PYXIS ONCOLOGY, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

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You should read the following discussion and analysis of our financial condition
and results of operations together with our (1) unaudited condensed consolidated
financial statements and related notes thereto included elsewhere in this
Quarterly Report on Form 10-Q, and (2) consolidated financial statements and
related notes and management's discussion and analysis of financial condition
and results of operations for the fiscal year ended December 31, 2021, included
in our Annual Report on Form 10-K , filed with the Securities and Exchange
Commission, or the SEC, on March 29, 2022. Unless the context requires
otherwise, references in this Quarterly Report on Form 10-Q to "Pyxis Oncology,"
the "Company," "we," "us," and "our" refer to Pyxis Oncology, Inc. and its
subsidiaries.

Forward-looking statements


This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
are often identified by the use of words such as "anticipate," "believe," "can,"
"continue," "could," "estimate," "expect," "intend," "likely," "may," "might,"
"objective," "ongoing," "plan," "potential," "predict," "project," "should," "to
be," "will," "would," or the negative or plural of these words, or similar
expressions or variations, although not all forward-looking statements contain
these words. We cannot assure you that the events and circumstances reflected in
the forward-looking statements will be achieved or occur and actual results
could differ materially from those expressed or implied by these forward-looking
statements.

Factors that could cause or contribute to such differences include, but are not
limited to, those identified herein, and those discussed in the section titled
"Risk Factors" set forth in Part II, Item 1A. of this Quarterly Report on Form
10-Q and in our other filings with the SEC. These risks are not exhaustive. New
risk factors emerge from time to time and it is not possible for our management
to predict all risk factors, nor can we assess the impact of all factors on our
business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking
statements. In addition, statements that "we believe" and similar statements
reflect our beliefs and opinions on the relevant subject. These statements are
based upon information available to us as of the date of this Quarterly Report
on Form 10-Q, and while we believe such information forms a reasonable basis for
such statements, such information may be limited or incomplete, and our
statements should not be read to indicate that we have conducted an exhaustive
inquiry into, or review of, all potentially available relevant information.
These statements are inherently uncertain and investors are cautioned not to
unduly rely upon these statements. Except as required by law, we undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date of such statements.

Insight


We are a preclinical oncology company focused on developing an arsenal of
next-generation therapeutics to target difficult-to-treat cancers and improve
quality of life for patients. We develop our product candidates with the
objective to directly kill tumor cells, and to address the underlying
pathologies created by cancer that enable its uncontrollable proliferation and
immune evasion. We are developing multi-asset, multi-modality portfolio aimed at
defeating difficult-to-treat cancers. Since our launch in 2019, we have
developed a broad portfolio of novel antibody drug conjugates, or ADCs,
immuno-oncology, or IO, product candidates and monoclonal antibody, or mAb,
preclinical discovery programs that we are developing as monotherapies and in
combination with other therapies.

We take a holistic view of attacking the key drivers of tumor growth and
progression within the tumor microenvironment, or TME, including targeting of
tumor antigens and modulating the innate and adaptive immune response. The TME
is an immunosuppressive environment consisting of cancer cells and stroma, which
includes the blood vessels, immune cells, fibroblasts, signaling molecules, and
the extracellular matrix that surrounds the tumor. The TME plays multiple roles
in tumor formation, progression and metastasis as well as anti-tumor immune
activity. We are developing our ADC and IO product candidates and mAb
preclinical discovery programs to precisely target key modulators of the
adaptive and innate immune system within the TME for difficult-to-treat solid
and hematologic tumors. We believe that the diversification of a multi-modality
approach optimizes our ability to effectively progress multiple assets for the
benefit of patients.

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Our ADCs utilize next-generation technologies that, based on observations from
preclinical studies, may allow for increased stability and a reduced off target
side-effect profile. We in-licensed two ADC programs in March 2021 from Pfizer,
one ADC program from LegoChem in December 2020 and one IO program from Biosion
in March 2022. Two of our product candidates, PYX-201, and PYX-106 are scheduled
for IND submission in the second half of 2022 whereas PYX-203 and PYX-102 are
scheduled for IND submission in the second half of 2023. We have additional
preclinical mAb discovery programs derived from work at the laboratory of Dr.
Thomas Gajewski. We retain full worldwide development and commercialization
rights to all our product candidates, with the exception of PYX-202 in South
Korea and PYX-106 in Greater China (mainland China, Hong Kong, Macau and
Taiwan). We are focusing our efforts on eliminating tumor cells through the
selective antibody mediated delivery of cytotoxic payloads and by modulating key
immune-associated pathways in the TME. We intend to develop each of our programs
as a monotherapy and potentially also in combination with other therapies. We
have designed our product candidates to overcome the limitations of ADCs that
use conventional conjugation with the aim of providing patients with safer and
more efficacious treatment options.

Our current pipeline is summarized below.
[[Image Removed: img30572168_0.jpg]]

PYX-106


On March 28, 2022, we entered into a license agreement, or the "Biosion License
Agreement," with Biosion USA, Inc., or Biosion, pursuant to which we licensed
worldwide (other than Greater China (mainland China, Hong Kong, Macau and
Taiwan)) development and commercialization rights for BSI-060T, a Siglec-15
targeting antibody, an IO product candidate (now referred to as PYX-106), and
products containing the licensed compound. PYX-106 is a fully human monoclonal
antibody and is engineered with high affinity to block Siglec-15 induced immune
suppression and is therefore designed to restore T cell proliferation, function
and anti-tumor immunity in the TME. PYX-106 is a novel immune checkpoint
inhibitor targeting Siglec-15, whose expression profile is generally
non-overlapping with PD-L1. Siglec-15 is expressed on M2 macrophages but can
also be expressed by tumor cells. Binding of Siglec-15 to an as of yet unknown
receptor on T cells leads to suppression of T cell proliferation and function.
This inhibition also reduces IFN? secretion which may further promote Siglec-15
expression. PYX-106 may synergize with and rescue PD(L)-1 targeted therapy
activity, with the potential for sequential drug administration to synergize for
enhanced anti-tumor activity.

We are initially evaluating our Siglec-15 targeting antibody for the treatment
of advanced or metastatic solid tumors, which could include thyroid cancer, Head
& Neck Squamous Cell Carcinoma, or HNSCC, non-small cell lung cancer, or NSCLC
and other solid tumors where high unmet need exists. We plan to submit an IND
for PYX-106 in the second half of 2022.

PYX-102


The anti-KLRG1 mAb, which we referred to as PYX-102, is our first organically
built IO development candidate from our internal discovery engine. PYX-102 was
identified as a promising IO target through our proprietary target catalog
licensed from Thomas Gajewski's lab at the University of Chicago. PYX-102 is an
investigational immune-therapeutic consisting of a ligand-blocking antibody
which is designed to rescue KLRG1-mediated suppression of human CD8+ T cells.
PYX-102 is an inhibitory immunoreceptor trysine-based inhibitory
motif-containing receptor engineered to expressed on T cells and NK cells in the
tumor microenvironment and acts as an inhibitory immune checkpoint receptor via
its interactions with E- and N-Cadherin ligands. We believe that targeting KLRG1
to reprogram these suppressed T and NK cells represents an exciting strategy to
promote the full anti-tumor activity of cytotoxic T cells and NK cells in the
tumor microenvironment. We are working through our development plans and we
anticipate IND submission in the second half of 2023.

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PYX-201 is an investigational, novel ADC consisting of an Immunoglobulin G1, or
IgG1, anti-fibronectin Extradomain-B, or EDB, mAb site-specifically conjugated
to auristatin via a cathepsin B-cleavable linker. Fibronectin is a glycoprotein
found in the extracellular matrix. Fibronectin EDB regulates blood vessel
morphogenesis, which provides the tumor access to nutrition and oxygen, a means
to remove waste, and a pathway for metastasizing cells. EDB is overexpressed in
many malignancies and is minimally expressed in most normal adult tissues,
making it a potentially attractive means to target tumors while sparing healthy
cells. In preclinical models of patient derived xenograft, or PDX models, we
observed tumor regression with single agent PYX-201. In addition, we observed
that the treatment of preclinical syngeneic tumor models with PYX-201 resulted
in enhanced T cell infiltration into the TME, which is a hallmark of immunogenic
cell death, or ICD, enabling synergistic activity in combination with a
checkpoint inhibitor. We anticipate submitting an IND in the second half of
2022.

PYX-202 is an investigational, novel ADC consisting of an IgG1 anti-Delta-like 1
homolog, or DLK1, mAb conjugated to MMAE via a site-specific plasma-stable
ß-glucuronide linker. DLK1 is a transmembrane protein normally expressed in
embryonic tissues but highly restricted in healthy adult tissues. DLK1 becomes
re-expressed in certain solid tumor malignancies. PYX-202 is designed to use the
microtubule-disrupting MMAE payload, which is utilized in three currently
marketed ADCs providing clinical support that the payload has anti-tumor effect
potential. We in-licensed LCB67, an ADC product candidate targeting DLK1
(referred to as PYX-202) from LegoChem in December 2020. In studies conducted by
LegoChem of preclinical small cell lung cancer, or SCLC, PDX models, as well as
in a human cell line-based, or CDX, mouse model of cancer, we have observed
significant anti-tumor activity as measured by durable tumor regression. In
preparation for our IND filing and based on observation of our GLP studies to
date, we have determined that we will need to conduct additional GLP and non-GLP
toxicity studies to determine whether PYX-202 is a viable clinical candidate. We
will continue to monitor the progress of our PYX-202 program and expect to
provide an update about PYX-202 in mid-2022.

PYX-203 is an investigational ADC consisting of an IgG1 anti-CD123 mAb antibody
conjugated to a novel cyclopropylpyrroloindoline, or CPI dimer payload via a
site-specific plasma-stable, cleavable linker. CD123, or IL-3Ra, is a cell
surface antigen highly expressed on leukemic stem cells and leukemic blasts in
acute myeloid leukemia, or AML. PYX-203, utilizes a novel DNA-damaging toxin,
CPI, and we have observed significant anti-tumor activity as measured by the
reduction in the frequency of the leukemic cells in the blood and bone marrow in
nine disseminated preclinical AML models. We anticipate submitting an IND in the
second half of 2023.

In addition to the programs identified above, we are conducting research and
development activities on various targets, leveraging our expertise in
monoclonal antibodies and understanding of immuno-oncology. Our preclinical
discovery programs are novel antibody programs intended to enhance the
anti-tumor activity of natural killer, or NK cells, and T cells and to overcome
immunosuppressive activity of tumor resident myeloid cells such as tumor
associated macrophages, or TAMs, and myeloid derived suppressor cells, or MDSCs.

Since our inception, we have focused substantially all our resources on
organizing and staffing our company, business planning, raising capital,
conducting research and development activities, filing and prosecuting patent
applications, identifying potential product candidates and undertaking
preclinical studies and a clinical trial. We do not have any products approved
for sale and have not generated any revenue from product sales or from any other
sources. To date, we have funded our operations with proceeds from sales of
convertible preferred stock and our recent IPO. Our ability to generate any
product revenue, and in particular to generate product revenue sufficient to
achieve profitability, will depend on the successful development and eventual
commercialization of one or more of our product candidates.

We have incurred significant operating losses since our inception. We reported
net losses of $31.4 million and $36.8 million for the three months ended March
31, 2022 and 2021. As of March 31, 2022, we had an accumulated deficit of $123.1
million, net equity of $233.5 million and cash and cash equivalents of $247.1
million. We expect to continue to incur significant expenses and operating
losses for the foreseeable future. We expect that our expenses and capital
expenditures will increase substantially in connection with our ongoing
activities.

COVID-19 Business Update


We continue to monitor the potential impact of the COVID-19 pandemic on our
business and consolidated financial statements. To date, we have not experienced
material business disruptions. We are following, and will continue to follow,
recommendations from the U.S. Centers for Disease Control and Prevention as well
as federal, state and local governments regarding working-from-home practices
for non-essential employees. We cannot be certain what the overall impact of the
COVID-19 pandemic will be on our business, and it has the potential to adversely
affect our business. For additional information about risks and uncertainties
related to the COVID-19 pandemic that may impact our business, financial
condition and results of operations, see the section titled "Risk Factors" under
Part II, Item 1A in this Quarterly Report.

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License and collaboration agreements

License agreement with Pfizer, Inc.


In December 2020, we entered into a license agreement, as amended, the "Pfizer
License Agreement," with Pfizer, Inc., or Pfizer, for worldwide development and
commercialization rights to two of Pfizer's proprietary ADC product candidates
(now referred to as PYX-201 and PYX-203), as well as other ADC product
candidates directed to the licensed targets. The Pfizer License Agreement became
effective in March 2021. The initial exclusively licensed targets are extra
domain B (EBD of fibronectin) and CD123 and we have the option to expand the
scope of our license to add other licensed targets. Pfizer has also granted us a
non-exclusive license to use Pfizer's FACT platform technology to develop and
commercialize the licensed ADCs. In March 2021, we entered into an amendment to
the Pfizer License Agreement to include additional know-how within the scope of
our license.

Pursuant to the Pfizer License Agreement, we incurred a combined $25.0 million
for license fee, consisting of an upfront fee of $5.0 million and issued
12,152,145 shares of Series B convertible preferred stock in 2021 to Pfizer, and
are obligated to pay future contingent payments and royalties, including up to
an aggregate of $660 million in milestones for the first four licensed ADCs.
Additional ADC targets may be licensed for an additional upfront fee, and such
targets would be subject to additional regulatory and commercial sales
milestones.

Additionally, if products are launched, we will pay Pfizer tiered royalties on
net sales of licensed products in varying royalty rates ranging from low single
digits to mid-teens. Our royalty obligations apply on a licensed
product-by-licensed product and country-by-country basis from first commercial
sale until the latest to occur of: (1) 12 years from first commercial sale; (2)
the expiration of all regulatory or data exclusivity; and (3) the expiration of
the last valid claim of a licensed patent covering the licensed product in a
country. We are also obligated to pay Pfizer a percentage of certain
sublicensing revenue ranging from low-double digits to thirty percent based on
the stage of development of the licensed product at the time of entering into
the applicable sublicense.

License agreement with the University of Chicago


In April 2020, we entered into a license agreement, or the "University License
Agreement," with the University of Chicago, or the University, to obtain an
exclusive license under certain patents resulting from research performed,
in-part, by our scientific founder, Dr. Thomas Gajewski, as well as a
non-exclusive license to certain know-how and materials. Under the terms of the
license, we have the exclusive global right to develop and commercialize
products that are covered by a valid claim of a licensed patent, incorporate or
use the licensed know-how and materials or are known to assess, modulate or
utilize the activity of certain specified biological targets.

In partial consideration for the license from the University, we issued to the
University 48,919 shares of our Common Stock in 2020. Pursuant to the University
License Agreement, we are obligated to pay to the University an annual
maintenance fee of $10 thousand commencing on the third anniversary of the
effective date, potential development and commercial milestones of up to an
aggregate of $7.7 million as well as running royalties on net sales of licensed
products at varying rates ranging from less than one percent to the low single
digits, subject to a minimum annual royalty ranging from $1.0 million to $3.0
million during certain years following the first commercial sale of a licensed
product. Our royalty obligations apply on a licensed product-by-licensed product
and country-by-country basis until: (1) for licensed products covered by a valid
claim of a licensed patent in a given country, the expiration of such valid
claims; and (2) for all other licensed products, 10 years from the first
commercial sale of a licensed product in a given country. We are also obligated
to pay the University a percentage of certain sublicensing revenue ranging from
low- to mid-teens based on the date of entering into the applicable sublicense.

Agreements with LegoChem Biosciences, Inc.


In December 2020, we entered into a license agreement, or the "LegoChem License
Agreement," with LegoChem Biosciences, Inc., or LegoChem, pursuant to which we
licensed worldwide (other than Korea) development and commercialization rights
for LCB67, an ADC product candidate targeting DLK1 (now referred to as PYX-202),
and products containing the licensed compound. We have the right to ask LegoChem
to use commercially reasonable efforts at our cost to modify the licensed
compound if there are certain technical failures of the licensed compound that
we believe are attributable to the linker or the payload used in the licensed
compound, and the modified compound will replace the unmodified version as the
licensed compound. In February 2021, we entered into an amendment to the
LegoChem License Agreement to include additional patents within the scope of our
license.

Pursuant to the LegoChem License Agreement, we paid an upfront fee of $0.5
million in 2020 and $9.0 million in 2021 and are required to purchase certain
initial quantities of licensed product from LegoChem for an estimated cost of
$7.0 million. We are also obligated to pay up to an aggregate of $284.5 million
to LegoChem if certain development, regulatory and sales milestones are
achieved, as well as tiered royalties on net sales of licensed products ranging
from mid-single digit to high single digit royalty rates. Our royalty
obligations apply on a licensed product-by-licensed product and
country-by-country basis until the latest to occur of: (1) the date of
expiration of the last valid claim of a licensed patent covering the licensed
product; (2) 10 years from first commercial sale; and (3) the expiration of
regulatory or data exclusivity.

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In December 2020, we also entered into an opt-in, investment and additional
consideration agreement with LegoChem, or the "Opt-In Agreement." Under the
Opt-In Agreement, we issued to LegoChem shares of Series B convertible preferred
stock as part of our Series B financing in March 2021. We are also obligated to
pay LegoChem a percentage of sublicensing revenue ranging from low-double digits
to thirty percent based on the stage of development of the licensed product at
the time of entering into the applicable sublicense, which percentage may be
increased to up to fifty percent for any upfront payment from a sublicensee
under certain circumstances. LegoChem has exercised its option under the Opt-In
Agreement to make a $8.0 million payment to us, which payment was made in April
2021, in exchange for the right to receive an extra milestone payment of $9.6
million upon the earliest to occur of certain events, including the date of
pricing or offer of the first public offering of our common stock or if we are
the subject of a change of control transaction. Upon our IPO in October 2021,
the extra milestone payment event triggered and we paid $9.6 million in January
2022 to LegoChem.

The Voxall joint venture with Alloy Therapeutics, Inc.


In March 2021, we entered into definitive transaction agreements with Alloy to
finance and operate Voxall, a joint venture company formed in collaboration with
Alloy to leverage Pyxis Oncology's site-specific target catalog and Alloy's
ATX-Gx™ platform and antibody discovery services.

Voxall granted to both Pyxis Oncology and Alloy 50% of the voting membership
units of Voxall in exchange for certain initial contributions. Our initial
contribution included $50 thousand and a non-exclusive fully paid-up license to
certain intellectual property owned or controlled by us to enable the
collaboration with Voxall. Alloy's initial contribution included $50 thousand
and the execution of a license agreement and a services agreement to enable the
collaboration with Voxall. Voxall is governed by a board of directors consisting
of an equal number of our representatives and Alloy's representatives. The
protective provisions under Voxall's operating agreement require the approval of
both Pyxis Oncology and Alloy before Voxall may take certain actions.

In connection with the formation of Voxall, we entered into a three-year
research collaboration with Alloy and Voxall to identify and select certain
biological targets and create development candidate antibodies directed to those
targets for further preclinical development, clinical development and
commercialization. Under the collaboration agreement, the parties will conduct
research under a mutually agreed research plan and budget for up to six research
programs focused on mutually selected targets. Each of us and Alloy will provide
research support for the collaboration through separate services agreements with
Voxall, which services will be paid in the form of promissory notes issued by
Voxall. Voxall will own all intellectual property arising from the
collaboration, subject to certain exceptions for intellectual property relating
to Alloy's ATX-Gx™ platform.

If a development candidate antibody under a research program meets certain
mutually agreed selection criteria, we will have the exclusive option to obtain
an exclusive license from Voxall to further develop and commercialize all the
development candidate antibodies discovered under that research program. We may
in-license one research program on certain pre-agreed financial terms. For all
other in-licensed research programs, we will be obligated to pay fair market
value as determined by a third-party valuation. Any research program that we do
not in-license may be licensed by Voxall to a third party.

License agreement with Biosion USA, Inc.


On March 28, 2022, we entered into a license agreement, or the "Biosion License
Agreement," with Biosion USA, Inc., or Biosion, pursuant to which we obtained
exclusive, worldwide (other than Greater China (mainland China, Hong Kong, Macau
and Taiwan)), licenses for development, manufacture and commercialization rights
for BSI-060T, a potentially best-in-class Siglec-15 targeting antibody, an IO
product candidate (now referred to as PYX-106), and products containing the
licensed compound.

Pursuant to the Biosion License Agreement, we agreed to pay an upfront fee of
$10 million and are obligated to pay future contingent payments including
development, regulatory and commercial milestone up to an aggregate of $217.5
million in case of normal approval and $222.5 million in case of accelerated
approval. Additionally, if products are launched, we will pay Biosion tiered
royalties on net sales of licensed products in varying royalty rates ranging
from low single digits to low teens. Our royalty obligations apply on a licensed
product-by-licensed product and country-by-country basis from first commercial
sale until the latest to occur of: (1) 12 years from first commercial sale; (2)
the expiration of all regulatory or data exclusivity; and (3) the expiration of
the last valid claim of a licensed patent covering the licensed product in a
country.

Components of our operating results

Functionnary costs

Research and development costs

Research and development expenses include costs incurred for our research activities, including our discovery efforts, and the development of our programs. These expenses include:

personnel expenses, including salaries, payroll taxes, related benefits and stock-based compensation expense for employees engaged in research and development activities;

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expenses incurred in connection with our product candidates and the development
of research programs, including under agreements with third parties, such as
consultants, contractors, contract manufacturing organizations, or CMOs, and
contract research organizations, or CROs;

laboratory supplies and research equipment; and

facilities, depreciation and other expenses, which include direct and apportioned expenses for rent and maintenance of facilities and insurance.


We expense research and development costs as incurred. Non-refundable advance
payments that we make for goods or services to be received in the future for use
in research and development activities are recorded as prepaid expenses. The
prepaid amounts are expensed as the related goods are delivered or the services
are performed, or when it is no longer expected that the goods will be
delivered, or the services rendered.

Our direct external research and development expenses consist of costs that
include fees, reimbursed materials and other costs paid to consultants,
contractors, CMOs and CROs in connection with our preclinical and clinical
activities. We do not allocate employee costs, costs associated with our
discovery efforts, laboratory supplies, and facilities expenses, including
depreciation or other indirect costs, to specific product development programs
because these costs are deployed across multiple programs and our platform and,
as such, are not separately classified.

Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect that our research and development expenses will increase substantially
in connection with our ongoing and planned preclinical and clinical development
activities in the near term and in the future. The successful development of our
product candidates is highly uncertain. At this time, we cannot accurately
estimate or know the nature, timing and costs of the efforts that will be
necessary to complete the preclinical and clinical development of any of our
product candidates and we may never succeed in obtaining regulatory approval for
any of our product candidates.

General and administrative expenses


General and administrative expenses consist primarily of salaries and
personnel-related costs, including stock-based compensation, for our personnel
in executive, legal, finance and accounting, human resources and other
administrative functions. General and administrative expenses also include legal
fees relating to patent and corporate matters; professional fees paid for
accounting, auditing, consulting and tax services; insurance costs; travel
expenses; and facility costs not otherwise included in research and development
expenses.

We anticipate that our general and administrative expenses will increase in the
future as we increase our headcount to support our continued research activities
and development of our programs and platform. We also anticipate that we will
incur increased accounting, audit, legal, regulatory, compliance, director and
officer insurance, and investor and public relations expenses associated with
operating as a public company.

Other income (expenses)

Interest income includes interest earned on our invested cash and cash equivalent balances.


The change in fair value of derivative liability represents the increase in the
fair value of the derivative liability recorded as a result of an Opt-in,
Investment and Additional Consideration Agreement with LegoChem, or the "Opt-In
Agreement".

Results of Operations

Comparison of the three months ended March 31, 2022 and 2021

The following table summarizes our operating results for the three months ended March 31, 2022 and 2021 (in thousands):

                                                     Three Months Ended March 31,
                                                       2022                 2021           Change
Operating expenses:
Research and development                          $       20,071       $       32,774     $ (12,703 )
General and administrative                                11,318                2,955         8,363
Total operating expenses:                                 31,389               35,729        (4,340 )
Loss from operations                                     (31,389 )            (35,729 )       4,340
Other income (expense):
Interest income                                                9                    4             5
Change in fair value of derivative liability                   -               (1,100 )       1,100
Total other income (expense):                                  9               (1,096 )       1,105
Net loss                                          $      (31,380 )     $      (36,825 )   $   5,445




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Research and development costs

The following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021 (in thousands):

                                                   Three Months Ended March 

31,

                                                     2022                 2021            Change

Research and development program expenses $15,898 $

  30,533     $  (14,635 )
Personnel-related expenses including
stock-based compensation                                 2,683                1,748            935
Other research and development expenses                  1,490                  493            997

Total research and development expenditure $20,071 $

32,774 ($12,703)



Research and development expenses decreased by $12.7 million, from $32.8 million
for the three months ended March 31, 2021 to $20.1 million for the three months
ended March 31, 2022. The program expenses decreased by $14.6 million was
primarily due to a decrease in licensing fees of $19.4 million offset by
increases of cell line development fees of $4.5 million and laboratory supplies
of $0.2 million. Personnel-related expenses including stock-based compensation
increased by $0.9 million was primarily due to an increase in headcount to
support our research and development activities. Other research and development
expenses increased by $1.0 million which was primarily related to the increase
in facility maintenance costs and higher depreciation on laboratory equipment.

General and administrative expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2022 and 2021 (in thousands):


                                                   Three Months Ended March 

31,

                                                     2022                 2021            Change
Personnel-related expenses including
stock-based compensation                        $         5,469       $       2,102     $    3,367
Professional and consultant fees                          4,549                 617          3,932
Facilities, insurance and other costs                     1,300                 236          1,064
Total general and administrative expenses       $        11,318       $     

2,955 $8,363



General and administrative expenses increased by $8.4 million, from $2.9 million
for the three months ended March 31, 2021 to $11.3 million for the three months
ended March 31, 2022. Personnel-related expenses including stock-based
compensation increased by $3.4 million primarily due to the increased headcount.
Professional and consultant fees increased by $3.9 million primarily due to
increase in legal, professional, recruiting and consulting fees to support our
growth and operations. Increase in facilities, insurance and other costs was
mainly due to directors and officers insurance expense.

Other income (expenses)


Other expense consists of change in fair value of the derivative liability of
$1.1 million for the three months ended March 31, 2021 as a result of the Opt-In
Agreement.

Cash and capital resources

Insight


We had cash and cash equivalents of $247.1 million as of March 31, 2022. For the
three months ended March 31, 2022 and 2021, we had net losses of $31.4 million
and $36.8 million, respectively. As of March 31, 2022, we had an accumulated
deficit of $123.1 million.

We expect our expenses to increase substantially in connection with our ongoing
activities, particularly as we advance the preclinical activities and clinical
trials for our product candidates in development. The timing and amount of our
funding requirements will depend on many factors, including:

the manufacture of product candidates, the completion of our enabling IND studies and the initiation of Phase 1 clinical trials for PYX-201, PYX-202, PYX-203, PYX-106 and PYX-102;

the timing and progress of our other preclinical and clinical development activities;

the number and scope of other preclinical and clinical programs we choose to pursue;

advancing the development efforts of parties with whom we have entered into or may in the future enter into license, collaboration and research and development agreements;

the costs and timing of future commercialization activities, including manufacturing, marketing, sales and product distribution, for any of our product candidates for which we receive a commercialization license;

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our ability to maintain our current licenses and research and development programs and establish new collaborative agreements;

costs involved in pursuing, maintaining and enforcing patents and other intellectual property rights;

any delays or interruptions, including due to the COVID-19 pandemic, that we experience in our preclinical studies, future clinical trials and/or supply chain;

the cost and timing of regulatory licenses; and

our efforts to hire additional clinical, regulatory, scientific, operational, financial and management personnel; and

incur insurance, legal and other regulatory compliance costs to operate as a public company.


Until such time, if ever, we can generate substantial product revenue, we expect
to finance our operations through a combination of equity offerings, debt
financings, collaborations, strategic alliances and marketing, distribution or
licensing arrangements. To the extent that we raise additional capital through
the sale of equity or convertible debt securities, your ownership interest will
be diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect your rights as a common stockholder. Debt
financing and preferred equity financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making acquisitions, engaging in
acquisition, merger or collaboration transactions, selling or licensing our
assets, making capital expenditures, redeeming our stock, making certain
investments or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or
marketing, distribution or licensing arrangements with third parties, we may
have to relinquish valuable rights to our technologies, future revenue streams,
research programs or product candidates, or grant licenses on terms that may not
be favorable to us. If we are unable to raise additional funds through equity or
debt financings when needed, we may be required to delay, limit, reduce or
terminate our product development or future commercialization efforts or grant
rights to develop and market product candidates that we would otherwise prefer
to develop and market ourselves.

Cash flow

The following table provides information about our cash flows for the periods presented (in thousands):


                                                           Three Months 

Finished March, 31st,

                                                             2022           

2021

Net cash used in operating activities                   $      (27,679 )     $      (18,731 )
Net cash used in investing activities                             (146 )               (219 )
Net cash provided by financing activities                          176      

151,534

Net (decrease) increase in cash, cash equivalents and
restricted cash                                         $      (27,649 )     $      132,584


Operating Activities

During the three months ended March 31, 2022, $27.7 million of cash was used in
operating activities. This was primarily attributable to our net loss of $31.4
million and net change in our operating assets and liabilities of $0.1 million,
partially offset by non-cash charges of $3.8 million. The non-cash charges of
$3.8 million was primarily due to $3.4 million in stock-based compensation. The
net change in our operating assets and liabilities was primarily due to a
decrease of $9.9 million in accounts payable, which is primarily due to the $9.6
million payment made pursuant to the LegoChem License Agreement and accrual of
$10.0 million of license fees pursuant to Biosion License Agreement.

During the three months ended March 31, 2021, $18.7 million of was cash used in
operating activities. This was primarily attributable to our net loss of $36.8
million and net change in our operating assets and liabilities of $5.8 million,
partially offset by non-cash charges of $23.9 million. The non-cash charges of
$23.9 million was primarily due to the $20.0 million of research and development
license fees incurred pursuant to the Pfizer License Agreement, $2.5 million in
stock-based compensation and $1.1 million for a change in fair value of the
derivative liability. The change in our operating assets and liabilities was
primarily due to an increase of $8.0 million in receivables pursuant to the
LegoChem License Agreement, partially offset by a derivative liability recorded
of $3.4 million pursuant to the LegoChem License Agreement.

Investing activities


During the three months ended March 31, 2022 and 2021, net cash used in
investing activities was $0.1 million and $0.2 million, respectively, due to
purchases of property and equipment. During the three months ended March 31,
2021, we also made an investment in our joint venture, Voxall Therapeutics, LLC,
for $0.1 million.

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Fundraising activities


During the three months ended March 31, 2022 and 2021, net cash provided by
financing activities was $0.2 million and $151.5 million, respectively. During
the three months ended March 31, 2022, the $0.2 million provided consisted of
net proceeds from stock option exercises. During the three months ended March
31, 2021, the $151.5 million provided consisted primarily of net proceeds of
$151.6 million from the sale of our Series B convertible preferred stock.

Outlook


Based on our existing cash balance as of March 31, 2022 of $247.1 million and
our research & development and business development plans, we expect to be able
to fund our operating expenses and capital expenditure requirements into the
third quarter of 2024. However, we have based this estimate on assumptions that
may prove to be wrong, and our operating plan may change as a result of many
factors currently unknown to us. In addition, we could utilize our available
capital resources sooner than we expect.

Contractual obligations and commitments


The following summarizes our contractual obligations as of March 31, 2022, and
the effects that such obligations are expected to have on our liquidity and cash
flows in future periods.

On September 29, 2021, we entered into a lease agreement for an office and
laboratory space in Boston, Massachusetts. The lease will expire on December 31,
2032, with future undiscounted operating lease payments (base rent) under the
lease agreement of $33.8 million over an initial lease period of approximately
ten years.

Pursuant to the Pfizer License Agreement, we are obligated to pay future
contingent payments and royalties, including up to an aggregate of $660 million
in milestones for the first four licensed ADCs. Additional ADC targets may be
licensed for an additional upfront fee, and such targets would be subject to
additional regulatory and commercial sales milestones. Additionally, if products
are launched, we will pay Pfizer tiered royalties on net sales of licensed
products in varying royalty rates ranging from low single digits to mid-teens.
Our royalty obligations apply on a licensed product-by-licensed product and
country-by-country basis from first commercial sale until the latest to occur
of: (1) 12 years from first commercial sale; (2) the expiration of all
regulatory or data exclusivity; and (3) the expiration of the last valid claim
of a licensed patent covering the licensed product in a country. We are also
obligated to pay Pfizer a percentage of certain sublicensing revenue ranging
from low-double digits to thirty percent based on the stage of development of
the licensed product at the time of entering into the applicable sublicense.

Pursuant to the LegoChem License Agreement, we are obligated to pay up to an
aggregate of $284.5 million to LegoChem if certain development, regulatory and
sales milestones are achieved, as well as tiered royalties on net sales of
licensed products ranging from mid-single digit to high single digit royalty
rates. Our royalty obligations apply on a licensed product-by-licensed product
and country-by-country basis until the latest to occur of: (1) the date of
expiration of the last valid claim of a licensed patent covering the licensed
product; (2) 10 years from first commercial sale; and (3) the expiration of
regulatory or data exclusivity.

Pursuant to the University License Agreement with the University of Chicago (the
"University"), we are obligated to pay to the University an annual maintenance
fee of $10 thousand commencing on the third anniversary of the effective date,
potential development and commercial milestones of up to an aggregate of $7.7
million as well as running royalties on net sales of licensed products at
varying rates ranging from less than one percent to the low single digits,
subject to a minimum annual royalty ranging from $1.0 million to $3.0 million
during certain years following the first commercial sale of a licensed product.
Our royalty obligations apply on a licensed product-by-licensed product and
country-by-country basis until: (1) for licensed products covered by a valid
claim of a licensed patent in a given country, the expiration of such valid
claims; and (2) for all other licensed products, 10 years from the first
commercial sale of a licensed product in a given country. We are also obligated
to pay the University a percentage of certain sublicensing revenue ranging from
low- to mid-teens based on the date of entering into the applicable sublicense.

Pursuant to the Biosion License Agreement, we are obligated to pay future
contingent payments including development, regulatory and commercial milestone
up to an aggregate of $217.5 million in case of normal approval and $222.5
million in case of accelerated approval. Additionally, if products are launched,
we will pay Biosion tiered royalties on net sales of licensed products in
varying royalty rates ranging from low single digits to low teens. Our royalty
obligations apply on a licensed product-by-licensed product and
country-by-country basis from first commercial sale until the latest to occur
of: (1) 12 years from first commercial sale; (2) the expiration of all
regulatory or data exclusivity; and (3) the expiration of the last valid claim
of a licensed patent covering the licensed product in a country.

We also enter into contracts in the normal course of business with CMOs, and
other third parties for preclinical studies. These contracts do not contain
minimum purchase commitments and are cancelable by us upon prior written notice.
Payments due upon cancellation consist only of payments for services provided or
expenses incurred, including non-cancelable obligations of our service
providers, up to the date of cancellation. These payments are not included in
contractual obligations above as the amount and timing of such payments are not
known.

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Off-balance sheet arrangements


We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
Securities and Exchange Commission.

Critical Accounting Policies and Significant Judgments and Estimates


Our unaudited condensed consolidated financial statements and the related notes
thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in
accordance with U.S. generally accepted accounting principles (U. S. GAAP). The
preparation of unaudited condensed consolidated financial statements also
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, costs and expenses, and related disclosures. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results could differ
significantly from the estimates made by management. To the extent that there
are differences between our estimates and actual results, our future financial
statement presentation, financial condition, results of operations, and cash
flows will be affected.

There have been no significant changes to our critical accounting policies and
estimates as compared to those described in "Note 2 - Summary of Significant
Accounting Policies" to our audited financial statements set forth in our Annual
Report on Form 10-K filed with the SEC on March 29, 2022.

Recently issued accounting pronouncements

See Note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

Jumpstart Our Business Startup Act


The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") permits an
"emerging growth company" to take advantage of an extended transition period to
comply with new or revised accounting standards. We are an "emerging growth
company," as defined in the JOBS Act. Section 107(b) of the JOBS Act provides
that an emerging growth company can take advantage of an extended transition
period for complying with new or revised accounting standards. Thus, an emerging
growth company can delay the adoption of certain accounting standards until
those standards would otherwise apply to private companies. We have irrevocably
elected not to avail ourselves of this extended transition period, and, as a
result, we will adopt new or revised accounting standards on the relevant dates
on which adoption of such standards is required for other public companies.

We are also a "smaller reporting company," meaning that the market value of our
shares held by non-affiliates is less than $700 million and our annual revenue
was less than 0 million during the most recently completed fiscal year. We
may rely on exemptions from certain disclosure requirements that are available
to smaller reporting companies. Specifically, as a smaller reporting company, we
may choose to present only the two most recent fiscal years of audited financial
statements in our Annual Report on Form 10-K and have reduced disclosure
obligations regarding executive compensation, and, similar to emerging growth
companies, if we are a smaller reporting company with less than $100 million in
annual revenue, we would not be required to obtain an attestation report on
internal control over financial reporting issued by our independent registered
public accounting firm.

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