

Total cash equivalents

$
16,778

$
—

$
—

$
16,778

Short-term investments:

Corporate bonds

$
8,978

$
—

$
(5
)

$
8,973

US government and agency debt securities

11,978

—

(5
)

11,973

Total short-term investments

$
20,956

$
—

$
(10
)

$
20,946

December 31, 2016

(in thousands)

Amortized
Cost

Gross Unrealized
Holding Gains

Gross Unrealized
Holding (Losses)

Estimated Fair
Value

Cash equivalents:

Money market fund

$
5,215

$
—

$
—

$
5,215

Total cash equivalents

$
5,215

$
—

$
—

$
5,215

Short-term investments:

Corporate bonds

$
9,959

$
1

$
(9
)

$
9,951

US government and agency debt securities

34,923

—

(25
)

34,898

Total short-term investments

$
44,882

$
1

$
(34
)

$
44,849

The Company’s cash equivalents are highly liquid investments with a maturity of 90 days or less at the date of purchase and include time deposits and investments in money market funds. Restricted cash includes $2.6 million securing letters of credit. $1.9 million of the ~~following:~~$2.6 million restricted cash balance mature by the end of the second quarter of 2021, therefore, we have classified them as restricted cash, current on the balance sheet.

The following table shows our cash, cash equivalents and long-term restricted cash as of June 30, 2020 and December 31, 2019:

On February 28, 2020, we repaid the ~~impact~~entire amount outstanding under the Credit and Security Agreement with MidCap Financial Trust from the proceeds of the sale of ~~the~~ ~~Hyperimmune Business. See Note 2 -Sale of Hyperimmune Business~~

~~Due~~Aptevo BioTherapeutics to Medexus. In addition to the ~~sale~~outstanding principal of ~~Aptevo’s Hyperimmune Business, the remaining inventory is solely~~$20 million, we paid $2.1 million in an end of facility fee, accrued interest, legal fees and prepayment fees. We recorded an adjustment of $0.1 million related to ~~IXINITY. CMC ICOS Biologics, Inc. (CMC) is the sole manufacturer~~unamortized loan initiation fees and a $2.1 million loss on extinguishment of the bulk drug substance for our IXINITY product. During 2015, we ordered nine manufacturing lots of bulk drug substance from CMC and only one of those lots was successfully manufactured and released in 2015. On October 4, 2016, we provided a Notice of Interruption in Manufacturing, or Notice, to the U.S. Food and Drug Administration (FDA), notifying the FDA of a potential interruptiondebt in the ~~supply~~first quarter of IXINITY due to the ongoing manufacturing challenges with the manufacturer of the bulk drug substance. On March 15, 2017, we announced the successful manufacture of a new bulk drug substance batch of IXINITY, providing new supply of IXINITY for the commercial market in May 2017.2020.

On June 17, 2017, the Company and CMC entered into a new non-exclusive Amended and Restated Commercial Supply, or Restated Supply Agreement, for the commercial development and manufacture of IXINITY. Pursuant to the terms of the Restated Supply Agreement, CMC agreed to manufacture IXINITY in the quantity of batches provided to CMC on a twenty-four month rolling forecast. Beginning 2018, the minimum and maximum batches will be four and ten, respectively, in a calendar year. Multiple batches ordered in succession with no changeover to another product between batches, or a campaign, shall receive an incremental discounted price.

In accordance with the Restated Supply Agreement, a $7.0 million reserve held by CMC will be applied to, at a minimum, the next seven batches manufactured through the end of 2017 as a price concession. As a result, at least the next seven batches will have reduced raw materials or other related CMC costs associated with the inventory. Aptevo will also see an impact on the Company’s statement of operations due to a lower costs of goods sold associated with this inventory, which will also result in higher gross margins as sales are recognized. Any portion of the $7.0 million reserve held by CMC that remains unutilized as of December 25, 2017 shall be paid to the Company in cash on or before December 31, 2017. As of September 30, 2017, $2.6 million has been applied against the reserve and recorded as a reduced cost to inventory. The Restated Supply Agreement has a five-year term renewable with twenty-four months’ prior notice before the expiry of the term for successive two-year terms.

On August ~~4, 2016,~~5, 2020, we entered into a ~~$35.0 million~~ Credit and Security Agreement ~~(the Credit~~(Credit Agreement) with MidCap Financial Trust. The Credit Agreement ~~prior to the amendments described below,~~ provided us with ~~up to $35.0~~$25 million of available borrowing ~~capacity, available (subject~~capacity. Refer to ~~certain conditions)~~Note 12 – Subsequent Events for further details.

We have an operating lease related to our office and laboratory space in ~~two tranches of $20.0 million~~Seattle, Washington. This lease was amended and ~~$15.0 million. Amounts drawn under the Credit Agreement bear interest at a rate of LIBOR plus 7.60% per annum.~~extended in March 2019. The ~~first tranche of $20.0 million was funded on the closing date~~term of the ~~Credit Agreement with~~amended lease is through April 2030 and we have two options to extend the ~~second tranche~~lease term, each by five years, as well as a one-time option to terminate the lease in April 2023. The lease was further amended effective August 2019 to reduce the square footage of ~~$15.0 million to become available (subject to certain conditions) following the date Aptevo and its subsidiaries: (1) achieve net commercial product revenue of $40.0 million on~~our rented area.

We recorded a ~~trailing twelve-month basis, and (2) receive an additional $20.0 million in cash from Emergent. Emergent made~~right-of-use asset for this ~~payment~~lease on January ~~13, 2017.We paid debt issuance costs~~1, 2019, of $1.2 million which reflects the amount of the remaining lease liability, less the balance of accrued and deferred rent, and net of the unamortized balance of tenant incentives. We also recorded a lease liability of $1.9 million which reflects the present value of which $1.5 million remains unamortized at September 30, 2017. The loan repayment included interest (no principal) through August 2018 and was set to transition to principal and interest as of August 2018 and to be repaid in full on February 1, 2021 (54 months). Amounts drawn under the ~~Credit Agreement bear interest at a~~remaining lease payments, discounted using our incremental borrowing rate of ~~LIBOR plus 7.60% per annum.~~16.95% for the remaining term of the lease.

~~The Credit Agreement contained financial covenants that require us~~In March 2019, we recorded an increase to our right-of-use asset for this lease amendment of $3.2 million which reflects the amount of the remaining lease liability through April 30, 2023, less the balance of accrued and deferred rent, and net of the unamortized balance of tenant incentives. In March 2019, we also recorded an increase to our ~~subsidiaries to maintain increasing minimum net commercial product revenue~~lease liability for ~~each twelve-month period ending~~this lease amendment of $3.2 million which reflects the present value of the remaining lease payments through April 30, 2023, discounted using our incremental borrowing rate of 14.45% for the remaining term of the lease on the ~~last day~~date of each calendar quarter, commencing with the twelve-month period ending September 30, 2016. As of March 31, 2017, the Company’s net minimum revenue did not meet the required minimum for the twelve months ended March 31, 2017.amendment.

As a result, on May 11, 2017, we and MidCap Financial Trust entered into an amendment to the Credit Agreement to, among other things, waive the existing event of default and revise the financial covenants pertaining to the minimum required commercial product revenue for the twelve months ended March 31, 2017 and future rolling twelve month periods. As a result of the amendment, the Company was in compliance with the modified minimum net revenue covenant forFor the three and six months ended June 30, ~~2017.~~ 2020, we recorded $0.2 million and $0.3 million, respectively, related to variable expenses.

As ~~such, amounts owed under~~of June 30, 2020, we have operating leases for one piece of lab equipment and four copiers in our Seattle, Washington headquarters. The future expense for these leases will be straight-line and will include any variable expenses that arise.

As of June 30, 2020, we had one equipment lease classified as a financing lease as the ~~Credit Facility are classified based on their contractual maturities.~~lease transfers ownership of the underlying asset to us at the end of the lease term. The remaining term of this lease is four months and has a remaining expense obligation of less than $0.1 million. There were no financing lease payments in the three months or six months ended June 30, 2020.

The long term portion of the ~~Credit Agreement to: (1) extend~~lease liabilities included in the time period through which the Company could draw the second tranche from August 2017 to March 2018, (2) increase the exit fee of 5.75% of the aggregate principal amount under the Credit Agreement for repayment or prepayment other than scheduled amortization paymentsamounts above is $2.9 million and the ~~final payment~~remainder of ~~principal to 6.75% and (3) permit MidCap Financial Trust to obtain an affirmative lien~~our lease liabilities are included in other current liabilities on ~~the intellectual property of the Company, upon the earlier of (i) the Company’s draw down of the second tranche or (ii) the Company’s cash, cash equivalents, and short-term investments~~our condensed consolidated balance ~~descend below a minimum cash threshold of $25 million.~~

On September 28, 2017, the Company entered into a second amendment of the Credit Agreement (Amendment No. 2) in order to permit the sale under the LLC purchase agreement described in Note 2 Sale of Hyperimmune Business, and to reflect changes in the remaining business as a result of such sale.

Pursuant to the Amendment No. 2, the agent and the lenders consented to the LLC purchase agreement and the consummation of the sale transaction, released the agent’s liens on the assets transferred to Venus Bio Therapeutics Sub LLC (Venus) prior to the sale, and agreed that no prepayment of the term loans under the credit agreement would be required as a result the sale.sheets.

As of the Amendment No. 2, the agent and the lenders agreed that: (i) the commitments of the lenders to make the remaining $15 million tranche of loans under the credit agreement were terminated, (ii) the covenant levels set forth in the minimum net commercial product revenue covenant were revised, (iii) a new covenant was added requiring the Company to maintain a minimum $10.0 million unrestricted cash balance, and (iv) the date on which the term loans begin to amortize will be extended to February 1, 2019 if the Company achieves net commercial product revenues of $16 million for the twelve month period ending June 30, ~~2018~~2020, the weighted average remaining lease term and ~~maintains such level of net commercial product revenues~~weighted discount rate for ~~each quarter prior to February 1, 2019 thereafter.~~operating leases was 2.8 years and 14.54%.

On March 11, 2020, we held a Special Meeting of Stockholders at which our stockholders approved a series of alternate amendments to the Amended and Restated Certificate of Incorporation to effect, at the option of our Board of Directors, a reverse split of Aptevo’s common stock at a ratio ranging from 1-for-2 to 1-for-20, inclusive, with the effectiveness of one of such amendments and the abandonment of the other amendments, or the abandonment of all amendments, to be determined by the Board in its sole discretion following the Special Meeting. The specific 1-for-14 reverse split ratio was subsequently approved by the Board on March 23, 2020. On March 26, 2020, the Company filed a Certificate of Amendment of Amended and Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to effect a 1-for-14 reverse stock split of the Company’s outstanding common stock.

No fractional shares were issued as a result of the reverse stock split. Stockholders of record who would otherwise be entitled to receive a fractional share received a cash payment in lieu thereof.

We have adjusted all common stock and stock equivalent figures retroactively in this Form 10-Q for all periods presented to reflect the reverse stock split.

Basic net ~~income (loss)~~loss per share is calculated by dividing the net ~~income (loss)~~loss by the weighted average number of common shares outstanding for the period. Diluted net ~~income (loss)~~loss per share is computed by dividing the net ~~income (loss)~~loss by the weighted average number of common share equivalents outstanding for the period using the as-if converted method. For the purpose of this calculation, warrants, stock options and restricted stock units (RSUs) are only included in the calculation of diluted net income per share when their effect is dilutive.

~~Prior~~We utilize the control number concept in the computation of diluted earnings per share to ~~the spin-off, Aptevo did not operate as a separate entity and as a result did not have any~~determine whether potential common stock ~~outstanding~~instruments are dilutive. The control number used is loss from continuing operations or income from discontinued operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other ~~than 1,000 shares held by Emergent. The~~categories of income or loss, regardless of their anti-dilutive effect on such categories. Therefore, no dilutive effect has been recognized in the calculation of ~~basic and diluted net loss~~income from discontinued operations per ~~share assumes that the 20,229,849 ordinary shares issued to Aptevo stockholders in connection with the spin-off were outstanding from the beginning of the periods presented.~~share.

The following table presents the computation of basic and diluted net ~~income (loss)~~loss per share (in thousands, except share and per share amounts):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016
Restated

2017

2016
Restated

Net income (loss)

$
37,867

$
(71,741
)

$
16,733

$
(97,469
)

Basic net income (loss) per share:

Net loss from continuing operations

$
0.14

$
(3.63
)

$
(1.08
)

$
(5.13
)
Net income from discontinued operations

$
1.63

$
0.08

$
1.87

$
0.31

Net income (loss)

$
1.77

$
(3.55
)

$
0.79

$
(4.82
)
Weighted-average shares used to compute per share
calculation

21,385,381

20,235,987

21,138,332

20,231,910

Diluted net income (loss) per share:

Net loss from continuing operations

$
0.14

$
(3.63
)

$
(1.08
)

$
(5.13
)
Net income from discontinued operations

$
1.61

$
0.08

$
1.87

$
0.31

Net income (loss)

$
1.75

$
(3.55
)

$
0.79

$
(4.82
)
Weighted-average shares used to compute per share
calculation

21,672,269

20,235,987

21,138,332

20,231,910

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Net loss from continuing operations	$	(6,803	)	$	(10,840	)	$	(16,804	)	$	(22,581	)
Income (loss) from discontinued operations		-			(2,492	)		12,898			(2,769	)
Net loss	$	(6,803	)	$	(13,332	)	$	(3,906	)	$	(25,350	)
Basic and diluted net income (loss) per share:
Net loss from continuing operations	$	(2.10	)	$	(3.37	)	$	(5.14	)	$	(8.69	)
Net income (loss) from discontinued operations	$	—		$	(0.77	)	$	3.95		$	(1.07	)
Basic and diluted net loss per basic share	$	(2.10	)	$	(4.14	)	$	(1.19	)	$	(9.76	)
Weighted-average shares used to compute per share calculations		3,232,811			3,221,074			3,269,410			2,598,552

The following table represents all potentially dilutive shares, which were all anti-dilutive and therefore excluded from the calculation of diluted net loss per share:

On March 11, 2019, we completed a public offering of common stock and warrants, as follows:

We received net proceeds of $20.2 million, net of transaction costs, as a result of this offering.

~~Note 9. Equity~~For the three months ended March 31, 2019, we issued 6,138 shares of common stock due to the vesting of RSUs. In addition, pursuant to our purchase agreement with Lincoln Park, we issued 13,991 of commitment shares in a non-cash transaction during the three months ended March 31, 2019.

On ~~August 1, 2016, in connection~~November 9, 2017, we entered into an Equity Distribution Agreement (the Equity Distribution Agreement) with Piper Sandler. The Equity Distribution Agreement provides that, upon the ~~spin-off~~terms and subject to the conditions set forth therein, we may issue and sell through Piper Sandler, acting as sales agent, shares of our common stock, $0.001 par value per share having an aggregate offering price of up to $17.5 million. We have no obligation to sell any such shares under the ~~Company from Emergent,~~Equity Distribution Agreement. The sale of such shares of common stock by Piper Sandler will be effected pursuant to a Registration Statement on Form S-3 which we filed on November 9, 2017. We issued ~~20.2 million~~no shares to Emergent stockholders and recorded a contribution from Emergent of $71.2 million. The transactions recorded in 2016 included a one-time payment of $45.0 million, and a working capital reimbursement for outstanding payments of $1.4 million, a noncash transfer of an intangible asset of $0.7 million, and a net transfer of cash from Emergent of $24.2 million. In addition,under the Equity Distribution Agreement in the first or second quarter of ~~2017 we received $20.0 million as payment for a promissory note issued at the time of the spin-off.~~2020.

The Company had no stock-based compensation plans of its own prior to the spin-off from Emergent; however certain Aptevo employees participated in Emergent’s stock-based compensation plans (Emergent Plans), which provided for the grants of stock options and restricted stock units (RSUs). The expense associated with Aptevo employees who participated in the Emergent Plans was allocated to the Company in the accompanying Statements of Operations for the associated periods prior to the spin off.

In connection with the spin-off ~~the Company~~from Emergent BioSolutions Inc. (Emergent) in August 2016, we adopted the Converted Equity Awards Incentive Plan (Converted Plan) and outstanding equity awards of Emergent held by Aptevo employees were converted into or replaced with equity awards of Aptevo (Conversion Awards) under the Converted Plan and were adjusted to maintain the economic value before and after the distribution date using the relative fair market value of the Emergent and Aptevo common stock based on the closing prices as of August 1, 2016. ~~There was no significant incremental stock-based compensation expense recorded as a result of the equity award conversion.~~ A total of ~~1.3~~0.1 million shares of Aptevo common stock have been authorized for issuance under the Converted Plan. Options issued as Conversion Awards were priced according to the Converted Plan. RSUs issued as part of the Converted Plan provide for the issuance of a share of ~~the Company’s~~Aptevo’s stock at no cost to the holder.

On August 1, 2016, the Company adopted the 2016 Stock Incentive Plan (2016 SIP). A total of ~~3.1~~0.2 million shares of Aptevo common stock have been authorized for issuance under the 2016 SIP in the form of ~~incentive~~equity stock options.

Stock options under the 2016 SIP generally vest pro rata over a three-year period and terminate ten years from the grant date, though the specific terms of each grant are determined individually. The Company’s executive officers and certain other employees may be awarded options with different vesting criteria, and options granted to non-employee directors also vest over a three-year period. Option exercise prices for new options granted by the Company equal the closing price of the Company’s common stock on the ~~NASDAQ Global~~Nasdaq Capital Market on the date of grant.

RSUs issued under the 2016 SIP provide for the issuance of a share of the Company’s common stock at no cost to the holder. RSUs granted to employees under the 2016 SIP generally provide for time-based vesting over ~~an eighteen-month~~a twelve-month to three-year period, although certain employees may be awarded RSUs with different time-based vesting criteria. Prior to vesting, RSUs granted under the 2016 SIP do not have dividend equivalent rights, do not have voting rights and the shares underlying the RSUs are not considered issued or outstanding.

The equity compensation awards granted by the Company generally vest only if the employee is employed by the Company (or in the case of directors, the director continues to serve on the Board) on the vesting date.

On May 31, 2017, at the 2017 Annual Meeting of Stockholders (Annual Meeting), the Company’s stockholders approved the amendment and restatement of the Company’s 2016 SIP (Restated 2016 Plan) to, among other things, increase the number of authorized shares issuable by ~~1.3~~0.1 million shares of Aptevo common stock. The Restated 2016 Plan was previously approved, subject to stockholder approval, by the Board of Directors of the Company.

On June 1, 2018, at the 2018 Annual Meeting, the Company’s stockholders approved a new 2018 Stock Incentive Plan (2018 SIP), which replaced the Restated 2016 Plan on a go-forward basis. All stock options, RSUs or other equity awards granted subsequent to June 1, 2018 will be issued out of the 2018 SIP, which has 0.3 million shares of Aptevo common stock authorized for issuance. The ~~Restated 2016~~2018 Plan became effective immediately upon stockholder approval at the Annual Meeting. Any shares subject to outstanding stock awards granted under the 2016 SIP that (a) expire or terminate for any reason prior to exercise or settlement; (b) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; or (c) otherwise would have returned to the 2016 SIP for future grant pursuant to the terms of the 2016 Plan (such shares, the “Returning Shares”) will immediately be added to the share reserve under the 2018 SIP as and when such shares become Returning Shares, up to a maximum of 0.3 million shares. The 2018 SIP was previously approved, subject to stockholder approval, by the Board of Directors of the Company. As of June 30, 2020, there are 0.1 million shares available to be granted under the 2018 SIP.

Stock options under the 2018 SIP generally vest pro rata over a three-year period and terminate ten years from the grant date, though the specific terms of each grant are determined individually. The Company’s executive officers and certain other employees may be awarded options with different vesting criteria, and options granted to non-employee directors also vest over a three-year period. Option exercise prices for new options granted by the Company equal the closing price of the Company’s common stock on the Nasdaq Capital Market on the date of grant.

Stock-based compensation expense includes amortization of stock options and RSUs granted to employees and non-employees and has been reported in our Condensed Consolidated Statements of Operations as follows:

The Company accounts for ~~stock-based~~stock- based compensation by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant ~~date, recognizing~~date. The Company recognized the compensation expense ~~for that fair value, reduced for an estimate of forfeitures,~~ over the vesting period.

Aptevo utilizes the Black-Scholes valuation model for estimating the fair value of all stock options granted. We note that there were no stock options granted in the three months ended June 30, 2020. Set forth below are the assumptions used in valuing the stock options granted:

Management has applied an estimated forfeiture rate of 8% for the three and six months ended June 30, 2020 and 10%. for the three and six months ended June 30, 2019.

The following is a summary of option activity for the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:

As of ~~September~~June 30, ~~2017,~~2020, we had ~~$1.7~~$1.1 million of unrecognized compensation expense related to options expected to vest over a weighted average period of ~~2.1~~1.5 years. The weighted average remaining contractual life of outstanding and exercisable options is 5.6 years.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing stock price of Aptevo’s common stock on the last trading day of ~~September 30, 2017~~June 2020 and the exercise price, multiplied by the number of in the money options) that would have been received by the option holders had all the option holders exercised their options on ~~September 30, 2017. The amount~~the last trading day of ~~aggregate intrinsic value will change based on~~ the ~~price of Aptevo’s common stock.~~quarter.

The following is a summary of RSU activity for the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:

As of ~~September~~June 30, ~~2017, we had $1.5~~2020, there was $0.05 million of unrecognized stock-based compensation expense related to ~~RSUs expected to vest over a period of 0.8 years. The weighted average remaining contractual life of~~ unvested ~~RSUs is 2.5 years.~~RSUs.

The fair value of each RSU has been determined to be the closing trading price of the Company’s common ~~shares~~stock on the date of grant as quoted ~~in NASDAQ Global~~on the Nasdaq Capital Market.

In March 2019, as part of a public offering, we issued warrants to purchase up to 1,725,000 shares of our common stock, 1,571,429 of which have an exercise price of $18.20 per share and have a five-year life, and 153,571 of pre-funded warrants with an exercise price of $0.014 per share. The pre-funded warrants had a ten-year life and would have expired on March 11, 2029; however, the pre-funded warrants were exercised in March 2019. We determined the warrants do not meet liability classification pursuant to ASC 480 – Distinguishing Liabilities from Equity. They are therefore included within equity on our consolidated balance sheet. As of June 30, 2020, there were 1,571,429 warrants outstanding.

~~Restatement Background~~On June 29, 2020, Aptevo commenced a voluntary employee and directors stock option exchange program (the “Exchange Program”) to permit the Company’s eligible employees, directors and certain consultants to exchange some or all of their eligible outstanding options (“Original Options”) to purchase the Company’s common stock with an exercise price greater than or equal to $21.00 per share, whether vested or unvested, for a lesser number of new stock options (“New Options”). In accordance with the terms and conditions of the Exchange Program, we closed the exchange program and accepted all exchanged outstanding options on July 27, 2020. The stock option exchange program was approved at the Company’s annual shareholder meetings on May 27, 2020.

~~Our December 31, 2015 financial statements include $41.8 million~~Pursuant to the Exchange Offer, 52 Eligible Holders elected to exchange Eligible Options, and the Company accepted for cancellation Eligible Options to purchase an aggregate of ~~intangible assets which resulted from~~200,016 shares of the ~~acquisition~~Company’s common stock, representing approximately 96% of ~~in process research~~the total shares of Common Stock underlying the Eligible Options. On July 27, 2020, immediately following the expiration of the Exchange Offer, the Company granted New Options to purchase 84,900 shares of Common Stock, pursuant to the terms of the Exchange Offer and ~~development (IPR&D) programs~~the Company’s 2018 Stock Incentive Plan. We may record an immaterial additional compensation cost related to ~~TRU-016, a novel CD37-directed therapy for B-cell malignancies, such~~the exchange as ~~chronic lymphocytic leukemia and non-Hodgkin’s lymphoma. This amount was deemed to be an indefinite-lived asset, to remain as an indefinite-lived asset on~~ the ~~balance sheet until completion or abandonment~~estimated fair value of the ~~associated research and development efforts. Following~~new options may slightly exceed the ~~spin-off~~fair value of the Company in August 2016, the Company conducted an internal review of all deferred tax assets and liabilities acquired and it was determined that a deferred tax liability should have been recorded associated with the difference between the book basis and the tax basis of the asset as a part of the acquisition in 2010. The error has no effect on the net assets distributed in the spin-off.

The Company has restated its statements of operations for the quarterly and nine month periods ended September 30, 2016. The restatement resulted in the recognition of a $15.3 million benefit from income taxes equal to the amount of the deferred tax liability recorded associated with the TRU-016 IPR&D asset when the $41.8 million was impaired. The restatement also resulted in an increase in the impairment expense recognized in the third quarter of 2016 due to the impairment of all goodwill, by the amount that goodwill would have been increased. These two restated captions on the statements of operations have the effect of offsetting each other, resulting in no impact to net loss for the quarter and nine months ended September 30, 2016. The restatement adjustment did not impact the consolidated statement of operations for any periodsexchanged stock options calculated immediately prior to the ~~third quarter of 2016.~~

~~The impact of~~exchange. We will recognize the restatement on the Company’s consolidated statements of operations, including the impact of discontinued operations, is reflected and quantified for interim periods affected, as applicable, in the below tables.

~~The following table sets forth our unaudited quarterly consolidated statement of operations data for the three and nine months ended September 30, 2016:~~

⁽¹⁾ These amounts reflect a benefit from income taxes after giving effect to the goodwill and deferred tax liability restatement discussed above. The impairment of the Company’s IPR&D in the quarter ended September 30, 2016 resulted in a benefit from income taxes of $15.3 millionremaining unamortized compensation cost related to the ~~reversal~~exchanged options over the vesting period of the ~~associated deferred tax liability in that quarter.~~new options.

On August 5, 2020, we entered into a Credit and Security Agreement (Credit Agreement), with MidCap Financial Trust. The ~~Company’s interim financial statements included in Form 10-Q~~Credit Agreement provided us with up to $25 million of available borrowing capacity. The full $25 million was drawn on the closing date of the Credit Agreement. The MidCap loan has a 48 month term, is interest-only for the ~~quarter ended September~~first 18 months, with straight-line amortization for the remaining 30 ~~2016 did not reflect this benefit from income taxes~~months and bears interest at a rate of one month LIBOR plus 6.25% per annum, subject to a 1.50% LIBOR floor and a 2.50% LIBOR cap. The loan includes additional repayment provisions should either or both of the ~~increase in impairment~~royalties or milestones related to IXINITYor royalties related to RUXIENCEbe sold during the term of ~~goodwill.~~the loan.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This ~~quarterly report~~Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements in this ~~quarterly report,~~Quarterly Report, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, intentions, expectations and objectives could be forward-looking statements. The words “anticipates,” “believes,” “could,” “designed,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “projects,” “pursuing,” “will,” “would” and similar expressions (including the negatives thereof) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, expectations or objectives disclosed in our forward-looking statements and the assumptions underlying our forward-looking statements may prove incorrect. Therefore, you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, expectations and objectives disclosed in the forward-looking statements that we make. Factors that we believe could cause actual results or events to differ materially from our forward-looking statements include, but are not limited to, those discussed in “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this ~~quarterly report.~~Quarterly Report. Our forward-looking statements in this ~~quarterly report~~Quarterly Report are based on current expectations and we do not assume any obligation to update any forward-looking statements.

You should read the following discussion and analysis together with the financial statements and the related notes to those statements included elsewhere in this ~~report.~~

The accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations gives effect to the restatement adjustments made to the previously reported consolidated financial statements that are discussed in Note 10- Restatement in the accompanying financial statements.Quarterly Report.

We are a research and development and clinical-stage biotechnology company focused on developing novel ~~oncology (cancer)~~immunotherapies for the treatment of cancer. Our lead clinical candidate, APVO436, and ~~hematology (blood disease) therapeutics to meaningfully improve patients’ lives. Our core~~preclinical candidates, ALG.APV-527 and APVO603 were developed based on our versatile and robust ADAPTIR™ modular protein technology platform. The ADAPTIR platform is capable of generating highly differentiated bispecific antibodies with unique mechanisms of action for the ~~ADAPTIR™ (modular protein technology) platform.~~treatment of different types of cancer and autoimmunity. We ~~currently have~~previously had one revenue-generating product in the ~~areas~~area of hematology, ~~as well as various investigational stage product candidates in immuno-oncology~~IXINITY, which sold to Medexus Pharma, Inc. (“Medexus”) on February 28, 2020.

For the three and ~~autoimmune~~six months ended June 30, 2020, we had a net loss of $6.8 million and ~~inflammatory diseases.~~

In August 2015, Emergent BioSolutions Inc., or Emergent, announced a plan to separate into two independent publicly traded companies, one a biotechnology company focused on novel oncology and hematology therapeutics to meaningfully improve patients’ lives and the other a global specialty life sciences company focused on providing specialty products for civilian and military populations that address intentional and naturally emerging public health threats. To accomplish this separation, Emergent created a new company, Aptevo Therapeutics Inc., or Aptevo, to be the parent company for the development-based biotechnology business focused on novel oncology, hematology, and autoimmune and inflammatory therapeutics. We were incorporated in Delaware in February 2016 as a wholly owned subsidiary of Emergent. To effect the separation, Emergent made a pro rata distribution of Aptevo’s common stock to Emergent’s stockholders on August 1, 2016.

In connection with the separation, we received certain assets from Emergent’s biosciences division, including commercial products and development programs, as well as the ADAPTIR platform technology. Certain historical operations that were included by Emergent in its biosciences segment have been reallocated to Emergent’s continuing operations, and as a result the financial statements and discussion and analysis contained herein differ from Emergent’s historically reportable biosciences segment.

Our historical consolidated financial statements for the periods prior to August 1, 2016 have been prepared on a standalone basis and are derived from Emergent’s consolidated financial statements and accounting records. The consolidated financial statements reflect our financial position, results of operations, and cash flows as our business was operated as part of Emergent prior$3.9 million, respectively, compared to the ~~separation, in conformity with U.S. Generally Accepted Accounting Principles (GAAP).~~

~~The consolidated financial statements include the allocation of certain assets~~three and liabilities that have historically been held at the Emergent corporate level but which are specifically identifiable or allocable to us. Cash and cash equivalents held by Emergent were not allocated to us unless the cash was held by an entity that was transferred to us in the distribution. All of our intracompany transactions and accounts for the periods prior to August 1, 2016 have been eliminated. Most intercompany transactions between us and Emergent for the periods prior to August 1, 2016 were considered to be effectively settled in the consolidated financial statements at the time the transaction was recorded but for those transition related services. The total net effect of the settlement of these intercompany transactions is reflected in the consolidated statement of cash flows as payment from former parent upon spin-off, net of receivable and net transfer from former parent, prior to spin-off as a financing activity and in the consolidated balance sheet as former parent investment in subsidiary.

The historical financial statements do not necessarily include all of the expenses that would have been incurred had we been a separate, standalone entity and may not necessarily reflect our results of operations, financial position and cash flows had we been a standalone company during the periods presented. Our consolidated financial statements for the periods prior to August 1, 2016 include an allocation of expenses related to certain Emergent corporate functions, including senior management, legal, human resources, finance, information technology, and quality assurance. These expenses have been allocated to us based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata basis of expenses, headcount, square footage, or other measures. We consider the expense allocation methodology and results to be reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred had we operated as an independent, publicly traded company for the periods presented.

~~On August 31, 2017, we entered into an LLC purchase agreement with Saol International Limited (Saol) whereby we agreed to sell our~~ Hyperimmune Business, which consisted of the following products: WinRho® SDF for autoimmune platelet disorder and hemolytic disease of the newborn; HepaGam B® for the prevention of Hepatitis B following liver transplantation and for treatment following hepatitis B exposure; and VARIZIG® for treatment following exposure to varicella zoster virus for individuals with compromised immune systems.

~~On September 28, 2017, the Company announced that it completed the sale of its Hyperimmune Business to Saol for total consideration of up to $74.5 million.~~ At the closing of the acquisition, Saol paid us an upfront payment totaling $65 million, including $3.25 million which was deposited in an escrow account for the purposes of satisfying any indemnification claims brought by Saol pursuant to the LLC purchase agreement. In addition, we may receive (1) an additional potential milestone payment totaling up to $7.5 million related to the achievement of certain gross profit milestones and (2) up to $2.0 million related to collection of certain accounts receivable after the closing. ~~As a result of the sale of our Hyperimmune Business, we anticipate that our future product revenue will decline and that we may experience a reduction in expenses and overhead.~~

~~Net income for the three~~six months ended ~~September~~June 30, ~~2017, was $37.9~~2019, when we had a net loss $13.3 million and ~~the net loss for the three months ended September 30, 2016 was $71.7 million. Net income for the nine months ended September 30, 2017, was $16.7~~$25.4 million, ~~and the net loss for the nine months ended September 30, 2016 was $97.5 million.~~respectively. We had an accumulated deficit of ~~$64.0~~$171.8 million as of ~~September~~June 30, ~~2017.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, net cash ~~provided by~~used in our operating activities was ~~$26.2~~$15.8 million. ~~Although~~

On February 28, 2020, we ~~expect our existing cash~~entered into an LLC Purchase Agreement with Medexus, pursuant to which we sold all of the issued and ~~cash equivalents~~outstanding limited liability company interests of Aptevo BioTherapeutics LLC (“Aptevo BioTherapeutics”), a wholly-owned subsidiary of Aptevo. As a result of the transaction, Medexus obtained all right, title and interest to the IXINITY product and related Hemophilia B business and intellectual property. In addition, Aptevo BioTherapeutics personnel responsible for the sale and marketing of IXINITY also transitioned to Medexus as part of the transaction. Aptevo BioTherapeutics met all the conditions to be classified as a discontinued operation since the sale of Aptevo BioTherapeutics represented a strategic shift that will ~~be sufficient to fund~~have a major effect on our operations ~~for at least fifteen months~~and financial results. Aptevo will not have further significant involvement in the operations of the discontinued Aptevo BioTherapeutics business. The operating results of Aptevo BioTherapeutics are reported as income from the ~~date~~discontinued operations, in the condensed consolidated statements of ~~this filing, if~~operations for all periods presented. The gain recognized on the sale of Aptevo BioTherapeutics, as well as deferred payments and milestones, is presented in income (loss) from discontinued operations in the consolidated statement of operations. In addition, on the consolidated balance sheet as of December 31, 2019, the assets and liabilities held for sale have been presented separately.

In July 2020, we announced that we engaged Piper Sandler & Co to sell our RUXIENCE and IXINITY royalty stream and deferred payments and milestones, respectively. Aptevo is entitled to receive a CD20 biosimilar product (royalty) payments from Pfizer Inc. of 2.5% of net sales of RUXIENCE in the United States, European Union, and Japan. The royalty term runs for seven years, until early 2027, and payments are ~~unable~~due quarterly. Additionally, Aptevo is entitled to ~~obtain~~receive deferred payments from Medexus Pharmaceuticals Inc. pertaining to the net sales of IXINITY in the United States and Canada. The royalty term runs for up to fifteen years, until early 2035, and payments are due quarterly. Additionally, milestone payments totaling up to $11 million may be earned related to certain regulatory and commercial achievements.

A novel strain of coronavirus, COVID-19 has spread through the world, including the United States. We have experienced and may experience additional disruptions that could severely impact our business and clinical trials, including:

The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

Received $0.1 million of ~~product revenue. As such, our results of operations will be highly dependent on IXINITY sales unless or until we develop any of our development stage product candidates. We will not generate revenues~~deferred payments (royalties) from our development stage product candidates unless and until we or our collaborators successfully complete development and obtain regulatory approval for such product candidates, which we expect will take a number of years and is subject to significant uncertainty. If we obtain regulatory approval for one of our development stage product candidates, we expect to incur significant commercialization expensesMedexus Pharmaceuticals related to sales marketing, manufacturing and distribution, to the extent that such costs are not paid by collaborators. We do not have sufficient cash to complete the clinical development of any of our development stage product candidates and will require additional funding in order to complete the development activities required for regulatory approval of such product candidates.

~~Pipeline Highlights~~

We have one marketed product, IXINITY coagulation factor IX (recombinant), indicated in adults and children 12 years of age and older with Hemophilia B for control and prevention of bleeding episodes, and management of bleeding during operations.

~~We also have numerous investigational stage product candidates based on our ADAPTIR~~^TM (modular protein technology) platform. The ADAPTIR platform technology can produce monospecific and multispecific immunotherapeutic proteins that specifically bind to one or more targets, for example, bispecific therapeutic molecules, which may have structural and functional

advantages over monoclonal antibodies. The structural differences of ADAPTIR molecules over monoclonal antibodies allow for the development of other ADAPTIR immunotherapeutics that engage immune effector cells and disease targets in a novel manner to produce unique signaling responses and ultimately kill tumors or modulate the immune system to kill tumors. We are skilled at product candidate generation, validation and subsequent preclinical and clinical development using the ADAPTIR platform. We have the ability to progress ADAPTIR molecules from concept to commercialization by way of our protein engineering, preclinical development and process development capabilities, cGMP manufacturing oversight and clinical development capabilities. We also have the ability to launch, market and commercialize these product candidates upon approval.

~~Our investigational stage product candidates are:~~

APVO414 (formerly known as MOR209/ES414), a bispecific immunotherapeutic ADAPTIR protein, currently in Phase 1, that simultaneously targets prostate specific membrane antigen, or PSMA, an enzyme that is expressed on the surface of prostate cancer cells and, CD3, a component of the T-cell receptor complex expressed on all T-cells. The mechanism of action of APVO414 is redirected T-cell cytotoxicity (RTCC), We are developing this candidate for metastatic castration-resistant prostate cancer, which is advanced prostate cancer that has spread to other organs and no longer responds to hormone blocking therapies.

~~otlertuzumab, a monospecific ADAPTIR protein therapeutic that is currently in Phase 2 clinical development for chronic lymphocytic leukemia, or CLL.~~

APVO436, a bispecific ADAPTIR protein therapeutic currently in preclinical development targeting CD123, a cell surface receptor highly expressed on several hematological malignancies and CD3. APVO436 utilizes redirected RTCC to redirect T-cells to specifically kill tumor bearing CD123.

APVO210, a bispecific ADAPTIR protein therapeutic the employs targeted cytokine delivery. This candidate targets monomeric IL-10 to CD86 expressing cells (primarily antigen presenting cells) and is currently in pre-clinical development for inflammatory bowel disease and other autoimmune and inflammatory diseases.

~~ALG.APV-527 a bispecific antibody candidate, featuring a novel mechanism of action designed to simultaneously target 4-1BB (CD137) and 5T4, a tumor antigen widely expressed on several solid tumors.~~

an immunotherapeutic protein targeting ROR1, an antigen found on several solid tumors and hematologic, or blood-related, malignancies. One pair of binding domains bind to ROR1 on tumors; the other pair of binding domains bind to CD3.

~~Other therapeutic protein product candidates primarily targeting cancer based on mechanisms of action that modulate the immune system (immuno-oncology based mechanism of action).~~

~~Collaboration with Alligator Bioscience AB~~

On July 20, 2017, our wholly owned subsidiary, Aptevo Research and Development LLC, or Aptevo R&D, entered into a collaboration and option agreement with Alligator Bioscience AB, or Alligator, pursuant to which Aptevo R&D and Alligator will collaboratively develop ALG.APV-527, a lead bispecific antibody candidate simultaneously targeting 4-1BB (CD137), a member of the TNFR superfamily of a costimulatory receptor found on activated T cells, and 5T4, a tumor antigen widely overexpressed in a number of different types of cancer. This product candidate is built on our novel ADAPTIR platform, which is designed to expand on the utility and effectiveness of therapeutic antibodies. Under this collaboration agreement, Alligator also granted to Aptevo R&D a time-limited option to enter into a second agreement with Alligator for the joint development of a separate bispecific antibody candidate simultaneously targeting 4-1BB (CD137) and a different tumor antigen.

In accordance with the terms of this Collaboration Agreement, the parties intend to develop the lead bispecific antibody candidate targeting 4-1BB (CD137) through the completion of Phase II clinical trials in accordance with an agreed upon development plan and budget. Subject to certain exceptions for Aptevo R&D’s manufacturing and platform technologies, the parties will jointly own intellectual property generated in the performance of the development activities under the Collaboration Agreement.

Following the completion of the anticipated development activities under the Collaboration Agreement, the parties intend to seek a third-party commercialization partner for this product candidate, or, in certain circumstances, may elect to enter into a second agreement granting rights to either Aptevo R&D or Alligator to allow such party to continue the development and commercialization of this product. Under the terms of the Collaboration Agreement, the parties intend to share revenue received from a third-party commercialization partner equally, or, if the development costs are not equally shared under the Collaboration Agreement, in proportion to the development costs borne by each party.

The Collaboration Agreement also contains several points in development at which either party may elect to “opt-out” (i.e., terminate without cause) and, following a termination notice period, cease paying development costs for this product candidate, which would be borne fully by the continuing party. Following an opt-out by a party, the continuing party will be granted exclusive rights to continue the development and commercialization of this product candidate, subject to a requirement to pay a percentage of revenue received from any future commercialization partner for this product, or, if the continuing party elects to self-commercialize, tiered royalties on the net sales of this product by the continuing party ranging from the low to mid-single digits, based on the point in development at which the ‘opt-out’ occurs. The parties have also agreed on certain technical criteria or ‘stage gates’ related to the development of this product that, if not met, will cause an automatic termination and wind-down of the Collaboration Agreement and the activities thereunder, provided that the parties do not agree to continue.

~~The Collaboration Agreement contains industry standard termination rights, including for material breach following a specified cure period, and in the case of a party’s insolvency.~~

~~IXINITY~~

~~IXINITY~~^® is our commercial product. It is a coagulation factor IX (recombinant) therapeutic indicated in adults and children 12 years of age and older with hemophilia B for control and prevention of bleeding episodes, and management of bleeding during operations. CMC ICOS Biologics, Inc., or CMC, is the sole manufacturer of bulk drug substance for IXINITY. Patheon UK Limited, acquired by Thermo Fischer Scientific, is currently the sole source fill-finish service manufacturer for IXINITY.

On October 4, 2016, we provided a Notice of Interruption in Manufacturing, or Notice, to the FDA, notifying the FDA of a potential interruption in the supply of IXINITY due to the ongoing manufacturing challenges associated with the manufacturer of the bulk drug substance. On March 15, 2017, we announced the successful manufacture of a new bulk drug substance batch of IXINITY, providing new supply of IXINITY for the ~~commercial market in May 2017.~~

Onfirst quarter of 2020. Royalties are earned at the rate of 2% of net revenue through the earlier of June ~~17, 2017, we entered into a new non-exclusive Amended and Restated Commercial Supply,~~2022 or ~~Restated Supply Agreement, with CMC for the commercial development and manufacture of IXINITY. Pursuant to the terms~~completion of the ~~Restated Supply Agreement, CMC agreed~~IXINITY pediatric trial being run by Medexus. After that, the royalty rate will increase to ~~manufacture IXINITY in the quantity~~5%. We expect to receive an estimated royalty of ~~batches provided to CMC on a twenty-four month rolling forecast. Beginning 2018, the minimum and maximum batches~~$0.2 million which will be ~~four and ten, respectively~~recorded in ~~a calendar year. Multiple batches ordered in succession with no changeover to another product between batches, or a campaign, shall receive an incremental discounted price.~~

In accordance with the Restated Supply Agreement, a $7.0 million reserve held by CMC will be will be applied to, at a minimum, the next seven batches manufactured through the end of 2017 as a price concession. As a result, at least the next seven batches will have reduced raw materials or other related CMC costs associated with the inventory. We will also see an impact onour statement of operations due to a lower costs of goods sold associated with this inventory, which will also result in higher gross margins as sales are recognized. Any portion of the $7 million reserve held by CMC that remains unutilized as of December 25, 2017 shall be paid to us in cash on or before December 31, 2017. As of September 30, 2017, $2.6 million has been applied against the reserve and recorded as a reduced cost to inventory. The Restated Supply Agreement has a five-year term renewable with twenty-four months’ prior notice before the expiry of the term for successive two-year terms.

While we do not currently anticipate or foresee a supply shortage or supply interruption occurring, any supply shortage interruption of IXINITY would adversely affect its sales and could adversely affect its market position, commercial viability and the trading price of our ~~common stock.~~third quarter financial statements.

Results of Operations

Except as otherwise stated below, the following discussions of our results of operations reflect the results of our continuing operations, excluding the results related to ~~the Hyperimmune Business. The Hyperimmune Business~~Aptevo BioTherapeutics, which has been separated from continuing operations and reflected as a discontinued operation. See Note 2 – Sale of ~~Hyperimmune Business,~~Aptevo BioTherapeutics to the accompanying financial statements for additional information.

Comparison of the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016~~2019

~~Financial Summary~~Royalty Revenue

~~We recognized total net income of $37.9~~Royalty revenue increased by $0.5 million for the three months ended ~~September~~June 30, ~~2017~~2020. This increase is related to a 2.5% royalty we are entitled to receive from Pfizer related to sales of RUXIENCE (rituximab biosimilar) which was approved by the FDA in July 2019 and ~~a net loss~~launched by Pfizer in the United States and Japan in early 2020. The payment from Pfizer relates to an agreement acquired by Aptevo as part of $71.7 million for the three months ended September 30, 2016, and net income of $16.7 million for the nine months ended September 30, 2017 and a net loss of $97.5 million for the nine months ended September 30, 2017. The increaseour spin-off from Emergent BioSolutions in net income for the three and nine month periods was primarily attributable to the proceeds from the Hyperimmune Business. We recognized net income from continuing operations of $3.0 million for the three months ended September 30, 2017 and a net loss from continuing operations of $73.4 million for the three months ended September 30, 2016. We recognized a net loss from continuing operations of $22.9 million for the nine months ended September 30, 2017 and a net loss from continuing operations of $103.7 million for the nine months ended September 30, 2016. The ~~increase in net income (or decrease in net loss) during~~agreement was originally executed by Trubion Pharmaceuticals, which was subsequently acquired by Emergent BioSolutions, and Wyeth, a wholly-own subsidiary of Pfizer. The royalty term runs through the ~~2017 periods was primarily attributable~~first quarter of 2027, which is the seventh anniversary of the first commercial sale of the CD20 biosimilar. We commenced recognizing royalty revenue related to ~~an impairment of goodwill~~this agreement with Pfizer and ~~intangible assets charge of $71.0 million during~~ the three and nine months ended September 30, 2016. Our income from discontinued operations for the three months ended September 30, 2017 was $34.9 million, compared to income from discontinued operations for the three months ended September 30, 2016 of $1.7 million. Our income from discontinued operations for the nine months ended September 30, 2017 was $39.6 million, compared to income from discontinued operations for the nine months ended September 30, 2016 of $6.3 million. The increase during the 2017 periods was primarily attributable to the proceeds from the Hyperimmune Business.

~~Revenue~~

~~Product~~ sales of IXINITY decreased by $0.3 million, to $2.5 million for the three months ended September 30, 2017 from $2.8 million for the three months ended September 30, 2016. This decrease was primarily related to decreased volumes shipped in the third quarter of 2017 as customers increased stock levels with increased ordersRUXIENCE in the second quarter of ~~2017 when additional IXINITY product came back~~2020. We note that the $0.5 million recorded is the payment received related to ~~market.~~

~~Product~~first quarter sales and an estimate for second quarter sales of IXINITY increased by $1.0 million, to $8.1 million for the nine months ended September 30, 2017 from $7.1 million for the nine months ended September 30, 2016. This increase was primarily related to the expansion of our current Hemophilia B patient base.

In addition to product sales in the third quarter 2017, we recognized $3.7 million of deferred collaboration revenue due to the termination of our collaboration agreement with MorphoSys. Previously we recognized this revenue as services that were performed. As a result of the termination of the collaboration agreement with MorphoSys, we will not recognize any additional revenue under such agreement in any future periods.

~~Cost of Product Sales~~

~~The primary expense we incur to deliver IXINITY, our sole marketed products to our customers~~RUXIENCE. There is manufacturing costs consisting of fixed and variable costs. Variable product costs consist primarily of costs for materials and personnel-related expenses for direct and indirect manufacturing support staff, contract manufacturing and filling operations. Fixed product costs include facilities, utilities and amortization of intangible assets. We determine the cost of product sales for products sold during a reportingno comparable prior period ~~based on the average cost per unit.~~

~~The following table provides information regarding our cost of products sales, including gross margin for the three months and nine months ended September 30, 2017 and 2016:~~

For the Three Months Ended September 30,

2017

2016

Change

Percent

Product sales

$
2,506

$
2,816

$
(310
)

-11%

Cost of product sales

1,872

4,110

(2,238
)

-54%

Gross profit

$
634

$
(1,294
)

$
1,928

Gross margin percent

25
%

-46
%

For the Nine Months Ended September 30,

2017

2016

Change

Percent

Product sales

$
8,131

$
7,050

$
1,081

15%

Cost of product sales

3,114

7,387

(4,273
)

-58%

Gross profit

$
5,017

$
(337
)

$
5,354

Gross margin percent

62
%

-5
%

Cost of product sales decreased by $2.2 million, or 54%, to $1.9 million for the three months ended September 30, 2017 from $4.1 million for the three months ended September 30, 2016 and decreased by $4.3 million, or 58%, to $3.1 million for the nine months ended September 30, 2017 from $7.4 million for the nine months ended September 30, 2016. The decrease the three-month period was due to a $2.9 million third quarter 2016 write-off of unsaleable IXINITY product. The year-to-date decrease is due to a one-time $3.0 million settlement in the first six months of 2017 related to a dispute between Aptevo and CMC in regards to certain IXINITY batches from 2015 that did not meet manufacturing specifications. Under the terms of the settlement agreement, Aptevo will not pay any additional amounts to CMC for the batches in question, as this was settled for non-cash consideration. This settlement satisfies the monies owed by Aptevo under a 2015 invoice and resolves any claims.

Due to the ongoing challenges with the manufacture of our IXINITY product that meets release specifications for the final drug product, in the third quarter of 2016, we wrote off approximately $2.9 million in unsaleable IXINITY inventory that was in process of being manufactured. This cost is included in cost of product sales.royalty revenue.

Research and Development Expenses

We expense research and development costs as incurred. These expenses consist primarily of the costs associated with our research and ~~discovery~~development activities, including conducting preclinical studies and clinical trials, fees to professional service providers for analytical testing, independent monitoring or other administration of our clinical trials and obtaining and evaluating data from our clinical trials and non-clinical studies, as well as costs of contract manufacturing services for clinical trial material, and costs of materials used in clinical trials and research and development.

Our research and development expenses ~~primarily consist of:~~include:

employee salaries and related expenses, including stock-based compensation and benefits for our employees involved in our drug discovery and development activities;

external research and development expense incurred under agreements with third-party contract research organizations ~~(CRO’s)~~(CROs) and investigative sites;

manufacturing expenses and material ~~expense~~ for third-party manufacturing; and

overhead costs such as rent, utilities and ~~depreciation~~depreciation.

We expect our future research and development spending will also be dependent upon such factors as the results from our clinical trials, the availability of reimbursement of research and development spending, the number of product candidates under development, the size, structure and duration of any clinical programs that we may initiate, and the costs associated with manufacturing our product candidates on a large-scale basis for later stage clinical trials. We may experience interruption of key clinical trial activities, such as patient enrollment and clinical trial site monitoring, and key non-clinical activities due to COVID-19. While programs are still in the ~~preclinical~~pre-clinical trial phase, we do not provide a breakdown of the initial associated expenses as we are often evaluating multiple product candidates simultaneously. Costs are reported in preclinical research and discovery until the program enters the clinic.

Our ~~principal~~ research and development expenses by program for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 are shown in the following table:

	For the Three Months Ended September 30,							For the Three Months Ended June 30,
(in thousands)	2017		2016		Change			2020		2019		Change
Clinical programs:
APVO414	$	1,425	$	562	$	863
otlertuzumab		334		16		318
APVO436								$	1,300	$	870	$	430
Other									163		1,119		(956	)
Total clinical programs		1,759		578		1,181			1,463		1,989		(526	)

Preclinical program, general research and discovery		5,135		5,365		(230	)		2,977		4,136		(1,159	)
IXINITY		281		1,134		(853	)
Total	$	7,175	$	7,077	$	98		$	4,440	$	6,125	$	(1,685	)

	For the Nine Months Ended September 30,							For the Six Months Ended June 30,
(in thousands)	2017		2016		Change			2020		2019		Change
Clinical programs:
APVO414	$	2,792	$	2,572	$	220
otlertuzumab		999		1,294		(295	)
APVO436								$	2,276	$	1,823	$	453
Other									223		2,275		(2,052	)
Total clinical programs		3,791		3,866		(75	)		2,499		4,098		(1,599	)

Preclinical program, general research and discovery		14,326		13,627		699			5,947		8,661		(2,714	)
IXINITY		1,718		5,266		(3,548	)
Total	$	19,835	$	22,759	$	(2,924	)	$	8,446	$	12,759	$	(4,313	)

Research and development expenses ~~did not change meaningfully between the three months ended September 30, 2016 and 2017 and~~ decreased by ~~$2.9~~$1.7 million ~~or 13%, to $19.8~~and $4.3 million for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017 from $22.8 million for~~2020 compared to the ~~nine~~three and six months ended ~~September~~June 30, ~~2016. This decrease was primarily comprised of:~~

~~Selling, general~~General and administrative expenses consist primarily of personnel-related costs and professional fees in support of our executive, ~~sales and marketing,~~ business development, finance, accounting, information technology, legal and human resource functions. Other costs include facility costs not otherwise included in ~~cost of product sales or~~ research and development expenses.

For the three months ended ~~September~~June 30, ~~2017 selling,~~2020, general and administrative expenses decreased by ~~$3.6~~$1.5 million, or ~~33%~~35%, to ~~$7.5~~$2.8 million from $4.3 million for ~~2017 from $11.1 million for 2016.~~June 30, 2019. This decrease was primarily due to ~~decreased~~reduced personnel ~~costs in the period.~~and professional services costs.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017 selling,~~2020, general and administrative expenses decreased by ~~$1.9~~$2.3 million, or 7%27%, to ~~$26.0~~$6.5 million from $8.8 million for ~~2017 from $27.9 million for 2016.~~June 30, 2019. This decrease was primarily due to ~~lower marketing costs for IXINITY~~reduced personnel and ~~reduced personnel~~professional services costs.

Other income (expense)~~, net,~~ consists primarily of gains or losses realized on foreign currency revaluation and interest on debt. For the six months ended June 30, 2020, other expense increased due to a loss on extinguishment of debt ~~financing. For~~of $2.1 million, which consists of interest, exit, prepayment, and legal fees recognized during the first quarter of 2020. There is no comparable activity in 2019. Other income increased to an immaterial amount of other income for the three months ended ~~September~~June 30, ~~2017, other income (expense) remained flat at~~2020 from an expense of $0.4 million ~~and~~ for the ~~nine~~three ended June 30, 2019 due the repayment of the MidCap loan in the first quarter of 2020 and an immaterial gain on foreign currency revaluation realized in the second quarter of 2020. Other expense decreased from $0.3 million for the six months ended ~~September~~June 30, ~~2017, increased by $0.9~~2020 from $1.0 million ~~both~~for the six months ended June 30, 2019 due primarily to ~~the interest on the loan entered into with Midcap Financial Trust~~a decrease in the ~~last half~~number of ~~2016.~~months during the quarter in which debt was outstanding.

~~Benefit~~On February 28, 2020, we entered into an LLC Purchase Agreement with Medexus, pursuant to which Aptevo sold all of the issued and outstanding limited liability company interests of Aptevo BioTherapeutics, a wholly owned subsidiary of Aptevo. As a result of the transaction, Medexus obtained all right, title and interest to the IXINITY product and the related Hemophilia B business and intellectual property.

In connection with the sale of Aptevo BioTherapeutics, we recognized net income from ~~income taxes decreased for the three months ended September 30, 2017 to $13.8 million from $17.6~~discontinued operations totaling $12.9 million for the ~~three~~six months ended ~~September~~June 30, ~~2016,~~2020. This included the gain on the sale of Aptevo BioTherapeutics of $14.3 million and ~~decreased~~net operating losses from Aptevo BioTherapeutics of $1.6 million related to ~~$15.6 million~~the period prior to the sale on February 28, 2020. The LLC Purchase Agreement with Medexus entitles us to future deferred payments and milestones. Consideration related to the deferred payments and future milestone constitutes contingent consideration. Per ASC 450-30, gain contingencies usually are not recognized in the ~~nine months ended September 30, 2017 from $18.6 million~~financial statements until the period in which all contingencies are resolved and the ~~nine months ended September 30, 2016. This tax impact~~gain is ~~due~~realized or realizable. As Medexus communicates payment amounts and sales details subsequent to ~~the restatement of our tax liability (see Note 10 – Restatement),~~quarter-end and there is uncertainty as ~~well as the exception~~ to ~~the Intraperiod Tax Allocation rules in accordance with ASC 740-20-45-7. The exception requires that all items (including discontinued operations) be considered in determining~~ the amount of the ~~tax benefit that results for the loss in continuing operations. This~~payment before quarter-end, we will record deferred ~~tax liability was released to benefit from income taxes upon the impairment of the related IPR& D.~~

~~Income tax expense increased to $21.3 million for the three months ended September 30, 2017, from $2.3 million for the three months ended September 30, 2016, and increased to $23.1 million~~payments in the ~~nine months ended September 30, 2017 from $3.3 million~~quarter the payment is received. Medexus communicated their estimated second quarter 2020 net IXINITY sales to Aptevo in July and expects to make a deferred payment within 45 days after quarter-end, per the LLC Purchase Agreement, to Aptevo of approximately $0.2 million. As such, we will record the deferred payment amount related to Medexus’ second quarter sales of IXINITY as a gain in the nine months ended September 30, 2016. This income tax expense is due to the impact of the sale of our Hyperimmune Business (see Note 2 – Sale of Hyperimmune Business) and is expected to be reversed in the fourththird quarter of ~~2017.~~2020.

The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; however, actual results could differ from those estimates. An accounting policy is considered critical if it is important to a company’s financial condition and results of operations and if it requires the exercise of significant judgment and the use of estimates on the part of management in its application. Although we believe that our judgments and estimates are appropriate, actual results may differ materially from our estimates.

We believe the judgments, estimates and assumptions associated with the following critical accounting policies have the greatest potential impact on our condensed consolidated financial statements:

~~For a detailed discussion of~~Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these ~~critical accounting policies~~estimates are becoming more challenging, and significant judgments and estimates, refer to “Critical Accounting Policies and Significant Judgments and Estimates” within “Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2016 that was filed with the SEC on March 31, 2017. There have not been any material changes in our critical accounting policies and significant judgments and estimates as disclosed in our Annual Report Form 10-K for the year ended December 31, 2016.actual results could differ materially from those estimates.

We did not have any off-balance sheet arrangements as of ~~September~~June 30, ~~2017.~~2020.

We have financed our operations to date primarily through revenue generated from our commercial products, the sale of ~~Liquidity~~

our hyperimmune products business in 2017, the sale of Aptevo BioTherapeutics on February 28, 2020, public offerings of our common stock, loan proceeds, license fees, milestone payments and research and development funding from strategic partners, and funds received at the date of our spin-off from Emergent. As of ~~September~~June 30, ~~2017,~~2020, we had cash, and cash equivalents ~~and investments~~ in the amount of ~~$96.8~~$7.6 million.

In February 2020, we used $22.1 million from the proceeds of the sale of Aptevo BioTherapeutics to Medexus to repay in full our term debt facility with MidCap Financial Trust, including $20 million of principal and $2.1 million in an end of facility fee, accrued interest, legal fees and prepayment fees. Repayment of the debt relieved us of our obligation to keep $5 million of cash restricted related to the agreement with MidCap.

The following table provides information regarding our cash flows for the six months ended June 30, 2020 and 2019:

Net cash used in operating activities of $15.8 million for the six months ended June 30, 2020 was primarily due to the gain on sale of Aptevo BioTherapeutics of $14.3 million, and changes in working capital accounts. Net cash used in operating activities of $29.7 million for the six months ended June 30, 2019 was primarily due to our net loss of $25.4 million, and changes in working capital accounts.

Net cash provided by investing activities for the six months ended June 30, 2020, was due to the cash received from the sale of Aptevo BioTherapeutics, net of transaction fees. For the six months ended June 30, 2019, the largest components of the cash used in investing activities were purchases of property and equipment.

Net cash used in financing activities for the six months ended June 30, 2020 is primarily due to the $22.1 million repayment of long-term debt. Net cash provided by financing activities for the six months ended June 30, 2019 was primarily due to the proceeds received from the issuance of common stock and purchase of warrants exercised.

On August 1, 2016, in connection with the spin-off of the Company from Emergent, we issued 20.2 million shares of our common stock to Emergent stockholders and recorded a contribution from Emergent of $71.2 million. The transactions recorded in 2016 included a one-time payment of $45.0 million, and a working capital reimbursement for outstanding payments of $1.4 million, a noncash transfer of an intangible asset of $0.7 million, and a net transfer of cash from Emergent of $24.2 million. In addition, in the first quarter of 2017 we received $20.0 million as payment for a promissory note issued at the time of the spin-off.

~~In addition, on August 4, 2016,~~5, 2020, we entered into a ~~$35.0 million~~ Credit and Security Agreement (Credit Agreement), with MidCap Financial Trust. The ~~original~~ Credit Agreement provided us with up to ~~$35.0~~$25 million of available borrowing ~~capacity composed of two tranches of $20.0 million and $15.0 million.~~ capacity. The ~~first tranche of $20.0~~full $25 million was ~~made available to us, and~~ drawn

on the closing date of the Credit Agreement.The MidCap loan has a 48 month term, is interest-only for the first 18 months, with straight-line amortization for the remaining 30 months and bears interest at a rate of one month LIBOR plus 6.25% per annum, subject to a 1.50% LIBOR floor and a 2.50% LIBOR cap. The loan includes additional repayment provisions should either or both of the royalties or milestones related to IXINITYor royalties related to RUXIENCEbe sold during the term of the loan.

On November 9, 2017, we entered into an Equity Distribution Agreement with Piper Sandler & Co (Piper Sandler). The Equity Distribution Agreement provides that, upon the terms and subject to the conditions set forth therein, we may issue and sell through Piper Sandler, acting as sales agent, shares of our common stock having an aggregate offering price of up to $17.5 million. We have no obligation to sell any such shares under the Equity Distribution Agreement. The sale of the shares of our common stock by Piper Sandler will be effected pursuant to a Registration Statement on Form S-3 which we filed on November 9, 2017. We issued no additional shares under the Equity Distribution Agreement in the first or second quarter of 2020. Following prior sales, we have the ability to sell up to an additional $17.3 million of common stock under the Equity Distribution Agreement.

The Equity Distribution Agreement will terminate upon the issuance and sale of all shares under the Equity Distribution Agreement or upon the earlier termination thereof at any time by us or Piper Sandler upon notice to the other party.

On December 20, 2018 we entered into the Purchase Agreement, and a registration rights agreement with Lincoln Park. Pursuant to the ~~second tranche~~purchase agreement Lincoln Park has committed to purchase up to $35.0 million worth of ~~$15.0 million to become available (subject to certain conditions) following~~our common stock over a 36-month period commencing on February 13, 2019, the date ~~we: (1) achieve net commercial product revenue of $40.0 million on a trailing twelve-month basis, and (2) receive payment~~the registration statement covering the resale of the ~~additional $20.0 million in cash committed~~shares was declared effective by ~~Emergent. Emergent’s promise~~the SEC. Pursuant to ~~pay such $20.0 million in cash was evidenced by a non-negotiable, unsecured promissory note~~this purchase agreement, we issued ~~to us and was paid~~13,991 commitment shares of common stock in the first quarter of 2017. Once drawn, interest would be paid monthly while principal would have been paid on a monthly basis commencing in August 2018. The credit agreement will mature on February 1, 2021. Amounts drawn under the Credit Agreement accrue interest at a rate of LIBOR plus 7.60% per annum.

~~The Credit Agreement covenants require us~~2019 and ~~our subsidiaries to maintain increasing minimum net commercial product revenue for each twelve-month period ending on the last day of each calendar quarter. An event of default could result~~none in the ~~acceleration~~first or second quarter of 2020.

Under the ~~amounts owed under the Credit~~Purchase Agreement, ~~and~~on any business day selected by us, we may direct Lincoln Park to purchase shares of our common stock provided that Lincoln Park’s maximum commitment on any single day does not ~~have sufficient funds or~~exceed $2.0 million. The purchase price per share will be ~~able to obtain additional financing to make any accelerated payments. Under these circumstances,~~based off of prevailing market prices of our ~~lenders could seek to enforce security interests in our assets securing our indebtedness.~~

On May 11, 2017, we and MidCap Financial Trust entered into an amendment to the Credit Agreement to, among other things, waive the existing event of default and revise the financial covenants pertaining to the minimum required commercial product revenue. The amendment revises the following covenants of the Credit Agreement to: (1) extendcommon stock immediately preceding the time ~~period through which~~of sale; provided, however, that we ~~can draw~~cannot direct any such purchase if the ~~second tranche from August 2017~~prevailing market price is less than $1.00. In addition, we may also direct Lincoln Park to ~~March 2018, (2) increase~~purchase other amounts as accelerated purchases or as additional accelerated purchases if the exit fee of 5.75% of the aggregate principal amount under the Credit Agreement for repayment or prepayment other than scheduled amortization payments and the final payment of principal to 6.75% and (3) permit MidCap Financial Trust to obtain an affirmative lien on our intellectual property, upon the earlier of (i) our draw down of the second tranche or (ii) our cash balance descending below a minimum cash threshold of $25 million.

~~On September 28, 2017, we and MidCap Financial Trust entered into a second amendment to the Credit Agreement in order to permit the~~closing sale under the LLC purchase agreement, and to reflect changes in the remaining business as a result of such sale. Pursuant to the second Amendment, the agent and the lenders consented to the LLC purchase agreement and the consummation of the sale transaction, released the agent’s liens on the assets transferred to oneprice of our ~~subsidiaries prior to the sale, and agreed that no prepayment of the term loans under the credit agreement would be required~~common stock exceeds certain threshold prices as a result the sale. As part of the second amendment, the agent and the lenders agreed that: (i) the commitments of the lenders to make the remaining $15.0 million tranche of loans under the credit agreement were terminated, (ii) the covenant levels set forth in the ~~minimum net commercial product revenue covenant were revised, (iii) a new covenant requiring us~~Purchase Agreement. We have not purchased any shares under the Purchase Agreement through the second quarter of 2020.

Actual sales of shares of our common stock to ~~maintain a minimum $10.0 million unrestricted cash balance, and (iv)~~Lincoln Park under the date on which the term loans begin to amortize will be extended to February 1, 2019 if we achieve net commercial product revenues of $16.0 million for the twelve month period ending June 30, 2018 and maintains such level of net commercial product revenues for each quarter prior to February 1, 2019 thereafter.

On September 28, 2017, Saol paid us an upfront payment totaling $65.0 million, including $3.3 million which was deposited in an escrow account for the purposes of satisfying any indemnification claims brought by Saol pursuant to the LLC purchase agreement.

We expect to incur losses from operations for the foreseeable future primarily due to research and development expenses, including expenses related to conducting clinical trials. The Company’s future capital requirementsPurchase Agreement will depend on a variety of factors as determined by us from time to time, including, among others, market conditions, the trading price of our common stock and additional determinations as to the appropriate sources of funding for our operations. Lincoln Park has no right to require any sales but is obligated to make purchases as we direct in accordance with the Purchase Agreement.

We have financed our operations to date primarily through revenue generated from our commercial products, the sale of our hyperimmune products business in 2017, the sale of Aptevo BioTherapeutics LLC on February 28, 2020, public offerings of our common stock, loan proceeds, license fees, milestone payments and research and development funding from strategic partners, and funds received at the date of our spin-off from Emergent. For the three and six months ended June 30, 2020, we had a net loss of $6.8 million and $3.9 million, respectively. We had cash and cash equivalents of $7.6 million, restricted cash of $2.6 million and an accumulated deficit of $171.8 million as of June 30, 2020.

For the six months ended June 30, 2020, net cash used in our operating activities was $15.8 million.

Our future success is dependent on our ability to develop our product candidates and ultimately upon our ability to attain profitable operations. We anticipate that we will continue to incur significant operating losses for the next several years as we incur expenses to continue to execute on our development strategy to advance our preclinical and clinical stage assets. We will not generate revenues from our development stage product candidates unless and until we or our collaborators successfully complete development and obtain regulatory approval for such product candidates, which we expect will take a number of years and is subject to significant uncertainty. If we obtain regulatory approval for one of our development stage product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution, to the extent that such costs are not paid by collaborators. We do not have sufficient cash to complete the clinical development of any of our development stage product candidates and will require additional funding in order to complete the development activities required for regulatory approval of such product candidates. We will require substantial additional funds to continue our development programs and to fulfill our planned operating goals.

Due to COVID-19, we may experience delays in opportunities to partner our product candidates, due to financial and other impacts on potential partners. Additionally, we may experience potential impacts on our future deferred payments from Medexus and royalty payments from Pfizer due to the environment, which may impact Medexus’ and Pfizer’s ability to continue to successfully commercialize the IXINITY and RUXIENCE businesses, respectively. We believe that our existing cash resources, the cash to be generated from future royalty and deferred payments, and the new Credit Agreement of $25 million with Midcap Financial Trust, will be sufficient to meet our projected operating requirements and debt service for at least twelve months from the date of this Form 10-Q filing.

In July 2020, we announced that we engaged Piper Sandler to sell our RUXIENCE and IXINITY royalty streams and, deferred payments and milestones, respectively, in order to provide additional funding for the development of our product candidates. However, there is no guarantee that we will be successful in completing such sales. In addition, our MidCap Credit Agreement includes repayment provisions should either or both of the royalties or milestones related to IXINITY or royalties related to RUXIENCE be sold during the term of the loan.

There are numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products. Accordingly, our future funding requirements may vary from our current expectations and will depend on many factors, ~~including:~~including, but not limited to:

~~We expect our cash, cash equivalents and investments will support our operations for~~If we are unable to raise substantial additional capital in the next ~~twelve months,~~year, whether on terms that are acceptable to us or at ~~least, based~~all, then we may be required to:

The sale of additional equity or convertible debt securities may result in additional dilution to our stockholders. If we raise additional funds through the issuance of debt securities or preferred stock or through credit facilities, these securities and/or the loans under credit facilities could provide for rights senior to those of our common stock and could contain covenants that would restrict our operations. Additional funds may not be available when we need them, on ~~current operating plans~~terms that are acceptable to us, or at all. We also expect to seek additional funds through arrangements with collaborators, licensees or other third parties. These arrangements would generally require us to relinquish or encumber rights to some of our technologies or drug candidates, and ~~financial forecasts.~~

~~Cash Flows~~we may not be able to enter into such arrangements on acceptable terms, if at all.

~~The following table provides information regarding~~Due to COVID-19, we may experience delays in opportunities to partner our ~~cash flows for the nine months ended September 30,~~ ~~2017 and 2016:~~

~~Net cash used in operating activities of $26.2 million for the nine months ended September 30, 2017 was primarily~~product candidates, due to ~~the gain~~financial and other impacts on sale of the Hyperimmune Business. Net cash used in operating activities of $30.2 million for the nine months ended September 30, 2016 was primarily due to our net loss of $97.5 million, which included a one-time impairment of goodwill and intangible assets of $71.0 million.potential partners.

Net cash provided by investing activities was primarily due to the cash proceeds from the sale of the Company’s Hyperimmune Business and the maturity and redemption of investments of $53.2 million, offset by investment purchases of $29.3 million in the nine months ended September 30, 2017. For the nine months ended September 30, 2016, the largest component of the cash used in investing was $49.8 million in purchases of corporate bonds and US government and agency debt securities.

Net cash provided by financing activities for the nine months ended September 30, 2017 includes the net proceeds received from Emergent at the time of the spin-off in support of a promissory note to support the operations of the Company, offset by $10.0 million in restricted cash in accordance with loan agreement. The net cash provided by financing activities for the nine months ended September 30, 2016 includes $18.0 million in proceeds from long-term debt, as well as $70.5 million for two contributions from Emergent.

In January 2020, we entered into a contract with The Leukemia & Lymphoma Society (LLS) to be part of an ongoing national AML master clinical trial called the ‘Beat AML Master Clinical Trial.’ The Beat AML Master Clinical Trial provides access to leading academic cancer centers and allows us to study APVO436 in a front-line AML setting. Our ~~future minimum contractual commitments and obligations were reported in our Annual Report on Form 10-K~~purchase obligation for the ~~year ended December 31, 2016 that was filed~~Beat AML Master Clinical Trial totals $8.1 million over the next four years. The Clinical Trial Participation Agreement contains a termination for convenience clause where we may terminate the agreement with ~~the SEC on March 14, 2017. Our future minimum contractual obligations and commitments have not changed materially from the amounts previously reported.~~180 days prior written notice.

~~Our exposure~~As of June 30, 2020, there were no material changes to ~~market risk is primarily confined to our investment securities~~the information provided under Item 7A, Quantitative and notes payable. The primary objective of our investment activities is to preserve our capital to fund operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of investments in high-credit-quality securities. In accordance with our investment policy, we invest funds in highly liquid, investment-grade securities. These securitiesQualitative Disclosures About Market Risk in our ~~investment portfolio are not leveraged~~Annual Report filed on Form 10-K for the year ended December 31, 2019 and are classified as available-for-sale. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that an increase in market rates would have a material negative impactfiled on the realized value of our investment portfolio. We actively monitor changes in interest rates and, with our current portfolio of short term investments, we are not exposed to potential loss due to changes in interest rates.March 25, 2020.

~~Based on~~As of June 30, 2020, management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures ~~(as~~as defined in Rules 13a-15(e) and 15d-15(e)~~) under the Securities Exchange Act~~ of ~~1934, or~~ the Exchange ~~Act) required by Rules 13a-15(b) or 15d-15(b) under the Exchange Act,~~Act. Based on this evaluation, our Chief Executive Officer and ~~our~~ Chief Financial Officer ~~have~~ concluded that, as of June 30, 2020, the ~~end~~design and operation of ~~the period covered by this report,~~ our disclosure controls and procedures were effective ~~at a~~to provide reasonable assurance ~~level~~.that information we are required to disclose in reports that 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 to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~September~~June 30, ~~2017,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We may from time to time be named as a party to legal claims, actions and complaints, including matters involving employment claims, our intellectual property or other third-party claims. Our management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition or cash flows.

You should carefully consider the following risks and other information in this ~~quarterly report~~Quarterly Report on Form 10-Q in evaluating us and our common stock. Any of the following risks could materially and adversely affect ~~Aptevo’s~~our results of operations, financial condition or financial prospects.

~~Our historical consolidated financial data prior to August 1, 2016 was prepared on a “carve-out” basis from~~For the ~~financial information of Emergent and shows that had we been a standalone company, we would have had a history of losses, and we may be unable to achieve profitability going forward.~~

~~Although for the three and nine~~six months ended ~~September~~June 30, ~~2017,~~2020 and 2019, we had net ~~income~~losses of ~~$37.9~~$3.9 million and ~~$16.7 million, respectively this net income was the result of our receipt of proceeds from the sale of the Hyperimmune Business in September 2017. We have experienced~~ net losses ~~in all other periods since our spinout from Emergent and as~~ of ~~September~~$25.4 million, respectively. As of June 30, ~~2017,~~2020, we had an accumulated deficit of $64.0 million as of September 30, 2017. If we cannot achieve profitability or generate positive cash from operating activities, our business operations may be adversely impacted and the trading value of our common stock may decline.$171.8 million.

We will require additional capital and may be unable to raise capital when needed or on acceptable terms.

As of ~~September~~June 30, ~~2017,~~2020, we had cash, cash equivalents, and ~~investments~~restricted cash in the amount of ~~$96.8~~$10.2 million. We will require additional funding to grow our business including to develop additional products, support commercial marketing activities or otherwise provide additional financial flexibility. In October 2019, we implemented an expense reduction plan that reduced annual expenditures by approximately 30%, including streamlining research and development programs, through reducing investment in certain programs; cut-backs in legal, professional and consulting expenses; reduction of leased space, cut-backs in non-commercial headcount; and reductions in executive and board cash compensation, with such compensation restored to previous levels in August 2020. If we are not able to secure adequate additional funding, we may need to make additional reductions in spending. This may include extending payment terms with suppliers, liquidating assets, and suspending or curtailing planned programs. We may also have to further delay, reduce the scope of, suspend or eliminate one or more research and development programs. A failure to raise the additional funding or to effectively implement cost reductions could harm our business, results of operations and future prospects. Our future capital requirements will depend on many factors, including:

If our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through bank loans, public or private equity or debt offerings, ~~a sale of commercial assets,~~ collaboration and licensing arrangements or other strategic transactions. Future issuances of common stock may include (i) any sale of up to the remaining $17.3 million worth of shares of our common stock pursuant to our Equity Distribution Agreement with Piper Sandler & Co entered into in November 2017, (ii) any sale of up to $35.0 million worth of shares of our common stock in a private placement pursuant to our Purchase Agreement with Lincoln Park Capital Fund, LLC, or Lincoln Park, entered into in December 2018, and (iii) the issuance of up to 1,571,429 shares of common stock upon the exercise of warrants issued in connection with our March 2019 public offering of common stock and warrants. Public or bank debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, pursuing acquisition opportunities or declaring dividends. If we raise funds by issuing equity securities, our stockholders will experience dilution. If we raise funds through collaboration and licensing arrangements with third parties or enter into other strategic transactions, it may be necessary to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that may not be favorable to us. For example, in July 2020, we announced that we intend to sell our rights to receive royalty payments from Pfizer with respect to the sales of RUXIENCE and our rights to deferred payments and milestones from Medexus with respect to IXINITY. We also reached agreement on a $25 million dollar loan with MidCap Financial Trust on August 5, 2020.

Current economic conditions, including the impact of COVID 19 on our operations or on the global economy and capital markets, may make it difficult to obtain additional financing on attractive terms, or at all. If financing is unavailable or lost, our business, results of operations, financial condition and financial prospects would be adversely affected and we could be forced to delay, reduce the scope of or eliminate many of our planned activities.

Our ~~business depends on the continued success~~operating results are unpredictable and may fluctuate.

Our operating results are difficult to predict and will likely fluctuate from quarter to quarter and year to year, as a result due to a variety of ~~IXINITY.~~

We currently have only one revenue-generating product, IXINITY, following the sale of our three hyperimmune products, WinRho SDF, HepaGam B and VARIZIG. We expect revenues from our product sales to continue to account for a portion of our revenue. The commercial success of IXINTY depends upon:factors, including:

Due to COVID-19, we may experience delays in opportunities to partner our product candidates, due to financial and other impacts on potential partners. Additionally, we may experience potential impacts on our future milestone or deferred payments from Medexus and or royalty payments from Pfizer due to the environment which may impact Medexus’ and or Pfizer’s ability to continue to successfully commercialize the IXINITY and RUXIENCE businesses, respectively. In the first and second quarter of 2020, we did see an impact of ~~competition from existing competitive products and from competitive products that may be approved in the future;~~

~~The failure to maximize the financial contribution of IXINITY could have a material adverse effect~~COVID-19 on our business as some of our clinical sites were at reduced capacity or closed, as well as our BEAT AML trial being delayed by LLS. These and other factors may make it difficult for us to forecast our expected financial ~~condition,~~performance. If our operating results are below the expectations of ~~operations~~securities analysts or investors, the trading price of our stock could decline.

Our future income will be dependent on the ability of Medexus and ~~growth prospects.~~Pfizer to successfully further develop, market and commercialize IXINITY or RUXIENCE, respectively, resulting in the payment of milestone, deferred and CD20 BioSimilar product payments.

On February 28, 2020, Aptevo entered into an LLC Purchase Agreement with Medexus, pursuant to which Aptevo sold all of the issued and outstanding limited liability company interests of Aptevo BioTherapeutics, a subsidiary of Aptevo wholly owns the IXINITY and related Hemophilia B business. We ~~may choose~~are entitled to ~~increase~~receive future potential payments as the ~~price~~result of the achievement of certain regulatory and commercial milestones and through deferred payments based on net sales of IXINITY. We no longer control the development, marketing and commercialization of IXINITY and ~~these price adjustments~~are dependent on Medexus to successfully do so. Although Medexus has agreed to use commercially reasonable efforts to commercialize IXINITY in the ordinary course of business in good faith, Medexus may ~~negatively affect~~not commit adequate resources to the further development, marketing and commercialization of IXINITY, may experience financial difficulties, may face competition, or may prioritize other products or initiatives. Due to COVID-19, we may experience potential impacts on our ~~sales volumes. In addition, our product sales~~future deferred payments from Medexus due to the environment which may ~~fluctuate significantly from quarter~~impact Medexus’ ability to ~~quarter, depending on~~continue to successfully commercialize the ~~number~~IXINITY business. The failure of ~~patients receiving treatment, the availability~~Medexus to successfully market and commercialize IXINITY, including because of ~~supply to meet the demand for IXINITY, the dosing requirements~~factors outside of ~~treated patients~~Medexus’ control, could result in lower than expected milestone or deferred payments and other factors. If sales of IXINTY were to decline, we could be required to make an allowance for excess or obsolete inventory, increase our provision for product returns, or we could incur other costs related to operating our business, each of which could negatively impact our ~~results of operations~~future financial and our financial condition. We are constantly evaluating commercial and strategic transactions to generate revenue that include any current collaborations and collaborations or a sale of assets in the future.

To preserve the tax-free treatment of the distribution related to the separation, together with certain related transactions, we are restricted under the tax matters agreement that we entered into with Emergent, from taking any action that prevents such transactions from being tax-free for U.S. federal income tax purposes. In particular, for a period of two years following the separation, we are restricted from taking certain actions (including restrictions on share issuances, business combinations, sales of assets, amendments to organizational documents and similar transactions) that could cause the distribution, together with certain related transactions, to fail to qualify as a tax-free transaction for U.S. federal income tax purposes. These restrictions may limit our ability to pursue certain strategic transactions or engage in other transactions that might increase the value of our business, including use of our common stock to make acquisitions and equity capital market transactions. In addition, under the tax matters agreement, we are required to indemnify Emergent against any tax liabilities and related expenses arising from the failure of the distribution, together with certain related transactions, to be tax-free to the extent such failure is attributable to actions, events or transactions relating to our stock, assets or business, including the acquisition of our stock even if we did not participate in or otherwise facilitate the acquisition.

~~We may not achieve profitability in future periods or on a consistent basis.~~

Although for the three and nine months ended September 30, 2017, we had net income of $37.9 million and $16.7 million, respectively, this net income was the result of our receipt of proceeds from the sale of our three hyperimmune products in September 2017. Our ability to become profitable in future periods will be substantially dependent on our product sales revenues from the sales of IXINITY and revenues from any current collaboration and licensing arrangements and any arrangements entered into in the future. Accordingly, our ability to become profitable may be adversely affected as we progress through various stages of ongoing or planned clinical trials for our product candidates. We may not be able to achieve profitability. We anticipate needing to generate greater revenue in future periods from IXINITY or our product candidates in development. If we are unable to generate greater revenue, we may not achieve profitability in future periods, and may not be able to maintain any profitability we do achieve. If we are unable to generate sufficient revenues, we will not become profitable and may be unable to continue operations without additional funding.

~~The terms of our credit agreement may restrict the operation of our business and limit the cash available for investment in our business operations.~~

On August 4, 2016, we entered into a Credit and Security Agreement, or the Credit Agreement, by and among us and certain our subsidiaries as borrowers, MidCap Financial Trust, as agent, and the lenders from time to time party thereto. The terms of the Credit Agreement, and its subsequent amendments, and borrowings we may make under the Credit Agreement in the future, could have significant adverse consequences for our business, including:

As of March 31, 2017, our net commercial product revenue did not meet the required minimum for the twelve months ended March 31, 2017. As a result, on May 11, 2017, we and MidCap Financial Trust entered into an amendment to the Credit Agreement to, among other things, waive the existing event of default and revise the financial covenants pertaining to the minimum required commercial product revenue. The amendment revises the following covenants of the Credit Agreement to: (1) extend the time period through which we can draw the second tranche from August 2017 to March 2018 (2) increase the exit fee of 5.75% of the aggregate principal amount under the Credit Agreement for repayment or prepayment other than scheduled amortization payments and the final payment of principal to 6.75% and (3) permit MidCap Financial Trust to obtain an affirmative lien on our intellectual property, upon the earlier of (i) our draw down of the second tranche or (ii) our cash balance descending below a minimum cash threshold of $25 million.operating results.

On ~~September 28, 2017,~~June 25, 2020, we ~~entered into~~announced that we will receive royalty payments from Pfizer related to sales of a ~~second amendment of~~rituximab biosimilar product, RUXIENCE (Rituximab-pvvr), which was approved by the ~~Credit Agreement (Amendment No. 2)~~U.S. Food and Drug Administration in ~~order to permit the sale of the Hyperimmune Business under the LLC purchase agreement (described in Note 2 - Sale of Hyperimmune Business, in the notes to the financial statements),~~July 2019 and ~~to reflect changes in the remaining business as a result of such sale.~~

Pursuant to the amendment, the agent and the lenders consented to the LLC purchase agreement and the consummation of the sale transaction, released Midcap Financial Trust’s liens on the assets transferred to Venus BioTherapeutics Sub LLC (Venus), one of our subsidiaries, prior to the sale, and agreed that no prepayment of the term loans under the credit agreement would be required as a result the sale.

As part of the amendment, the agent and the lenders agreed that: (i) the commitments of the lenders to make the remaining $15.0 million tranche of loans under the credit agreement were terminated, (ii) the covenant levels set forth in the minimum net commercial product revenue covenant were revised, (iii) a new covenant requiring us to maintain minimum unrestricted cash balances was added to the credit agreement, and (iv) the date on which the term loans begin to amortize will be extended to February 1, 2019 if we achieve commercial product revenues of $16.0 million for the twelve month period ending June 30, 2018 and maintain such level of net commercial product revenues for each quarter prior to February 1, 2019 thereafter.

We may not have sufficient funds or be able to obtain additional financing to pay the amounts due under any future borrowings under the Credit Agreement. In addition, failure to comply with the covenants, including but not limited to the revenue covenants, under the Credit Agreement could result in an event of default. An event of default could result in the acceleration of amounts due under the Credit Agreement, and we may not be able to obtain additional financing to make any accelerated payments. Under these circumstances, our lenders could seek to enforce security interests in our assets securing our indebtedness.

~~Our results of operations and liquidity needs could be materially negatively affected~~launched by ~~market fluctuations and economic downturns.~~

~~Our results of operations could be materially negatively affected by general economic conditions, both~~Pfizer in the United States and ~~elsewhere around the world. Continuing concerns over inflation, energy costs, geopolitical issues,~~Japan in early 2020. The payments from Pfizer relates to a collaboration and the availability and cost of credit have contributed to increased volatility and diminished expectations for the economy and the markets going forward. Domestic and international equity markets continue to experience heightened volatility and turmoil. These events and the continuing market upheavals may have an adverse effect on us. In the event of a continuing market downturn, our results of operations could be adversely affectedlicense agreement acquired by ~~those factors in many ways, including making it more difficult for~~ us ~~to raise funds, if necessary, and our stock price may further decline.~~

~~The way that we account for our operational and business activities is based on estimates and assumptions that may differ from actual results.~~

~~The preparation~~as part of our ~~consolidated financial statements requires us to make estimates~~spin-off from Emergent in 2016, which applies a fixed royalty rate of 2.5% on net sales in the United States, European Union, and ~~assumptions that affect~~Japan. The agreement was originally executed by Trubion Pharmaceuticals (which was subsequently acquired by Emergent) and Wyeth (a wholly-owned subsidiary of Pfizer). The royalty term runs until the ~~reported amounts of assets and liabilities, the disclosure of contingent liabilities as~~seventh anniversary of the ~~date~~first commercial sale of the biosimilar. Royalty payments to us are due within 60 days after the end of each quarter. Although the agreement was terminated in 2012, the royalty obligation survived. We have no control over the sales of RUXIENCE and are dependent on Pfizer to successfully do so. The failure of Pfizer to successfully commercialize RUXIENCE could result in lower than expected royalty payments and negatively impact our future financial ~~statements~~ and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, our management evaluates its critical estimates and judgments, including, among others: those related to revenue recognition, including product rebates, chargeback and return accruals; inventory; clinical research costs; business combinations; intangible assets and impairment; income taxes; stock-based compensation; and contingent consideration. Those critical estimates and assumptions are based on our historical experience, future projections, our observance of trends in the industry, and various other factors that are believed to be reasonable under the circumstances, and they form the basis for making judgments about the carrying values and fair values of assets and liabilities that may not be readily apparent from other sources. If actual results differ from these estimates as a result of unexpected conditions or events occurring which cause us to have to reassess our assumptions, there could be a material adverse impact on our financial results and the performance of our stock.operating results.

We face product liability exposure, which could cause us to incur substantial liabilities and negatively affect our business, financial condition and results of operations.

The nature of our business exposes us to potential liability inherent in pharmaceutical products, including with respect to the ~~sale of IXINITY, any other product candidates that we successfully develop and the~~ testing of our product candidates in clinical ~~trials.~~trials and any product candidates that we successfully develop. Product liability claims might be made by patients in clinical trials, consumers, health care providers or pharmaceutical companies or others that sell ~~our products.~~any products that we successfully develop. These claims may be made even with respect to those products that are manufactured in licensed and regulated facilities or otherwise possess regulatory approval for study or commercial ~~sale or study.~~sale. We cannot predict the frequency, outcome or cost to defend any such claims.

If we cannot successfully defend ourselves against future claims that ~~IXINITY or~~ our product candidates caused injuries, we may incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in:

The amount of insurance that we currently hold may not be adequate to cover all liabilities that may occur. Further product liability insurance may be difficult and expensive to obtain. We may not be able to maintain insurance coverage at a reasonable cost and we may not be able to obtain insurance coverage that will be adequate to satisfy all potential liabilities. Claims or losses in excess of our product liability insurance coverage could have a material adverse effect on our business, financial condition and results of operations. The cost of defending any ~~products~~product liability litigation or other proceeding, even if resolved in our favor, could be substantial. Uncertainties resulting from the initiation and continuation of ~~products~~product liability litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Product liability claims, regardless of merit or eventual outcome, may absorb significant management time and result in reputational harm, potential loss of revenue from decreased demand for ~~our products and/or~~any product candidates we successfully develop, withdrawal of clinical trial participants and potential termination of clinical trial sites or entire clinical programs, and could cause our stock price to fall.

Product recalls may be issued at our discretion or at the discretion of our suppliers, government agencies and other entities that have regulatory authority for pharmaceutical sales. Any recall of IXINITY could materially adversely affect our business by rendering us unable to sell IXINITY for some time and by adversely affecting our reputation. A recall could also result in product liability claims by individuals and third-party payors. In addition, product liability claims could result in an investigation of the safety or efficacy of IXINITY, our manufacturing processes and facilities, or our marketing programs conducted by the FDA, the European Medicines Agency, or EMA, or the competent authorities of the EU Member States. Such investigations could also potentially lead to a recall of IXINITY or more serious enforcement actions, limitations on the indications for which they may be used, or suspension, variation, or withdrawal of approval. Any such regulatory action by the FDA, the EMA or the competent authorities of the EU Member States could lead to product liability lawsuits as well.

We rely significantly on information technology systems and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively or result in data leakage of proprietary and confidential business and employee information.

Our business is increasingly dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support business processes as well as internal and external communications. The size and complexity of our computer systems make them potentially vulnerable to interruption, invasion, computer viruses, destruction, malicious intrusion and additional related disruptions, which may result in the impairment of production and key business processes.

In addition, our systems are potentially vulnerable to data security breaches—whether by employee error, malfeasance or other disruption—which may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information, including sensitive personal information, of our employees, clinical trial patients, customers and others. A significant business disruption or a breach in security resulting in misappropriation, theft or sabotage with respect to our proprietary and confidential business and employee information could result in financial, legal, business or reputational harm to us, any of which could adversely affect our business, financial condition and operating results.

Our success is dependent on our continued ability to attract, motivate and retain key personnel, and any failure to attract or retain key personnel may negatively affect our business.

Because of the specialized scientific nature of our business, our ability to develop products and to compete with our current and future competitors largely depends upon our ability to attract, retain and motivate highly qualified managerial and key scientific and technical personnel. If we are unable to retain the services of one or more of the principal members of senior management, including our Chief Executive Officer, Marvin L. White, our Chief Financial Officer, Jeffrey G. Lamothe, ~~and~~ our Chief ~~Medical~~Scientific Officer, ~~Scott C. Stromatt,~~Jane Gross Ph.D., or other key employees, our ability to implement our business strategy could be materially harmed. ~~Our industry has experienced a high rate of turnover of management personnel in recent years.~~ We face intense competition for qualified employees from biotechnology and pharmaceutical companies, research organizations and academic institutions. Attracting, retaining or replacing these personnel on acceptable terms may be difficult and time-consuming given the high demand in our industry for similar personnel. We believe part of being able to attract, motivate and retain personnel is our ability to offer a competitive compensation package, including equity incentive awards. If we cannot offer a competitive compensation package or otherwise attract and retain the qualified personnel necessary for the continued development of our business, we may not be able to maintain our operations or grow our business. Furthermore, we have experienced and may experience an impact on the health of key personnel due to COVID-19.

We ~~are~~may be subject to periodic litigation, which could result in losses or unexpected expenditure of time and resources.

From time to time, we may be called upon to defend ourselves against lawsuits relating to our business. Any litigation, regardless of its merits, could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully run our business. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome in any such proceedings could have an adverse impact on our business, financial condition and results of operations. If our stock price is volatile, we may become involved in securities class action lawsuits in the future.

Our ability to use net operating losses to offset future taxable income may be subject to limitations.

As of December 31, 2019, we had approximately $28.2 million and $3.0 million of federal and state net operating loss carryforwards, respectively, available to reduce future taxable income that will begin to expire in 2028 for federal purposes and 2029 for state tax purposes. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the newly enacted federal income tax law, federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provision of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We have not assessed whether such an ownership change has previously occurred, including as a result of our March 2019 public offering of common stock and warrants. In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change has occurred or occurs in the future and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

The COVID-19 coronavirus could adversely impact our business, including our clinical trials

The terms of our credit agreement may restrict the operation of our business and limit the cash available for investment in our business operations.

In August 2020, we entered into a Credit and Security Agreement, or the Credit Agreement, by and among us and certain our subsidiaries as borrowers, MidCap Financial Trust, as agent, and the lenders from time to time party thereto. The terms of the Credit Agreement and borrowings we may make under the Credit Agreement in the future, could have significant adverse consequences for our business, including:

We may not have sufficient funds or be able to obtain additional financing to pay the amounts due under the Credit Agreement. In addition, failure to comply with the covenants under the Credit Agreement could result in an event of default. An event of default could result in the acceleration of amounts due under the Credit Agreement, and we may not be able to obtain additional financing to make any accelerated payments. Under these circumstances, our lenders could seek to enforce security interests in our assets securing our indebtedness, including our intellectual property.

The results of our current and planned clinical trials may not satisfy the requirements of the FDA or non-U.S. regulatory authorities. Interim or top line data may be subject to change or qualification based the complete analysis of data.

Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results. The FDA or a non-US regulatory authority may require us, to conduct additional clinical or preclinical testing. Success in early clinical trials does not mean that future larger registration clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and non-U.S. regulatory authorities despite having progressed through initial clinical trials. A number of companies in the pharmaceutical industry, including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier clinical trials.

We may publicly disclose top line or interim data from time to time, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. The top line or interim results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Even in situations where a clinical stage candidate appears to be benefiting a patient, that benefit may not be of a permanent nature. For example, we have previously reported on a patient in cohort 4 of our APVO 436 Phase 1/1b clinical trial who showed a complete marrow response. That patient dropped out of the trial during the eleventh cycle of treatment because his/her disease progressed. Top line and interim data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. In addition, the achievement of one primary endpoint for a trial does not guarantee that additional co-primary endpoints or secondary endpoints will be achieved.

Further, our product candidates may not be approved even if they achieve their primary endpoints in Phase 3 clinical trials or registration trials. Regardless of any advisory committee recommendation, the FDA may decline to approve the BLA for a number of reasons including, if the clinical benefit, safety profile or effectiveness of the drug is not deemed by the FDA to warrant approval. The FDA or other non-U.S. regulatory authorities may disagree with our trial design, and our interpretation of data from preclinical studies and clinical trials. In particular, the FDA may not view our data as being clinically meaningful or statistically persuasive. In addition, any of these regulatory authorities may change requirements for the approval of a product candidate even after reviewing and providing comments or advice on a protocol for a pivotal Phase 3 clinical trial. Any of these regulatory authorities may also approve a product candidate for fewer or more limited indications than we request or may grant approval contingent on the performance of costly post-marketing clinical trials. The FDA or other non-U.S. regulatory authorities may not approve the labeling claims that we believe would be necessary or desirable for the successful commercialization of our product candidates.

If we experience delays or difficulties in the enrollment of patients in clinical trials, the time to reach critical trial data and receipt of any necessary regulatory approvals could be delayed.

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. In addition, some of our competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. In addition, the global outbreak of the COVID-19 coronavirus makes it more difficult to initiate studies and enroll patients.

Our inability to enroll a sufficient number of patients for clinical trials could result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates and in delays to commercially launching our product candidates, if approved, which may cause the value of our company to decline and limit our ability to obtain additional financing.

Serious adverse events, undesirable side effects or other unexpected properties of our product candidates may be identified that could delay, prevent or cause the withdrawal of regulatory approval, limit the commercial potential, or result in significant negative consequences following marketing approval.

Serious adverse events or undesirable side effects caused by, or other unexpected properties of any of our product candidates could cause us or regulatory authorities to interrupt, delay or halt our manufacturing and distribution operations and could result in a more restrictive label, the imposition of distribution or use restrictions or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. If any of our product candidates are associated with serious adverse events or undesirable side effects or have properties that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects that prevented further development of the compound.

Undesirable side effects, or other unexpected adverse events or properties of any of our product candidates, could arise or become known either during clinical development or, if approved, after the approved product has been marketed. If such an event occurs during development, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our other product candidates. If such an event occurs, a number of potentially significant negative consequences may result, including:

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate, or could substantially increase commercialization costs and expenses, which could delay or prevent us from generating revenue from the sale of our products and harm our business and results of operations.

We do not have the ability to independently conduct the clinical and non-clinical trials required to obtain regulatory approval for our product candidates. We depend on third parties, such as independent clinical investigators, contract research organizations and other third-party service providers to conduct the clinical and non-clinical trials of our product candidates and expect to continue to do so. For example, Dr. Scott Stromatt, our former full-time Chief Medical Officer, is now providing clinical trial and medical affairs oversight duties as an independent consultant. We rely heavily on Dr. Stromatt and these other third parties for successful execution of our clinical and non-clinical trials, but we do not exercise day-to-day control over their activities. Our reliance on these service providers does not relieve us of our regulatory responsibilities, including ensuring that our trials are conducted in accordance with the FDA-approved good clinical practices, or GCPs, and the plan and protocols contained in the relevant regulatory application. In addition, these organizations and individuals may not complete these activities on our anticipated or desired timeframe. We also may experience unexpected cost increases that are beyond our control. Problems with the timeliness or quality of the work of a contract research organization may lead us to seek to terminate the relationship and use an alternative service provider, which may prove difficult, costly and result in a delay of our trials. In addition, business disruptions arising from the COVID-19 pandemic could negatively affect the ability of some of the independent clinical investigators, contract research organizations and other third-party service provider that conduct our clinical and non-clinical trials of our product candidates. Any delay in or inability to complete our trials could delay or prevent the development, approval and commercialization of our product candidates.

If we contract research organizations or other third parties assisting us or our study sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or its non-U.S. counterparts may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA or non-U.S. regulatory agencies will determine that any of our clinical trials comply with GCPs. In addition, our clinical trials must be conducted with product produced under GCPs and similar regulations outside of the United States. Our failure, or the failure of our product manufacturers, to comply with these regulations may require us to repeat or redesign clinical trials, which would increase our development costs and delay or impact the likelihood of regulatory approval.

If third parties do not carry out their duties under their agreements with us, if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols, including dosing requirements, or regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties need to be replaced, our clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates or succeed in our efforts to create approved line extensions for certain of our existing products or generate additional useful clinical data in support of these products.

If we are unable to obtain any necessary third-party services on acceptable terms or if these service providers do not successfully carry out their contractual duties or meet expected deadlines, our efforts to obtain regulatory approvals for our product candidates may be delayed or prevented.

Our ability to grow revenues and execute on our long-term strategy depends heavily on our ability to discover, develop, and obtain marketing approval for ~~additional products or~~our product candidates.

In order for us to achieve our long-term business objectives, we will need to successfully discover and/or develop and commercialize ~~additional products or~~our product candidates. Although we have made, and expect to continue to make, significant investments in research and development, we have had only a limited number of our internally-discovered product candidates reach the clinical development stage. We currently have one clinical-stage candidate, APVO436, which is built on the ADAPTIR platform. Drug discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of failure. For example, in 2018, we announced the discontinuation of development of APVO414 and otlertuzumab as a result of clinical trial results. In addition, in October 2019, we announced our decision to discontinue development of APVO210, a novel investigational bispecific antibody candidate under development for the treatment of autoimmune diseases. The decision followed the review of data from Phase 1 multiple ascending dose (MAD) clinical study of APVO210 in healthy volunteers that suggests that APVO210 would not meet the desired target product profile for future commercialization. Specifically, the clinical data showed evidence of increasing titers of ADA with repeated doses of APVO210, which had varying impact on APVO210 drug levels in subjects’ blood. Failure to successfully discover and/or develop, obtain marketing approval for and commercialize additional products and product candidates would likely have a material adverse effect on our ability to grow revenues and improve our financial condition.

We may not be successful in our efforts to use and further develop our ADAPTIR platform.

A key element of our strategy is to expand our product pipeline of immunotherapeutics based on our ADAPTIR platform technology. We plan to select and create product candidates for early development, potentially with other collaborative partners. We expect to continue to develop the platform to address unmet medical needs through directed cytokine delivery via monospecifics and bispecifics in areas including oncology, and multispecific molecules in oncology ~~autoimmune disease~~ and other therapeutic areas. Our goal is to leverage this technology to make targeted investment in bispecific ADAPTIR therapeutics. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not successfully develop and commercialize product candidates based on our ADAPTIR platform technology, our ability to obtain product revenues in future periods may be adversely affected, which likely would result in harm to our financial position and our financial prospects and adversely affect our stock price.

The development and commercialization of new biotechnology products is highly competitive and subject to rapid technological advances. We may face future competition with respect to ~~IXINITY,~~ our current product candidates and any product candidates we may seek to develop or commercialize in the future obtained from other companies and governments, universities and other non-profit research organizations. Our competitors may develop products that are safer, more effective, more convenient or less costly than any products that we may develop or market, or may obtain marketing approval for their products from the ~~U.S. Food and Drug Administration, or the~~ FDA, or equivalent foreign regulatory bodies more rapidly than we may obtain approval for our ~~products.~~product candidates. Our competitors have greater resources and may devote greater resources to ~~market or sell~~research and develop their products, research and development capabilities, adapt more quickly to new technologies, scientific advances or patient preferences and needs, initiate or withstand substantial price competition more successfully, or more effectively negotiate third-party licensing and collaborative arrangements.

We believe that our most significant competitors in the ~~hematology/~~oncology ~~inflammation and transplantation markets~~market include: AbbVie Inc., Aduro, Inc., Affirmed, Amgen Inc., AnaptysBio, Inc., Astellas Pharma ~~Inc., Baxalta US~~ Inc., Bayer AG, Biogen Idec Inc., Boehringer Ingelheim GmbH, ~~CSL Behring, a subsidiary of CSL Limited, Dendron Corp.,~~ Genentech Inc. (a subsidiary of F. Hoffmann-La Roche Ltd.), Genmab A/S, ~~Gilead Sciences, Inc.,~~ GlaxoSmithKline plc, Grifols USA LLC, Bristol Myers Squibb Foundation, ImmunoGen, Inc., Immunomedics, Inc., Janssen BioTech Inc., Johnson & Johnson, Macrogenics, Inc., Novartis International AG, ~~Pfizer~~Pieris Pharmaceuticals, Inc., ~~Sanofi-Adventis~~Sanofi-Aventis US LLC, Takeda Pharmaceuticals U.S.A., Inc., Xencor, Inc. and Zymeworks Biopharmaceuticals, Inc. We ~~compete, in the case of IXINITY, and~~ expect to compete ~~in the cases of our product candidates in development,~~ on the basis of product efficacy, safety, ease of administration, price and economic value compared to drugs used in current practice or currently being developed. If we are not successful in demonstrating these attributes, physicians and other key healthcare decision makers may choose other products over ~~our~~any products we successfully develop, switch from our products to new products or choose to use our products only in limited circumstances, which could adversely affect our business, financial condition and results of operations.

In addition, many of our competitors are able to deploy more personnel to market and sell their products than we do. We currently have a relatively small number of sales representatives compared with the number of sales representatives of most other biotechnology companies with marketed products. Each of our sales representatives is responsible for a territory of significant size. The continued growth of IXINITY and the launch of any future products may require expansion of our sales force and sales support organization internationally, and we may need to commit significant additional funds, management and other resources to the growth of our sales organization. We may not be able to achieve any necessary growth in a timely or cost-effective manner or realize a positive return on our investment, and we may not have the financial resources to achieve the necessary growth in a timely manner or at all. We also have to compete with other biotechnology and life sciences companies to recruit, hire, train and retain sales and marketing personnel, and turnover in our sales force and marketing personnel could negatively affect sales IXINITY. If our specialty sales force and sales organization are not appropriately-sized to adequately promote any current or potential future products, the commercial potential of IXINITY and any future products may be diminished. We compete with a significant number of pharmaceutical and life sciences companies with extensive sales, marketing and promotional experience in the hematology/oncology markets, and our failure to compete effectively in this area could negatively affect our sales of IXINITY.

IXINITY and our product candidates may also compete in the future with new products currently under development by others. Any products that we develop are likely to be in a highly competitive market, and many of our competitors may succeed in developing products before we do or in developing products that may render our products obsolete or noncompetitive.

Competition for IXINITY, may be affected by follow-on biologics, or biosimilars, in the United States and other jurisdictions. Biologics are medical products made from a variety of natural sources (human, animal or microorganism) intended to prevent, diagnose or treat diseases and medical conditions.

In the United States, biosimilars are biologics that are highly similar to licensed reference biological products, notwithstanding minor differences in clinically inactive components, and for which there are no clinically meaningful differences between the biosimilar and the reference product in terms of safety, purity and potency. Regulatory and legislative activity in the United States and other countries may make it easier for our competitors to manufacture and sell biosimilars of IXINITY, which might affect our results of operations or commercial viability of our IXINITY. Under the Biologics Price Competition and Innovation Act of 2010, the FDA cannot approve an application for a biosimilar until the 12-year exclusivity period for the reference product has expired. Thus, if a competitor were to seek regulatory approval for a biosimilar product citing IXINITY as the reference product, such approval could not be granted until April 2027.

Regulators in the EU review biosimilar products using a similar regulatory process. IXINITY has not received marketing authorization by the European Medicines Agency, or EMA, and is not sold in Europe.

~~If a biosimilar version of IXINTY is approved, it could have a material adverse effect on the sales and gross profits of IXINTY and could adversely affect our business and operating results.~~

~~The commercial success of IXINITY and any~~Any of our product candidates, ~~will depend upon the degree of market acceptance by physicians, patients,~~if approved, may become subject to unfavorable pricing regulations or third-party ~~payors~~coverage and ~~others in the medical community.~~reimbursement policies, which would harm our business.

The success of ~~IXINITY and~~ our product candidates, if approved, will depend upon, among other things, their acceptance by physicians, patients, third-party payors and other members of the medical community as a therapeutic and cost-effective alternative to competing products and treatments. If ~~IXINITY or~~ any of our product candidates do not achieve and maintain an adequate level of acceptance, we may not generate material revenues from sales of these products. The degree of market acceptance of our products will depend on a number of factors, including: our ability to provide acceptable evidence of safety and efficacy; the prevalence and severity of any side effects; availability, relative cost and relative efficacy of alternative and competing treatments; the ability to offer our products for sale at competitive prices; our ability to continuously supply the market without interruption; the relative convenience and ease of administration; the willingness of the target patient population to try new products and of physicians to prescribe these products; the strength of marketing and distribution support; publicity concerning our products or competing products and treatments; and the sufficiency of coverage or reimbursement by third parties.

If IXINITY and our product candidates do not gain or maintain market acceptance, or do not become widely accepted, by physicians, patients, third-party payors and other members of the medical community,

Healthcare legislature reform measures may have a material adverse effect on our business ~~financial condition~~ and ~~operating~~ results ~~could be materially and adversely affected.~~of operations.

~~Changes in health care systems and payor reimbursement policies could result in a decline in our potential sales and a reduction in our expected revenue from IXINITY and our product candidates.~~

The revenues and profitability of biotechnology companies like ours may be affected by the continuing efforts of government payors, including Medicare and Medicaid, and other third-party payors to contain or reduce the costs of health care through various means. For example, in certain foreign markets, the pricing or profitability of therapeutic and other pharmaceutical products is subject to governmental control. In the United States, there have been and ~~we expect that there will~~ continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the ACA was enacted, which substantially changed the way health care is financed by both governmental and private insurers, and significantly impacted the U.S. pharmaceutical industry. However, some provisions of the ACA have yet to be fully implemented and certain provisions have been subject to legal and political challenges, as well as efforts by the Trump Administration to repeal or replace certain aspects of the ACA. For example, since January 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA, such as removing penalties as of January 1, 2019 for not complying with the ACA’s individual mandate to carry health insurance, delaying the implementation of certain ACA-mandated fees, and increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. Additionally, on December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the individual mandate was repealed by Congress as part of the Tax Cuts & Jobs Act. While the Texas U.S. District Court Judge, as well as the current U.S. Presidential administration and the Centers for Medicare and Medicaid Services, or CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business. We continue to evaluate how the ACA and recent efforts to repeal and replace or limit the implementation of the ACA will impact our business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2 percent per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional Congressional action is taken.

Additionally, there has been heightened governmental scrutiny recently over the manner in which manufacturers set prices for their marketed products. For example, there have been several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, the Trump administration released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to ~~implement similar governmental control. Recent U.S.~~increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. Individual states in the United States have also become increasingly active in passing legislation ~~rules~~ and implementing regulations ~~instituted significant changes~~designed to ~~the U.S.~~control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. These new laws and initiatives may result in additional reductions in Medicare and other healthcare ~~system that~~funding, which could have a material adverse effect on our ~~business,~~future customers and accordingly, our financial ~~condition and results of~~ operations. The trend toward managed health care in the United States, as well as the implementation of the Patient Protection and Affordable Care Act (as amended by the Health Care and Education Reconciliation Act), collectively referred to as the Affordable Care Act, and the concurrent growth of organizations such as managed care organizations, accountable care organizations and integrated delivery networks, may result in increased pricing pressures for pharmaceutical products, including any products

We expect that may be offered by us in the future. Cost-cutting measures that health care providers are instituting, and the implementation of health care reform, could adversely affect our ability to sell any drug products that are successfully developed by us. We cannot predict what effects, if any, this legislation might have on our company and IXINITY and our product candidates as this legislation continues to be further implemented over the next few years, nor can we predict whether additional ~~legislative or regulatory proposals may be adopted.~~

In the United States and internationally, sales of IXINITY and our ability to generate revenues on such sales are dependent, in significant part, on the availability and level of reimbursement from third-party payors, including state and federal ~~governments and private insurance plans. Insurers have implemented cost-cutting~~healthcare reform measures ~~and other initiatives to enforce more stringent reimbursement standards and likely~~ will ~~continue to do so~~be adopted in the ~~future. These measures include~~future, any of which could limit the ~~establishment of more restrictive formularies~~amounts that federal and ~~increases in the out-of-pocket obligations of patients~~state governments will pay for ~~such products. Third-party payors are also increasingly challenging the prices charged for medical~~healthcare products and services. Third-party payors may limit access to biotechnology products through the use of prior authorizations and step therapy. Any reimbursement granted may not be maintained, or limits on reimbursement available from third parties, may reduce theservices, which could result in reduced demand for ~~or negatively affect the price and potential profitability of those products. If these payors do not provide sufficient coverage and reimbursement for IXINITY or~~ any ~~future drug product we may market, these products may be too costly for general use, and physicians may prescribe them less frequently. Our ability to successfully commercialize our products and~~ product candidates ~~and the demand for our products depends, in part, on the extent to which reimbursement and access is available from such third-party payors.~~

~~In addition, particularly in the United States and increasingly in other countries,~~ we are required to provide discounts and pay rebates to state and federal governments and agencies in connection with purchases IXINITY that are reimbursed by such entities. Various provisions of the Affordable Care Act increased the levels of rebates and discounts that we have to provide in connection with sales of IXINITY that are paid for,successfully develop or reimbursed by, certain state and federal government agencies and programs. It is possible that future legislation and regulatory changes in the United States and other jurisdictions could be enacted, which could potentially impact the reimbursement rates for IXINITY and also could further impact the levels of discounts and rebates we are required to pay to state and federal government entities.

~~Certain government~~additional pricing programs, including Medicare Part B, the Medicaid rebate program, the 340B/PHS drug pricing program and Federal Supply Schedule, affect the revenues that we derive from IXINITY and product candidates. Any future legislation or regulatory actions altering these programs or imposing new ones could have an adverse impact on our business. There have been, and we expect there will continue to be, a number of legislative and regulatory actions and proposals to control and reduce health care costs. These measures may, among other things: negatively impact the level of reimbursement for pharmaceutical products; require higher levels of cost-sharing by beneficiaries; change the discounts required to be provided to government payors and/or providers; extend government discounts to additional government programs and/or providers; or reduce the level of reimbursement for health care services and other non-drug items. Any such measures could indirectly affect demand for pharmaceutical products because they can cause payors and providers to apply heightened scrutiny and/or austerity actions to their entire operations, including pharmacy budgets.

~~Our revenues also depend on the availability outside the United States of adequate pricing and reimbursement from third-party payors for IXINITY and future drug products, if any.~~

Outside the United States, certain countries, including a number of EU Member States, set prices and reimbursement for pharmaceutical products, or medicinal products as they are commonly referred to in the EU, with limited participation from the marketing authorization holders. We cannot be sure that these prices and reimbursement will be acceptable to us or our collaborative partners. If the regulatory authorities in these foreign jurisdictions set prices or reimbursement that are not commercially attractive for us or our collaborative partners, our revenues from sales, and the potential profitability of our drug products, in those countries would be negatively affected. An increasing number of countries are taking initiatives to attempt to reduce large budget deficits by focusing cost-cutting efforts on pharmaceuticals for their state-run health care systems. These international price control efforts have impacted all regions of the world, but have been most drastic in the EU.

~~An inability to convince hospitals and managed care organizations to include IXINITY on their approved formulary lists, may result in our failure to meet revenue expectations.~~

Hospitals and managed care organizations establish formularies, which are lists of drugs approved for use in the hospital or under a managed care plan. If a drug is not included on the formulary, the ability of our engagement partners and engagement managers to promote and sell the drug may be limited or denied. If we fail to secure and maintain formulary inclusion for IXINITY on favorable terms or are significantly delayed in doing so, we may have difficulty achieving market acceptance of IXINITY and our business, results of operations and financial condition could be materially adversely affected.

~~If we are unable to negotiate and maintain satisfactory arrangements with group purchasing organizations our financial condition could be adversely affected.~~

Our ability to sell IXINITY, to hospitals and clinics in the United States depends in part on our relationships with group purchasing organizations, or GPOs. GPOs negotiate pricing arrangements and contracts, sometimes on an exclusive basis, with medical supply manufacturers and distributors. These negotiated prices are then made available to a GPO’s affiliated hospitals and clinics and other members. If we are not one of the providers selected by a GPO, affiliated hospitals, clinics and other members may be less likely to purchase IXINITY, and if the GPO has negotiated a strict sole source, market share compliance or bundling contract for another manufacturer’s products, we may be precluded from making sales to members of the GPO for the duration of the contractual arrangement. Our failure to renew contracts with GPOs may cause us to lose market share and could have a material adverse effect on our sales, financial condition and results of operations. We cannot assure you that we will be able to renew these contracts on the current or substantially similar terms. If we are unable to keep our relationships and develop new relationships with GPOs, our competitive position may suffer.

~~We rely on third parties to distribute~~ ~~IXINITY~~ ~~and those third parties may not perform.~~

We rely on the sales and marketing strength of these distributors and the distribution channels through which they operate for a portion of our revenues. If third parties do not successfully carry out their contractual duties, or if there is a delay or interruption in the distribution of our products, it could negatively impact our revenues from product sales.pressures.

The loss of any of our ~~sole source~~third-party manufacturers, or delays or problems in the manufacture of ~~IXINITY~~ or our product candidates, could result in product shortages ~~and loss in revenue or~~ delays in clinical development.

We do not have manufacturing capabilities and do not plan to develop such capacity in the foreseeable future. We depend on a limited number of sole source third-party ~~manufacturers, including CMC ICOS Biologics, Inc.,~~suppliers for our ~~products and~~ product candidates. Accordingly, our ability to develop and deliver products in a timely and competitive manner ~~depend~~depends on our third-party manufacturers being able to continue to meet our ongoing ~~commercial and~~ clinical trial needs and perform their contractual obligations. ~~We have a limited ability to control the manufacturing process or costs related to the manufacture~~

Manufacture of ~~IXINITY and~~ our product candidates. Increases in the prices we pay our manufacturers, interruptions in the supply of raw materials or IXINITY themselves or lapses in quality could adversely impact our margins, profitability, cash flows and prospects.

If, for any reason, CMC, sole manufacturer of bulk drug substance for our IXINITY product, does not continue to supply us with IXINITY in a timely fashion and in compliance with applicable quality and regulatory requirements, or otherwise fails or refuses to comply with its obligations to us under our manufacturing arrangement, we may not have adequate remedies for any breach of contract, and its failure to supply us could result in a shortage of IXINITY, which could lead to lost revenue and otherwise adversely affect our business, financial condition, results of operations and growth prospects. In addition, if CMC fails or refuses to supply us for any reason, we may be forced to consider entering into additional manufacturing arrangements with other third-party manufacturers. In each case, we will incur significant costs and time in obtaining the regulatory approvals for these third-party facilities and in taking the necessary steps to prepare these third parties for the manufacture of IXINITY. Because of contractual restraints and the lead-time necessary to obtain FDA approval of a new manufacturer, replacement of any of these manufacturers may be expensive and time consuming and may cause interruptions in our supply of IXINITY to our customers or an inability to manufacture.

For example, during 2015, we ordered nine manufacturing lots of bulk drug substance from CMC and only one of those lots was successfully manufactured and released in 2015. During 2016, we ordered five manufacturing lots of bulk drug substance from CMC and none of these lots satisfied product release specifications.

On June 17, 2017, we entered into a new non-exclusive Amended and Restated Commercial Supply, or Restated Supply Agreement, with CMC for the commercial development and manufacture of IXINITY. Pursuant to the terms of the Restated Supply Agreement, CMC agreed to manufacture IXINITY in the quantity of batches provided to CMC on a twenty-four month rolling forecast. Beginning 2018, the minimum and maximum batches will be four and ten, respectively in a calendar year. Multiple batches ordered in succession with no changeover to another product between batches, or a campaign, should receive an incremental discounted price.

In accordance with the Restated Supply Agreement, a $7.0 million reserve held by CMC will be will be applied to, at a minimum, the next four batches manufactured through the end of 2017 as a price concession in the form of no raw materials or other related costs associated with the inventory. As this reserve is utilized, Aptevo will also see an impact on the Company’s income statement due to a lower costs of goods sold associated with this inventory, which will also result in higher gross margins as sales are recognized. Any remaining reserve amount outstanding as of December 25, 2017 shall be paid to the Company on or before December 31, 2017. The Restated Supply Agreement has a five-year term renewable with twenty-four months’ prior notice before the expiry of the term for successive two-year terms.

While we do not currently anticipate or foresee a supply shortage or supply interruption occurring, any supply shortage or supply interruption of IXINITY would adversely affect its sales and could adversely affect its market position, commercial viability and the trading price of our common stock.

~~Manufacturing biologic products,~~candidates, especially in large quantities, is complex and time consuming.

~~IXINITY and all~~All of our current product candidates are biologics. ~~IXINITY and our~~Our product candidates must be made consistently and in compliance with a clearly defined manufacturing process. Problems may arise during manufacturing for a variety of reasons, including problems with raw materials, equipment malfunction or replacement and failure to follow specific protocols and procedures. Slight deviations anywhere in the manufacturing process, including obtaining materials, maintaining master seed or cell banks and preventing genetic drift, seed or cell growth, fermentation and contamination including from, among other things, particulates, filtration, filling, labeling, packaging, storage and shipping, and quality control testing, may result in lot failures or manufacturing shut-down, delays in the release of lots, product recalls, spoilage or regulatory action. Due to COVID-19, our third-party manufacturers may experience difficulties that impact our product candidates.

Failure of our third-party manufacturers to successfully manufacture material that conforms to our specifications and the FDA’s or foreign regulatory authorities’ strict regulatory requirements, may prevent regulatory approval of those manufacturing facilities.

We rely on third parties to manufacture all clinical trial materials for our product candidates, and we will rely on third parties to manufacture commercial supplies, if any such product candidates are ultimately approved for commercial sale. Our product candidates, including ~~APVO414, APVO210, otlertuzumab,~~ APVO436 and ALG.APV-527 will not be approved for marketing by the FDA or other foreign regulatory authorities unless the FDA or their foreign equivalents also approve the facilities used by our third-party manufacturers to produce them for commercialization. If our third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the FDA’s or foreign regulatory authorities’ strict regulatory requirements, the FDA or their foreign counterparts will not approve their manufacturing facilities, which would result in significant delays in obtaining FDA or foreign marketing approvals for our product candidates. In order to successfully develop and commercialize our product candidates in a timely manner, we and our third-party manufacturers must be able to develop and execute on manufacturing processes and reach agreement on contract terms.

We and our third-party manufacturers may not be able to meet these manufacturing process requirements for any of our current product candidates, all of which have complex manufacturing processes, which make meeting these requirements even more challenging. Due to COVID-19, our third-party manufacturers may experience difficulties that impact our product candidates. If we are unable to develop manufacturing processes for our clinical product candidates that satisfy these requirements, we will not be able to supply sufficient quantities of test material to conduct our clinical trials in a timely or cost effective manner, and as a result, our development programs will be delayed, our financial performance will be adversely impacted and we will be unable to meet our long-term goals.

Development and commercialization of ~~IXINITY and~~ our product candidates may be terminated or delayed.

Our development and commercialization strategy involves entering into arrangements with corporate and academic collaborators, contract research organizations, distributors, third-party manufacturers, licensors, licensees and others to conduct development work, manage or conduct our clinical trials, manufacture ~~IXINITY and~~ our product candidates and market and sell our products outside of the United States and maintaining our existing arrangements with respect to the commercialization or manufacture of our products. We may not have the expertise or the resources to conduct all of these activities for all products and product candidates on our own and, as a result, are particularly dependent on third parties in many areas. Any current or future arrangements for development and commercialization may not be ~~successful. If we are not able to establish or maintain agreements relating to IXINITY and our product candidates in development, our results of operations would be materially and adversely affected.~~

~~Third parties may not perform their contractual obligations~~successful, as ~~expected. The~~the amount and timing of resources that third parties devote to developing, manufacturing and commercializing our products candidates are not within our control. Our collaborative partners may develop, manufacture or commercialize, either independently or with others, products and services that are similar to or competitive with the products that are the subject of the collaboration with us. Furthermore, our interests may differ from those of third parties that manufacture or commercialize our products. Our collaborative partners may reevaluate their priorities from time to time, including following mergers and consolidations, and change the focus of their development, manufacturing or commercialization efforts. Disagreements that may arise with these third parties could delay or lead to the termination of the development or commercialization of our product candidates, or result in litigation or arbitration, which would be time consuming and expensive.

If any third-party that manufactures or supports the development or commercialization of IXINITY and our product candidates breaches or terminates its agreement with us, or fails to commit sufficient resources to our collaboration or conduct its activities in a timely manner, or fails to comply with regulatory requirements, such breach, termination or failure could delay or otherwise adversely impact the manufacturing, development or commercialization of IXINITY, our products in development or any additional products or product candidates that we may develop; require us to seek a new collaborator or undertake unforeseen additional responsibilities or devote unforeseen additional resources to the manufacturing, development or commercialization IXINITY and our product candidates; or result in the termination of the development or commercialization of IXINITY and our product candidates.

If we are ~~unable~~not able to ~~successfully develop our business infrastructure and operations, our ability to generate future product revenue will be adversely affected.~~

~~To manage our existing and planned future growth, including our ability to support the sales and marketing of IXINITY and~~establish or maintain agreements relating our product candidates in ~~the United States~~development, our results of operations and ~~globally,~~prospects would be materially and the increasing breadth and complexity of our activities, we need to properly invest in personnel, infrastructure, information management systems and other operational resources. Developing our business infrastructure and operations may be more difficult, more expensive or take longer than we anticipate. We may also need to revise our strategy for developing the proper infrastructure and operations periodically.adversely affected.

~~We are subject to a number of risks and uncertainties associated with our international activities and operations.~~

We currently have limited operations outside of the United States. However, we have manufacturing, collaboration, clinical trial and other relationships outside the United States, and our products are marketed internationally through collaborations. We may seek to grow our international operations significantly over the next several years. Our future results of operations will depend in part on our ability to grow our product sales in foreign markets, particularly in Europe. Our foreign operations subject us to additional risks and uncertainties, particularly because we have limited experience in marketing, servicing and distributing our products or otherwise operating our business outside of the United States and Canada. These risks and uncertainties include: political and economic determinations that adversely impact pricing or reimbursement policies; our customers’ ability to obtain reimbursement for procedures using our products in foreign markets; export licensing requirements, political and economic instability, trade restrictions, and changes in tariffs and difficulties in staffing and managing foreign operations; cross border restrictions on the movement of cash funds and repatriation of earnings; foreign currency fluctuations; longer accounts receivable collection times; reduced protection of intellectual property rights in some foreign countries; the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute; and compliance with foreign or U.S. laws, rules and regulations, including data privacy requirements, labor relations laws, tax laws, anti-competition regulations, anti-bribery/anti-corruption laws, including but not limited to the U.S. Foreign Corrupt Practices Act, or FCPA, and the U.K. Bribery Act of 2010, which could subject us to investigation or prosecution under such U.S. or foreign laws.

Our ~~long term~~long-term success depends, in part, upon our ability to develop, receive regulatory approval for and commercialize our product candidates.

Our product candidates and the activities associated with their development, including testing, manufacture, recordkeeping, storage and approval, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Generally, failure to obtain regulatory approval for a product candidate will prevent us from commercializing the product candidate. We have limited resources for use in preparing, filing and supporting the applications necessary to gain regulatory approvals and expect to rely on third-party contract research organizations and consultants to assist us in this process.

The FDA and other comparable regulatory agencies in foreign countries impose substantial and rigorous requirements for the development, production, marketing authorization and commercial introduction of drug products. These requirements include ~~preclinical,~~pre-clinical, laboratory and clinical testing procedures, sampling activities, clinical trials and other costly and time-consuming procedures. In addition, regulation is not static, and regulatory authorities, including the FDA evolve in their staff interpretations and practices and may impose more stringent or different requirements than currently in effect, which may adversely affect our planned and ongoing drug development and/or our sales and marketing efforts.

In the United States, to obtain approval from the FDA to market any of our future biologic products, we will be required to submit a biologics license application, or BLA, to the FDA. Ordinarily, the FDA requires a sponsor to support a BLA with substantial evidence of the product’s safety, purity and potency in treating the targeted indication based on data derived from adequate and well-controlled clinical trials, including Phase ~~III~~3 safety and efficacy trials conducted in patients with the disease or condition being targeted.

The process of obtaining these regulatory approvals is expensive, often takes many years if approval is obtained at all, and can vary substantially based upon the type, complexity and novelty of the product candidate involved. Changes in the regulatory approval process during the development period, changes in or the enactment of additional statutes or regulations, or changes in the regulatory review for a submitted product application may cause delays in the approval or rejection of an application.

The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient to support approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate.

~~We have a pipeline of clinical and preclinical stage product candidates, including:~~

Developing and obtaining regulatory approval for product candidates is a lengthy process, often taking a number of years, is uncertain and is expensive. All of the product candidates that we are developing, or may develop in the future, require research and development, ~~preclinical~~pre-clinical studies, nonclinical testing and clinical trials prior to seeking regulatory approval and commencing commercial sales. In addition, we may need to address a number of technological challenges in order to complete development of our product candidates. As a result, the development of product candidates may take longer than anticipated or not be successful at all.

Generally, no product can receive FDA approval, marketing authorization from the European Commission or the competent authorities of the EU Member States, or approval from comparable regulatory agencies in foreign countries unless data generated in human clinical trials demonstrates both safety and efficacy for each target indication in accordance with such authority’s standards.

The large majority of product candidates that begin human clinical trials fail to demonstrate the required safety and efficacy characteristics necessary for marketing approval. Failure to demonstrate the safety and efficacy of any of our product candidates for each target indication in clinical trials would prevent us from obtaining required approvals from regulatory authorities, which would prevent us from commercializing those product candidates. Negative or inconclusive results from the clinical trials or adverse medical events during the trials could lead to requirements that trials be repeated or extended, or that additional trials be conducted, any of which may not be clinically feasible or financially practicable, that the conduct of trials be suspended, or that a program be terminated.

Any regulatory approval we ultimately obtain may limit the indicated uses for the product or subject the product to restrictions or post-approval commitments that render the product commercially non-viable. Securing regulatory approval requires the submission of extensive non-clinical and clinical data, information about product manufacturing processes and inspection of facilities and supporting information to the regulatory authorities for each therapeutic indication to establish the product’s safety and efficacy. If we are unable to submit the necessary data and information, for example, because the results of clinical trials are not favorable, or if the applicable regulatory authority delays reviewing or does not approve our applications, we will be unable to obtain regulatory approval.

Delays in obtaining or failure to obtain regulatory approvals may: delay or prevent the successful commercialization of any of the products or product candidates in the jurisdiction for which approval is sought; diminish our competitive advantage; and defer or decrease our receipt of revenue.

~~Certain~~Some of our ~~products~~product candidates previously in development ~~have~~ experienced regulatory and/or clinical ~~setbacks~~setbacks. Clinical development has been discontinued for product candidates otlertuzumab, APVO414, and APVO210. Both APVO414 and APVO210 were discontinued after patients developed anti-drug antibodies (ADA). Most recently, in 2019, we elected to discontinue the ~~past. For example, in December 2015, after a joint~~APVO210 development program following the review of data from the Phase 1 multiple ascending dose ~~escalation~~(MAD) clinical study of ~~APVO414~~APVO210 in ~~prostate cancer patients, Aptevo and MorphoSys concluded~~healthy volunteers that suggests that APVO210 would not meet the ~~dosing regimen and administration required adjustment. Patients receiving weekly~~desired target product profile for future commercialization. Specifically, the clinical data showed evidence of increasing titers of ADA with repeated doses of ~~APVO414 developed antibodies against~~APVO210, which had varying impact on APVO210 drug levels in subjects’ blood. The cause of the ~~drug; which are called anti-drug antibodies, or ADA.~~ ADA ~~developed in most patients including those receiving the maximum tolerated dose~~is uncertain; however we believe that appearance of drug that could be given safely on a weekly basis. These antibodies bind to the drug and reduce the concentration of active APVO414 in the blood and thus could potentially reduce its efficacy. However, we observed no safety issuesADA is related to the ~~development~~mechanism of ~~ADA. The cause~~action of ~~these antibodies is unclear but could be~~APVO210, and not due to the ~~weekly administration~~structure, or sequences characteristic of the ~~drug. Hence,~~ADAPTIR platform. Although we have re-designed certain components of the ~~protocol has been amended to continuous intravenous infusion as a way to administer higher levels of drug and prevent the development of ADA. There~~ADAPTIR platform based on what we have learned in prior clinical, trials, there is no guarantee that ~~this change~~the occurrence of ADA or other clinical setbacks will not occur in ~~administration will enable higher dosing and/or prevent~~ the development of ~~ADA.~~ our existing and future ADAPTIR product candidates.

The procedures to obtain marketing approvals vary among countries and can involve additional clinical trials or other pre-filing requirements. The time required to obtain foreign regulatory approval may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all the risks associated with obtaining FDA approval, or different or additional risks. Regulatory agencies may have varying interpretations of the same data, and approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions. Accordingly, approval by the FDA does not ensure approval by the regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by the FDA or regulatory authorities in other foreign countries. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products and products in development in any market on a timely basis, if at all.

The APVO414 Phase I clinical trial under the amended protocol, providing continuous intravenous infusion as a way to administer higher levels of drug and prevent the development of ADA, commenced December 2016. As a result of the required dosing regimen change and the impact to the overall development timeline and technical risk, our co-development agreement with MorphoSys was restructured. Under the terms of the restructured agreement, MorphoSys’ cost sharing in the years 2016 to 2018 was reduced and future milestone payments payable by MorphoSys to us were reduced to a total of up to $74.0 million. As a result of the required change in dosing regimen for APVO414, the lead RTCC candidate, the termination provisions under the MorphoSys collaboration agreement were amended to give MorphoSys a one-time right to terminate the collaboration agreement, without notice, at either the end of 2016 or after review of clinical data from the first six patients enrolled and dosed in the Phase 1 trial. The requirement for further adjustments to the dosing regimen or other parts of the program could delay our development timeline or delay or prevent our ability to receive regulatory approval for APVO414. In December 2016, the agreement was modified to adjust the allocation of certain manufacturing and development costs and extend MorphoSys’ convenience termination rights. Under the amendment, the timeframe for a one-time right to terminate the collaboration agreement by MorphoSys has been extended from December 31, 2016 to June 30, 2017, or after review of clinical data from the first six patients enrolled and dosed in the APVO414 Phase I clinical trial. Effective August 31, 2017, MorphoSys terminated the MorphoSys collaboration agreement with Company in accordance with the terms of the Fourth Amendment which was effective December 7, 2015.

Biotechnology company stock prices have declined significantly in certain instances where companies have failed to obtain FDA or foreign regulatory authority approval of a product candidate or if the timing of FDA or foreign regulatory authority approval is delayed. If the ~~FDA’s~~FDAs or any foreign regulatory authority’s response to any application for approval is delayed or not favorable for any of our product candidates, our stock price could decline significantly.

Regulatory approval for any approved product is limited by the FDA to those specific indications and conditions for which clinical safety and efficacy have been demonstrated, and we may incur significant liability if it is determined that we are promoting the “off-label” use of any of our products.

Any regulatory approval is limited to those specific diseases and indications for which a product is deemed to be safe and effective by the FDA. For example, the FDA-approved label for IXINITY is not approved for use in patients younger than twelve years old. In addition to the FDA approval required for new formulations, any new indication for an approved product also requires FDA approval. If we are not able to obtain FDA approval for any desired future indications for our products and product candidates, our ability to effectively market and sell our products may be reduced and our business may be adversely affected.

While physicians may choose to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical studies and approved by the regulatory authorities, our ability to promote the products is limited to those indications that are specifically approved by the FDA. These “off-label” uses are common across medical specialties and may constitute an appropriate treatment for some patients in varied circumstances. Regulatory authorities in the United States generally do not regulate the behavior of physicians in their choice of treatments. Regulatory authorities do, however, restrict communications by pharmaceutical companies on the subject of off-label use. If our promotional activities fail to comply with the FDA’s regulations or guidelines, we may be subject to warnings from, or enforcement action by, these authorities. In addition, our failure to follow FDA rules and guidelines relating to promotion and advertising may cause the FDA to issue warning letters or untitled letters, suspend or withdraw an approved product from the market, require a recall or institute fines, which could result in the disgorgement of money, operating restrictions, injunctions or civil or criminal enforcement, any of which could harm our business.

Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow companies to engage in truthful, non-misleading and non-promotional scientific exchange concerning their products. We engage in medical education activities and communicate with investigators and potential investigators regarding our clinical trials. If the FDA or another regulatory or enforcement authority determines that our communications regarding our marketed products are not in compliance with the relevant regulatory requirements and that we have improperly promoted off-label uses, we may be subject to significant liability, including civil and administrative remedies as well as criminal sanctions.

~~Our products may face regulatory, legal or commercial challenges even after approval.~~

Any drug or, biologic for which we receive FDA approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continuing regulation by the FDA, including, among other things, record keeping requirements, reporting of adverse experiences, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, current good manufacturing practices, or cGMP, and restrictions on advertising and promotion. Adverse events that are reported after marketing approval can result in additional limitations being placed on the product’s distribution or use and, potentially, withdrawal or suspension of the product from the market. In addition, various state laws require that companies that manufacture and/or distribute drug products within the state obtain and maintain a manufacturer or distributor license, as appropriate. Because of the breadth of these laws, it is possible that some of our business activities, or those of our third-party manufacturers and distributors, could be subject to challenge under one or more of such laws.

In addition, the FDA has post-approval authority to require post-approval clinical trials and/or safety labeling changes if warranted by the appearance of new safety information. In certain circumstances, the FDA may impose a Risk Evaluation and Mitigation Strategy, or REMS, after a product has been approved. Facilities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA for compliance with cGMP and other laws. The FDA also closely monitors advertising and promotional materials we may disseminate for our products for compliance with restrictions on off-label promotion and other laws. We may not promote our products for conditions of use that are not included in the approved package inserts for our products. Certain additional restrictions on advertising and promotion exist for products that have so-called boxed warnings in their approved package inserts.

Failure by CMC or our other third-party manufacturers to comply with regulatory requirements could adversely affect their ability to supply products or ingredients to us. All facilities and manufacturing techniques used for the manufacture of pharmaceutical products must be operated in conformity with the FDA’s current cGMP requirements. The FDA enforces its cGMP and other requirements through periodic unannounced inspections of manufacturing facilities. If, in connection with any future inspection, the FDA finds that any of our third-party manufacturers is not in substantial compliance with cGMP requirements, or if the FDA is not satisfied with the corrective actions such manufacturer may take, the FDA may undertake certain enforcement actions, including product seizure or withdrawal of the product from the market, imposition of restrictions on the marketing or manufacturing of a product and suspension or withdrawal of regulatory approvals or refusal to approve pending applications or supplements.

Similar actions may be taken against us should we fail to comply with regulatory requirements, or later discover previously unknown problems with our products. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. If we experience any of these post-approval events, our business, financial condition and operating results could be materially and adversely affected.

If we fail to comply with foreign, federal, state and ~~state~~local healthcare laws, including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

As a biotechnology company, even though we do not provide healthcare services or receive payments directly from or bill directly to Medicare, Medicaid or other third-party payors for our products, certain federal, state, local and ~~state~~foreign healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are ~~and will be~~ applicable to our business. We are subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the U.S. federal Anti-Kickback Statute, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Moreover, recent health care reform legislation has strengthened these laws. For example, the ~~Affordable Care Act,~~ACA, among other things, amends the intent requirement of the federal ~~anti-kickback~~Anti-Kickback Statute and criminal health care fraud statutes, so that a person or entity no longer needs to have actual knowledge of ~~this~~the statute or specific intent to violate it. In addition, the ~~Affordable Care Act~~ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims statutes. Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid.False Claims Act.

Recently, several pharmaceutical and other healthcare companies have been prosecuted under the federal false claims laws for allegedly inflating drug prices they report to pricing services, which in turn are used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, interactions with specialty pharmacies, and patient assistance programs may also violate ~~false claims~~fraud and abuse laws. To the extent that any product we make is sold in a foreign country, we may be subject to similar foreign laws and regulations.

Further, there has been a recent trend in the increase of federal and state laws and regulations regarding financial arrangements with physicians. The Affordable Care Act imposes new requirements to report certain financial arrangements with physicians and others, including reporting any “transfer of value” made or distributed to prescribers and other healthcare providers and reporting any ownership or investment interests held by physicians and their immediate family members during each calendar year, subject to federal implementation and enforcement policies.

In addition, certain ~~states~~state and local laws mandate that we comply with a state code of conduct, adopt a company code of conduct under state criteria, disclose marketing payments made to ~~physicians,~~health care professionals and entities, disclose drug pricing information and/or report compliance information to the state authorities. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply in multiple jurisdictions with different compliance and reporting requirements increase the possibility that a pharmaceutical company may violate one or more of the requirements. Any failure to comply with these reporting requirements could result in significant fines and penalties.

The risks of complying with these laws cannot be entirely eliminated. The risk of violation of such laws is also increased because many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal, state, local and ~~state~~foreign privacy, security, fraud and ~~fraud~~transparency laws may prove costly. If our past or present operations, or those of our distributors are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to ~~penalties,~~sanctions, including civil and administrative penalties, criminal ~~penalties,~~fines, damages, ~~fines,~~disgorgement, exclusion from participation in U.S. federal or state health care programs, individual imprisonment, integrity obligations, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results. Similarly, if healthcare providers, distributors or other entities with whom we do business are found to be out of compliance with applicable laws and regulations, they may be subject to sanctions, which could also have a negative impact on us.

If we fail to comply with our obligations under U.S. governmental pricing programs, we could be required to reimburse government programs for underpayments and could pay penalties, sanctions and fines.

On August 2, 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering mandatory reductions in federal spending by as much as $1.1 trillion from 2013 through 2021, referred to as sequestration. The Bipartisan Budget Act of 2013 and subsequent legislation provide billions in sequester relief, but also extends the 2% reduction in Medicare payments, discussed below through fiscal year 2025. Sequestration-related spending reductions may have a significant adverse impact on our business.

The issuance of regulations and coverage expansion by various governmental agencies relating to the Medicaid rebate program will continue to increase our costs and the complexity of compliance and will be time-consuming. Changes to the definition of “average manufacturer price,” or AMP, and the Medicaid rebate amount under the Affordable Care Act and Centers for Medicare & Medicaid Services’, or CMS’s, issuance of final regulations implementing those changes also has affected and could further affect our 340B “ceiling price” calculations. Because we participate in the Medicaid rebate program, we are required to report “average sales price,” or ASP, information to CMS for certain categories of drugs that are paid for under Part B of the Medicare program, including IXINITY. Future statutory or regulatory changes or CMS binding guidance could affect the ASP calculations for our products and the resulting Medicare payment rate, and could negatively impact our results of operations.

Pricing and rebate calculations vary among products and programs, involve complex calculations and are often subject to interpretation by us, governmental or regulatory agencies and the courts. The Medicaid rebate amount is computed each quarter based on our submission to CMS of our current AMP and “best price” for the quarter. If we become aware that our reporting for a prior quarter was incorrect, or has changed as a result of recalculation of the pricing data, we are obligated to resubmit the corrected data for a period not to exceed twelve quarters from the quarter in which the data originally were due. Any such revisions could have the impact of increasing or decreasing our rebate liability for prior quarters, depending on the direction of the revision. Such restatements and recalculations increase our costs for complying with the laws and regulations governing the Medicaid rebate program. Price recalculations also may affect the “ceiling price” at which we are required to offer our products to certain covered entities, such as safety-net providers, under the 340B/PHS drug pricing program.

In addition to retroactive rebate liability and the potential for 340B program refunds, if we are found to have made a misrepresentation in the reporting of ASP, we are subject to civil monetary penalties for each such price misrepresentation and for each day in which such price misrepresentation was applied. If we are found to have knowingly submitted false AMP or “best price” information to the government, we may be liable for civil monetary penalties per item of false information. Any refusal of a request for information or knowing provision of false information in connection with an AMP survey verification also would subject us to civil monetary penalties. In addition, our failure to submit monthly/quarterly AMP or “best price” information on a timely basis could result in a civil monetary penalty per day for each day the information is late beyond the due date. Such failure also could be grounds for CMS to terminate our Medicaid drug rebate agreement, pursuant to which we participate in the Medicaid program. In the event that CMS terminates our rebate agreement, no federal payments would be available under Medicaid or Medicare Part B for our covered outpatient drugs. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot assure you that our submissions will not be found by CMS to be incomplete or incorrect.

In order for our products to be reimbursed by the primary federal governmental programs, we report certain pricing data to the U.S. federal government. Compliance with reporting and other requirements of these federal programs is a pre-condition to: (i) the availability of federal funds to pay for our products under Medicaid and Medicare Part B; and (ii) procurement of our products by the Department of Veterans Affairs, or DVA, and by covered entities under the 340B/PHS program. The pricing data reported are used as the basis for establishing Federal Supply Schedule, or FSS, and 340B/PHS program contract pricing and payment and rebate rates under the Medicare Part B and Medicaid programs, respectively. Pharmaceutical companies have been prosecuted under federal and state false claims laws for submitting inaccurate and/or incomplete pricing information to the government that resulted in increased payments made by these programs. The rules governing the calculation of certain reported prices are highly complex. Although we maintain and follow strict procedures to ensure the maximum possible integrity for our federal pricing calculations, the process for making the required calculations involves some subjective judgments and the risk of errors always exists, which creates the potential for exposure under the false claims laws. If we become subject to investigations or other inquiries concerning our compliance with price reporting laws and regulations, and our methodologies for calculating federal prices are found to include flaws or to have been incorrectly applied, we could be required to pay or be subject to additional reimbursements, penalties, sanctions or fines, which could have a material adverse effect on our business, financial condition and results of operations.

To be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs as well as to be purchased by certain federal agencies and certain federal grantees, we also must participate in the DVA FSS pricing program. To participate, we are required to enter into an FSS contract with the DVA, under which we must make our innovator “covered drugs” available to the “Big Four” federal agencies—the DVA, the U.S. Department of Defense, or the DoD, the Public Health Service (including the Indian Health Service), and the Coast Guard—at pricing that is capped pursuant to a statutory federal ceiling price, or FCP, formula set forth in Section 603 of the Veterans Health Care Act of 1992, or VHCA. The FCP is based on a weighted average wholesale price known as the Non-Federal Average Manufacturer Price, or Non-FAMP, which manufacturers are required to report on a quarterly and annual basis to the DVA. Pursuant to the VHCA, knowing provision of false information in connection with a Non-FAMP filing can subject us to penalties of $100,000 for each item of false information. If we overcharge the government in connection with our FSS contract or Section 703 Agreement, whether due to a misstated FCP or otherwise, we are required to disclose the error and refund the difference to the government. The failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~The failure to obtain or maintain regulatory approval in international jurisdictions could prevent us from marketing our products abroad and could limit the growth of our business.~~

We currently sell and intend to continue to sell our products outside the United States. To market our products in the EU and many other foreign jurisdictions, we may need to obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. Approval by the FDA does not ensure approval by foreign regulatory authorities. The approval procedures in foreign jurisdictions can vary widely and can involve additional clinical trials and data review. We and our collaborative partners may not be able to obtain foreign regulatory approvals on a timely basis, if at all, and therefore we may be unable to commercialize our products internationally. The failure to obtain these approvals could harm our business.

~~Our international operations increase our risk of exposure to potential claims of bribery and corruption.~~

As we expand our commercialization activities outside of the United States, we are subject to an increased risk of inadvertently conducting activities in a manner that violates the FCPA, the U.K. Bribery Act of 2010, Canada’s Corruption of Foreign Public Officials Act, or other similar foreign laws, which prohibit corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. In the course of establishing and expanding our commercial operations and seeking regulatory approvals outside of the United States, we will need to establish and expand business relationships with various third parties and will interact more frequently with foreign officials, including regulatory authorities and physicians employed by state-run healthcare institutions who may be deemed to be foreign officials under the FCPA or similar foreign laws. If our business practices outside the United States are found to be in violation of the FCPA or similar foreign laws, we and our senior management may be subject to significant civil and criminal penalties, potential debarment from public procurement and reputational damage, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our operations, including our use of hazardous materials, chemicals, bacteria and viruses, require us to comply with regulatory requirements and expose us to significant potential liabilities.

Our operations involve the use of hazardous materials, including chemicals, and may produce dangerous waste products. Accordingly, we, along with the third parties that conduct clinical trials and manufacture our products and product candidates on our behalf, are subject to federal, state, local and foreign laws and regulations that govern the use, manufacture, distribution, storage, handling, exposure, disposal and recordkeeping with respect to these materials. We are also subject to a variety of environmental and occupational health and safety laws. Compliance with current or future laws and regulations can require significant costs and we could be subject to substantial fines and penalties in the event of noncompliance. In addition, the risk of contamination or injury from these materials cannot be completely eliminated. In such event, we could be held liable for substantial civil damages or costs associated with the cleanup of hazardous materials.

Our failure to comply with data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

EU Member States, Switzerland and other countries have adopted data protection laws and regulations, which impose significant compliance obligations. For example, European Union, or EU, member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations. Moreover, the ~~EU Data Protection Directive, as implemented into national laws by the EU Member States, imposes strict obligations~~collection and ~~restrictions on the ability to collect, analyze and transfer~~use of personal ~~data, including~~ health data from clinical trials and adverse event reporting. Data protection authorities from the different EU Member States may interpret the EU Data Protection Directive and national laws differently, which adds to the complexity of processing personal data in the ~~European Union,~~EU is now governed under the EU General Data Protection Regulation, or the GDPR, effective in May 2018. The GDPR, which is wide-ranging in scope, imposed several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and ~~guidance~~confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on ~~implementation~~the transfer of personal data out of the EU to the U.S., provides an enforcement authority and ~~compliance practices are often updated~~imposes large penalties for noncompliance, including the potential for fines of up to €20 million or ~~otherwise revised. Our failure~~4% of the annual global revenues of the noncompliant company, whichever is greater. The GDPR requirements apply not only to ~~comply with these laws could lead~~third-party transactions, but also to ~~government enforcement actions and significant penalties against~~transfers of information between us and ~~adversely impact~~ our ~~operating results.~~subsidiaries, including employee information. The ~~revised EU Data Protection Directive adopted in April 2016 may also increase~~GDPR increases our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may be required to put in place additional mechanisms ~~ensuring~~to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new EUregulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. However, despite our ongoing efforts to bring our practices into compliance with the GDPR, we may not be successful either due to various factors within our control, such as limited financial or human resources, or other factors outside our control. It is also possible that local data protection ~~rules.~~

~~Our business depends on our success in developing and commercializing our product candidates.~~

Weauthorities may have invested significant effort and financial resources in the development of our therapeutics and product candidates. In addition to our product sales, our ability to generate revenue is dependent on a number of factors, including the success of our development programs, the interest of commercial entities and non-governmental organizations and others in funding the development of our product candidates, the ability to attract and establish external development partnerships and the commercial viability of our developed product candidates. The commercial success of our product candidates will depend on many factors, including accomplishing the following in an economical manner:

~~If we are delayed~~inconsistencies amongst various EU member states. Any failure or prevented from developing or commercializing a product candidate in a profitable manner, or if doing so requires us to incur significant unanticipated costs, our growth could be materially and adversely affected.

~~Clinical trials of product candidates are expensive and time-consuming, and their outcome is uncertain.~~

Before obtaining regulatory approval for the sale of our product candidates, we and our collaborative partners, where applicable, must conduct extensive preclinical studies and clinical trials to establish proof of concept and demonstrate the safety and efficacy of our product candidates. Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. An unexpected result in one or more of our clinical trials can occur at any stage of testing.

~~We may experience unforeseen events or issues during, or~~alleged failure (including as a result of ~~preclinical testing or clinical trials. These issues and events, which could delay or prevent our ability to receive regulatory approval for a product candidate, include, among others:~~

For example, in December 2015, after a joint review of data from the Phase 1 dose escalation study of APVO414 in prostate cancer patients, the Company and MorphoSys concluded that the dosing regimen and administration required adjustment. Patients receiving weekly doses of APVO414 developed ADA. ADA developed in most patients including those receiving the maximum tolerated dose of drug which could be given safely on a weekly basis. These antibodies bind to the drug and reduce the concentration of active APVO414 in the blood and thus could potentially reduce its efficacy. However, we observed no safety issues related to the development of ADA. The cause of these antibodies is unclear but could be due to the weekly administration of the drug. We and MorphoSys amended the clinical protocol to provide continuous intravenous infusion as a way to administer higher levels of drug and prevent the development of ADA. There is no guarantee that this change in administration will enable higher dosing and/or prevent the development of ADA. Further adverse or inconclusive clinical results could require additional adjustments to the dosing regimen or other parts of the program and could delay or prevent our ability to receive regulatory approval for APVO414.

In addition, product candidates that experience success in preclinical testing and early-stage clinical trials will not necessarily experience the same success in late-stage clinical trials, which are required for marketing approval. The FDA and other countries’ regulatory authorities will allow us to begin clinical trials under an IND, or similar document in other countries only if we demonstratedeficiencies in our ~~submission that the potential product candidate will not expose humans~~policies, procedures, or measures relating to ~~unreasonable risks and that the compound has pharmacological activity that justifies clinical development. It takes significant time and expense to generate the requisite~~privacy, data ~~to support an IND~~security, marketing, or similar document. In many cases, companies spend the time and resources only to discover that the data are not sufficient to support an IND or similar document and therefore are unable to enter human clinical trials.

Even if we are successful in advancing a product candidate into the clinical development stage, before obtaining regulatory and marketing approvals, we must demonstrate through extensive human clinical trials that the product candidate is safe and effective for its intended use. Human clinical trials must be carried out under protocols that are acceptable to regulatory authorities and to the independent committees responsible for the ethical review of clinical studies. There may be delays in preparing protocols or receiving approval for them that may delay the start or completion of the clinical trials. This is applicable both domestically and internationally. Clinical practices vary globally, and there is a lack of harmonization among the guidance providedcommunications) by ~~various regulatory bodies of different regions and countries with respect to the data that is required to receive marketing approval, which makes designing global trials increasingly complex.~~

~~Serious adverse events or undesirable side effects caused by, or other unexpected properties of any of our product candidates could cause~~ us or regulatory authorities to interrupt, delay or halt our manufacturing and distribution operations and could result in a more restrictive label, the imposition of distribution or use restrictions or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. If any of our product candidates are associated with serious adverse events or undesirable side effects or have properties that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects that prevented further development of the compound.

For example, as noted above, APVO414 is currently being tested in its first clinical trial in humans. Twenty-one patients have received the drug. One of the significant serious adverse events associated with the drug is infusion reactions. Infusion reactions are often associated with the infusion of a protein and are expected with this drug that activates T-cells. The events that have been reported with infusion of the drug include: fever, fatigue, hypertension, bronchospasm, chills and rigors. The severity of these reactions varied by patient and were managed medically and resolved. In addition, in December 2015, we discovered that patients receiving weekly doses of our product candidate APVO414 developed ADA during use. This ADA, which was not associated with safety issues, developed in most patients including those receiving the maximum tolerated dose of drug which could be given safely on a weekly basis. Undesirable side effects, such as this, or other unexpected adverse events or properties of any of our candidates, could arise or become known either during clinical development or, if approved, after the approved product has been marketed. If such an event occurs during development, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our other product candidates. If such an event occurs, a number of potentially significant negative consequences may result, including:

We do not have the ability to independently conduct the clinical and non-clinical trials required to obtain regulatory approval for our product candidates. We depend on third parties, such as independent clinical investigators, contract research organizations and other third-party service providers to conduct the clinical and non-clinical trials of our product candidates and expect to continue to do so. We rely heavily on these third parties for successful execution of our clinical and non-clinical trials, but we do not exercise day-to-day control over their activities. Our reliance on these service providers does not relieve us of our regulatory responsibilities, including ensuring that our trials are conducted in accordance with the FDA-approved good clinical practices, or GCPs, and the plan and protocols contained in the relevant regulatory application. In addition, these organizations may not complete these activities on our anticipated or desired timeframe. We also may experience unexpected cost increases that are beyond our control. Problems with the timeliness or quality of the work of a contract research organization may lead us to seek to terminate the relationship and use an alternative service provider, which may prove difficult, costly and result in a delay of our trials. Any delay in or inability to complete our trials could delay or prevent the development, approval and commercialization of our product candidates.

~~If we, contract research organizations or other third parties assisting us or our study sites fail~~ to comply with ~~applicable GCPs, the clinical~~laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating to privacy or data ~~generated~~security, may result in ~~our clinical trials may be deemed unreliable~~governmental investigations and ~~the FDA~~enforcement actions, litigation, fines and penalties or its non-U.S. counterparts may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA or non-U.S. regulatory agencies will determine that any of our clinical trials comply with GCPs.adverse publicity. In addition, ~~our clinical trials must~~we expect that there will continue to be ~~conducted with product produced under GCPs~~new proposed laws, regulations and ~~similar regulations outside of~~industry standards relating to privacy and data protection in the United ~~States. Our failure, or~~States, the ~~failure~~EU and other jurisdictions, such as the California Consumer Privacy Act of ~~our product manufacturers, to comply with these regulations may require us to repeat or redesign clinical trials,~~2018, which ~~would increase our development costs and delay or impact~~has been characterized as the ~~likelihood of regulatory approval.~~

If third parties do not carry out their duties under their agreements with us, if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols, including dosing requirements, or regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties needfirst “GDPR-like” privacy statute to be ~~replaced, our clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates or succeed~~enacted in ~~our efforts to create approved line extensions for certain of our existing products or generate additional useful clinical data in support of these products.~~

~~In certain cases, government entities conduct studies of our product candidates,~~the United States, and we cannot determine the impact such future laws, regulations and standards may ~~seek to rely~~have on ~~these studies in applying for marketing approval for certain of~~ our product candidates. These government entities have no obligation or commitment to us to conduct or complete any of these studies or clinical trials and may choose to discontinue these development efforts at any time.

~~We may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates.~~

We continue to evaluate our business strategy and, as a result, may modify our strategy in the future. In this regard, we may, from time to time, focus our product development efforts on different product candidates or may delay or halt the development of various product candidates. This could require changes in our facilities and our personnel. Any product development changes that we implement may not be successful. In particular, we may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates.

Our decisions to allocate our research and development, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources from better opportunities. Similarly, our decisions to delay or terminate product development programs may also prove to be incorrect and could cause us to miss valuable opportunities.business.

If we are unable to protect our intellectual proprietary rights, our business could be harmed.

Our commercial success will depend, in large part, on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology, products and product candidates. Obtaining and maintaining this protection is very costly. The patentability of technology in the biotechnology field generally is highly uncertain and involves complex legal and scientific questions. We cannot be certain that our patents and patent applications, including our own and those that we have rights through licenses from third parties, will adequately protect our intellectual property. Our success protecting our intellectual property depends significantly on our ability to:

We may not be able to obtain issued patents relating to our technology or ~~products.~~product candidates. Even if issued, patents may inadvertently lapse or be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the duration of patent protection we may have for our ~~products.~~product candidates. Further, patents may lapse prior to the regulatory approval of the underlying product in one or more territories. In the past, we have abandoned the prosecution and/or maintenance of patent applications related to patent families in the ordinary course of business. In the future we may choose to abandon such prosecution and/or maintenance in a similar fashion. If these patent rights are later determined to be valuable or necessary to our business, our competitive position may be adversely affected. Changes in patent laws or administrative patent office rules or changes in interpretations of patent laws in the United States and in other countries may diminish the value of our intellectual property or narrow the scope of our patent protection, or result in costly defensive measures.

The cost of litigation to uphold the validity of patents, once obtained, to prevent infringement or to otherwise protect or enforce our proprietary rights could be substantial and, from time to time, our patents are subject to patent office proceedings. Some of our competitors may be better able to sustain the costs of complex patent litigation because they may have substantially greater financial resources. Intellectual property lawsuits are expensive and unpredictable and would consume management’s time and attention and other resources, even if the outcome were successful. In addition, there is a risk that a court would decide that our patents are not valid and that we do not have the right to stop the other party from using the inventions covered by or incorporating them. There is also a risk that, even if the validity of a patent were upheld, a court would refuse to stop the other party from using the invention(s), including on the grounds that its activities do not infringe the patent. If any of these events were to occur, our business, financial condition and operating results could be materially and adversely affected.

In addition to patent litigation, we may be a party to adversarial proceedings before the Patent Trial and Appeal Board (PTAB) of the US Patent and Trademark Office (USPTO), or the Opposition Division of the European Patent Office (EPO). Potential proceedings before the PTAB include inter partes review proceedings, post-grant review proceedings and interference proceedings. Depending on our level of success at the PTAB and Opposition Division of the EPO, these proceedings could adversely impact our intellectual property rights with respect to our products and technology.

In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the value of patents, once obtained, and with regard to our ability to obtain patents in the future. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Patent and intellectual property laws outside of the United States may also change and be uncertain.

Patent and other intellectual property laws outside the United States are even more uncertain than in the United States and are continually undergoing review and revisions in many countries. Further, the laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. For example, certain countries do not grant patent claims that are directed to business methods and processes. In addition, we may have to participate in additional opposition proceedings, like the proceedings described above, to determine the validity of our foreign patents or our competitors’ foreign patents, which could result in substantial costs and diversion of our efforts.

Our collaborative partners and licensors may not adequately protect our intellectual property rights. These third parties may have the first right to maintain or defend intellectual property rights in which we have an interest and, although we may have the right to assume the maintenance and defense of such intellectual property rights if these third parties do not do so, our ability to maintain and defend such intellectual property rights may be compromised by the acts or omissions of these third parties.

Our patents, once obtained, also may not afford us protection against competitors with similar technology. Because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that others have not filed or maintained patent applications for technology used by us or covered by our pending patent applications without our being aware of these applications.

We also will rely on current and future trademarks to establish and maintain recognized brands. If we fail to acquire and protect such trademarks, our ability to market and sell our products, and therefore our business, financial condition and operating results, could be materially and adversely affected.

A European Patent Opposition is a European Patent Office proceeding that allows for a 3rd party (opponent) to challenge the validity of an issued patent. In a European Patent Opposition only the validity of the patent can be challenged; the European Patent Office cannot rule on whether a party infringes a patent (this is a matter for the courts across Europe). To initiate an Opposition at the European Patent Office, an opponent files a notice that it wishes to oppose the patent within a nine-month period following the publication of the patent grant. After the opponent files the notice, it may be a few years before the merits of the opposition are heard and decided by the European Patent Office Opposition Division and several more years before the Boards of Appeal hears and decides on any appeals. We were previously involved in five opposition proceedings in Europe relating to factor IX proteins. Baxter International Inc. (or Baxalta) was the sole counter-party in all proceedings. Two oppositions were decided in our favor and cannot be further appealed. Of the three remaining oppositions, Baxter either withdrew its patents or withdrew its opposition of a UNC patent (a licensed patent asset). Accordingly, we are no longer involved in adversarial proceedings with Baxter (or Baxalta) relating to these assets in Europe.

International patent protection is particularly uncertain, and if we are involved in additional opposition proceedings in foreign countries, we may have to expend substantial sums and management resources.

Our development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be claimed to infringe patents and other intellectual property rights of third parties under which we do not hold sufficient licenses or other rights. Third parties may be successful in obtaining patent protection for technologies that cover development and commercialization activities in which we are already engaged. These third parties may have substantially greater financial resources than us and could bring claims against us that could cause us to incur substantial expenses to defend against these claims and, if successful against us, could cause us to pay substantial damages. If a patent infringement or other similar suit were brought against us, we could be forced to stop or delay development, manufacturing or sales of the product or product candidate that is the subject of the suit. Intellectual property litigation in the biotechnology industry is common, and we expect this trend to continue.

As a result of patent infringement or other similar claims, or to avoid potential claims, we may choose or be required to seek a license from the third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms, if at all, or if an injunction is granted against us, which could harm our business significantly.

There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other adversarial proceedings such as proceedings before the PTAB and opposition proceedings in the European Patent Office, regarding intellectual property rights ~~with respect to~~that could impact our products and technology.

Patent litigation and other proceedings may also absorb significant management time. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

Our Aptevo trademarks may be opposed which could have a material and adverse effect on our business.

We have applications pending that cover the APTEVO ~~APTEVO~~ THERAPEUTICS, APTEVO BIOTHERAPEUTICS, and APTEVO RESEARCH AND DEVELOPMENT trademarks. We refer to these trademarks as our house marks. If a third party opposes any of these house marks and we are unable to reach settlement prior to the commencement of an opposition proceeding, we may incur significant expense in the course of participating in the opposition process, which can be expensive and lengthy. Any settlement with a third party may result in our agreeing to be subject to restrictions on our use of the relevant house mark. In addition, if we are unsuccessful in an opposition against a house mark, we would lose the ability to obtain trademark registration for one or more uses of the relevant mark both in the United States and in other territories ~~which could have a material and adverse effect on our business.~~

Synoptis Pharma Sp. z.o.o., or Synoptis, has opposed several of our house marks in the European Union. Despite efforts to initiate discussions with Synoptis regarding use of our house marks, Synoptis has refused to enter into settlement agreements. Our foreign counsel is investigating possible cancellation of Synoptis' registrations based on nonuse, which may allow the parties to enter negotiation discussions. If the event we are unsuccessful with our efforts to negotiate a settlement with Synoptis, we may lose our ability to obtain trademark registration for one or more of the house marks in the European Union, where Synoptis has opposed the marks, which could have a material and adverse effect on our business.

The Bristol Myers Squibb Company, or BMS, previously opposed several of our house marks in and outside the United States. We entered into a settlement and co-existence agreement with BMS and its licensee, Ono Pharmaceutical Co., Ltd on July 5, 2017. BMS subsequently withdrew oppositions of our house marks. The settlement and co-existence agreement places restrictions on how we can use our house marks and how we can seek trademark protection for our house marks.

Defending ourselves against such trademark infringement claims could be costly, time-consuming and distracting to management, and if we are unsuccessful in our defense, we could face an injunction and damages.

Defending ourselves against claims could be costly, time-consuming and distracting to management, and if we are unsuccessful in our defense, we could face an injunction prohibiting us from using the Aptevo trademarks and damages, all which could have a material and adverse effect on our business.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Failure to comply with our obligations in our intellectual property licenses with third parties, could result in loss of license rights or other damages.

We are a party to a number of license agreements and expect to enter into additional license agreements in the future. Our existing licenses impose, and we expect future licenses will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license in whole or in part, terminate the exclusive nature of the license and/or sue us for breach, which could cause us to not be able to market any product that is covered by the licensed patents and may be subject to damages.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and ~~products~~product candidates could be adversely affected.

In addition to patented technology, we rely upon unpatented proprietary technology, information processes and know-how. These types of trade secrets can be difficult to protect. We seek to protect this confidential information, in part, through agreements with our employees, consultants and third parties as well as confidentiality policies and audits, although these may not be successful in protecting our trade secrets and confidential information. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known, including through a potential cyber security breach, or may be independently developed by competitors. If we are unable to protect the confidentiality of our proprietary information and know-how, competitors may be able to use this information to develop products that compete with our products, which could adversely impact our business.

~~Risks~~If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.

We rely on information technology systems to keep financial records, capture laboratory data, maintain clinical trial data and corporate records, communicate with staff and external parties and operate other critical functions. Our information technology systems are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses or other disruptive events including but not limited to natural disaster. The impact of COVID-19 also poses an increased security risk, due to the mandatory remote working orders. If we were to experience a prolonged system disruption in our information technology systems or those of certain of our vendors, it could delay or negatively impact our development and commercialization of our product candidates, which could adversely impact our business. If operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring function on an acceptable timeframe. In addition, our information technology systems are potentially vulnerable to data security breaches—whether by employees or others—which may expose sensitive or personal data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of our employees, patients in our clinical trials, customers and others, any of which could have a material adverse effect on our business, financial condition and results of operations. Moreover, a security breach or privacy violation that leads to destruction, loss, alteration, unauthorized use or access, disclosure or modification of, personally identifiable information or personal data, could harm our reputation, compel us to comply with federal, state and/or international breach notification laws, subject us to mandatory corrective or regulatory action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect personal data, including the GDPR and the California Consumer Privacy Act of 2018, which could disrupt our business, result in increased costs or loss of revenue, and/or result in significant legal and financial exposure. In addition, a data security breach could result in loss of clinical trial data or damage to the integrity of that data. If we are unable to implement and maintain adequate organizational and technical measures to prevent such security breaches or privacy violations, or to respond adequately in the event of a breach, our operations could be disrupted, and we may suffer loss of reputation, problems with regulatory authorities, financial loss and other negative consequences. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

We may not be successful in establishing and maintaining collaborations that leverage our capabilities in pursuit of developing and commercializing our product candidates.

For each of our product candidates ~~including otlertuzumab,~~ we plan to evaluate the merits of entering into collaboration arrangements with third parties, including leading biotechnology companies or non-governmental organizations. In ~~addition, in~~ July 2017, we entered into a collaboration agreement with Alligator Bioscience AB, or Alligator, pursuant to which Aptevo R&D and Alligator will collaboratively develop ALG.APV-527, a lead bispecific antibody candidate simultaneously targeting 4-1BB (CD137), a member of the TNFR superfamily of a costimulatory receptor found on activated ~~T cells,~~T-cells, and 5T4, a tumor antigen widely overexpressed in a number of different types of cancer. We ~~expect~~intend to ~~selectively~~ pursue collaboration arrangements with third parties that have particular technology, expertise or resources for the development or commercialization of our product candidates or for accessing particular markets. We face, and will continue to face, significant competition in seeking appropriate partners for our product candidates. If we are unable to identify partners whose capabilities complement and integrate well with ours and reach collaboration arrangements with such partners on a timely basis, on acceptable terms or at all, or if the arrangements we establish are unproductive for us, we may fail to meet our business objectives for the particular product candidate. Our ability to enter into such arrangements with respect to products in development that are subject to licenses may be limited by the terms of those licenses.

~~Any~~Our collaboration ~~that we have entered into, such as agreements~~agreement with ~~MorphoSys and~~ Alligator, or any collaboration agreement we may consider entering into, may not be successful and the success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborative partners. It is likely that our collaborative partners will have significant discretion in determining the efforts and resources that they will apply to these collaborations.

The risks that we are subject to in any of our collaborations include, among others:

The failure of any of our current or future collaboration partners to perform as expected could place us at a competitive disadvantage and adversely affect us financially, including delay and increased costs of development, loss of market opportunities, lower than expected revenues and impairment of the value of the related product candidate. A loss of ~~Aptevo’s~~our collaboration agreement with Alligator would result in a burden of locating a replacement partner under potentially less favorable terms at an additional cost. Collaborations are a critical part of our business strategy, and any inability on our part to establish and successfully maintain such arrangements on terms favorable to us or to work successfully with our collaborative partners could have an adverse effect on our operations and financial performance.

~~Emergent may fail to perform under various transaction agreements that were executed as part of the separation or~~COVID-19, we may ~~fail~~experience delays in opportunities to ~~have necessary systems~~develop our product candidates, due to financial and ~~services in place when certain of the transaction agreements expire.~~other impacts on potential partners.

In connection with our separation from Emergent, we and Emergent agreed to indemnify the ~~separation, we entered into a separation~~other party for certain liabilities. The Emergent indemnity may not be sufficient to hold us harmless from the full amount of liabilities for which Emergent will be allocated responsibility, and ~~distribution agreement and various other agreements with~~ Emergent including a transition services agreement, a tax matters agreement, an employee matters agreement, a manufacturing services agreement, a Canadian distributor agreement, a trademark license agreement and a product license agreement. Certain of these agreements provide for the performance of services by Emergent for a period of time after the separation. We will rely on Emergent to satisfy its performance obligations under these agreements. If Emergent is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses.

~~If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services when the transition services or longer-term agreements terminate, we~~ may not be able to ~~operate~~satisfy its indemnification obligations in the future.

Pursuant to the separation agreement and certain other agreements with Emergent, Emergent has agreed to indemnify us for certain liabilities, and we agreed to indemnify Emergent for certain liabilities. Indemnities that we may be required to provide Emergent are not subject to any cap, may be significant and could negatively impact our business, ~~effectively~~particularly indemnities relating to our actions that could impact the tax-free nature of the distribution. Third parties could also seek to hold us responsible for any of the liabilities that Emergent has agreed to retain. Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our ~~results of operations may be adversely affected. We~~operating business. Further, the indemnity from Emergent may not be ~~successful in effectively or efficiently implementing these systems~~sufficient to protect us against the full amount of such liabilities, and ~~services or in transitioning data from Emergent’s systems to ours. These systems and services may also be more expensive or less efficient than the systems and services~~ Emergent ~~is expected to provide during the transition period.~~

~~Our accounting and other management systems and resources~~ may not be ~~adequately prepared~~able to ~~meet the ongoing financial reporting and other requirements of a standalone publicly-traded company.~~

~~Prior to our separation~~fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Emergent ~~our financial results were included within the consolidated results of Emergent. We~~any amounts for which we are now directly subject to substantial reporting and other obligations under the Securities Exchange Act of 1934, or Exchange Act. These reporting and other obligations place significant demand on our management, administrative and operational resources, including accounting resources. We may not have sufficient time to meet these obligations by the applicable deadlines.

~~Moreover, to comply with these requirements,~~held liable, we have migrated our systems, including information technology systems, implement additional financial and management controls, reporting systems and procedures. We expect to incur additional annual expenses related to these steps, and those expenses may be ~~significant. If we are unable~~temporarily required to ~~upgrade~~bear these losses ourselves. Each of these risks could negatively affect our financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired. Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, ~~financial condition,~~ results of operations and financial condition. Due to COVID-19, we may experience delays in opportunities to develop our product candidates, due to financial and other impacts on potential partners.

Our stock price has fluctuated in the past and is likely to be volatile in the future. Since August 1, 2016, the reported closing price of our common stock has fluctuated between $3.29 and $112 per share (as adjusted to reflect our 1-for-14 reverse stock split of our outstanding common stock that was effective on March 26, 2020). The stock market in general, and the market for biotechnology companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. In particular, the stock market has experienced extreme volatility in recent months as a result of COVID-19 and its impact on the global economy. The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control or unrelated to our operations, including, among others:

In addition, when the market price of a company’s common stock drops significantly, stockholders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

If we do not continue to develop effective internal controls, we may not be able to accurately report our financial results and our business could be harmed.

We and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting as of and for the years ended December 31, 2015 and for quarters through September 30, 2016. A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Specifically, it was determined that a deferred tax liability should have been recorded associated with the difference between the book basis and the tax basis of the in-process research and development asset that was recorded as a part of an acquisition in 2010. As a result, we were required to restate our previously issued audited financial statements for the year ended December 31, 2015 and unaudited financial information for the quarter ended March 31, 2016, included in the Company’s Registration Statement on Form 10, and unaudited financial information for the quarters ended June 30, 2016 and September 30, 2016 included in the Company’s Quarterly Report on Form 10-Q for the quarters ended June 30, 2016 and September 30, 2016.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, ~~beginning in 2018,~~ Section 404 of the Sarbanes-Oxley Act, or Section 404, ~~will require~~requires us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. As an emerging growth company, we have availed ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404. However, we may no longer avail ourselves of this exemption when we cease to be an emerging growth company. When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Investor perceptions of our company may suffer if material weaknesses are found, and this could cause a decline in the market price of our common stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could harm our operating results and reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.

In connection with our separation from Emergent, we and Emergent agreed to indemnify the other party for certain liabilities. The Emergent indemnity may not be sufficient to hold us harmless from the full amount of liabilities for which Emergent will be allocated responsibility, and Emergent may not be able to satisfy its indemnification obligations in the future.

Pursuant to the separation agreement and certain other agreements with Emergent, Emergent has agreed to indemnify us for certain liabilities, and we agreed to indemnify Emergent for certain liabilities. Indemnities that we may be required to provide Emergent are not subject to any cap, may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature of the distribution. Third parties could also seek to hold us responsible for any of the liabilities that Emergent has agreed to retain. Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business. Further, the indemnity from Emergent may not be sufficient to protect us against the full amount of such liabilities, and Emergent may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Emergent any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, results of operations and financial condition.

If the distribution, together with certain related transactions, does not qualify as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Code, our stockholders could be subject to significant tax liabilities, and, in certain circumstances, we could be required to indemnify Emergent for taxes and related expenses resulting from the failure of the transaction to so qualify.

It is intended that the distribution, together with certain related transactions, will generally be tax-free to Emergent and its stockholders for U.S. federal income tax purposes. Emergent has received a favorable private letter ruling from the IRS regarding certain U.S. federal income tax matters relating to the distribution and certain related transactions. It was a condition to the distribution that (i) the private letter ruling from the IRS continue to be valid and in full force and effect and (ii) Emergent receive an opinion from WilmerHale LLP, in a form and substance satisfactory to Emergent, substantially to the effect that, for U.S. federal income tax purposes, the distribution and certain related transactions, taken together, will qualify as a transaction described under Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code, or the Code. The IRS private letter ruling is based upon certain facts and representations submitted by Emergent to the IRS. In addition, the opinion from WilmerHale LLP was based upon and rely on, among other things, the IRS private letter ruling and certain facts and assumptions, as well as certain representations and covenants of Emergent and Aptevo contained in the tax matters agreement and certain representations contained in representation letters provided by Emergent, Aptevo and certain stockholders to WilmerHale LLP, including representations and covenants relating to the past and future conduct of Emergent, Aptevo and such stockholders. If any of these facts, assumptions, representations, or covenants is, or becomes, inaccurate or incomplete, the IRS private letter ruling and/or the opinion of WilmerHale LLP may be invalid and the conclusions reached therein could be jeopardized. In addition, the IRS private letter ruling only addresses certain limited matters relevant to determining whether the distribution, together with certain related transactions, qualifies as a transaction described under Sections 355 and 368(a)(1)(D) of the Code, and the opinion of WilmerHale LLP represents the judgment of such counsel which is not binding on the IRS or any court. Accordingly, notwithstanding the IRS private letter ruling and the opinion of WilmerHale LLP, there can be no assurance that the IRS will not assert that the distribution and/or certain related transactions should be treated as a taxable transaction for U.S. federal income tax purposes or that a court would not sustain such a challenge.

If the distribution, together with certain related transactions, does not qualify as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Code, for U.S. federal income tax purposes, in general, (i) Emergent would recognize taxable gain on the distribution equal to the amount by which the fair market value of the Aptevo common stock distributed to Emergent stockholders exceeds Emergent’s tax basis in its shares of our common stock and (ii) each Emergent stockholder would be treated as receiving a taxable distribution in an amount equal to the fair market value of the Aptevo common stock received by such stockholder.

Under the tax matters agreement that we entered into with Emergent, we may be required to indemnify Emergent against any tax liabilities and related expenses resulting from the failure of the distribution, together with certain related transactions, to qualify as a transaction described under Sections 355 and 368(a)(1)(D) of the Code to the extent that the failure to so qualify is attributable to actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or covenants made by us in the tax matters agreement or the IRS private letter ruling or in the representation letters provided to WilmerHale LLP.

~~Certain of our executive officers and/or directors may have actual or potential conflicts of interest because of their previous positions at Emergent.~~

The ownership by our executive officers and/or directors of shares of Emergent common stock, stock options or other equity awards may create, or may create the appearance of, conflicts of interest. Because of their current or former positions with Emergent, certain of our executive officers and/or directors own shares of Emergent common stock, stock options to purchase Emergent common stock or other equity awards. Shares of Emergent common stock, stock options to purchase Emergent common stock or other equity awards may comprise a significant portion of some of these individuals’ total personal financial assets. Even though our executive officers and/or directors who were previously employees of Emergent have ceased to be employees of Emergent, some of our executive officers and/or directors continue to have a financial interest in Emergent common stock, which may create, or may create the appearance of, conflicts of interest when these individuals are faced with decisions that could have different implications for Emergent than the decisions have for us.

~~We cannot be certain that an active trading market for our common stock will be sustained and our stock price may fluctuate significantly.~~

~~An active trading market for our common stock may not sustained, nor can we predict the prices at which shares of our common stock may trade in the future.~~

Our stock price has fluctuated in the past and is likely to be volatile in the future. Since August 1, 2016, the reported sale price of our common stock has fluctuated between $1.19 and $3.33 per share. The stock market in general, and the market for biotechnology companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control or unrelated to our operations, including, among others:

The restatement of our previously issued financial statements, the misstatements that resulted in such restatement, and the material weakness that has been identified in our internal control over financial reporting, could expose us to additional risks that could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our common stock to decline.

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2016, and in Note 10 – Restatement, to the financial statements included in this Quarterly Report on Form 10-Q we restated our previously issued audited consolidated financial statements for the year ended December 31, 2015 and the unaudited financial information related to March 31, 2016 and June 30, 2016 and the three and nine months ended September 30, 2016. This restatement, along with the material weakness that were identified in our internal control over financial reporting, could expose us to potential claims and additional risks that could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our common stock to decline. We have implemented actions with respect to our internal controls but to the extent these steps are not successful, we could be forced to incur additional time and expense or we may not be able to produce accurate and timely financial results. As a result of the restatement and the material weakness in our internal controls, we could be subject to stockholder, governmental, or other actions in connection with the restatement or related or other matters. Any such proceedings would, regardless of the outcome, consume a significant amount of management’s time and attention and would result in additional legal, accounting and other costs. If we were not to prevail in any such proceedings, we could be required to pay substantial damages or settlement costs. In addition, the restatement and related matters could impair our reputation or could lead to a loss of investor confidence.

The public announcement of data from clinical ~~studies~~trials or news of any developments related to our product pipeline may cause significant volatility in our stock price.

The announcement of data from clinical ~~studies~~trials by us or our collaborative partners or news of any developments related to our key pipeline product candidates may cause significant volatility in our stock price. Furthermore, the announcement of any negative or unexpected data or the discontinuation of development of any of our key pipeline product candidates, or any delay in our anticipated timelines for filing for regulatory approval, could cause our stock price to decline significantly. There can be no assurance that data from clinical ~~studies~~trials will support a filing for regulatory approval or even if approved, that any of our key pipeline products will become commercially successful.

In the future, your percentage ownership in Aptevo may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards to our directors, officers and employees. Our employees have options to purchase shares of our common stock and ~~we have issued significant number of restricted stock units that will vest over time. From~~from time to time, we ~~may~~expect to issue additional options, restricted stock units, or other stock-based awards to our employees under our employee benefits plans.

Future issuances of common stock may include (i) any sale of up to the remaining $17.3 million worth of shares of our common stock pursuant to our Equity Distribution Agreement with Piper Sandler & Co entered into in November 2017, (ii) any sale of up to $35.0 million worth of shares of our common stock in a private placement pursuant to our Purchase Agreement with Lincoln Park, entered into in December 2018 and (iii) the issuance of up to 1,571,429 shares of common stock upon the exercise of warrants issued in connection with our March 2019 public offering of common stock and warrants.

In addition, our restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock respecting dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock.

Fuad El-Hibri, the chairman of our Board of Directors, has significant influence over us through his substantial beneficial ownership of our common stock, including an ability to influence the election of the members of our Board of Directors, or delay or prevent a change of control of us.

Mr. El-Hibri has the ability to significantly influence the election of the members of our Board of Directors due to his substantial beneficial ownership of our common stock. As of September 30, 2017, Mr. El-Hibri was the beneficial owner of approximately 15% of our outstanding common stock. As a result, Mr. El-Hibri could delay or prevent a change of control of us that may be favored by other directors or stockholders and otherwise exercise substantial control over all corporate actions requiring board or stockholder approval, including any amendment of our certificate of incorporation or by-laws. The control by Mr. El-Hibri may prevent other stockholders from influencing significant corporate decisions. In addition, Mr. El-Hibri’s significant beneficial ownership of our shares could present the potential for a conflict of interest.

Provisions under Delaware law and in our restated certificate of incorporation and amended and restated by-laws may discourage acquisition proposals, delay a change in control or prevent transactions that stockholders may consider favorable.

Certain provisions in our restated certificate of incorporation and amended and restated by-laws, and under Delaware law, may discourage, delay or prevent a merger, acquisition or other changes in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our incumbent directors and management.

The affirmative vote of holders of our capital stock representing at least 75% of the voting power of all outstanding stock entitled to vote is required to amend or repeal the above provisions of our certificate of incorporation. The affirmative vote of either a majority of the directors present at a meeting of our Board of Directors or holders of our capital stock representing at least 75% of the voting power of all outstanding stock entitled to vote is required to amend or repeal our by-laws.

In addition, Section 203 of the General Corporation Law of Delaware prohibits a corporation from engaging in a business combination with an interested stockholder, generally a person which, together with its affiliates, owns or within the last three years has owned 15% or more of the corporation’s voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of us.

In addition, under the tax matters agreement, for a period of two years following the separation, we are restricted from taking certain actions (including restrictions on business combinations and share issuances) that could cause the distribution, together with certain related transactions, to fail to qualify as a tax-free transaction for U.S. federal income tax purposes. We would be required to indemnify Emergent for any taxes and related expenses resulting from the failure of the transactions to so qualify to the extent that the failure is attributable to actions, events or transactions relating our stock, assets or business, and this indemnity obligation might discourage, delay or prevent a change of control that you may consider favorable.

Our by-laws include an exclusive forum provision that could limit our stockholders’ ability to obtain a judicial forum viewed by stockholders as more favorable for disputes with us or our directors, officers or other employees or certain stockholders.

Our by-laws provide that the Chancery Court of the State of Delaware will be the sole and exclusive forum for certain legal proceedings, unless we consent in writing to the selection of an alternative forum. This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage lawsuits against us or our directors or officers. Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

~~Because we currently do not expect to pay dividends, investors will benefit from an investment in our common stock only if it appreciates in value.~~

We anticipate that we will retain all our future earnings, if any, to support our operations and our proprietary drug development programs and product candidates and pursue other opportunities. In addition, our credit facility limits our ability to pay dividends. As a result, we currently do not expect to pay dividends for the foreseeable future. Any future determination to pay dividends will be at the sole discretion of our Board of Directors and will depend upon our financial condition, results of operations, capital requirements, restrictions contained in future financing instruments and such other factors as our Board of Directors deems relevant. We cannot guarantee that we will pay any dividends in the future or continue to pay any dividend if we were to commence paying dividends. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.

~~A significant portion of our shares may be sold into the market at any time which could depress our stock price~~

If our stockholders sell a substantial number of shares of our common stock in the public market, our market price could decline. In addition, holders of an aggregate of approximately three million shares of our common stock have the right to require us to register these shares of common stock under the Securities Act of 1933, as amended, under specified circumstances.

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.

Delaware	81-1567056
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2401 4^th Avenue, Suite 1050 Seattle, Washington	98121
(Address of principal executive offices)	(Zip Code)


Title of Each Class	Trading Symbols(s)	Name of Exchange on Which Registered
Common Stock, $0.001 par value per share	APVO	The Nasdaq Stock Market LLC (The Nasdaq Capital Market)

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☐☒ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☒
		Emerging growth company	☒

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	23
	Condensed Consolidated Statements of Operations	3
	~~Consolidated Statements of Comprehensive Loss~~	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	6
	Notes to Condensed Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2825
Item 4.	Controls and Procedures	2825

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	2926
Item 1A.	Risk Factors	2926
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6045
Item 3.	Defaults Upon Senior Securities	6045
Item 4.	Mine Safety Disclosures	6045
Item 5.	Other Information	6045
Item 6.	Exhibits	6146
Signatures	62	47

Cash payment received	$	61,750	$	29,250
Escrow receivable		3,250		750
Total consideration		65,000		30,000
Less:
Net carrying value of assets transferred to Saol		10,315		13,376
Transaction costs		1,273		1,880
Working capital adjustment		874
Minimum Transition Services Agreement ("TSA") fund				406
Net gain on sale of business	$	52,538	$	14,338


ASSETS	September 30, 2017			December 31, 2016
Current assets:
Cash and cash equivalents	$	75,830		$	9,676
Restricted cash		10,400			400
Short-term investments		20,946			44,849
Accounts receivable		528			307
Inventories		1,237			461
Current assets held for sale		—			10,155
Prepaid expenses and other current assets		6,381			5,566
Total current assets		115,322			71,414
Property and equipment, net		6,163			5,910
Intangible assets, net		6,287			6,910
Long-term assets held for sale		—			7,624
Other long-term assets		3,250			—
Total assets	$	131,022		$	91,858
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	7,512		$	10,518
Accrued compensation		3,815			4,009
Sales rebates and discounts		378			278
Due to acquirer of discontinued operations		878			—
Deferred revenue, current portion		—			811
Other short-term liabilities		2,287			—
Current liabilities held for sale		—			3,928
Total current liabilities		14,870			19,544
Deferred revenue, net of current portion		—			2,896
Long-term debt, net		17,484			18,383
Other liabilities		8,358			469
Total liabilities		40,712			41,292

Stockholders' equity:
Preferred stock: $0.001 par value; 15,000,000 shares authorized, zero shares issued or outstanding		—			—
Common stock: $0.001 par value; 500,000,000 shares authorized; 21,426,731 and 20,271,737 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		21			20
Additional paid-in capital		154,257			151,271
Accumulated other comprehensive loss		(10	)		(33	)
Contribution receivable from former parent		—			(20,000	)
Accumulated deficit		(63,958	)		(80,692	)
Total stockholders' equity		90,310			50,566
Total liabilities and stockholders' equity	$	131,022		$	91,858

	September 30, 2017
(in thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	16,778	$	—	$	—	$	16,778
Corporate bonds		—		8,973		—		8,973
US government and agency debt securities		—		11,973		—		11,973
Total assets	$	16,778	$	20,946	$	—	$	37,724

	December 31, 2016
(in thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	5,215	$	—	$	—	$	5,215
Corporate bonds		—		9,951		—		9,951
US government and agency debt securities		—		34,898		—		34,898
Total assets	$	5,215	$	44,849	$	—	$	50,064

	September 30, 2017
(in thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding (Losses)			Estimated Fair Value
Cash equivalents:
Money market fund	$	16,778	$	—	$	—		$	16,778
Total cash equivalents	$	16,778	$	—	$	—		$	16,778

Short-term investments:
Corporate bonds	$	8,978	$	—	$	(5	)	$	8,973
US government and agency debt securities		11,978		—		(5	)		11,973
Total short-term investments	$	20,956	$	—	$	(10	)	$	20,946

	December 31, 2016
(in thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding (Losses)			Estimated Fair Value
Cash equivalents:
Money market fund	$	5,215	$	—	$	—		$	5,215
Total cash equivalents	$	5,215	$	—	$	—		$	5,215

Short-term investments:
Corporate bonds	$	9,959	$	1	$	(9	)	$	9,951
US government and agency debt securities		34,923		—		(25	)		34,898
Total short-term investments	$	44,882	$	1	$	(34	)	$	44,849

	September 30,		December 31,
(in thousands)	2017		2016⁽¹⁾
Raw materials and supplies	$	240	$	260
Work-in-process		57		4
Finished goods		940		197
Total inventories	$	1,237	$	461

	June 30,		December 31,
(in thousands)	2020		2019
Cash	$	2,025	$	4,954
Cash equivalents		5,574		7,494
Restricted cash, current		1,862		—
Restricted cash, long-term		693		7,498
Total cash, cash equivalents, and restricted cash	$	10,154	$	19,946

	For the Three Months Ended June 30,		For the Six Months Ended June 30,		For the Three Months Ended June 30,		For the Six Months Ended June 30,
(in thousands)	2020		2020		2019		2019
Operating lease cost	$	395	$	790	$	399	$	734
Finance lease cost:
Amortization of right-of-use assets		2		3		2		3
Interest on lease liabilities		—		—		—		1
Total lease cost	$	397	$	793	$	401	$	738

	As of June 30,		As of June 30,
(in thousands)	2020		2019
Operating leases, excluding Seattle office lease	$	349	$	345
Seattle office lease, including amendment		3,067		4,347
Total operating leases	$	3,416	$	4,692

	For the Nine Months Ended September 30,				As of June 30,
(in thousands, except for per share amounts)	2017		2016
(in thousands)					2020		2019
Warrants						1,571		1,571
Outstanding options to purchase common stock		2,989		2,053		340		294
Unvested RSUs		1,256		3,324		12		—

	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Term		Aggregate Intrinsic Value
Balance at December 31, 2016		2,085,214	$	2.57			$	164,767
Granted		993,339		2.07				—
Forfeited		89,245		2.35				4,769
Outstanding at September 30, 2017		2,989,308	$	2.41		6.88	$	328,052
Exercisable at September 30, 2017		1,292,727	$	2.42		4.58	$	110,082

	Number of Units			Weighted Average Fair Value per Unit		Aggregate Fair Value
Balance at December 31, 2016		3,034,195		$	2.88	$	—
Granted		19,803			2.00		—
Vested		(1,555,217	)		2.84		—
Forfeited		(243,271	)		2.94		—
Outstanding at September 30, 2017		1,255,510		$	2.91	$	2,875,118
Expected to Vest		1,181,266		$	2.91	$	2,705,100

	Three Months Ended									Nine Months Ended
(in thousands)	September 30, 2016 (As previously reported)			Restatement Adjustment			September 30, 2016 (Restated)			September 30, 2016 (As previously reported)			Restatement Adjustment			September 30, 2016 (Restated)
Impairment expense	$	55,702		$	15,311		$	71,013		$	55,702		$	15,311		$	71,013
Loss from operations		(71,254	)		(19,271	)		(90,525	)		(97,081	)		(24,825	)		(121,906	)
Loss before income taxes		(71,747	)		(19,270	)		(91,017	)		(97,498	)		(24,825	)		(122,323	)
Benefit from income taxes		6			17,602			17,608			29			18,561			18,590
Net loss	$	(71,741	)	$	(1,668	)	$	(73,409	)	$	(97,469	)	$	(6,264	)	$	(103,733	)

(in thousands, except per share amounts)	Three Months Ended September 30, (Restated)⁽¹⁾			Nine Months Ended September 30, (Restated)⁽¹⁾
Revenue	$	2,816		$	7,203
Loss from operations		(90,525	)		(121,906	)
Loss before income taxes		(91,017	)		(122,323	)
Benefit from income taxes		17,608			18,590
Net loss	$	(73,409	)	$	(103,733	)
Net loss per share - basic and diluted	$	(3.55	)	$	(4.82	)

Exhibit Number		Description

2.1*†# 2.1		LLC Purchase Agreement ~~dated as of August 31, 2017,~~ by and among Aptevo ~~BioTherapeutics LLC, Aptevo~~ Therapeutics Inc.~~, Venus Bio Therapeutics Sub LLC,~~ and ~~Saol International Limited.~~Medexus Pharma, Inc. dated February 28, 2020

3.1		Amended and Restated Certificate of Incorporation of Aptevo Therapeutics Inc. ~~(incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed on August 2, 2016)~~

3.2		Certificate of Amendment of Amended and Restated ~~Bylaws~~Certificate of Incorporation of Aptevo Therapeutics Inc. ~~(incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, filed on August 2, 2016).~~
~~4.1~~
10.1*		~~Form~~Collaboration and License Agreement, dated as of ~~Common Stock Certificate (incorporated~~December 19, 2005, by ~~reference to Exhibit 4.1 to the Company's Form 10, filed on June 29, 2016).~~and among Wyeth Pharmaceuticals and Trubion Pharmaceuticals, Inc.
~~4.2~~
10.2*		~~Registration Rights~~Amendment No. 1 to the Collaboration and License Agreement dated as of ~~August 1, 2016,~~December 19, 2005 (the “Agreement”) by and ~~among Aptevo Therapeutics~~between Trubion Pharmaceuticals, Inc. (“Trubion”) and ~~certain of~~Wyeth, acting through its ~~stockholders (incorporated by reference to Exhibit 4.0 to the Company's Current Report on Form 8-K, filed on August 2, 2016)~~Wyeth Pharmaceuticals Division (“Wyeth”).
~~10.1~~
10.3*		Amendment No. 2 to ~~Credit~~the Collaboration and ~~Security~~License Agreement dated as of ~~September 28, 2017,~~December 19, 2005 (as previously amended, the “Agreement”) by and ~~among Aptevo Therapeutics~~between Trubion Pharmaceuticals, Inc. (“Trubion”) and ~~certain of~~Wyeth LLC (formerly known as Wyeth), acting through its ~~subsidiaries and Midcap Financial Trust (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 29, 2017)~~Wyeth Pharmaceuticals Division (“Wyeth”).
10.2*†
10.4*		Amendment No. 3 to the Collaboration and ~~Option~~License Agreement dated as of ~~July 20, 2017,~~December 19, 2005 (as previously amended, the “Agreement”) by and between ~~Aptevo Research~~Emergent Product Development Seattle, LLC (successor to Trubion Pharmaceuticals, Inc. (“Trubion”)) (“EPDS”) and ~~Development~~Wyeth LLC ~~and Alligator Bioscience AB.~~(formerly known as Wyeth), acting through its Wyeth Pharmaceuticals Division (“Wyeth”).

10.5*		Amendment No. 4 to the Collaboration and License Agreement dated as of December 19, 2005 (as previously amended, the “Agreement”) by and between Emergent Product Development Seattle, LLC (successor to Trubion Pharmaceuticals, Inc. (“Trubion”)) and Wyeth LLC (formerly known as Wyeth), acting through its Wyeth Pharmaceuticals Division (“Wyeth”).

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the ~~Sarbanes-Oxley~~Sarbanes Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the ~~Sarbanes-Oxley~~Sarbanes Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~.2002.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

	APTEVO THERAPEUTICS INC.

Date: ~~November 9, 2017~~August 14, 2020	By:	/s/ Marvin White
		Marvin White
		President and Chief Executive Officer

Date: ~~November 9, 2017~~August 14, 2020	By:	/s/ Jeffrey G. Lamothe
		Jeffrey G. Lamothe
		Senior Vice President, Chief Financial Officer, and Treasurer