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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-35006 
https://cdn.kscope.io/a2d57a4e2d9912ba3bb2d1945e79337d-sppi-20220630_g1.jpg
SPECTRUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware93-0979187
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Pilot House - Lewis Wharf, 2 Atlantic Ave6th FloorBostonMA02110
(Address of principal executive offices)(Zip Code)

(617) 586-3900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueSPPIThe NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer 
Non-accelerated filer Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  
As of August 8, 2022, 188,164,186 shares of the registrant’s common stock were outstanding.



Table of Contents
Spectrum Pharmaceuticals, Inc.
Quarterly Report on Form 10-Q
For the Three and Six Months Ended June 30, 2022
TABLE OF CONTENTS
ItemPage
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited):
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 6.
Items 2 through 5 of Part II have been omitted because they are not applicable with respect to the current reporting period.

SPECTRUM PHARMACEUTICALS, INC. ® is a registered trademark of Spectrum Pharmaceuticals, Inc. and its affiliates. REDEFINING CANCER CARE™ and the Spectrum Pharmaceuticals’ logos are trademarks owned by Spectrum Pharmaceuticals, Inc. Any other trademarks are the property of their respective owners.


2


Table of Contents
Part I: Financial Information

Item 1: Financial Statements

SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
(Unaudited)
June 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$25,512 $88,539 
Marketable securities42,447 12,108 
Other receivables608 1,028 
Prepaid expenses and other current assets5,012 2,277 
Total current assets73,579 103,952 
Property and equipment, net347 455 
Facility and equipment under lease1,703 2,505 
Other assets3,800 4,636 
Total assets$79,429 $111,548 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities$33,123 $41,258 
Accrued payroll and benefits7,918 11,971 
Total current liabilities41,041 53,229 
Other long-term liabilities4,946 10,766 
Total liabilities45,987 63,995 
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
  
Common stock, $0.001 par value; 300,000,000 shares authorized; 184,870,273 and 164,502,013 issued and outstanding at June 30, 2022 and December 31, 2021, respectively
185 165 
Additional paid-in capital1,124,625 1,094,353 
Accumulated other comprehensive loss(2,955)(3,042)
Accumulated deficit(1,088,413)(1,043,923)
Total stockholders’ equity33,442 47,553 
Total liabilities and stockholders’ equity$79,429 $111,548 
See accompanying notes to these unaudited condensed consolidated financial statements.
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SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Operating costs and expenses:
Selling, general and administrative$9,385 $14,957 $19,255 $29,272 
Research and development16,007 29,114 20,200 48,485 
Total operating costs and expenses25,392 44,071 39,455 77,757 
Loss from continuing operations before other income (expense) and income taxes(25,392)(44,071)(39,455)(77,757)
Other income (expense):
Interest income, net117 26 128 110 
Other expense, net(3,757)(5,876)(5,091)(7,957)
Total other expense(3,640)(5,850)(4,963)(7,847)
Loss from continuing operations before income taxes(29,032)(49,921)(44,418)(85,604)
Provision for income taxes from continuing operations(13)(16)(29)(9)
Loss from continuing operations(29,045)(49,937)(44,447)(85,613)
Loss from discontinued operations, net of income taxes(3)(195)(43)(216)
Net loss$(29,048)$(50,132)$(44,490)$(85,829)
Basic and diluted loss per share:
Loss from continuing operations$(0.17)$(0.32)$(0.26)$(0.57)
Loss from discontinued operations$(0.00)$(0.00)$(0.00)$(0.00)
Net loss per share, basic and diluted$(0.17)$(0.32)$(0.26)$(0.57)
Weighted average shares outstanding, basic and diluted175,566,757 155,243,402 172,558,831 150,334,548 
See accompanying notes to these unaudited condensed consolidated financial statements.

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Table of Contents
SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Net loss$(29,048)$(50,132)$(44,490)$(85,829)
Other comprehensive income (loss):
Unrealized loss on available-for-sale securities, net of tax (46)(11)(46)(1,129)
Foreign currency translation adjustments(1)191 133 (369)
Other comprehensive income (loss) (47)180 87 (1,498)
Total comprehensive loss$(29,095)$(49,952)$(44,403)$(87,327)
See accompanying notes to these unaudited condensed consolidated financial statements.

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Table of Contents

SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Common StockAdditional Paid-In CapitalAccumulated
Other Comprehensive Loss 
Accumulated DeficitTotal
Stockholders' Equity
SharesAmount
Balance as of December 31, 2021164,502,013 $165 $1,094,353 $(3,042)$(1,043,923)$47,553 
Net loss— — — — (15,442)(15,442)
Other comprehensive income, net— — — 134 — 134 
Recognition of stock-based compensation expense— — 3,011 — — 3,011 
Restricted stock award grants, net of forfeitures1,675,472 2 (2)— — — 
Issuance of common shares to Hanmi Pharmaceutical Co., Ltd.12,500,000 12 19,988 — — 20,000 
Issuance of common stock upon vesting of performance units150,000 — — — — — 
Balance as of March 31, 2022178,827,485 $179 $1,117,350 $(2,908)$(1,059,365)$55,256 
Net loss— — — — (29,048)(29,048)
Other comprehensive loss, net— — — (47)— (47)
Recognition of stock-based compensation expense— — 2,077 — — 2,077 
Issuance of common shares pursuant to at-the-market offering, net of offering costs5,619,827 6 4,941 — — 4,947 
Issuance of common stock for employee stock purchase plan388,541 — 257 — — 257 
Restricted stock award grants, net of forfeitures34,420 — — — — — 
Balance as of June 30, 2022184,870,273 $185 $1,124,625 $(2,955)$(1,088,413)$33,442 

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Common StockAdditional Paid-In CapitalAccumulated
Other Comprehensive Loss 
Accumulated DeficitTotal
Stockholders' Equity
SharesAmount
Balance as of December 31, 2020146,083,110 $146 $1,021,221 $(1,829)$(885,295)$134,243 
Net loss— — — — (35,697)(35,697)
Other comprehensive loss, net— — — (1,678)— (1,678)
Recognition of stock-based compensation expense— — 4,212 — — 4,212 
Issuance of common shares under an at-the-market sales agreement5,678,893 6 21,351 — — 21,357 
Restricted stock award grants, net of forfeitures1,966,333 2 — — — 2 
Balance as of March 31, 2021153,728,336 $154 $1,046,784 $(3,507)$(920,992)$122,439 
Net loss— — — — (50,132)(50,132)
Other comprehensive income, net— — — 180 — 180 
Recognition of stock-based compensation expense— — 4,360 — — 4,360 
Issuance of common stock for employee stock purchase plan163,463 — 474 — — 474 
Issuance of common stock upon exercise of stock options1,250 — 2 — — 2 
Restricted stock award grants, net of forfeitures39,127 — — — — — 
Issuance of common stock upon vesting of restricted stock units1,386 — — — — — 
Issuance of common shares under an at-the-market sales agreement 10,172,498 10 31,255 — — 31,265 
Balance as of June 30, 2021164,106,060 $164 $1,082,875 $(3,327)$(971,124)$108,588 

See accompanying notes to these unaudited condensed consolidated financial statements.
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SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months Ended
June 30,
 20222021
Cash Flows From Operating Activities:
Loss from continuing operations$(44,447)$(85,613)
Loss from discontinued operations, net of income taxes(43)(216)
Net loss(44,490)(85,829)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization147 138 
Stock-based compensation 5,088 8,572 
Non-cash lease expense724 766 
Other non-cash items183 188 
Loss on disposal of assets4  
Realized gain on sale of equity holdings(1,390)(4,121)
Unrealized loss on equity holdings 5,488 12,387 
Changes in operating assets and liabilities:
Accounts receivable, net 68 
Other receivables414 (1,063)
Prepaid expenses and other current assets(2,735)804 
Other assets834 (1)
Accounts payable and other accrued liabilities(8,362)5,933 
Accrued payroll and benefits(4,053)(2,971)
Other long-term liabilities(5,594)988 
Net cash used in operating activities(53,742)(64,141)
Cash Flows From Investing Activities:
Proceeds from maturities of investments2,695 92,023 
Proceeds from sale of equity holdings985 4,062 
Purchases of investments(38,108)(16,351)
Purchases of property and equipment, net(45)(140)
Net cash (used in) provided by investing activities(34,473)79,594 
Cash Flows From Financing Activities:
Issuance of common shares to Hanmi Pharmaceutical Co., Ltd.20,000  
Proceeds from sale of common stock under an at-the-market sales agreement, net4,947 52,622 
Proceeds from sale of stock under our employee stock purchase plan257 474 
Proceeds from employees for exercises of stock options 2 
Net cash provided by financing activities25,204 53,098 
Effect of exchange rates on cash and cash equivalents(16)13 
Net (decrease) increase in cash and cash equivalents(63,027)68,564 
Cash and cash equivalents—beginning of period88,539 46,009 
Cash and cash equivalents—end of period$25,512 $114,573 
Supplemental disclosure of cash flow information:
Cash paid for facility and equipment under operating leases$1,164 $1,187 
Cash paid for income taxes$ $12 

See accompanying notes to these unaudited condensed consolidated financial statements.
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Spectrum Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

Note 1. Description of Business, Basis of Presentation, And Operating Segment
(a) Description of Business
Spectrum Pharmaceuticals, Inc. (“Spectrum,” the “Company,” “we,” “our,” or “us”) is a biopharmaceutical company with a strategy of acquiring, developing, and commercializing novel and targeted oncology therapies. Our in-house development organization includes clinical development, regulatory, quality and data management.
We have two drugs in late-stage development:
Eflapegrastim, a novel long-acting granulocyte colony-stimulating factor (“G-CSF”) for the treatment of chemotherapy-induced neutropenia. On August 6, 2021, the Company announced the receipt of a complete response letter (“CRL”), that cited manufacturing deficiencies related both to the drug substance and drug product manufacturers. The Company believes it has completed the remediation of these deficiencies and resubmitted the Biologics License Application (“BLA”) on March 11, 2022. On April 11, 2022, the Company announced that it had received notice that the BLA had been accepted and received a Prescription Drug User Fee Act (“PDUFA”) date of September 9, 2022; and
Poziotinib, a novel irreversible tyrosine kinase inhibitor under investigation for non-small cell lung cancer (“NSCLC”) tumors with various mutations. On December 6, 2021, the Company announced it submitted its New Drug Application (“NDA”) for poziotinib to the FDA for use in patients with previously treated locally advanced or metastatic NSCLC with HER2 exon 20 insertion mutations. The NDA submission is based on the positive results of Cohort 2 from the ZENITH20 clinical trial, which assessed the safety and efficacy of poziotinib. The product has received Fast Track designation and there is currently no treatment specifically approved by the FDA for this indication. On February 11, 2022, the Company announced that it had received notice that the NDA had been accepted and received a PDUFA action date of November 24, 2022.

Our business strategy is the development of late-stage assets through commercialization and the sourcing of additional assets that are synergistic with our existing portfolio (through purchase acquisitions, in-licensing transactions, or co-development and marketing arrangements).
(b) Basis of Presentation
Interim Financial Statements
The interim financial data for the three and six months ended June 30, 2022 and 2021 is unaudited and is not necessarily indicative of our operating results for a full year. We believe the interim data includes normal and recurring adjustments necessary for a fair presentation of our financial results for the three and six months ended June 30, 2022 and 2021. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations relating to interim financial statements. Certain prior period amounts have been reclassified for consistency with the current year presentation. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and Notes thereto included within our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (filed with the SEC on March 17, 2022).
Discontinued Operations - Sale of our Commercial Product Portfolio
In March 2019, we completed the Commercial Product Portfolio Transaction (see Note 7) to Acrotech Biopharma LLC (“Acrotech”) (the “Commercial Product Portfolio Transaction”). In accordance with applicable GAAP (ASC 205-20, Presentation of Financial Statements), the revenue-deriving activities and allocable expenses of our sold commercial
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

operations, connected to the Commercial Product Portfolio, are separately classified as “discontinued” for all periods presented within the accompanying Condensed Consolidated Statements of Operations.
Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with GAAP and with the rules and regulations of the SEC. These financial statements include the financial position, results of operations, and cash flows of Spectrum and its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions among these legal entities have been eliminated in consolidation. Substantially all of the accumulated other comprehensive loss is comprised of foreign currency translation adjustments at June 30, 2022.
Liquidity and Going Concern
The Company expects to incur future net losses as it continues to fund the advancement and commercialization of its product candidates. As of June 30, 2022, the Company had approximately $68.0 million in aggregate cash, cash equivalents and marketable securities and an accumulated deficit of $1.1 billion. Based on its available cash resources, the Company does not have sufficient cash on hand to fund its current operations for more than twelve months from the date of filing this Quarterly Report on Form 10-Q. This condition raises substantial doubt about the Company’s ability to continue as a going concern.

The Company is subject to a number of risks, including the need for substantial additional capital to continue its development programs and to fulfill its planned operating goals. In particular, the Company’s currently planned operating and capital requirements include the need for substantial working capital to support the development and commercialization activities for its lead product candidates, eflapegrastim and poziotinib. The Company resubmitted a BLA to the FDA on March 11, 2022 for eflapegrastim for the treatment of chemotherapy-induced neutropenia and on April 11, 2022 announced that it had received notice that the BLA had been accepted and received a PDUFA date of September 9, 2022. In addition, an NDA was submitted to the FDA for poziotinib for use in patients with previously treated locally advanced or metastatic NSCLC with HER2 exon 20 insertion mutations on December 6, 2021. On February 11, 2022, the Company announced that it had received notice that the NDA had been accepted and received a PDUFA action date of November 24, 2022. The transition to profitability is dependent on the successful development, approval, and commercialization of eflapegrastim and poziotinib, as well as the achievement of a level of revenues adequate to support our cost structure.

Given the Company’s projected operating requirements and its existing cash, cash equivalents and marketable securities, management’s plans include evaluating different strategies to obtain the required funding of future operations. These plans may include, but are not limited to, public or private sales of debt or equity securities, out-licensing arrangements, funding from joint-venture or strategic partners, debt financing or short-term loans, or a combination of the foregoing. However, there can be no assurance that the Company will be able to secure such additional financing, or if available, that it will be sufficient to meet its needs or be on favorable terms. Therefore, the plans cannot be deemed probable of being implemented. As a result, the Company’s plans do not alleviate substantial doubt about our ability to continue as a going concern.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
(c) Operating Segment
We operate one reportable operating segment that is focused exclusively on developing (and eventually marketing) oncology and hematology drug products. For the three and six months ended June 30, 2022 and 2021, all of our operating costs and expenses were solely attributable to these activities (and as applicable, classified as “discontinued” within the accompanying Condensed Consolidated Statements of Operations).
Note 2. Summary of Significant Accounting Policies And Use of Estimates
The preparation of financial statements in conformity with GAAP requires our management to make informed estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses. These amounts may materially differ from the amounts ultimately realized and reported due to the inherent uncertainty of any estimate or assumption. On an on-going basis, our management evaluates (as applicable) its most critical estimates and assumptions, including those related to: (i) the realization of our tax assets and estimates of our tax liabilities; (ii) the fair value of our investments; (iii) the valuation of our stock options and the periodic expense recognition of stock-based compensation; (iv) the potential outcome of our ongoing
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

or threatened litigation; and (v) the future undiscounted cash flows and revenues, as well as assesses our ability to fund our operations for at least the next twelve months from the date of issuance of these financial statements.
Our accounting policies and estimates that most significantly impact the presented amounts within these Condensed Consolidated Financial Statements are further described below:
(i) Cash and Cash Equivalents
Cash and cash equivalents consist of bank deposits and highly liquid investments with maturities of three months or less from the purchase date.
(ii) Marketable Securities
Marketable securities consist of our holdings in equity securities (including mutual funds), bank CDs, government-related debt securities, and corporate debt securities. For equity securities and mutual funds, any realized or unrealized gains (losses) are recognized in “other income (expense), net” within the Condensed Consolidated Statements of Operations. Debt securities and bank CDs are classified as “available-for-sale” investments and (1) realized gains (losses) are recognized in “other income (expense), net” within the Condensed Consolidated Statements of Operations and (2) unrealized gains (losses) are recognized as a component of “accumulated other comprehensive loss” within the Condensed Consolidated Statements of Stockholders’ Equity.
(iii) Property and Equipment, Net
Our property and equipment, net, is stated at historical cost, and is depreciated on a straight-line basis over an estimated useful life that corresponds with its designated asset category. We evaluate the recoverability of long-lived assets (which includes property and equipment) whenever events or changes in circumstances in our business indicate that the asset’s carrying amount may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the net undiscounted cash flows expected to be generated by the asset group. An impairment loss would be recorded for the excess of net carrying value over the fair value of the asset impaired. The fair value is estimated based on expected discounted future cash flows or other methods such as orderly liquidation value based on assumptions of asset class and observed market data.
(iv) Stock-Based Compensation
Stock-based compensation expense for equity awards granted to our employees and members of our Board of Directors is recognized on a straight-line basis over each award’s vesting period. Recognized compensation expense is net of an estimated forfeiture rate, representing the percentage of awards that are expected to be forfeited prior to vesting, though is ultimately adjusted for actual forfeitures. We use the Black-Scholes option pricing model to determine the fair value of stock options and stock appreciation rights (as of the date of grant) that have service conditions for vesting. We use the Monte Carlo valuation model to value equity awards (as of the date of grant) that have combined market conditions and service conditions for vesting.
The recognition of stock-based compensation expense and the initial calculation of stock option fair value requires uncertain assumptions, including (a) the pre-vesting forfeiture rate of the award, (b) the expected term that the stock option will remain outstanding, (c) our stock price volatility over the expected term (and that of our designated peer group with respect to certain market-based awards), and (d) the prevailing risk-free interest rate for the period matching the expected term.
With regard to (a)-(d) above: we estimate forfeiture rates based on our employees’ overall forfeiture history, which we believe will be representative of future results. We estimate the expected term of stock options granted based on our employees’ historical exercise patterns, which we believe will be representative of their future behavior. We estimate the volatility of our common stock on the date of grant based on the historical volatility of our common stock for a look-back period that corresponds with the expected term. We estimate the risk-free interest rate based upon the U.S. Department of the Treasury yields in effect at award grant, for a period equaling the expected term of the stock option.
(v) Basic and Diluted Net Loss per Share
We calculate basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods presented. In periods of a net loss, basic and diluted loss per share is the same. For the diluted earnings per
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

share calculation, we adjust the weighted average number of common shares outstanding to include only stock options, warrants, and other common stock equivalents outstanding during the period to the extent that they are dilutive.
There were 24.3 million shares and 12.7 million shares of outstanding securities (including stock options, restricted stock units, unvested restricted stock awards, stock appreciation rights, and performance awards) as of June 30, 2022 and 2021, respectively, that were excluded from the calculation of diluted net loss per share because their inclusion would have been anti-dilutive.
(vi) Income Taxes
Deferred tax assets and liabilities are recorded based on the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.
We apply an estimated annual effective tax rate (“ETR”) approach for calculating a tax provision for interim periods. Our ETR differs from the U.S. federal statutory tax rate primarily as a result of nondeductible expenses and the impact of a valuation allowance on our deferred tax assets, which we record because we believe that, based upon a weighting of positive and negative factors, it is more likely than not that these deferred tax assets will not be realized. If/when we were to determine that our deferred tax assets are realizable, an adjustment to the corresponding valuation allowance would increase our net income in the period that such determination was made.
In the event that we are assessed interest and/or penalties from taxing authorities that have not been previously accrued, such amounts would be included in “provision for income taxes from continuing operations” within the accompanying Condensed Consolidated Statements of Operations for the period in which we received the notice.
(vii) Research and Development Expenses
Our research and development costs are expensed as incurred. Research and development costs consist primarily of salaries, benefits, and other staff-related costs including associated stock-based compensation, laboratory supplies, clinical trial and related clinical manufacturing costs, costs related to manufacturing preparations, fees paid to other entities that conduct certain research and development activities on our behalf and payments made pursuant to license agreements. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. We accrue for costs incurred as the services are being provided by monitoring the status of activities and the invoices received from our external service providers. We adjust our accruals as actual costs become known. Where contingent milestone payments are due to third parties under research and development or license agreements, the milestone payment obligations are expensed in the earliest period that we determine the respective milestone achievement is probable or has occurred.
(viii) Fair Value Measurements
We determine measurement-date fair value based on the proceeds that would be received through the sale of the asset, or that we would pay to settle or transfer the liability, in an orderly transaction between market participants. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include the following:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are publicly accessible at the measurement date.
Level 2: Observable prices that are based on inputs not quoted on active markets, but that are corroborated by market data. These inputs may include quoted prices for similar assets or liabilities or quoted market prices in markets that are not active to the general public.
Level 3: Unobservable inputs are used when little or no market data is available.
(ix) Recently Issued Accounting Standards
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

There are several new accounting pronouncements issued by the FASB, which we don’t believe had or will have a material impact on our consolidated financial statements, unless otherwise described below.
In June 2022 the Financial Accounting Standards Board issued Accounting Standards Update No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This standard clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This standard becomes effective for us on January 1, 2024, and is not expected to have a material impact on our condensed consolidated financial statements and related disclosures.
Note 3. Fair Value Measurements
The table below summarizes certain asset and liability fair values that are included within our accompanying Condensed Consolidated Balance Sheets, and their designations among the three fair value measurement categories:
 June 30, 2022
Fair Value Measurements
 Level 1Level 2Level 3Total
Assets:
Money market funds$6,037 $ $ $6,037 
Equity securities1,499   1,499 
Government-related debt securities44,845   44,845 
Mutual funds3,603 8  3,611 
Key employee life insurance, cash surrender value(1)
 3,667  3,667 
$55,984 $3,675 $ $59,659 
Liabilities:
Deferred executive compensation liability(2)
$ $7,648 $ $7,648 
$ $7,648 $ $7,648 
(1) Included within other assets on our Condensed Consolidated Balance Sheets, and the amount is based on the stated cash surrender value of life insurance policies of named current and former employees at each period-end.

(2) Included $3.9 million within accounts payable and other accrued liabilities and $3.7 million within other long-term liabilities on our Condensed Consolidated Balance Sheets.
December 31, 2021
Fair Value Measurements
Level 1Level 2Level 3Total
Assets:
Equity securities$5,718 $ $ $5,718 
Money market funds66,322   66,322 
Mutual funds6,390 9  6,399 
Key employee life insurance, cash surrender value(1)
 4,507  4,507 
$78,430 $4,516 $ $82,946 
Liabilities:
Deferred executive compensation liability(2)
$ $11,243 $ $11,243 
$ $11,243 $ $11,243 
(1) Included within other assets on our Condensed Consolidated Balance Sheets, and the amount is based on the stated cash surrender value of life insurance policies of named current and former employees at each period-end.
(2) Included $2.0 million within accounts payable and other accrued liabilities and $9.2 million within other long-term liabilities on our Condensed Consolidated Balance Sheets.

We did not have any transfers between “Level 1” and “Level 2” measurement categories for any periods presented.
Our carrying amounts of financial instruments such as cash equivalents, accounts receivable, prepaid expenses, accounts payable, and other accrued liabilities approximate their fair values due to their short-term nature of settlement.
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

Note 4. Balance Sheet Account Detail
The composition of selected financial statement captions that comprise the accompanying Condensed Consolidated Balance Sheets are summarized below:
(a) Cash and Cash Equivalents and Marketable Securities

We maintain cash balances with select major financial institutions. The Federal Deposit Insurance Corporation (FDIC) and other third parties insure a fraction of these deposits. Accordingly, these cash deposits are not insured against the possibility of a substantial or complete loss of principal and are inherently subject to the credit risk of the corresponding financial institution.
Our investment policy requires that purchased investments may only be in highly-rated and liquid financial instruments and limits our holdings of any single issuer (excluding any debt or equity securities that may be received from our strategic partners in connection with an out-license arrangement).
The carrying amount of our equity securities, money market funds, and bank CDs approximates their fair value (utilizing “Level 1” or “Level 2” inputs) because of our ability to immediately convert these instruments into cash with minimal expected change in value. There were no material unrealized losses on our investment securities at June 30, 2022 or December 31, 2021.
The following is a summary of our presented composition of “cash and cash equivalents” and “marketable securities”:
Historical or Amortized CostFair
Value
Cash and Cash
Equivalents
Marketable
 Securities
June 30, 2022
Money market funds$6,037 $6,037 $6,037 $ 
Equity securities(1)
350 1,499  1,499 
Government-related debt securities44,891 44,845 7,500 37,345 
Mutual funds2,318 3,603  3,603 
Bank deposits11,975 11,975 11,975  
Total cash and cash equivalents and marketable securities$65,571 $67,959 $25,512 $42,447 
December 31, 2021
Equity securities$3,512 $5,718 $ $5,718 
Money market funds66,322 66,322 66,322  
Bank deposits22,217 22,217 22,217  
Mutual funds5,218 6,390  6,390 
Total cash and cash equivalents and marketable securities$97,269 $100,647 $88,539 $12,108 
(1)Our aggregate equity holdings consist of 0.3 million common shares of CASI Pharmaceuticals, Inc., a NASDAQ-listed biopharmaceutical company, with a fair market value of $1.0 million as of June 30, 2022. We completed the sale of 0.6 million shares of common stock and recognized a $0.7 million gain within “other expense, net” within the accompanying Condensed Consolidated Statements of Operations for the six months ended June 30, 2022. Additionally, we hold 0.6 million common shares of Unicycive Therapeutics, Inc., a NASDAQ-listed biopharmaceutical company, with a fair market value of $0.5 million as of June 30, 2022. We completed the sale of 0.2 million shares of common stock and recognized a $0.2 million gain within “other expense, net” within the accompanying Condensed Consolidated Statements of Operations for the six months ended June 30, 2022.
(b)  Accounts Payable and Other Accrued Liabilities
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

“Accounts payable and other accrued liabilities” consists of the following:
June 30, 2022December 31, 2021
Trade accounts payable and other $26,154 $33,408 
Lease liability - current portion715 1,282 
Commercial Product Portfolio accruals (Note 7)6,254 6,568 
Accounts payable and other accrued liabilities $33,123 $41,258 
Amounts presented within “accounts payable and other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets for our categories of gross-to-net (“GTN”) estimates related to the Commercial Product Portfolio accruals were as follows:
Commercial/Medicaid Rebates and Government ChargebacksDistribution, Data, Inventory and
GPO Administrative Fees
Product Return AllowancesTotal
Balance as of December 31, 2020$2,601 $942 $4,299 $7,842 
(Less): Payments and credits against GTN accruals (1,159) (115)(1,274)
Balance as of December 31, 20211,442 942 4,184 6,568 
(Less): Payments and credits against GTN accruals (50) (264)(314)
Balance as of June 30, 2022$1,392 $942 $3,920 $6,254 
Note 5. Stock-Based Compensation
In June 2018, we adopted the 2018 Long-Term Incentive Plan (the “2018 Plan”) which provides for the issuance of restricted stock awards and units, incentive and nonqualified stock options, performance unit awards, stock appreciation rights, and other stock-based awards to employees, consultants and members of our Board of Directors. On June 21, 2022, our shareholders approved an additional 18 million shares to be reserved for issuance under the 2018 Plan.
We report our stock-based compensation expense (inclusive of our incentive stock plan and employee stock purchase plan) in the accompanying Condensed Consolidated Statements of Operations within “total operating costs and expenses” for the three and six months ended June 30, 2022 and 2021, as follows:
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Selling, general and administrative$1,197 $3,005 $3,112 $5,803 
Research and development880 1,355 1,976 2,769 
Total stock-based compensation$2,077 $4,360 $5,088 $8,572 
Restricted Stock Awards and Restricted Stock Units
Stock-based award grants to employees generally vest one-third on the first anniversary of the date of grant, and in equal annual installments thereafter over the remaining two years vesting period. In the event of a change in control, all award types with the exception of performance unit awards, will vest in full effective immediately prior to the consummation of the change in control. A total of 1.8 million restricted stock units were granted with a weighted average grant date fair value of $0.65 during the six months ended June 30, 2022.
We granted 2.2 million restricted stock awards with a weighted average grant date fair value of $1.20 during the six months ended June 30, 2022. At June 30, 2022, we had 6.3 million restricted stock awards and units outstanding with a weighted average grant date fair value of $1.73.
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

As of June 30, 2022, there was approximately $9.6 million of unrecognized compensation expense related to the unvested portions of restricted stock awards and restricted stock units. This expense is expected to be recognized over a weighted-average period of approximately 1.9 years.
Stock Options
Stock option grants to employees, consultants, and members of our Board of Directors generally should be exercised no later than 10 years from the date of grant.
We granted 6.5 million stock options with a weighted average exercise price of $0.65 during the six months ended June 30, 2022. At June 30, 2022, we had 14.6 million options outstanding with a weighted average exercise price of $3.81.
As of June 30, 2022, there was approximately $4.8 million of unrecognized compensation expense related to unvested stock options. This expense is expected to be recognized over a weighted-average period of approximately 2.2 years.
Note 6. Financial Commitments and Contingencies and Key License Agreements
(a) Facility and Equipment Leases
Overview
In the ordinary course of our business, we enter into leases with unaffiliated parties for the use of (i) office and research facilities and (ii) office equipment. Our current leases have remaining terms ranging from less than one year to four years and none include any residual value guarantees, restrictive covenants, term extensions, or early-termination options.
We lease our principal executive office in Boston, Massachusetts under a non-cancelable operating lease expiring December 31, 2024. We also lease our research and development facility, in addition to other administrative office leases, in Irvine, California under a non-cancelable operating lease which expired on July 31, 2022. In June 2022, we entered into a new office facility lease in Irvine, California under a non-cancelable operating lease expiring July 31, 2025. We also lease an office facility in Henderson, Nevada under a non-cancelable operating lease expiring October 31, 2022. We recognize lease expense on a straight-line basis over the expected term of these operating leases, as reported within “selling, general and administrative” expense on the accompanying Condensed Consolidated Statements of Operations.
Our facility leases have minimum annual rents, payable monthly, and some carry fixed annual rent increases. Under some of these arrangements, real estate taxes, insurance, certain operating expenses, and common area maintenance are reimbursable to the lessor. These amounts are expensed as incurred, as they are variable in nature and therefore excluded from the measurement of our reported lease asset and liability discussed below. As of June 30, 2022 and 2021, we had no sublease arrangements with us as lessor, and no finance leases, as defined in ASU 2016-02, Leases (“Topic 842”).
The reported asset and liability, respectively, represents (i) the economic benefit of our use of leased facilities and equipment and (ii) the present-value of our contractual minimum lease payments, applying our estimated incremental borrowing rate as of the lease commencement date (since an implicit interest rate is not readily determinable in any of our leases). The recorded asset and liability associated with each lease is amortized over the respective lease term using the effective interest rate method. During the three and six months ended June 30, 2022 and 2021, we recognized no additional ROU assets in exchange for lease liabilities.
We elected to not separate “lease components” from “non-lease components” in our measurement of minimum payments for our facility leases and office equipment leases. Additionally, we elected to not recognize a lease asset and liability for a term of 12 months or less.
Financial Reporting Captions
The below table summarizes the lease asset and liability accounts presented on our accompanying Condensed Consolidated Balance Sheets:
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

Operating LeasesCondensed Consolidated Balance Sheet CaptionJune 30, 2022December 31, 2021
Operating lease right-of-use assets - non-currentFacility and equipment under lease$1,703 $2,505 
Operating lease liabilities - currentAccounts payable and other accrued liabilities715 1,282 
Operating lease liabilities - non-currentOther long-term liabilities1,139 1,452 
Total operating lease liabilities$1,854 $2,734 
As of June 30, 2022 and December 31, 2021, our “facility and equipment under lease” consisted of office and research facilities of $1.3 million and $2.1 million, respectively, and office equipment of $0.4 million and $0.4 million, respectively.
Components of Lease Expense
We recognize lease expense on a straight-line basis over the term of our operating leases, as reported within “selling, general and administrative” expense on the accompanying Condensed Consolidated Statements of Operations. The components of our aggregate lease expense is summarized below:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Operating lease cost$421 $427 $843 $893 
Variable lease cost99 99 198 200 
Short-term lease cost20 15 44 32 
     Total lease cost$540 $541 $1,085 $1,125 
Weighted Average Remaining Lease Term and Applied Discount Rate
Weighted Average Remaining Lease TermWeighted Average Discount Rate
Operating leases as of June 30, 20222.7 years2.8%
Operating leases as of December 31, 20212.7 years3.8%
Future Contractual Lease Payments
The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments:
Operating Leases - future paymentsJune 30, 2022
2022 (remaining)$423 
2023657 
2024669 
202598 
2026 and thereafter73 
Total future lease payments, undiscounted$1,920 
(Less): Implied interest(66)
Present value of operating lease payments$1,854 
(b) In/Out Licensing Agreements and Co-Development Arrangements
Overview
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

The in-license agreements for our development-stage drug products provide us with territory-specific rights to their manufacture and distribution (including further sub-licensing/out-licensing rights). We are generally responsible for all related clinical development costs, patent filings and maintenance costs, marketing costs, and liability insurance costs. We also may enter into out-license agreements for territory-specific rights to these drug products which include one or more of: upfront license fees, royalties from our licensees’ sales, and/or milestone payments from our licensees’ sales or regulatory achievements. For certain drug products, we may enter into cost-sharing arrangements with licensees and licensors.
We are also obligated to make specified milestone payments to our licensors upon the achievement of certain regulatory and sales milestones, and to pay royalties based on our net sales of all in-licensed products. Depending on the milestone achievement type and whether the product has been approved, we will either (a) capitalize the value to “intangible assets” in the Condensed Consolidated Balance Sheets or (b) recognize the payment value within “research and development” or “cost of sales” on the Condensed Consolidated Statements of Operations. The liability relating to the payment due to the licensor will be recognized in the earliest period that we determine the respective milestone achievement is probable or has occurred.
The most significant remaining agreements associated with our operations, along with the key financial terms and our corresponding accounting and reporting conventions for each, are as follows:
(i) Eflapegrastim: Co-Development and Commercialization Agreement with Hanmi
In October 2014, we exercised our option under a License Option and Research Collaboration Agreement dated January 2012 (as amended) with Hanmi Pharmaceutical Co., Ltd (“Hanmi”) for eflapegrastim, a drug based on Hanmi’s proprietary LAPSCOVERY™ technology for the treatment of chemotherapy induced neutropenia. Under the terms of this agreement, as amended, we have primary financial responsibility for the eflapegrastim development plan and hold its worldwide rights (except for Korea, China, and Japan).
Effective January 1, 2022, we executed an amendment to this license agreement, whereby we are contractually obligated to pay Hanmi a flat mid-single digit royalty on our aggregate annual net sales of eflapegrastim. Additionally, Hanmi has agreed to release the Company from a prior purchase obligation for eflapegrastim drug substance which resulted in a reduction in accrued liabilities of $11.2 million with a corresponding reduction in research and development expense. In addition, beginning in year three after the commercial launch, we are responsible for a supplemental mid-single digit royalty on aggregate annual net sales. This supplemental royalty will terminate once the aggregate payments made to Hanmi meet the milestone limit of $10 million, based on the supplemental royalty. There were no obligations to Hanmi for the three or six months ended June 30, 2022.
(ii) Poziotinib: In-License Agreement with Hanmi and Exclusive Patent and Technology License Agreement with MD Anderson
In February 2015, we executed an in-license agreement with Hanmi for poziotinib, a pan-HER inhibitor in Phase 2 clinical trials, (which has also shown single agent activity in the treatment of various cancer types during Phase 1 studies, including breast, gastric, colorectal, and lung cancers) and made an upfront payment to Hanmi for these distribution rights. Under the terms of this agreement, we received the exclusive global rights to commercialize poziotinib, except for Korea and China. Hanmi and its development partners are fully responsible for the completion of on-going Phase 2 trials in Korea. We are financially responsible for all other clinical studies.
Effective January 1, 2022, we executed an amendment to this in-license agreement, whereby the payments to Hanmi upon our achievement of various regulatory milestones now aggregate to $18.0 million, which includes eliminating the first approval milestone payment in return for a supplemental mid-single digit royalty on aggregate annual net sales beginning in year three after the commercial launch. This supplemental royalty will terminate once the aggregate payments made to Hanmi meet the milestone limit of $15.0 million, based on the supplemental royalty. There were no contractual obligations to Hanmi under the previous agreement for the three or six months ended June 30, 2022.
In April 2018, we executed an exclusive patent and technology agreement for the use of poziotinib in treating patients with EGFR and HER2 exon 20 mutations in cancer and HER2 exon 19 mutations in cancer with The University of Texas M.D. Anderson Cancer Center (“MD Anderson”). MD Anderson discovered poziotinib’s use in treating these patient-types. We made an upfront payment to MD Anderson of $0.5 million upon the execution of this agreement.
We are contractually obligated to pay nominal fixed annual license maintenance fees to MD Anderson and pay additional fees upon our achievement of various regulatory and sales milestones. These regulatory milestones aggregate to $6.0 million
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

and the sales milestones aggregate to $24.0 million. We are also contractually obligated to pay MD Anderson royalties in the low single-digits on our net sales of poziotinib.
(iii) In-License Agreement with ImmunGene for FIT Drug Delivery Platform

In April 2019, we executed an asset transfer, license, and sublicense agreement with ImmunGene, Inc. (“ImmunGene”) for an exclusive license for the intellectual property related to (a) Anti-CD20-IFNα, an antibody-interferon fusion molecule directed against CD20 that is in Phase 1 development for treating relapsed or refractory non-Hodgkin’s lymphoma, including diffuse large B-cell lymphoma patients, representing a considerable unmet medical need, and (b) an antibody-interferon fusion molecule directed against GRP94, a target for which currently there are no existing approved therapies that have the potential for treating both solid and hematologic malignancies. Both molecules are based on the Focused Interferon Therapeutics (“FIT”) drug delivery platform.
In November 2021, we provided notice to terminate the asset transfer, license, and sublicense agreement with ImmunGene, Inc. Pursuant to the agreement, we will transfer the rights, title or interest with respect to the transferred product back to ImmunGene. There were no contractual obligations to ImmunGene for the three or six months ended June 30, 2022.
We are also contractually obligated to pay nominal fixed annual license maintenance fees to one licensor.
(iv) In-License Agreement with Therapyx

In December 2020, we executed an asset transfer and license agreement with Therapyx, Inc. (“Therapyx”) for an exclusive worldwide license for the intellectual property related to any pharmaceutical or biological product for use in human oncology containing, whether as its sole active or in combination with other active ingredients, an encapsulated IL-12, in any injectable dosage form or formulation.
We made an upfront payment of $0.8 million to Therapyx upon contract execution, which was recorded to “research and development” expense within our Consolidated Statements of Operations for the year ended December 31, 2020. We will make an additional payment of $2.2 million upon our acceptance of certain transferred materials from Therapyx. We will make further payments to Therapyx upon our achievement of various (i) regulatory milestones aggregating up to $30 million for the first approved IL-12 product, plus an additional $2.5 million milestone payment for each new indication approved for each product in the U.S., Europe, or Japan; and (ii) sales milestones aggregating up to $167.5 million based on worldwide annual net sales. We are contractually obligated to pay royalties in the mid-single digits on our net sales of all IL-12 products, potentially reduced by royalties due to third parties, the loss of IP protection within one or more countries, or the introduction of a competing product within one or more countries.
Depending on the nature of the milestone achievement type we will either (a) capitalize the payment value to “intangible assets” in the Consolidated Balance Sheets or (b) recognize the payment value within “research and development” or “cost of sales” within the Consolidated Statements of Operations. The corresponding liability for the payment due to this licensor will be recognized in the Consolidated Balance Sheets within “accounts payable and other accrued liabilities” in the earliest period that we determine the respective milestone achievement is probable or has occurred.
(c) Service Agreements for Research and Development Activities
We have entered into various contracts with numerous third-party service providers for the execution of our research and development initiatives. These vendors include raw material suppliers, clinical trial sites, clinical research organizations, and data monitoring centers, among others. The financial terms of these agreements are varied and generally obligate us to pay in stages, depending on the achievement of certain events specified in the agreements - such as contract execution, progress of service completion, delivery of drug supply, and the dosing of patients in clinical studies.
We recognize these “research and development” expenses and corresponding “accounts payable and other accrued liabilities” in the accompanying financial statements based on estimates of our vendors’ progress of performed services, patient enrollments and dosing, completion of clinical studies, and other events. Should we decide to discontinue and/or slow-down the work on any project, the associated costs for those projects would typically be limited to the extent of the work completed, as we are generally able to terminate these contracts with adequate notice.
(d) Supply and Service Agreements Associated with Product Production
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

We have various product supply agreements and/or have issued vendor purchase orders that obligate us to agreed-upon raw material purchases from certain vendors. We also have certain drug production service agreements with select contract manufacturers that obligate us to service fees during the contractual period.
(e) Employment Agreements
We entered into revised employment agreements with certain of our named executive officers (chief executive officer, chief legal officer, and chief medical officer) in April/June 2018 and June 2019, which supersede any prior change in control severance agreements with such individuals. Also, we entered into an employment agreement with our current chief financial officer in April 2022. These agreements provide for the payment of certain benefits to each executive upon their separation of employment under specified circumstances. These arrangements are designed to encourage each to act in the best interests of our stockholders at all times during the course of a change in control event or other significant transaction.
We previously entered into an employment agreement with our former Chief Executive Officer, Joseph Turgeon, under which cash compensation and benefits would become payable in the event of termination by us for any reason other than cause, his resignation for good reason, or upon a change in control of our Company. Effective December 31, 2021, Mr. Turgeon’s employment with the Company was terminated without cause in accordance with his employment agreement. We have accrued $2.6 million and $3.1 million for all contractual amounts due and unpaid to Mr. Turgeon as of June 30, 2022 and December 31, 2021, respectively, within "accrued payroll and benefits" on the accompanying Consolidated Balance Sheets.
(f) Deferred Compensation Plan
The Spectrum Pharmaceuticals, Inc. Deferred Compensation Plan (the “DC Plan”) is governed by our Compensation Committee and is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended.
The DC Plan is maintained to provide special deferred benefits for a select group of our employees (the “DC Participants”). DC Participants make annual elections to defer a portion of their eligible cash compensation which is then placed into their DC Plan accounts. We match a fixed percentage of these deferrals, and may make additional discretionary contributions. At June 30, 2022 and December 31, 2021, the aggregate value of this DC Plan liability was $7.6 million and $11.2 million, respectively, and is included within “accounts payable and other accrued liabilities” and “other long-term liabilities” in the accompanying Condensed Consolidated Balance Sheets.
(g) Litigation
We are involved from time-to-time with various legal matters arising in the ordinary course of business. These claims and legal proceedings are of a nature we believe are normal and incidental to a pharmaceutical business, and may include product liability, intellectual property, employment matters, and other general claims. We may also be subject to derivative lawsuits from time to time.
We make provisions for liabilities when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Such provisions are assessed at least quarterly and adjusted to reflect the impact of any settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable. Although the ultimate resolution of these various matters cannot be determined at this time, we do not believe that such matters, individually or in the aggregate, will have a material adverse effect on our consolidated results of operations, cash flows, or financial condition.
Bioverativ Patent Litigation
On May 28, 2021, Bioverativ Therapeutics Inc. (“Bioverativ”) filed a complaint against us in the U.S. District Court for the District of Delaware, which alleges that our proposed manufacture, use and sale of eflapegrastim would, if approved, infringe claims of three patents owned by Bioverativ (the “Subject Patents”). Bioverativ sought an unspecified amount of damages and injunctive relief.
Pursuant to our agreements with Hanmi, we hold worldwide rights (except for Korea, China, and Japan) to develop and commercialize eflapegrastim. The agreements with Hanmi contain typical license terms including, without limitation,
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

indemnification rights in favor of the Company with respect to any claims of infringement from a third party with respect to our use of a licensed technology, product or compound pursuant to such agreements.
Related to the Bioverativ litigation, on December 20, 2021, we were named as respondents in an International Trade Commission (ITC) action filed in the ITC. The complaint alleged importation into the United States, the sale for importation, and the sale within the United States after importation of certain monomer-dimer hybrid immunoconjugates in violation of section 337 of the Tariff Act of 1930 (19 U.S.C. 1337).
On February 18, 2022, Spectrum, Hanmi and Bioverativ entered into a license and settlement agreement which included a stipulation to dismiss the Bioverativ litigation and withdraw the ITC complaint. On February 18, 2022, the ITC action against us was withdrawn, and on March 2, 2022, the Bioverativ case was dismissed by the U.S. District Court.
Luo v. Spectrum Pharmaceuticals, Inc., et al. On August 31, 2021, a shareholder lawsuit was filed against us in the U.S. District Court for the District of Nevada, which alleges that we and certain of our executive officers made false or misleading statements and failed to disclose material facts about our business and the prospects of approval for our BLA to the FDA for eflapegrastim in violation of Section 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934, as amended. On November 1, 2021, four individuals and one entity filed competing motions to be appointed lead plaintiff and for approval of counsel in this putative securities class action. The plaintiffs seek damages, interest, costs, attorneys’ fees, and other unspecified equitable relief. We believe that these claims are without merit and intend to vigorously defend against these claims. On March 2, 2022, the Court entered an order partially granting and partially denying without prejudice a stipulated order eliminating defendants’ obligation to answer the initial pleading pending an amended complaint and addressing related briefing scheduling for an anticipated motion to dismiss. On July 28, 2022, the Court appointed a lead plaintiff and counsel for the class.
Csaba v. Turgeon, et. al, (filed December 15, 2021 in the U.S. District Court District of Nevada); Shumacher v. Turgeon, et. al, (filed March 15, 2022 in the U.S. District Court District of Nevada); Johnson v. Turgeon, et. al, (filed March 29, 2022 in the U.S. District Court District of Nevada); Raul v. Turgeon, et. al, (filed April 28, 2022 in the U.S. District of Delaware); and Albayrak v. Turgeon, et al, (filed June 9, 2022 in the U.S. District Court District of Nevada). These putative stockholder derivative actions were filed against us (as a nominal defendant), certain of our executive officers, and certain of our past and present members of the board of directors. The stockholder derivative complaints allege that certain of our executive officers are liable to Spectrum, pursuant to Section 10(b) and 21(d) of the Securities Exchange Act of 1934, as amended, for contribution and indemnification, if they are deemed (in the Luo class action), to have made false or misleading statements and failed to disclose material facts about our business and the prospects of approval for our BLA to the FDA for eflapegrastim. The complaints generally but not uniformly further allege that certain of our executive officers and certain of our past and present directors breached their fiduciary duties, and certain of our present directors negligently violated Section 14(a) of the Exchange Act, by allegedly causing such false or misleading statements to be issued and/or failing to disclose material facts about our business and the prospects of approval for our BLA to the FDA for eflapegrastim. The allegations state that as a result of the violations, certain of our executive officers and past and present board members committed acts of gross mismanagement, abuse of control, or were unjustly enriched. The plaintiffs generally seek corporate reforms, damages, interest, costs, attorneys’ fees, and other unspecified equitable relief.
The parties are in the process of seeking court approval for the consolidation of the Nevada derivative actions and staying all derivative actions until there is an adverse decision on a motion to dismiss in the Nevada securities class action. We believe that these claims are without merit and intend to vigorously defend against these claims.
Note 7. Discontinued Operations
Overview
In March 2019 we completed the sale of our seven then-commercialized drugs (the “Commercial Product Portfolio”) to Acrotech Biopharma LLC (“Acrotech”) (the “Commercial Product Portfolio Transaction”). Upon closing we received $158.8 million in an upfront cash payment. We are also entitled to receive up to an aggregate of $140 million upon Acrotech’s future achievement of certain regulatory milestones (totaling $40 million) and sales-based milestones (totaling $100 million) relating to the Commercial Product Portfolio.
Substantially all of the contractual rights and obligations associated with the Commercial Product Portfolio were transferred to Acrotech at the closing of the Commercial Product Portfolio Transaction. However, under the terms of this transaction we retained our trade “accounts receivable, net” and GTN liabilities included within “accounts payable and other
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

accrued liabilities” associated with our product sales made on and prior to February 28, 2019. Accordingly, these Condensed Consolidated Financial Statements reflect the corresponding revenue-deriving activities and allocable expenses of this commercial business within “discontinued operations.”
Condensed Consolidated Statements of Operations
The following table presents the various elements of “loss from discontinued operations, net of income taxes” as reported in the accompanying Condensed Consolidated Statements of Operations:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenues:
        Product sales, net$39 $ $39 $ 
             Total revenues 39  39  
Operating costs and expenses:
Cost of sales (excluding amortization of intangible assets)42 127 44 127 
Selling, general and administrative    
Research and development