ATHENEX, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

The following discussion contains management's discussion and analysis of our
financial condition and results of operations and should be read together with
the historical consolidated financial statements and the notes thereto included
in Part II, Item 8 "Financial Statements and Supplementary Data." This
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs and involve numerous risks and uncertainties, including but not
limited to those described in the "Risk Factors" section of this Annual Report.
Actual results may differ materially from those contained in any forward-looking
statements. You should carefully read "Special Note About Forward-Looking
Statements" and Part I, Item 1A, "Risk Factors."

Overview and Recent Developments

We are a biopharmaceutical company dedicated to becoming a leader in the discovery, development, and commercialization of next-generation products for the treatment of cancer.

Our mission is to become a leader in bringing innovative cancer treatments to
the market and to improve patient health outcomes. In pursuit of this mission,
Athenex leverages years of experience in research and development, clinical
trials, regulatory standards, and manufacturing. For more information about our
mission, please see the section titled "Overview" in Part I, Item 1. "Business"
of this Annual Report on Form 10-K.

We are organized around two operating segments: (1) our Oncology Innovation
Platform, dedicated to the research and development of our proprietary drugs;
and (2) our Commercial Platform, focused on the sales and marketing of our
specialty drugs and the market development of our proprietary drugs. Our current
clinical pipeline in the Oncology Innovation Platform is derived mainly from the
following technologies: (a) Cell Therapy, based on natural killer T ("NKT")
cells, and (b) Orascovery, based on a P-glycoprotein pump inhibitor.

For more information about recent developments in our Oncology Innovation
Platform, please see the section titled "Our R&D Programs" in Part I, Item 1.
"Business" of this Annual Report on Form 10-K. We previously had a third
operating segment, the Global Supply Chain Platform, focused on the current Good
Manufacturing Practices ("cGMP") manufacturing and supply of active
pharmaceutical ingredients and 503B sterile compounded pharmaceutical products.
The components within this operating segment were sold or otherwise discontinued
during 2022.

Oncology Innovation Platform Developments

Cell Therapy Platform

Through our acquisition of Kuur Therapeutics, Inc. (formerly known as Cell
Medica, "Kuur") in 2021, we acquired rights to intellectual property to further
the development of autologous and allogeneic, or "off-the-shelf", NKT cell
immunotherapies for the treatment of solid and hematological malignancies. We
are advancing the following product candidates: KUR-501, KUR-502, and KUR-503.

KUR-501 is an autologous product in which NKT cells are engineered with a CAR
targeting disialoganglioside ("GD2"). GD2 is expressed on almost all
neuroblastoma tumors and certain other malignancies. Neuroblastoma is a rare
pediatric cancer and patients with relapsed or refractory ("R/R") high-risk
neuroblastoma ("HRNB") have very poor outcomes. Therefore, we believe there is a
significant unmet medical need for better treatment options. KUR-501 is
currently being evaluated in a Phase 1 dose-escalation clinical trial
("GINAKIT2") treating children with R/R HRNB. Updated clinical data from this
trial was presented at the American Society of Gene & Cell Therapy Annual
Meeting in May 2022. The data demonstrated expansion of CAR-NKT cells
post-transfer in all patients and objective responses in patients with R/R HRNB,
including patients previously treated with anti-GD2 monoclonal antibody. Overall
Response Rate ("ORR") was 25%, or three responses out of 12 patients, and
Disease Control Rate was 58% with four stable disease, two partial responses
("PR"), and one complete response ("CR"). Two of these responses occurred at the
highest dose level tested so far of 100 million cells/m2, and the CR lasted for
nearly 14 months. KUR-501 has been well-tolerated without dose limiting toxicity
("DLT"), as the majority of adverse events observed were cytopenias related to
the preconditioning nonmyeloablative lymphodepletion chemotherapy regimen. There
was no evidence of ICANS in any of the patients at the first four dose levels,
and there was one case of Grade 2 CRS. The GINAKIT2 study is supported by
Athenex and is being conducted by Athenex's collaborator, the Baylor College of
Medicine ("BCM"). BCM temporarily suspended patient enrollment on this study
after a young heavily pretreated male patient with R/R HRNB treated at the fifth
dose level of 300 million cells/m2 died within three weeks of CAR-NKT cell
therapy product administration. He was found to have human metapneumovirus
infection, then Grade 1 CRS that was treated with immunosuppressants, and he
later developed polyclonal hyperleukocytosis complicated by multiorgan
dysfunction without evidence of sepsis. This was followed by a recent
FDA-imposed clinical hold on the KUR-501 Investigational New Drug ("IND") while
BCM completes their investigation of the etiology and pathogenesis of this event
and devises a safety risk mitigation plan to reopen the clinical trial, one that
could include excluding patients with concomitant viral infections. No patients
are receiving or scheduled to receive additional treatment with KUR-501. While
we intend to work with BCM to help address the FDA's questions

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and target to reopen the clinical trial during the year, BCM may not resume GINAKIT2 study patient enrollment unless and until the FDA lifts their clinical hold on the KUR-501 IND. There can be no assurance that BCM will be able to resume the Phase 1 clinical trial of KUR-501.

KUR-502 is an allogeneic ("off-the-shelf") product in which NKT cells isolated
from healthy donors are engineered with a CAR targeting CD19, which is widely
expressed on both normal and malignant B cells. In addition to the CAR, KUR-502
is genetically engineered to downregulate surface expression of HLA class I and
class II proteins, resulting in reduced recognition and elimination by the host
immune system following infusion. KUR-502 is currently being evaluated in a
single-center, BCM-sponsored, Phase 1 clinical trial (ANCHOR) treating adults
with R/R CD19-positive malignancies, including B cell non-Hodgkin lymphoma
("NHL"), acute lymphoblastic leukemia ("ALL"), and chronic lymphocytic leukemia.
An interim data update on seven evaluable patients was presented at the Tandem
Meetings of the American Society of Transplantation and Cellular Therapy and the
Center for International Blood & Marrow Transplant Research in April 2022. Five
patients were enrolled and treated at the first two dose levels in the NHL
cohort, and there were two CRs and one PR for an ORR of 60%, including responses
in two patients who were previously treated with CD19-directed CAR-T cell
therapy. Both CRs were durable and persisted for more than six months. Two
patients were enrolled at the first dose level of the ALL cohort, and there was
one CR and one progressive disease ("PD") for an ORR of 50%. KUR-502 has been
well tolerated without DLT, as the majority of adverse events observed were
cytopenias related to the preconditioning nonmyeloablative lymphodepletion
chemotherapy regimen. There have been three cases of Grade 1 CRS, all observed
in the ALL cohort, but there have not been any cases of ICANS or GvHD
attributable to CAR-NKT cells. In March 2022, the Company's IND application to
expand the ANCHOR study to a multicenter, Athenex-sponsored Phase 1 study
(ANCHOR2) was allowed to proceed by the FDA, which began enrolling patients in
Q4 2022.

KUR-503 is an allogeneic ("off-the-shelf") product in which NKT cells are
engineered with a CAR targeting glypican-3 ("GPC3"). GPC3 is a molecule that is
highly expressed on most hepatocellular carcinomas but not on normal liver or
other non-neoplastic tissue. KUR-503 is currently in preclinical development,
and we are planning to submit an IND application to the FDA in 2024.

The cell therapy program also includes TCR-NKT cell therapy products, including
ones targeting p53 and KRAS, which are the most commonly altered genes in
epithelial cancers. These HLA class I- or class II-restricted cell therapy
products are presently undergoing preclinical screening to identify those
candidates with the best TCR-NKT cell isolation efficiency, transduction
efficiency, and functional activity. We plan to engineer the TCRs into the NKT
cell therapy platform to develop an allogeneic "off-the-shelf" approach for
solid tumor treatment.

Orascovery Platform

We are also continuing certain studies of oral paclitaxel and encequidar ("Oral Paclitaxel"), the currently active product candidate using our Orascovery technology, based on a P-glycoprotein ("P-gp") pump inhibitor.

On February 26, 2021, we received a Complete Response Letter ("CRL") from the
FDA regarding our New Drug Application ("NDA") for Oral Paclitaxel for the
treatment of metastatic breast cancer ("mBC"). Following the CRL, we held two
Type A meetings with the FDA to discuss the deficiencies raised in the CRL,
review a proposed design for a new clinical trial intended to address the
deficiencies raised in the CRL, and discuss the potential regulatory path
forward for Oral Paclitaxel in mBC in the U.S. In October 2021, after careful
consideration of the FDA feedback, we determined to redeploy our resources to
focus on our Cell Therapy platform and other ongoing studies of Oral Paclitaxel.
On November 29, 2021, we announced the U.K. Medicines and Healthcare products
Regulatory Agency ("MHRA") validation of the Marketing Authorization Application
("MAA") for Oral Paclitaxel, for review. The Phase 3 study of Oral Paclitaxel in
mBC (KX-ORAX-001) served as the basis of the MAA. On January 3, 2023, we
announced that the Oral Paclitaxel formulation did not receive regulatory
approval from the MHRA for mBC based on CMC issues. The MHRA application was not
rejected based on any clinical efficacy or safety concerns expressed by the
MHRA. MHRA regulations allow an applicant to request a re-examination of an
opinion by an independent board which the Company plans to pursue. The Company
views the identified Chemistry, Manufacturing, and Controls ("CMC") issues as
addressable. The MHRA application was supplemented with safety data from the
I-SPY 2 TRIAL and no major clinical efficacy or safety concerns were expressed.

Oral Paclitaxel is being evaluated in combination with dostarlimab (a checkpoint
inhibitor) +/- carboplatin in the neoadjuvant treatment of breast cancer, as
part of the I-SPY 2 TRIAL (Investigation of Serial studies to Predict Your
Therapeutic Response with Imaging And moLecular analysis 2). On December 20,
2022, we announced that collaborators at the Quantum Leap Healthcare
Collaborative ("QLHC") reported that Oral Paclitaxel in combination with a PD-1
inhibitor and carboplatin graduated in the triple-negative subgroup of high-risk
early-stage breast cancer. Oral Paclitaxel, relative to IV paclitaxel, was
associated with less neuropathy and was not associated with an increase in
febrile neutropenia. The study has been completed and QLHC anticipates
presenting these results at upcoming national meetings in the second quarter of
2023. We plan to discuss the I-SPY 2 TRIAL data with the FDA with respect to our
metastatic breast cancer New Drug Application ("NDA").

In the United States, we plan to discuss the I-SPY 2 TRIAL data with the FDA with respect to our NDA for Oral Paclitaxel for the treatment of mBC. We received a CRL from the FDA in February 2021 regarding our NDA for Oral Paclitaxel. We then held two

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Type A meetings with the FDA to discuss the deficiencies raised in the CRL,
review a proposed design for a new clinical trial intended to address the
deficiencies raised in the CRL, and discuss the potential regulatory path
forward for Oral Paclitaxel in mBC in the U.S. We believe the data from the
I-SPY 2 TRIAL may address some of the deficiencies raised by the FDA in the CRL,
but no assurance can be given that we will be successful in pursuing this path
forward with the NDA.

In May 2022, we announced a clinical trial collaboration and supply agreement
with Merck (known as MSD outside the U.S. and Canada). The agreement applies to
the expansion phase of the Phase 1 clinical trial evaluating Oral Paclitaxel in
combination with Merck's anti-PD-1 therapy KEYTRUDA® (pembrolizumab) for certain
non-small cell lung cancer ("NSCLC") patients. Recruitment for the expansion
phase of this clinical trial is currently ongoing.




Non-core Asset Developments

During 2022, we made significant progress on our strategy to dispose of non-core
assets intended to extend our cash runway in 2023 as we pivoted to focusing on
our cell therapy platform.

In June 2022, the Company and ATNX SPV, LLC, its newly-formed subsidiary (the
"SPV" or "Subsidiary"), entered into a Revenue Interest Purchase Agreement (the
"RIPA") with affiliates of Sagard Healthcare Partners ("Sagard") and funds
managed by Oaktree Capital Management, L.P. ("Oaktree" and together with Sagard,
the "Purchasers"), for the sale of revenues from U.S. and European royalty and
milestone interests in Klisyri® (tirbanibulin) for an aggregate purchase price
of $85.0 million ("Purchase Price"). On June 29, 2022, the Purchasers paid the
Company the Purchase Price. Of the total Purchase Price, $5.0 million was placed
into escrow to be paid to the Company upon the satisfaction of certain
manufacture and supply milestones for Klisyri prior to December 31, 2025, $5.0
million was used to pay for transaction expenses, $56.6 million was used to pay
down the Company's senior secured loan agreement and related security agreements
(the "Senior Credit Agreement") with Oaktree, and $7.5 million was deposited and
held in a segregated account of the Company (the "Segregated Funds"). The
Purchasers released the $7.5 million of Segregated Funds to the Company in
August 2022, and $1.5 million of the amount placed in escrow was released to the
Company upon completion of an escrow release trigger milestone in September
2022. The remaining proceeds were available for the Company's operations. Refer
to Part II, Item 8, Note 1 - Company and Nature of Business and Note 12 - Debt
and Lease Obligations for additional information.

In connection with this transaction, the Company formed the Subsidiary and
contributed its interest in the License and Development Agreement with Almirall
S.A. ("Almirall") relating to Klisyri (the "Almirall License Agreement") and
certain related assets to the Subsidiary. Oaktree and Sagard each own a 10%
equity interest in the Subsidiary. Pursuant to the RIPA, the Subsidiary sold its
right to the cash received in respect of certain royalties and certain milestone
interests under the Almirall License Agreement to the Purchasers. The Subsidiary
retained the right to receive 50% of certain of the milestone interests under
the Almirall License Agreement, equal to $155.0 million in the aggregate if
those milestones are achieved, and 50% of the royalties paid under the Almirall
License Agreement for sales of Klisyri once net sales of Klisyri exceed a
certain dollar amount.

In February 2022, we completed the sale of our leasehold interest in the 409,000
square feet, newly constructed cGMP ISO Class 5 high potency pharmaceutical
manufacturing facility located in Dunkirk, NY (the "Dunkirk Transaction"). We
sold our interest in the Dunkirk Facility and certain other assets to
ImmunityBio, Inc. for approximately $40.0 million. Of these proceeds, we used
approximately $27.4 million to make a mandatory prepayment of $25.0 million in
principal, accrued and unpaid interest, and associated fees to the lenders under
our Senior Credit Agreement with Oaktree. See "Liquidity and Capital Resources"
below for more information about the Senior Credit Agreement.

In November 2022, we completed the sale of our equity interests in our China
subsidiaries, including Chongqing Taihao Pharmaceutical Co. Ltd. ("Taihao") and
Athenex Pharmaceuticals (Chongqing) Limited (together, the "Chongqing
Companies") to Chongqing Comfort Pharmaceutical Inc. as assignee of TiHe Capital
(Beijing) Co. Ltd. (the "API Buyer") in November 2022. The Chongqing Companies
had operated a cGMP high potency oncology API plant based in Chongqing, China,
and completed construction of a new facility in Chongqing (the "China API
Operations"). The aggregate purchase price of this sale was RMB129.4 million, or
approximately $18 million. At closing, we received approximately $11 million,
representing 70% of the sale proceeds in cash, net of PRC withholding tax and
stamp duty. The remaining proceeds are expected to be received in the first half
of 2023. At closing, we entered into a supply agreement ("Supply Agreement")
with affiliates of the API Buyer (the "Supplier"). Under the Supply Agreement,
we and the Supplier agreed to pricing and other supply terms for certain API
("API Products"), including those used in Klisyri® (tirbanibulin) and Oral
Paclitaxel, to be manufactured at certain manufacturing sites by the Supplier.

In December 2022, we began the wind-down of our 503B sterile compounding
business operated out of our facility in Clarence, NY and ceased production of
our 503B products in the first quarter of 2023. We have committed to a plan to
sell our related assets in our efforts to monetize non-core assets, and
consequently, such business is presented as discontinued in the Company's
consolidated financial statements.

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Other Corporate Developments

On March 16, 2023, we received notice from The Nasdaq Stock Market LLC
indicating that we had regained compliance with the minimum bid price
requirement under Nasdaq Rule 5550(a)(2). On February 15, 2023, we effected a
20:1 reverse stock split of our common stock in order to regain compliance with
this standard. All share and per share amounts, and exercise prices of stock
options, warrants, and pre-funded warrants, if applicable, in this Annual Report
on Form 10-K have been retroactively adjusted for all periods presented to give
effect to this reverse stock split.

In August 2022, the Company completed an underwritten public offering in which
it sold 1,766,667 shares of common stock, common warrants to purchase up to
2,000,000 shares of common stock at a price of $20.00 per share, and pre-funded
warrants to purchase up to 233,334 shares of common stock at a price of $0.02
per share. The shares of common stock, together with the common warrants, were
sold at $15.00 per share and accompanying common warrant, and the pre-funded
warrants, together with the common warrants, were sold at $14.98 per pre-funded
warrant and accompanying common warrant. The common and pre-funded warrants were
exercisable immediately and will expire five years from the date of issuance.
The Company received net proceeds of $28.1 million, after deducting discounts,
commissions, and offering expenses. The Company intends to use the net proceeds
from the proposed offering to fund ongoing clinical development for its product
candidates and for working capital and other general corporate purposes.

In August 20, 2021, the Company entered into a sales agreement (the "Sales
Agreement") with SVB Leerink LLC, in connection with the offer and sale of up to
$100,000,000 of shares of the Company's common stock, par value $0.001 per share
("ATM Shares"). The ATM Shares to be offered and sold under the Sales Agreement
will be issued and sold pursuant to a registration statement on Form S-3 (File
No. 333-258185) that became effective on August 12, 2021. During the year ended
December 31, 2022, we raised net proceeds of $9.4 million by selling 1,263,251
shares of our common stock for an average price of $7.40 per share under the
Sales Agreement. During the year ended December 31, 2021, we raised net proceeds
of $1.1 million by selling 38,142 shares of our common stock for an average
price of $29.80 per share under the Sales Agreement.




Going Concern Considerations

We have two operating segments: our Oncology Innovation Platform and Commercial
Platform. Since inception, we have devoted a substantial amount of our resources
to research and development of our lead product candidates under our Orascovery
and Cell Therapy platforms, while building up our commercial infrastructure. We
have incurred significant net losses since inception.

We have incurred operating losses since inception and, as a result, as of
December 31, 2022 and 2021, we had an accumulated deficit of $1,016.8 million
and $913.4 million, respectively. We expect to incur significant expenses and
operating losses for the foreseeable future. We project insufficient liquidity
to fund our operations through the next twelve months beyond the date of this
report. In addition to the alleged events of default described below in
Liquidity and Capital Resources, we project that we will be in violation of
financial covenants included within the Senior Credit Agreement during the
twelve-month period subsequent to the date of this filing. This projection does
not reflect management's plans that are outside of the Company's control,
pursuant to ASC 205. These conditions raise substantial doubt about our ability
to continue as a going concern. See Part II, Item 8, Note 1-Company and Nature
of Business for further information regarding our ability to continue as a going
concern.

We have funded our operations to date primarily from the issuance and sale of
our common stock through public offerings, senior secured loans, private
placements, and to a lesser extent, from convertible bond financing, revenue,
and grant funding. As of December 31, 2022, we had cash and cash equivalents of
$30.4 million, restricted cash of $5.2 million, and short-term investments of
$1.1 million.

Results of Operations

Since inception, we have devoted a substantial amount of our resources to
research and development of our lead product candidates under our R&D programs,
to sales and general administrative costs associated with our operations, and to
the development of our specialty drug operations in our Commercial Platform. We
have incurred significant net losses since inception. Our net losses were $104.4
million, and $202.0 million for the years ended December 31, 2022 and 2021
respectively. As of December 31, 2022 and 2021, we had an accumulated deficit of
approximately $1,016.8 million and $913.4 million, respectively.

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We have funded our operations to date primarily from the issuance and sale of
our common stock through public offerings, private placements, debt and
convertible bonds, and to a lesser extent, through revenue generated from our
Commercial Platform. Our operating activities from continuing operations used
$64.3 million and $129.8 million of cash during the years ended December 31,
2022, and 2021, respectively. As of December 31, 2022, we had cash and cash
equivalents of $30.4 million, restricted cash of $5.2 million, and short-term
investments of $1.1 million.

Key Components of Results of Operations

Revenue

We derive our consolidated revenue primarily from (i) the sales of generic injectable products by our Commercial Platform; and (ii) licensing and collaboration projects conducted by our Oncology Innovation Platform, which generates revenue in the form of upfront payments, milestone payments, and payments received for providing research and development services for our collaboration projects and for other third parties.

The following table sets forth the components of our consolidated revenue and the amount as a percentage of total revenue for the periods indicated.

                                         Year ended December 31,
                                      2022                      2021
                             (in thousands)       %    (in thousands)       %
Product sales, net          $         90,884     88%   $        68,505     72%
License and other revenue             11,937     12%            26,864     28%
                            $        102,821           $        95,369


Cost of Sales

Along with sourcing from third-party manufacturers, we manufacture clinical and
proprietary commercial products in our U.S. cGMP facility in New York. Cost of
sales primarily includes the cost of finished products, raw materials, labor
costs, manufacturing overhead expenses and reserves for expected scrap, as well
as transportation costs. Cost of sales also includes depreciation expense for
production equipment, changes to our excess and obsolete inventory reserves,
certain direct costs such as shipping costs, net of costs charged to customers,
and sublicense fees related to in-license agreements.

Research and Development Expenses

R&D expenses primarily consist of the costs associated with conducting clinical
trials, in-licensing of product candidates, milestone payments, conducting
preclinical studies, activities related to regulatory filings and other R&D
activities. The following table sets forth the components of our R&D expenses
and the amount as a percentage of total R&D expenses for the periods indicated.

                                                      Year Ended December 31,
                                              2022                              2021
                                 (in thousands)           %        (in thousands)           %
Wages, benefits, and related
costs                            $        17,327         33%       $        21,779         28%
Clinical trial costs for
Orascovery program                        14,044         27%                22,745         29%
Clinical trial costs for cell
therapy program                           11,841         23%                 7,937         10%
Drug licensing costs                       5,265         10%                 8,559         11%
Preclinical research costs                 1,224         2%                  2,393         3%
Other research and development
  costs                                    2,057         4%                 14,255         18%
Total research and development
  costs                          $        51,758                   $        77,668

Our current R&D activities mainly relate to the clinical development of our Oncology Innovation Platform.

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We expense R&D costs as incurred. We record costs for certain development
activities, such as clinical trials, based on an evaluation of the progress to
completion of specific tasks using data such as patient enrollment or clinical
site activations. We do not allocate employee-related costs, depreciation,
rental and other indirect costs to specific R&D programs because these costs are
deployed across multiple product programs under R&D. For 2021, other research
and development costs include the cost of manufacturing Oral Paclitaxel in
advance of the potential product launch in 2021, which did not continue in 2022.
Other research and development costs in 2022 included process optimization for
Tirbanibulin.

We cannot determine with certainty the duration, costs and timing of the current
or future preclinical or clinical studies of our drug candidates. The duration,
costs, and timing of clinical studies and development of our drug candidates
will depend on a variety of factors, including:

•

The scope, rate of progress, and costs of our ongoing, as well as any additional, clinical studies and other R&D activities;

•

Future clinical study results;

•

Uncertainties in clinical study enrollment rates;

•

Significant and changing government regulation; and

•

The timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate.

R&D activities are central to our business model. We expect our R&D expenses to
decrease overall, as the development of most non-Cell Therapy technologies has
been suspended. R&D expenses related to our Cell Therapy platform are expected
to continue to increase as we prepare for additional clinical and preclinical
studies for our Cell Therapy programs. There are numerous factors associated
with the successful commercialization of any of our drug candidates, including
future trial design and various regulatory requirements, many of which cannot be
determined with accuracy at this time based on our stage of development.
Additionally, future commercial, regulatory and public health factors beyond our
control will likely impact our clinical development programs and plans.

Selling, General and Administrative Expenses

Selling, general and administrative, ("SG&A"), expenses primarily consist of
compensation, including salary, employee benefits and stock-based compensation
expenses for sales and marketing personnel, and for administrative personnel
that support our general operations such as executive management, legal counsel,
financial accounting, information technology, and human resources personnel.
SG&A expenses also include professional fees for legal, patent, consulting,
auditing and tax services, as well as other direct and allocated expenses for
rent and maintenance of facilities, insurance and other supplies used in the
selling, marketing, general and administrative activities. SG&A expenses also
include costs associated with our commercialization efforts for our proprietary
drugs, such as market research, brand strategy and development work on market
access, scientific publication, product distribution, and patient support.

We anticipate that our SG&A costs associated with the commercialization of the
Orascovery platform will decrease in future periods. Meanwhile, we anticipate
that cost related to legal, compliance, accounting and investor and public
relations expenses associated with being a public company will remain
consistent.

Impairments

Impairments are recognized when the carrying value of goodwill, intangible assets, and other long-lived assets are in excess of their fair value. Long-lived assets are tested for impairment annually, or more frequently if a triggering event occurs.

Interest Expense and Interest Income

Interest expense consists of stated interest payments and amortization of debt
discount on our Senior Credit Agreement with Oaktree and interest expense
recognized from amortizing our Royalty Financing Liability. We expect interest
expense related to our Senior Credit Agreement with Oaktree to decrease as
additional principal payments are made. Interest income consists primarily of
interest generated from our cash and short-term investments in U.S. Treasury
securities, U.S. agency securities, high rated commercial papers and corporate
bonds.

Loss on Extinguishment of Debt

The loss on extinguishment of debt is the result of the amendments to and
prepayments on the Senior Credit Agreement with Oaktree. The amendments to the
Senior Credit Agreement resulted in exit and prepayment fees and the recognition
of the unamortized debt discount as a loss on extinguishment of debt in the
consolidated statements of operations and comprehensive loss.

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Results of Operations

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

The following table sets forth a summary of our consolidated results of
operations for the years ended December 31, 2022 and 2021, together with the
changes in those items in dollars and as a percentage. This information should
be read together with our consolidated financial statements and related notes
included elsewhere in this report. Our operating results in any period are not
necessarily indicative of the results that may be expected for any future
period.

                                                                  Year ended December 31,
                                                2022                 2021                      Change
                                           (in thousands)       (in thousands)       (in thousands)         %
Revenue
Product sales, net                        $         90,884     $         68,505     $         22,379       33%
License and other revenue                           11,937               26,864              (14,927 )     -56%
Total revenue                             $        102,821     $         95,369                7,452
Cost of sales                                      (76,118 )            (62,892 )            (13,226 )     21%
Gross profit                                        26,703               32,477               (5,774 )
Research and development expenses                  (51,758 )            (77,668 )             25,910       -33%
Selling, general, and administrative                                                                       -30%
expenses                                           (44,880 )            (64,230 )             19,350
Impairments                                            (79 )            (41,011 )             40,932       100%
Interest income                                        363                  128                  235       184%
Interest expense                                   (25,843 )            (20,654 )             (5,189 )     25%
Loss on extinguishment of debt                      (3,134 )                  -               (3,134 )    -100%
Income tax benefit (expense)                          (347 )             10,604              (10,951 )      NM
Net loss from continuing operations                (98,975 )           (160,354 )             61,379
Loss from discontinued operations                   (5,448 )            (41,682 )             36,234       -87%
Net loss                                          (104,423 )           (202,036 )             97,613
Less: net loss attributable to                                                                             56%
non-controlling interests                             (996 )             (2,268 )              1,272

Net loss attributable to Athenex, Inc. $ (103,427 ) $ (199,768 ) $ 96,341

*NM used to indicate a percentage change that is not meaningful

Revenue

Product sales for the year ended December 31, 2022 was $90.9 million, an
increase of $22.4 million, or 33%, as compared to $68.5 million for the year
ended December 31, 2021. This increase was primarily attributable to the launch
of two additional APD products, contributing $11.6 million in net product sales,
and increased demand for three products on the FDA shortage list, contributing
$12.0 million in net product sales.

License fees and other revenue decreased to $11.9 million for the year ended
December 31, 2022, from $26.9 million for the year ended December 31, 2021, a
decrease of $14.9 million, or 56%. During the year ended December 31, 2022, we
recorded $2.5 million and $5.0 million of license revenue pursuant to our
license agreement with Almirall upon the completion of a line extension
milestone and upon the launch of Klisyri in three major European countries,
respectively, and $1.6 million related to the approval of Tirbanibulin in Taiwan
under the 2011 PharmaEssentia Agreement. During the year ended December 31,
2021, we recorded $20.0 million and $5.0 million of license revenue pursuant to
our license agreement with Almirall upon the launch of Klisyri in the U.S. in
February 2021 and in Europe in September 2021, respectively, and $0.5 million
related to the upfront fee pursuant to the Second Amendment to the
PharmaEssentia Agreement, for the license of Tirbanibulin in Japan and South
Korea. Further, we received royalties from the sales of Klisyri of $2.3 million
during the year ended December 31, 2022, an increase of $1.3 million from the
$1.0 million in royalties received in 2021.

Cost of Sales

Cost of sales totaled $76.1 million for the year ended December 31, 2022, an
increase of $13.2 million, or 21%, as compared to $62.9 million for the year
ended December 31, 2021. Gross profit as a percentage of product sales was 16.2%
for the year ended December 31, 2022, and 8.2% for the year ended December 31,
2021. The increase in gross profit as a percentage of product sales was due
primarily to the increased contribution from the sales of three FDA shortage
products during 2022.

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Research and Development Expenses

R&D expenses totaled $51.8 million for the year ended December 31, 2022, a
decrease of $25.9 million, or 33%, as compared to $77.7 million for the year
ended December 31, 2021. This was primarily due to a decrease in costs related
to Oral Paclitaxel, costs for clinical operations for the Orascovery platform,
compensation, and drug licensing costs, and included the following:

•

$13.5 million decrease in Oral Paclitaxel product development, API, and medical affairs costs associated with the potential product launch in 2021;

•

$8.7 million decrease in costs of clinical operations and regulatory affairs related to the Orascovery platform after the slow down of clinical and regulatory activities following receipt of the CRL in 2021;

•

$4.5 million decrease in R&D related compensation expenses;

•

$3.3 million decrease in drug licensing costs, due to a license milestone payment related to Arginine deprivation therapy and the repurchase of Orascovery rights from Xiangxue in 2021; and

•

$1.2 million decrease in costs of preclinical operations, primarily related to the Orascovery platform.

The decrease in these R&D expenses was partially offset by a $3.9 million increase in costs to develop the NKT cell therapies and a $1.4 million increase in process optimization costs related to Tirbanibulin.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses totaled $44.9 million for the year
ended December 31, 2022, a decrease of $19.4 million, or 30%, as compared to
$64.2 million for the year ended December 31, 2021. This was primarily due to a
$11.5 million decrease in pre-launch costs for Oral Paclitaxel that
significantly slowed upon receipt of the Complete Response Letter in 2021. In
addition, we recorded a $4.2 million gain on the change in fair value of
contingent consideration during 2022 related to the probability of milestones
associated with one of the cell therapy pipeline programs, as opposed to a $4.2
million loss on the change in fair value of contingent consideration during
2021. Operating costs, including insurance costs, IT costs, and other
professional fees decreased in 2022 by $2.4 million. These decreases were
partially offset by an increase in compensation related costs of $2.9 million in
2022.

Impairments

During the year ended December 31, 2021, we recognized goodwill impairment
expense of $41.0 million. This impairment was related to the Oncology Innovation
Platform reporting unit, representing a full impairment of the goodwill
allocated to that reporting unit. Goodwill impairment is the excess of a
reporting unit's carrying amount over its fair value. The decrease in our
estimation of the reporting unit's fair value was related to the Company's
decision to no longer pursue regulatory approval for Oral Paclitaxel monotherapy
for the treatment of mBC in the U.S. Impairment in the year ended December 31,
2022 was the result of the discontinuation of a project within Comprehensive
Drug Enterprises' ("CDE") in-process research and development ("IPR&D").

Interest Income and Interest Expense

Interest income consisted of interest earned on our short-term investments and
increased by $0.2 million, or 184%, from 2021 to 2022 due to increases in market
rates for commercial paper, corporate bonds, and U.S. Treasury securities.
Interest expense for the year ended December 31, 2022 totaled $25.8 million, an
increase of $5.2 million, or 25%, as compared to $20.7 million for the year
ended December 31, 2021. This increase was primarily due to $11.2 million of
interest recognized on our Royalty Financing Liability during 2022. This was
partially offset by a $6.0 million decrease in interest expense recorded on
borrowings under the Senior Credit Agreement with Oaktree as the result of
principal payments made during the year.

Loss on Extinguishment of Debt

We recognized a $3.1 million loss on the extinguishment of debt related to the
prepayments we made to Oaktree during 2022 under the amendment to the Senior
Credit Agreement related to the sale of our leasehold interest in the Dunkirk
Facility, the RIPA, and the sale of our equity interests in the China API
Operations. We did not incur a loss on the extinguishment of debt during the
year ended December 31, 2021.

Income Tax (Expense) Benefit

Income tax expense for the year ended December 31, 2022 was primarily the result
of foreign tax withholdings on license revenue. For the year ended December 31,
2021, income tax benefit amounted to $10.6 million, which is the result of
taxable temporary difference due to the deferred tax liability recognized for
the indefinite lived intangible assets acquired in connection with the
acquisition of Kuur's IPR&D. This taxable temporary difference is considered a
source of taxable income to support the realization of deferred tax assets from
the acquirer which resulted in a reversal of our valuation allowance.

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Loss from discontinued operations

Loss from discontinued operations is comprised of operating results of the
activities related to the Dunkirk Facility, China API Operations, and 503B
Operations. The operations related to the Dunkirk Facility recorded a gain of
$12.5 million in 2022 and a loss of $7.8 million in 2021. This was primarily due
to the gain on the sale of the Dunkirk Facility of $14.5 million and a decrease
in general and administrative expenses of $8.3 million during the year ended
December 31, 2022. The China API Operations recorded a loss of $12.3 million in
2022 and a loss of $28.9 million in 2021. This was primarily due to impairment
of goodwill and other long-lived assets of $23.8 million during the year ended
December 31, 2021, and the reserve of excess inventory of $7.1 million and sale
of pilot products of $3.1 million during the year ended December 31, 2022.
Lastly, the 503B operations recorded a loss of $5.7 million in 2022 and a loss
of $5.0 million in 2021. In 2022, the 503B operations experienced a decrease in
gross margin due to increases in material, labor, and overhead costs and
recorded impairment of long-lived assets of $1.5 million related to the
operations being classified as held-for-sale. In 2021, the primary cause of the
loss was the goodwill impairment of $4.6 million recorded during the year ended
December 31, 2021.

Liquidity and Capital Resources

Capital Resources

Since our inception, we have incurred net losses and negative cash flows from
our operations. Our cash requirement was primarily cash used for our R&D
programs, SG&A costs associated with our operations, the development of our
specialty drug operations in our Commercial Platform, and 503B operations and
the investment we made in our pre-launch activities in anticipation of
commercializing our proprietary drugs. We incurred net losses of $104.4 million
and $202.0 million for the years ended December 31, 2022 and 2021, respectively.
As of December 31, 2022, we had an accumulated deficit of $1,016.8 million. Our
operating activities from continuing operations used $64.3 million and $129.8
million of cash during the years ended December 31, 2022 and 2021, respectively.
We intend to continue to advance our various clinical and pre-clinical programs
which could lead to increased cash outflow of R&D costs. While we expect our R&D
expenses to remain at a decreased level from prior periods, as the development
of most non-Cell Therapy technologies has been suspended, R&D expenses related
to our Cell Therapy platform are expected to increase as we prepare for
additional clinical and preclinical studies for our Cell Therapy programs. We
can provide no assurance that the funding requirements to diversify the product
portfolio for specialty drug products in the Commercial Platform will decline in
the future. Our principal sources of liquidity as of December 31, 2022 were cash
and cash equivalents totaling $30.4 million, restricted cash of $5.2 million,
held in a controlled bank account in connection with the Senior Credit Agreement
with Oaktree, and short-term investments totaling $1.1 million, which are
generally high-quality investment grade corporate debt securities.

ATM Financing

On August 20, 2021, we entered into a sales agreement with SVB Leerink LLC, in
connection with the offer and sale of up to $100,000,000 of shares of our common
stock, par value $0.001 per share, in an at-the-market offering (the "ATM
Offering"). During the year ended December 31, 2022, we raised net proceeds of
$9.4 million by selling 1,263,251 shares of our common stock for an average
price of $7.40 per share under the Sales Agreement. During the year ended
December 31, 2021, we raised net proceeds of $1.1 million by selling 38,142
shares of our common stock for an average price of $29.80 per share under the
Sales Agreement. While we intend to continue selling shares of common stock in
the ATM Offering, there can be no assurance that the ATM Offering will be
available to us, that we will be able to sell shares of common stock at a price
that is acceptable to our Board of Directors, or that we will be successful in
raising significant capital in the offering.

Public Offering of Stock

In August 2022, we completed an underwritten public offering in which we sold
1,766,667 shares of common stock, common warrants to purchase up to 2,000,000
shares of common stock at a price of $20.00 per share, and pre-funded warrants
to purchase up to 233,334 shares of common stock at a price of $0.02 per share.
The shares of common stock, together with the common warrants, were sold at
$15.00 per share and accompanying common warrant, and the pre-funded warrants,
together with the common warrants, were sold at $14.98 per pre-funded warrant
and accompanying common warrant. The common and pre-funded warrants were
exercisable immediately and will expire five years from the date of issuance. We
received net proceeds of $28.1 million, after deducting discounts, commissions,
and offering expenses. We are using the net proceeds from this offering to fund
ongoing clinical development for our product candidates and for working capital
and other general corporate purposes.

Indebtedness

We had $129.1 million and $148.7 million of debt as of December 31, 2022 and
2021, respectively. As of December 31, 2022, this consisted of the $86.7 million
royalty financing liability under the RIPA, the Senior Credit Agreement with
Oaktree of $37.0 million, and finance and operating lease obligations of $5.4
million. As of December 31, 2021, this consisted of the Senior Credit Agreement
with Oaktree of $141.3 million and finance and operating lease obligations of
$7.3 million.

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The sale of the interest in U.S. and European royalties and milestones to Sagard
and Oaktree in connection with the Revenue Interest Purchase Agreement was
recorded as a royalty financing liability due to our significant continued
involvement in the cash flows due to the Purchasers. The RIPA contains various
representations and warranties, information rights, non-financial covenants, and
indemnification obligations, however, this liability is not guaranteed by the
Company. During the year ended December 31, 2022, the Company received Klisyri
royalties of $0.9 million, which were remitted to the Purchasers.

Oaktree Senior Credit Agreement

On June 19, 2020 (the "Closing Date"), we entered into the Senior Credit
Agreement to borrow up to $225.0 million in five tranches with a maturity date
of June 19, 2026, bearing interest at a fixed annual rate of 11.0%, payable
quarterly. We are required to make quarterly interest-only payments until June
19, 2022, after which we are required to make quarterly amortizing payments,
with the remaining balance of the principal plus accrued and unpaid interest due
at maturity. Between September 2020 and February 2022, we were required to pay a
commitment fee on any undrawn commitments equal to 0.6% per annum, payable on
each subsequent funding date and the commitment termination date. We are also
required to pay an exit fee at maturity equal to 2.0% of the aggregate principal
amount of the loans funded under the Senior Credit Agreement. Three tranches in
the aggregate amount of $150.0 million were drawn prior to December 31, 2020.
Our ability to draw the remaining tranches of the Senior Credit Agreement was
associated with the marketing approval and future sales of Oral Paclitaxel.
These tranches were reduced to zero in connection with the Third Amendment
described below and are not available for future borrowing.

We are required to make mandatory prepayments of the senior secured loans with
net cash proceeds from certain asset sales or insurance proceeds or condemnation
awards, in each case, subject to certain exceptions and reinvestment rights. In
connection with the sale of the Dunkirk Facility in February 2022, we entered
into an amendment to the Senior Credit Agreement (the "Third Amendment") whereby
we were required to repay $25.0 million, or 62.5% of the proceeds from the sale,
of the outstanding principal of the loan. In addition, on the date of closing
the Dunkirk Transaction, we were required to pay (i) accrued and unpaid interest
and (ii) a 7.0% fee, allocated as a 2.0% Exit Fee and a 5.0% Prepayment Fee
(each as defined in the Senior Credit Agreement), on the principal amount being
repaid. We were required to pay Oaktree an amendment fee of $0.3 million and
certain related expenses. Further, the Third Amendment required us to make an
additional prepayment of $12.5 million in principal plus the costs and fees
described above on June 14, 2022. In June 2022, the Company entered into two
additional amendments to the Senior Credit Agreement with Oaktree (the "Fourth
Amendment" and the "Fifth Amendment"). In connection with the Fourth Amendment
and the Fifth Amendment to the Senior Credit Agreement, effective in connection
with the execution of the RIPA, we were required to repay $52.5 million of the
loan, along with (i) accrued and unpaid interest and (ii) a 5.0% fee, allocated
as a 2.0% Exit Fee and a 3.0% Prepayment Fee on the principal amount being
repaid. Under the Sixth Amendment to the Senior Agreement, entered into in
connection with the sale of the China API Operations in August 2022 (the "Sixth
Amendment"), we were required to repay $6.8 million of the loan, along with (i)
accrued and unpaid interest and (ii) a 5.0% fee, allocated as a 2.0% Exit Fee
and a 3.0% Prepayment Fee on the principal amount being repaid. We made
payments, inclusive of principal, interest, and fees, to Oaktree in the
aggregate amount of $121.3 million during the year ended December 31, 2022.
These payments include our scheduled repayments under the Credit Agreement and
prepayments under the Third Amendment, Fourth Amendment, Fifth Amendment, and
Sixth Amendment.

We may voluntarily prepay the Senior Credit Agreement at any time subject to a
prepayment premium which equals 3.0% of the principal amount of the senior
secured loans being repaid and is reduced over time until June 19, 2024, after
which no prepayment premium is required.

Our obligations under the Senior Credit Agreement are guaranteed by us and
certain of our existing domestic subsidiaries and subsequently acquired or
organized subsidiaries subject to certain exceptions. Our obligations under the
Senior Credit Agreement and the related guarantees thereunder are secured,
subject to customary permitted liens and other agreed upon exceptions, by (i) a
pledge of all of the equity interests of our direct subsidiaries, and (ii) a
perfected security interest in all of our tangible and intangible assets.

The Senior Credit Agreement contains customary representations and warranties
and customary affirmative and negative covenants, including, among other things,
restrictions on indebtedness, liens, investments, mergers, dispositions,
prepayment of other indebtedness, and dividends and other distributions, subject
to certain exceptions, including specific exceptions with respect to product
commercialization and development activities. In addition, the Senior Credit
Agreement contains certain financial covenants, including, among other things,
maintenance of minimum liquidity and a minimum revenue test, measured quarterly
until the last day of the second consecutive fiscal quarter where the
consolidated leverage ratio does not exceed 4.5 to 1, provided that thereafter
we cannot allow our consolidated leverage ratio to exceed 4.5 to 1, measured
quarterly. Failure of the Company to comply with the financial covenants will
result in an event of default, subject to certain cure rights of the Company. At
December 31, 2022, we were in compliance with all applicable covenants.

On March 7 and March 13, 2023, we received notices of certain alleged defaults
and reservations of rights from Oaktree. The alleged defaults relate to (i) the
Company exceeding the $10.0 million threshold for incurring additional
indebtedness by having accounts payable owed to counterparties overdue by more
than 90 days, (ii) the Company's obligation to provide notice to Oaktree related
to the foregoing, and (iii) the Company's obligation to provide notice to
Oaktree regarding the recent reverse stock split. Upon the occurrence of an
Event of Default, Oaktree has the right to accelerate all amounts outstanding
under the Senior Credit Agreement, in addition to other remedies available to it
as a secured creditor of ours. If Oaktree accelerates the maturity of the
indebtedness under the Senior Credit Agreement, we do not have sufficient
capital available to pay the amounts due on a timely basis, if at all, and there
is

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no guarantee that we would be able to repay, refinance or restructure the
payments due under the Senior Credit Agreement. The Company responded to
Oaktree, which included grounds upon which the Company disputes each of the
alleged defaults. The Company has not reached a mutual agreement with Oaktree on
this matter, and given the Company is in receipt of the notices of default and
reservation of rights, which could result in payment to Oaktree on demand, the
amounts due and outstanding to Oaktree are presented as a current obligation of
the Company.

The Senior Credit Agreement contains events of default which are customary for
financings of this type, in certain circumstances subject to customary cure
periods. Oaktree has the right upon notice to accelerate all amounts outstanding
under the Senior Credit Agreement, in addition to other remedies available to it
as a secured creditor of the Company.

In connection with our entry into the Senior Credit Agreement, we granted
warrants to Oaktree to purchase up to an aggregate of 45,420 shares of our
common stock at a purchase price of $252.60 per share. Under the Third
Amendment, the exercise price for 50% of the shares underlying the warrants was
amended to be $22.00 per share. Under the Fourth Amendment, the exercise price
for all of the shares underlying the warrants was amended to be $10.00 per
share.

Outlook

We expect to explore and review a broad range of strategic alternatives with a
goal of improving our balance sheet and supporting our development efforts and
operations during 2023. We may also seek to access the capital markets to fund
our operations. To the extent that we raise additional capital by issuing equity
securities, our stockholders may experience substantial dilution. To the extent
that we raise additional funds through collaboration or partnering arrangements
or by monetizing non-core assets, we may be required to relinquish some of our
rights to our technologies or rights to market and sell our products in certain
geographies, grant licenses on terms that are not favorable to us, or issue
equity that may be substantially dilutive to our stockholders. In addition, we
have borrowed and, in the future, may borrow additional capital from
institutional and commercial banking sources to fund future growth. We may
borrow additional funds on terms that may include restrictive covenants,
including covenants that further restrict the operation of our business, liens
on assets, high effective interest rates, financial performance covenants and
repayment provisions that reduce cash resources and limit future access to
capital markets.

As of December 31, 2022, we had cash and cash equivalents of $30.4 million,
restricted cash of $5.2 million, and short-term investments of $1.1 million. We
are implementing cost savings programs and plan to monetize non-core assets and
raise capital in order to extend our cash runway in 2023. If we are unable to
monetize assets or raise additional capital, we believe that the existing cash
and cash equivalents, restricted cash, and short-term investments will fund
operations into the second quarter of 2023 and will not be sufficient to fund
our operations through the next twelve months beyond the date of the issuance of
our consolidated financial statements. We have concluded that this, the notice
of alleged defaults referenced above, and a forecasted violation of covenants on
the Company's Senior Credit Agreement, raise substantial doubt about our ability
to continue as a going concern. See Part II, Item 8. Note 1-Company and Nature
of Business for further information regarding our ability to continue as a going
concern. We have based these estimates on assumptions that may prove to be
wrong, and we could spend the available financial resources much faster than
expected and need to raise additional funds sooner than anticipated. Although we
plan to raise additional funds though the sale of non-core assets and selling
equity securities, these plans are subject to market conditions which are
outside of our control, and therefore cannot be deemed to be probable. There can
be no assurance that additional financing, if available, can be obtained on
terms acceptable to us. If we are unable to obtain such additional financing, we
would need to reevaluate our future operating plans.

We anticipate that our expenses will cover the following activities as we:

•

Advance the preclinical and clinical research program and development activities of our Cell Therapy technology platform;

•

Continue our preclinical and clinical research program and development activities related to our Mission;

•

Seek to identify additional research programs and product candidates within existing Cell Therapy platform; and

•

Maintain, expand and protect our intellectual property ("IP") portfolio.

While we made significant progress on our strategy to dispose of non-core
assets, as discussed above in "-Non-core Asset Developments," our expenses could
increase as we continue to fund clinical and preclinical development of our
research programs by advancing our Cell Therapy programs, certain candidates in
our pipeline, our specialty drug products, working capital and other general
corporate purposes. We have based our estimates on assumptions that might prove
to be wrong and we might use our available capital resources sooner than we
currently expect. Because of the numerous risks and uncertainties associated
with the development and commercialization of our drug candidates, we are unable
to accurately estimate the amounts of increased capital outlays and operating
expenditures necessary to complete the development and commercialization of our
drug candidates.

Our future capital requirements will depend on many factors, including:

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•

Our ability to generate revenue and profits from our Commercial Platform or otherwise;

•

The costs, timing and outcome of regulatory reviews and approvals?

•

Progress of our drug candidates to progress through clinical development successfully?

•

The initiation, progress, timing, costs and results of nonclinical studies and clinical trials for our other programs and potential drug candidates?

•

The number and characteristics of the drug candidates we pursue?

•

The costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our IP rights and defending IP related claims?

•

The extent to which we acquire or in-license other products and technologies? and

•

Our ability to maintain and establish collaboration arrangements on favorable terms, if at all.

Cash Flows

The following table provides information regarding our cash flows from
continuing and discontinued operations for the years ended December 31, 2022,
and 2021:

                                                           Year ended December 31,
                                                           2022               2021
                                                               (in thousands)
Net cash used in operating activities from
continuing operations                                  $     (64,348 )    $   (129,796 )
Net cash provided by investing activities from
continuing operations                                          7,536        

127,851

Net cash provided by financing activities from
continuing operations                                          2,371        

2,737

Net cash provided by (used in) discontinued
operations                                                    38,893           (35,725 )
Net effect of foreign exchange rate changes                     (534 )      

548

Net decrease in cash, cash equivalents, and
restricted cash                                        $     (16,082 )    $ 

(34,385 )

Net Cash Used in Operating Activities

The use of cash in all periods presented resulted primarily from our net losses
adjusted for non-cash charges and changes in components of working capital. The
primary use of our cash in all periods presented was to fund our R&D, regulatory
and other clinical trial costs, drug licensing costs, inventory purchases,
pre-launch commercialization activities, build-out of our manufacturing
facilities, and other expenditures related to sales, marketing and
administration.

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During the year ended December 31, 2022, operating activities from continuing
operations used $64.3 million of cash, which resulted principally from our net
loss from continuing operations of $99.0 million, adjusted for non-cash charges
of $22.8 million, and cash provided by our operating assets and liabilities of
$11.8 million. Our prepaid expenses and other current assets, accounts payable
and accrued expense balances in all periods presented were affected by the
timing of vendor invoicing and payments. Our net non-cash charges during the
year ended December 31, 2022 consisted of $14.6 million of amortization of debt
discount and royalty financing liability, $6.3 million of stock-based
compensation expense, $3.1 million of loss on extinguishment of debt, $2.3
million depreciation and amortization expense, partially offset by a $4.2
million change in fair value of contingent consideration. Our operating assets
increased $5.2 million for accounts receivable mainly related to the timing of
revenues, and increased $19.6 million for inventory of specialty drug products
to service the demand for our shortage products and products launched during the
year. Our operating liabilities increased by $35.9 million mainly due to an
increase in accounts payable, accrued clinical expenses related to Cell Therapy,
accrued wages and benefits, and accrued selling fees and rebates associated with
increased sales of specialty drug products. Net cash used in operating
activities from discontinued operations in 2022 was $10.7 million, primarily
related to the operating expenses incurred by the activities at the Dunkirk
Facility and China API Operations.

During the year ended December 31, 2021, operating activities from continuing
operations used $129.8 million of cash, which resulted principally from our net
loss from continuing operations of $160.4 million, adjusted for non-cash charges
of $60.4 million, non-cash income tax benefit of $10.8 million related to the
reversal of our valuation allowance on our deferred tax assets to offset the
deferred tax liability assumed in connection with the acquisition of Kuur's
IPR&D, and cash used by our operating assets and liabilities of $19.0 million.
Our net non-cash charges during the year ended December 31, 2021 consisted of
$41.0 million of impairment of goodwill and intangible assets, $9.2 million of
stock-based compensation expense, $3.1 million depreciation and amortization
expense, $4.2 million change in fair value of contingent consideration, $2.9
million amortization of debt discount, and $0.6 million write-off of deferred
debt issuance costs related to the revenue interest financing with Sagard in
2020. Net cash used in operating activities from discontinued operations in 2021
was $12.6 million, related to operations of the Dunkirk Facility, China API
Operations, and 503B operations.

Net Cash Provided by Investing Activities

In 2022, cash provided by investing activities of continuing operations of $7.5
million was primarily attributable to $9.6 million in the sale and maturity of
short-term investments, net of purchases. This was partially offset by $1.6
million in payments for licenses and $0.4 million in purchases of property and
equipment. Net cash provided by investing activities of discontinued operations
in 2022 was $50.4 million, primarily due to the proceeds of $40.0 million and
$12.5 million from the sales of the Dunkirk Facility and China API Operations,
respectively, partially offset by purchases of property and equipment at the
discontinued operations of $2.2 million.

In 2021, cash provided by investing activities of continuing operations of
$127.8 million was primarily attributable to $128.9 million in the sale and
maturity of short-term investments, net of purchases, and $1.4 million cash
received from the acquisition of Kuur, partially offset by $2.1 million in
payments for licenses and $0.5 million purchases of property and equipment. Net
cash used in investing activities of discontinued operations in 2021 was $22.8
million, related to purchasing property and equipment at the Dunkirk Facility
and China API Operations.

Net Cash Provided by Financing Activities

In 2022, cash provided by financing activities of continuing operations was $2.4
million and was primarily comprised of $76.5 million in net proceeds from the
issuance of the royalty financing liability, $27.7 million in net proceeds from
the sale of common stock under the ATM Offering, public stock offering, and 2017
Employee Stock Purchase Plan, and $10.4 million from the issuance of pre-funded
and common warrants, partially offset by the $105.4 million repayment of
long-term debt and $6.5 million in costs related to the repayment of such debt.
Net cash used by financing activities of discontinued operations in 2022 was
$0.8 million which was related to the repayment of the Chongqing Maliu debt at
our China API Operations.

In 2021, cash provided by financing activities of continuing operations was $2.7
million, which primarily consisted of the proceeds from the exercise of stock
options of $1.6 million, proceeds from the sale of shares in the ATM Offering of
$1.3 million in December, partially offset by the repayment of finance lease
obligations of $0.1 million. Net cash used in financing activities of
discontinued operations in 2021 was $0.3 million, related to the repayment of
finance lease obligations.

Capital Expenditures

Our liquidity position and capital requirements are subject to a number of factors. For example, our cash inflow and outflow may be impacted by the following:

•

Our ability to generate revenue;

•

Our ability to improve margins on our commercial products;

•

Fluctuations in working capital; and

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•

Our ability to raise additional funds.

Our primary short-term capital needs, which are subject to change, include expenditures related to:

•
Repayment of indebtedness;

•

Continuous support of the development and research of our proprietary drug products;

•

New research and product development efforts; and

•

Support of our commercialization efforts related to our current and future products.

Although we believe the foregoing items reflect our most likely uses of cash in
the short term, we cannot predict with certainty all of our short-term cash uses
or the timing or amounts of cash used. If cash generated from operations is
insufficient to satisfy our working capital and capital expenditure
requirements, we may be required to sell additional equity or debt securities or
obtain credit financing. This capital may not be available on satisfactory
terms, if at all. Furthermore, any additional equity financing may be dilutive
to our stockholders, and debt financing, if available, may include restrictive
covenants.

Contractual Obligations

A summary of our contractual obligations as of December 31, 2022 is as follows:

                                                            Payments Due by Period                              Total
                                       Less than 1                                           More than         Amounts
                                          year          1 to 3 years      3 to 5 years        5 years         Committed
                                                                        (in thousands)
Operating leases                      $       2,238     $       3,506     $         479     $          -     $     6,223
Long-term debt                               56,027                 -                 -                -          56,027
Finance lease obligations                       147               110                                  -             257
License fees                                  1,167                 -                 -                -           1,167
                                      $      59,579     $       3,616     $         479     $          -     $    63,674




Our operating and finance leases are principally for facilities and equipment.
We currently lease office space in the U.S. and foreign countries to support our
operations as a global organization. The operating leases in the above table
include our several locations with the amounts committed by each location: (1)
the rental of our global headquarters in the Conventus Center for Collaborative
Medicine in Buffalo, NY; (2) the rental of the Commercial Platform headquarters
in Chicago, IL; (3) the rental of our clinical research headquarters in
Cranford, NJ; (4) the rental of our contract research organization throughout
Latin America; (5) the rental of our office in Houston, TX; and (6) the rental
of other facilities and equipment located mainly in Buffalo, NY. These locations
represent $3.3 million, $1.4 million, $0.1 million, less than $0.1 million, $0.1
million, and $1.3 million, respectively, of the total amounts committed. In
addition to the minimum rental commitments on our operating leases we may also
be required to pay amounts for taxes, insurance, maintenance and other operating
expenses.

The long-term debt includes our indebtedness under the Senior Credit Agreement
with Oaktree. The finance lease obligations represent leases of equipment in our
office in Buffalo, NY. The license fees in the above table represent the amount
committed and accrued under in-license agreements for specialty drug products by
the Commercial platform.

The Company is obligated to remit funds collected from certain Klisyri royalties
and milestones under the License Agreement with Almirall to the Purchasers under
the RIPA. The Company retained the right to receive 50% of certain of the
milestone interests under the License Agreement, equal to $155.0 million in the
aggregate if those milestones are achieved, and 50% of the royalties paid under
the License Agreement for sales of Klisyri once net sales of Klisyri exceed a
certain dollar amount. The estimates of these cash flows are excluded from the
above table.

In addition, we have certain obligations under licensing arrangements with third
parties contingent upon achieving various development, regulatory, and
commercial milestones. Pursuant to our purchase agreement of Kuur Therapeutics,
we may be required to make payments worth up to $115.0 million, payable in cash
of shares of our common stock, upon the occurrence of certain development and
regulatory milestones related to our NKT cell therapy. Pursuant to our license
agreement with Baylor College of Medicine, we may be required to pay up to
$128.5 million upon the occurrence of certain development and sales milestones.
Pursuant to the license agreement with XLifeSc, our 55% owned joint venture Axis
Therapeutics Limited, we may be required to make cash payments worth up to
$108.0 million upon the occurrence of certain regulatory milestones related to
XLifeSc's proprietary TCR-T technology, and make royalty payments representing a
percentage of aggregate net income generated by sales of licensed products.
Pursuant to our license agreements with Hanmi, we may be required to make equity
payments of $24.0 million upon regulatory approval of a product within the
Orascovery platform and make tiered royalty payments based on net sales of any
product using the licensed intellectual property. These amounts are not included
in the table above.

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Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations
is based on our consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities and the disclosure of contingent assets and liabilities
at the date of our financial statements and the reported amounts of revenue and
expenses during the periods. We evaluate our estimates and judgments on an
ongoing basis, including but not limited to, estimating the useful lives of
long-lived assets, assessing the impairment of long-lived assets, stock-based
compensation expenses, and the realizability of deferred income tax assets. We
base our estimates on historical experience, known trends and events,
contractual milestones and other various factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Changes in the accounting estimates are
likely to occur from period to period. Actual results could be significantly
different from these estimates. We believe that the accounting policies
discussed below are critical to understanding our historical and future
performance, as these policies relate to the more significant areas involving
management's judgment and estimates.

Revenue Recognition

1.
Oncology Innovation Platform

The Company out-licenses certain of its IP to other pharmaceutical companies in
specific territories that allow the customer to use, develop, commercialize, or
otherwise exploit the licensed IP. In accordance with ASC 606, Revenue from
Contracts with Customers ("Topic 606"), the Company analyzes the contracts to
identify its performance obligations within the contract. Most of the Company's
out-license arrangements contain multiple performance obligations and variable
pricing. After the performance obligations are identified, the Company
determines the transaction price, which generally includes upfront fees,
milestone payments related to the achievement of developmental, regulatory, or
commercial goals, and royalty payments on net sales of licensed products. The
Company considers whether the transaction price is fixed or variable, and
whether such consideration is subject to return. Variable consideration is only
included in the transaction price to the extent that it is probable that a
significant reversal in the amount of cumulative revenue recognized will not
occur when the uncertainty associated with the variable consideration is
subsequently resolved. If any portion of the transaction price is constrained,
it is excluded from the transaction price until the constraint no longer exists.
The Company then allocates the transaction price to the performance obligation
to which the consideration is related. Where a portion of the transaction price
is received and allocated to continuing performance obligations under the terms
of the arrangement, it is recorded as deferred revenue and recognized as revenue
when (or as) the underlying performance obligation is satisfied.

The Company's contracts may contain one or multiple promises, including the
license of IP and development services. The licensed IP related to the Company's
approved and late-stage drug candidates is capable of being distinct from the
other performance obligations identified in the contract and is distinct within
the context of the contract, as upon transfer of the IP, the customer is able to
use and benefit from it, and the customer could obtain the development services
from other parties. The Company also considers the economic and regulatory
characteristics of the licensed IP and other promises in the contract to
determine if it is a distinct performance obligation. The Company considers if
the IP is modified or enhanced by other performance obligations through the life
of the agreement and whether the customer is contractually or practically
required to use updated IP. The IP licensed by the Company has been determined
to be functional IP. The IP is not modified during the license period and
therefore, the Company recognizes revenues from any portion of the transaction
price allocated to the licensed IP when the license is transferred to the
customer and they can benefit from the right to use the IP. The Company
recognized $9.2 million and $0.5 million in license revenue from out-license
arrangements for the years ended December 31, 2022 and 2021, respectively.
During the year ended December 31, 2021, the Company received $2.0 million in
upfront fees for a license of TCR-T technology, which was deemed not to be
distinct, as the IP is in an early stage and is dependent on development
activities to be performed by the Company, and $0.7 million for licenses of
Klisyri in territories in which it is not yet approved and further development
activities are required to be performed by the Company. Therefore these licenses
of IP and the development services were considered a bundled performance
obligation. As of December 31, 2022, this bundle of performance obligations was
not satisfied and the corresponding $2.7 million was recorded as deferred
revenue on the Company's consolidated balance sheet.

Other performance obligations included in most of the Company's out-licensing
agreements include performing development services to reach clinical and
regulatory milestone events. The Company satisfies these performance obligations
at a point-in-time, because the customer does not simultaneously receive and
consume the benefits as the development occurs, the development does not create
or enhance an asset controlled by the customer, and the development does not
create an asset with no alternative use. The Company considers milestone
payments to be variable consideration measured using the most likely amount
method, as the entitlement to the consideration is contingent on the occurrence
or nonoccurrence of future events. The Company allocates each variable milestone
payment to the associated milestone performance obligation, as the variable
payment relates directly to the Company's efforts to satisfy the performance
obligation and such allocation depicts the amount of consideration to which the
Company expects to be entitled for satisfying the corresponding performance
obligation. The Company re-evaluates the probability of achievement of such
performance obligations and any related constraint and adjusts its estimate of
the transaction price as appropriate.

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To date, no amounts have been constrained in the initial or subsequent
assessments of the transaction price. The Company did not recognize revenue from
other performance obligations included in the Company's out-licensing agreements
during the years ended December 31, 2022 or 2021.

Certain out-license agreements include performance obligations to manufacture
and provide drug product in the future for commercial sale when the licensed
product is approved. For the commercial, sales-based royalties, the
consideration is predominantly related to the licensed IP and is contingent on
the customer's subsequent sales to another commercial customer. Consequently,
the sales- or usage-based royalty exception would apply. Revenue will be
recognized for the commercial, sales-based milestones as the underlying sales
occur. The Company recognized $2.5 million and $25.0 million in commercial
milestones during the years ended December 31, 2022 and 2021, respectively. The
Company recorded $2.3 million and $0.7 million of royalty revenue related to
sales of Tirbanibulin during the years ended December 31, 2022 and 2021,
respectively.

The Company exercises significant judgment when identifying distinct performance
obligations within its out-license arrangements, determining the transaction
price, which often includes both fixed and variable considerations, and
allocating the transaction price to the proper performance obligation. The
Company did not use any other significant judgments related to out-licensing
revenue during the years ended December 31, 2022 and 2021.

2.

Commercial Platform

The Company's Commercial Platform generates revenue by distributing specialty
products through independent pharmaceutical wholesalers. The wholesalers then
sell to an end-user, normally a hospital, alternative healthcare facility, or an
independent pharmacy, at a lower price previously established by the end-user
and the Company. Upon the sale by the wholesaler to the end-user, the wholesaler
will chargeback the difference, if any, between the original list price and
price at which the product was sold to the end-user. The Company also offers
cash discounts, which approximate 2.3% of the gross sales price, as an incentive
for prompt customer payment, and, consistent with industry practice, the
Company's return policy permits customers to return products within a window of
time before and after the expiration of product dating. Further, the Company
offers contractual allowances, generally in the form of rebates or
administrative fees, to certain wholesale customers, group purchasing
organizations ("GPOs"), and end-user customers, consistent with pharmaceutical
industry practices. Revenues are recorded net of provisions for variable
consideration, including discounts, rebates, GPO allowances, price adjustments,
returns, chargebacks, promotional programs and other sales allowances. Accruals
for these provisions are presented in the consolidated financial statements as
reductions in determining net sales and as a contra asset in accounts
receivable, net (if settled via credit) and other current liabilities (if paid
in cash). As of December 31, 2022 and 2021, the Company's total provision for
chargebacks and other deductions included as a reduction of accounts receivable
totaled $29.5 million and $22.9 million, respectively. The Company's total
provision for chargebacks and other revenue deductions was $179.9 million and
$129.0 million for the years ended December 31, 2022 and 2021, respectively.

The Company exercises significant judgment in its estimates of the variable
transaction price at the time of the sale and recognizes revenue when the
performance obligation is satisfied. Factors that determine the final net
transaction price include chargebacks, fees for service, cash discounts,
rebates, returns, warranties, and other factors. The Company estimates all of
these variables based on historical data obtained from previous sales finalized
with the end-user customer on a product-by-product basis. At the time of sale,
revenue is recorded net of each of these deductions. Through the normal course
of business, the wholesaler will sell the product to the end-user, determining
the actual chargeback, return products, and take advantage of cash discounts,
charge fees for services, and claim warranties on products. The final
transaction price per product is compared to the initial estimated net sale
price and reviewed for accuracy. The final prices and other factors are
immediately included in the Company's historical data from which it will
estimate the transaction price for future sales. The underlying contracts for
these sales are generally purchase orders including a single performance
obligation, generally the shipment or delivery of products and the Company
recognizes this revenue at a point-in-time.

Research and Development Expenses

Research and development expenses represent costs associated with developing our
proprietary drug candidates, our collaboration agreements for such drugs, and
our ongoing clinical studies.

Clinical trial costs are a significant component of our research and development
expenses. We have a history of contracting with third parties that perform
various clinical trial activities on our behalf in the ongoing development of
our drug candidates. Expenses related to clinical trials are accrued based on
our estimates of the actual services performed by the third parties for the
respective period. If the contracted amounts are revised or the scope of a
contract is revised, we will modify the accruals accordingly on a prospective
basis and will do so in the period in which the facts that give rise to the
revision become reasonably certain.

Intangible Assets, net

Intangible assets arising from a business acquisition are recognized at fair
value as of the acquisition date. The Company amortizes intangible assets using
the straight-line method. When the straight-line method of amortization is
utilized, the estimated

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useful life of the intangible asset is shortened to assure the recognition of
amortization expense corresponds with the expected cash flows. Other purchased
intangibles, including certain licenses, are capitalized at cost and amortized
on a straight-line basis over the license life, when a future economic benefit
is probable and measurable. If a future economic benefit is not probable or
measurable, the license costs are expensed as incurred within research and
development expenses. In-process research and development ("IPR&D") intangible
assets are not amortized, but rather are reviewed for impairment on an annual
basis or more frequently if indicators of impairment are present, until the
project is completed, abandoned, or transferred to a third party.

Impairment of Long-Lived Assets

The Company reviews the recoverability of its long-lived assets, excluding
goodwill, when events or changes in circumstances occur that indicate that the
carrying value of the asset may not be recoverable. The assessment of possible
impairment is based on the ability to recover the carrying value of the assets
from the expected future cash flows (undiscounted and without interest expense)
of the related operations. If these cash flows are less than the carrying value
of such assets, an impairment loss for the difference between the estimated fair
value and carrying value is recorded. The Company determined that impairment
indicators occurred during the first and fourth quarters of 2021 and concluded
that there was impairment of intangible assets other than goodwill amounting to
$1.7 million for the year ended December 31, 2021. See Part II, Item 8, Note 8 -
Goodwill and Intangible Assets, net for additional details.

Contingent Consideration

Contingent consideration arising from a business acquisition is included as part
of the purchase price and is recorded at fair value as of the acquisition date.
Subsequent to the acquisition date, the Company remeasures contingent
consideration arrangements at fair value at each reporting period until the
contingency is resolved. The changes in fair value are recognized within
selling, general, and administrative expenses in the Company's consolidated
statement of operations and comprehensive loss. Changes in fair values reflect
new information about the likelihood of the payment of the contingent
consideration and the passage of time.

Liability related to the sale of future royalties

The Company treats the liability related to the sale of future royalties, as
discussed further in Part II, Item 8. Note 12 - Debt and Lease Obligations, as a
debt instrument, amortized under the effective interest rate method over the
estimated life of the revenue streams. The Company recognizes interest expense
thereon using the effective interest rate, which is based on its current
estimates of future revenues over the life of the arrangement. The Company
periodically assesses its expected revenues using internal projections, imputes
interest on the carrying value of the deferred royalty obligation, and records
interest expense using the imputed effective interest rate. To the extent its
estimates of future revenues are greater or less than previous estimates or the
estimated timing of such payments is materially different than previous
estimates, the Company will account for any such changes by adjusting the
effective interest rate on a prospective basis, with a corresponding impact to
the reclassification of the deferred royalty obligation. The assumptions used in
determining the expected repayment term of the royalty financing liability and
amortization period of the issuance costs require that the Company makes
significant estimates that could impact the short-term and long-term
classification of the royalty financing liability, interest recorded on such
liability, as well as the period over which such costs will be amortized.

Recent Accounting Pronouncements

In the normal course of business, we evaluate all new accounting pronouncements
issued by the Financial Accounting Standards Board, SEC, or other authoritative
accounting bodies to determine the potential impact they may have on our
Consolidated Financial Statements. Refer to Note 2 - Summary of Significant
Accounting Policies of the Notes to Consolidated Financial Statements contained
in Item 8 of this report for additional information about these recently issued
accounting standards and their potential impact on our financial condition or
results of operations.

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