CASI Pharmaceuticals, Inc (DE) - Quarter Report: 2021 March (Form 10-Q)

Three Months Ended March 31,

(In thousands)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 March 31, 2021

☐	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 0-20713

CASI PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)


Delaware	58-1959440
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

9620 Medical Center Drive, Suite 300

Rockville, Maryland

(Address of principal executive offices)

20850

(Zip code)

(240) 864-2600

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock	CASI	Nasdaq Capital 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 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 þ	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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most recent practicable date.



Class		Outstanding at April 30, 2021
Common Stock $.01 Par Value		139,797,487

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CASI PHARMACEUTICALS, INC.

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		PAGE
PART I. FINANCIAL INFORMATION		4

Item 1 --	Consolidated Financial Statements	4

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020		4

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three months ended March 31, 2021 and 2020		5

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three months ended March 31, 2021 and 2020		6

Unaudited Condensed Consolidated Statements of Cash Flows for the Three months ended March 31, 2021 and 2020		7

Notes to Unaudited Condensed Consolidated Financial Statements		8

Item 2 --	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3 --	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4 --	Controls and Procedures	32

Part II. OTHER INFORMATION		33

Item 1 --	Legal Proceedings	33

Item 1A --	Risk Factors	33

Item 2 --	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3 --	Defaults Upon Senior Securities	33

Item 4 --	Mine Safety Disclosures	33

Item 5 --	Other Information	33

Item 6 --	Exhibits	34

SIGNATURES		35

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TRADEMARKS AND SERVICE MARKS

We own or have rights to trademarks and trademark applications for use in connection with the operation of our business, including, but not limited to, CASI and CASI PHARMACEUTICALS. All other trademarks appearing in this Quarterly Report on Form 10-Q that are not identified as marks owned by us are the property of their respective owners.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain 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. Forward-looking statements also may be included in other statements that we make. All statements that are not descriptions of historical facts are forward-looking statements. These statements can generally be identified by the use of forward-looking terminology such as “believes,” “expects,” “intends,” “may,” “will,” “should,” or “anticipates” or similar terminology. These forward-looking statements include, among others, statements regarding the timing of our clinical trials, our cash position and future expenses, and our future revenues.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to update forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor 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.

Actual results could differ materially from those currently anticipated due to a number of factors, including: the risk that we may be unable to continue as a going concern as a result of our inability to raise sufficient capital for our operational needs; the possibility that we may be delisted from trading on The Nasdaq Capital Market; the volatility in the market price of our common stock; the outbreak of the COVID-19 pandemic and its effects on global markets and supply chains; the risk of substantial dilution of existing stockholders in future stock issuances; the difficulty of executing our business strategy in China; our inability to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates or future candidates; our lack of experience in manufacturing products and uncertainty about our resources and capabilities to do so on a clinical or commercial scale; risks relating to the commercialization, if any, of our products and proposed products (such as marketing, safety, regulatory, patent, product liability, supply, competition and other risks); our inability to predict when or if our product candidates will be approved for marketing by the U.S. Food and Drug Administration (FDA), National Medical Products Administration (NMPA), or other regulatory authorities; our inability to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates or future candidates; the risks relating to the need for additional capital and the uncertainty of securing additional funding on favorable terms; the risks associated with our product candidates, and the risks associated with our other early-stage products under development; the risk that result in preclinical and clinical models are not necessarily indicative of clinical results; uncertainties relating to preclinical and clinical trials, including delays to the commencement of such trials; our ability to protect our intellectual property rights; our ability to design and implement a development plan for our ANDAs held by CASI Wuxi; the lack of success in the clinical development of any of our products; and our dependence on third parties; the risks related to our dependence on Juventas to conduct the clinical development of CNCT19 and to partner with us to co-market CNCT19; risks related to our dependence on Juventas to ensure the patent protection and prosecution for CNCT19; risks relating to the commercialization, if any, of our proposed products (such as marketing, safety, regulatory, patent, product liability, supply, competition and other risks); risks relating to interests of our largest stockholders and our Chairman and CEO that differ from our other stockholders; and risks related to the development of a new manufacturing facility by CASI Wuxi. Such factors, among others, could have a material adverse effect upon our business, results of operations and financial condition.

We caution readers not to place undue reliance on any forward-looking statements, which only speak as of the date made. Additional information about the factors and risks that could affect our business, financial condition and results of operations, are contained in our filings with the SEC, including, but not limited to, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, each of which is available at www.sec.gov.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CASI Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)



	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	68,117	$	57,064
Investment in equity securities, at fair value		10,948		9,309
Accounts receivable, net of $0 allowance for doubtful accounts		5,838		4,645
Inventories		2,994		1,356
Prepaid expenses and other		1,117		1,651
Total current assets		89,014		74,025

Property, plant and equipment, net		1,876		2,062
Intangible assets, net		12,834		13,210
Long-term investments		34,870		29,442
Right of use assets		8,323		8,696
Other assets		1,176		299
Total assets	$	148,093	$	127,734

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,741	$	3,669
Accrued and other current liabilities		2,238		3,015
Bank borrowings		1,525		826
Notes payable		466		466
Total current liabilities		9,970		7,976

Deferred income		2,331		2,351
Other liabilities		13,596		13,834
Total liabilities		25,897		24,161

Commitments and contingencies (Note 19)

Redeemable noncontrolling interest, at redemption value (Note 11)		22,164		22,033

Stockholders’ equity:
Preferred stock, $1.00 par value: 5,000,000 shares authorized and 0 shares issued and		—		—
outstanding
Common stock, $0.01 par value:
250,000,000 shares authorized at March 31, 2021 and December 31, 2020
139,877,032 shares and 124,023,374 shares issued at March 31, 2021 and December 31, 2020, respectively;
139,797,487 shares and 123,943,829 shares outstanding at March 31, 2021 and December 31, 2020, respectively		1,399		1,240
Additional paid-in capital		690,018		658,246
Treasury stock, at cost: 79,545 shares held at March 31, 2021 and December 31, 2020		(8,034)		(8,034)
Accumulated other comprehensive income		485		589
Accumulated deficit		(583,836)		(570,501)
Total stockholders’ equity		100,032		81,540
Total liabilities, redeemable noncontrolling interest and stockholders' equity	$	148,093	$	127,734

See accompanying condensed notes.

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CASI Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)


	Three Months Ended March 31
	2021		2020

Revenues:
Product sales	$	5,700	$	3,372
Lease income		36		34
Total revenues		5,736		3,406

Costs and expenses:
Costs of revenues		2,358		3,211
Research and development		5,258		3,017
General and administrative		5,502		4,058
Selling and marketing		2,715		1,260
Gain on disposal of intangible assets		-		(450)
Acquired in-process research and development		5,500		1,081
Total costs and expenses		21,333		12,177

Loss from operations		(15,597)		(8,771)
Non-operating income/(expense):
Interest income, net		106		190
Other income		20		—
Foreign exchange gains		219		363
Change in fair value of investments		1,568		(15)
Net loss		(13,684)		(8,233)
Less: loss attributable to redeemable noncontrolling interest		(349)		(109)
Accretion to redeemable noncontrolling interest redemption value		548		317
Net loss attributable to CASI Pharmaceuticals, Inc.	$	(13,883)	$	(8,441)

Net loss per share (basic and diluted)	$	(0.11)	$	(0.09)
Weighted average number of common shares outstanding (basic and diluted)		124,825		98,773

Comprehensive loss:
Net loss	$	(13,684)	$	(8,233)
Foreign currency translation adjustment		(172)		(826)
Total comprehensive loss	$	(13,856)	$	(9,059)
Less: Comprehensive loss attributable to redeemable noncontrolling interest		(417)		(109)
Comprehensive loss attributable to common stockholders	$	(13,439)	$	(8,950)

See accompanying condensed notes.

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CASI Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)


													Accumulated
									Additional				Other
	Preferred Stock				Common Stock				Paid-in		Treasury		Comprehensive		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Loss		Deficit		Total
Balance at December 31, 2020		—	$	—		123,943,829	$	1,240	$	658,246	$	(8,034)	$	589	$	(570,501)	$	81,540
Issuance of common stock pursuant to financing agreements		—		—		15,853,658		159		32,341		—		—		—		32,500
Stock issuance costs		—		—		—		—		(2,019)		—		—		—		(2,019)
Stock-based compensation expense, net of forfeitures		—		—		—		—		1,998		—		—		—		1,998
Foreign currency translation adjustment		—		—		—		—		—		—		(104)		—		(104)
Net loss attributable to CASI Pharmaceuticals, Inc.		—		—		—		—		(548)		—		—		(13,335)		(13,883)
Balance at March 31, 2021		—	$	—		139,797,487	$	1,399	$	690,018	$	(8,034)	$	485	$	(583,836)	$	100,032


													Accumulated
									Additional				Other
	Preferred Stock				Common Stock				Paid-in		Treasury		Comprehensive		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Loss		Deficit		Total
Balance at December 31, 2019		—	$	—		97,771,698	$	979	$	606,686		(8,034)	$	(2,728)	$	(523,908)	$	72,995
Issuance of common stock for options and warrants exercised		—		—		2,708,795		27		3,805		—		—		—		3,832
Repurchase of stock options to satisfy tax withholding obligations		—		—		—		—		(251)		—		—		—		(251)
Issuance of common stock pursuant to financing agreements		—		—		434,336		4		1,395		—		—		—		1,399
Stock issuance costs		—		—		—		—		(251)		—		—		—		(251)
Stock-based compensation expense, net of forfeitures		—		—		—		—		1,905		—		—		—		1,905
Foreign currency translation adjustment		—		—		—		—		—		—		(826)		—		(826)
Net loss attributable to CASI Pharmaceuticals, Inc.		—		—		—		—		(317)		—		—		(8,124)		(8,441)

Balance at March 31, 2020		—	$	—		100,914,829	$	1,010	$	612,972	$	(8,034)	$	(3,554)	$	(532,032)	$	70,362

See accompanying condensed notes.

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CASI Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)


	Three Months Ended

	March 31, 2021		March 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(13,684)	$	(8,233)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation for property, plant and equipment		179		146
Amortization of intangible assets		337		377
Reduction in the carrying amount of the right-of-use assets		348		314
Gain on disposal of intangible assets		—		(450)
Stock-based compensation expense		1,998		1,905
Acquired in-process research and development		5,500		1,081
Change in fair value of investments		(1,568)		15
Changes in operating assets and liabilities:
Accounts receivable		(1,193)		(579)
Inventories		(1,638)		2,533
Prepaid expenses and other assets		637		6
Accounts payable		2,073		(729)
Accrued liabilities and other liabilities		(978)		(1,020)
Deferred income		(12)		—
Net cash used in operating activities		(8,001)		(4,634)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of intangible assets		—		450
Purchases of property, plant and equipment		(981)		(1)
Cash paid to acquire in-process research and development		(5,500)		—
Cash paid to acquire convertible loan in Black Belt Tx Limited		(86)		—
Cash paid to acquire convertible loan in Cleave		(5,500)		—
Net cash (used in) provided by investing activities		(12,067)		449

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings		709		—
Stock issuance costs		(2,019)		(42)
Proceeds from sale of common stock		32,500		1,399
Proceeds from exercise of stock options		—		3,832
Repurchase of stock options to satisfy tax withholding obligations		—		(251)
Net cash provided by financing activities		31,190		4,938

Effect of exchange rate change on cash and cash equivalents		(69)		(489)
Net increase in cash and cash equivalents		11,053		264

Cash and cash equivalents at beginning of period		57,064		53,621
Cash and cash equivalents at end of period	$	68,117	$	53,885

Supplemental disclosure of cash flow information:
Interest paid	$	—	$	—
Income taxes paid	$	—	$	—

Non-cash investing activity:
Accrual for acquisition of in-process research and development	$	—	$	1,081

See accompanying condensed notes.

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CASI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation, Organization and Principal Activities

Basis of Presentation

CASI Pharmaceuticals, Inc. (“CASI” or the “Company”) (Nasdaq: CASI) is a U.S. biopharmaceutical company focused on developing and commercializing innovative therapeutics and pharmaceutical products in China, the United States, and throughout the world. The Company is focused on acquiring, developing and commercializing products that augment its hematology oncology therapeutic focus as well as other areas of unmet medical need. The Company is executing its plan to become a biopharmaceutical leader by launching medicines in the greater China market leveraging its China-based regulatory, clinical and commercial competencies and its global drug development expertise.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, in which CASI, directly or indirectly, has a controlling financial interest. These subsidiaries include Miikana Therapeutics, Inc. (“Miikana”), CASI Pharmaceuticals (China) Co., Ltd. (“CASI China”), CASI Pharmaceuticals (Wuxi) Co., Ltd. (“CASI Wuxi”), and CASI Biopharmaceuticals (WUXI) Co., Ltd. (“CASI Biopharmaceuticals”). CASI China is a non-stock Chinese entity with 100% of its interest owned by CASI. CASI China received approval for a business license from the Beijing Industry and Commercial Administration in August 2012 and has operating facilities in Beijing. CASI Biopharmaceuticals is a wholly owned subsidiary of CASI Wuxi and was established in April 2019. The Company controls CASI Wuxi through 80% voting rights (see Note 11). Accordingly, the financial statements of CASI Wuxi have been consolidated in the Company’s consolidated financial statements since its inception. All inter-company balances and transactions have been eliminated in consolidation. The Company currently operates in one operating segment, which is the development of innovative therapeutics addressing cancer and other unmet medical needs for the global market.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, such condensed consolidated financial statements do not include all of the information and disclosures required by U.S. generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying December 31, 2020 financial information was derived from the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, 2020 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the year then ended.

Overview

The Company launched its first commercial product, EVOMELA® (Melphalan for Injection), in China in August 2019. In China, EVOMELA® is approved for use as a conditioning treatment prior to stem cell transplantation and as a palliative treatment for patients with multiple myeloma. The other core hematology/oncology assets in the Company’s pipeline include:

●

CNCT19 is an autologous CD19 CAR-T investigative product (CNCT19) being developed by the Company’s partner Juventas Cell Therapy Ltd (“Juventas”) for which the Company has co-commercial and profit-sharing rights. CNCT19 is being developed as a potential treatment for patients with hematological malignancies which express CD19 including, B-cell acute lymphoblastic leukemia (“B-ALL”) and B-cell non-Hodgkin lymphoma (“B-NHL”). CNCT19’s Phase 1 studies of B-ALL and B-NHL in China have been substantially completed by Juventas, with the Phase 2 B-NHL registration study and the Phase 2 B-ALL registration study of CNCT19 both currently enrolling in China.

●

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in combination with MabThera® (rituximab) in patients with relapsed/refractory non-Hodgkin lymphoma (NHL). BioInvent International AB, released positive interim results from its Phase 1/2a trial that suggests that novel anti-FcyRIIB antibody BI-1206 restores activity of rituximab in patients with relapsed/refractory non-Hodgkin’s lymphoma. An FDA End of Phase 1 meeting for the NHL development program is planned for the third quarter of 2021.

●

CB-5339 is a novel VCP/p97 inhibitor focused on valosin-containing protein (VCP)/p97 as a novel target in protein homeostasis, DNA damage response and other cellular stress pathways for therapeutic use in cancer. The Company entered into an exclusive license on March 21, 2021 with Cleave Therapeutics, Inc. (Cleave”) for the development and commercialization of CB-5339 in Mainland China, Hong Kong, Macau and Taiwan. CB-5339, an oral second-generation, small molecule VCP/p97 inhibitor, is being evaluated in a Phase 1 clinical trial in patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS) and in a Phase 1 clinical trial of patients with solid tumors and lymphomas.

●

CID-103 is a full human IgG1 anti-CD38 monoclonal antibody recognizing a unique epitope that has demonstrated encouraging preclinical efficacy and safety profile compared to other anti-CD38 monoclonal antibodies for which the Company has exclusive global rights. CID-103 is being developed for the treatment of patients with multiple myeloma. The Company has achieved in May 2021 the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, in patients with previously treated, relapsed or refractory multiple myeloma.

The Company also has greater China rights to ZEVALIN® (Ibritumomab Tiuxetan), a CD20-directed radiotherapeutic antibody that is approved in the U.S. to treat patients with non-Hodgkin lymphoma (“NHL”) and MARQIBO® (vincristine sulfate LIPOSOME injection) a novel, sphingomyelin/cholesterol liposome-encapsulated, formulation of vincristine sulfate, a microtubule inhibitor, approved by the FDA for the treatment of adult patients with Philadelphia chromosome-negative (Ph-) acute lymphoblastic leukemia (ALL) in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies. However, due to the evolving standard of care environment, the rare and niche indication for these products, and the Company’s commitment to prioritize resources, the Company is currently evaluating its options for these products. In addition, the Company’s assets include a few FDA-approved ANDAs which the Company is evaluating due to generic drug pricing reforms by the Chinese government and its impact on the pricing and competitiveness of these products.

The Company’s business development strategy is currently focused on acquiring additional targeted drugs and immuno-oncology therapeutics through licensing that will expand its hematology-oncology franchise. In many cases its business development strategy includes direct equity investments in the licensor company. The Company intends for its pipeline to reflect a diversified and risk-balanced set of assets that include (1) late-stage clinical drug candidates in-licensed for China regional rights, (2) proprietary or licensed innovative drug candidates, and (3) select high quality pharmaceuticals that fit its therapeutic focus. The Company uses a market-oriented approach to identify pharmaceutical/biotechnology candidates that the Company believes to have the potential for gaining widespread market acceptance, either globally or in China, and for which development can be accelerated under the Company’s global drug development strategy. Although oncology with a focus on hematological malignancies is its principal clinical and commercial target, the Company is opportunistic about other therapeutic areas that can address unmet medical needs.

Liquidity Risks and Management’s Plans

Since its inception in 1991, the Company has incurred significant losses from operations and, as of March 31, 2021, has incurred an accumulated deficit of $583.8 million. In 2012, with new leadership, the Company shifted its business strategy to China and has since built an infrastructure in China that includes sales and marketing, medical affairs, regulatory and clinical development and in the foreseeable future, manufacturing. In 2014, the Company changed its name to “CASI Pharmaceuticals, Inc.” The majority of the Company’s operations are now located in China. The Company expects to continue to incur operating losses for the foreseeable future due to, among other factors, its continuing clinical and development activities and expansion of the Company’s operations. The Company’s Beijing office is primarily responsible for the Company’s day-to-day operations and the Company’s commercial team of over 80 hematology and oncology sales and marketing specialists based in China. CASI Wuxi is part of the long-term strategy to support the Company’s future clinical and commercial manufacturing needs, to manage the Company’s supply chain for certain products, and to develop a GMP manufacturing facility in China.

The Company has primarily funded its operations through the proceeds from the sales of common stock and, to a lesser extent, asset sales and government grants. To date, the Company has minimal product revenue and management expects operating losses to continue for the foreseeable future.

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On March 26, 2021, the Company closed an underwritten public offering of 15,853,658 shares of the Company’s common stock (the “Offering”) at a price to the public of $2.05 per share. The gross proceeds to CASI from the Offering were $32.5 million before deducting the underwriting discounts and commissions and offering expenses payable by CASI. See Note 12 -- Stockholders’ Equity.

Taking into consideration the cash and cash equivalents balance as of March 31, 2021, the Company believes that it has sufficient resources to fund its operations at least one year beyond the date that the unaudited condensed consolidated financial statements are issued. As of March 31, 2021, the Company had a consolidated cash balance of $68.1 million; $45.4 million was held by the Company (excluding its subsidiaries), and the Company’s subsidiaries held $4.8 million (CASI China), $17.7 million (CASI Wuxi), and $0.2 million (other subsidiaries). The Company intends to continue to exercise tight controls over operating expenditures and will continue to pursue opportunities, as required, to raise additional capital and will also actively pursue non- or less-dilutive capital raising arrangements.

Risks and Uncertainties

The Company has experienced operational interruptions as a result of COVID-19, including the temporary disruption of operations in China during the first three months of 2020 due to a Chinese government mandated quarantine protocol, including mandatory business closures, social distancing measures, and various travel restrictions. In the first quarter 2020, during which the peak of the pandemic occurred in China, the Company experienced some disruptions to its EVOMELA® marketing and sales activities due to travel restrictions and the prioritization of hospitals and physicians to attend to patients with COVID-19 infection. Although the Company's operations in China have normalized, there can be no assurance that such operations will continue to do so.

To the extent that such events occur, demand for the Company's products may decline, and the Chinese government or other governments may impose additional restrictions resulting in further shutdowns, further work restrictions, and the disruption of the Company’s supply and distribution channels; there can be no assurance that such restrictions will not be imposed again.

The Company currently relies on a single source for its supply of EVOMELA®. Due to COVID-19, the Company experienced a disruption to its supply chain for EVOMELA®. That disruption, along with a change in 2020 in the manufacturer of EVOMELA® , contributed to a decrease in the Company's revenue for the second quarter of 2020. The Company returned to expected levels of sales in the second half of 2020.

If suppliers refuse or are unable to provide products for any reason (including the occurrence of an event like the COVID-19 pandemic that makes delivery impractical), the Company would be required to negotiate an agreement with a substitute supplier, which would likely interrupt the manufacturing of EVOMELA® , cause delays and increase costs.

Clinical trials, whether planned or ongoing, may be affected by the COVID-19 pandemic. The Company's partner, Juventas, experienced some delay in conducting the CNCT19 trials due to the COVID-19 pandemic. The COVID-19 pandemic has also impacted the Company's targeted start time of its CID-103 trial due to the lock-down of many medical facilities in Europe. Study procedures (particularly any procedures that may be deemed non-essential), site initiation, participant recruitment and enrollment, participant dosing, shipment of the Company's product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis may be paused or delayed due to changes in hospital or research institution policies, federal, state or local regulations, prioritization of hospital and other medical resources toward COVID-19 efforts, or other reasons related to the pandemic. In addition, there could be a potential effect of COVID-19 on the operations of the health regulatory authorities, which could result in delays of reviews and approvals, including with respect to the Company's product candidates. Any prolongation or de-prioritization of the Company's clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of the Company's product candidates.

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2. License and Distribution Agreements

China Resources Guokang Pharmaceuticals Co., Ltd:

The Company has product rights and perpetual exclusive licenses from Acrotech Biopharma L.L.C. (“Acrotech”) to develop and commercialize its commercial product EVOMELA® in the greater China region (which includes China, Taiwan, Hong Kong and Macau). On December 3, 2018, the Company received NMPA’s approval for importation, marketing and sales in China, and in August 2019 the Company launched EVOMELA® in China. The NMPA required post-marketing study is ongoing and is actively recruiting.

In March 2019, the Company entered into a three-year exclusive distribution agreement with China Resources Guokang Pharmaceuticals Co., Ltd (“CRGK”) to appoint CRGK on an exclusive basis as its distributor to distribute EVOMELA® in the territory of the People’s Republic of China (excluding Hong Kong, Taiwan and Macau), subject to certain terms and conditions. The Company’s internal marketing and sales team will continue to be responsible for commercial activities, including, for example, direct interaction with Key Opinion Leaders (KOL), physicians, hospital centers and the generating of sales. Commercial sales of EVOMELA® were launched in August 2019. For the three months ended March 31, 2021 and 2020, the Company recognized $5.7 million and $3.4 million of revenues, respectively, from sales of EVOMELA® under this arrangement

Juventas Cell Therapy:

In June 2019, the Company entered into a license agreement for exclusive worldwide license to commercialize an autologous anti-CD19 T-cell therapy product (CNCT19) from Juventas Cell Therapy Ltd. (“Juventas”) (the “Juventas license agreement”). Juventas is a China-based company engaged in cell therapy.

In September 2020, Juventas and its shareholders (including CASI Biopharmaceuticals) agreed to certain terms and conditions required by a new third-party investor to facilitate the Series B financing of Juventas, pursuant to which the Company agreed to amend and supplement the original licensing agreement (the "Supplementary Agreement") by agreeing to pay Juventas certain percentage of profits generated from commercial sales of CNCT19. The Supplementary Agreement also specifies a minimum annual target net profit to be distributed to Juventas and certain other terms and obligations. In return, the Company obtained additional equity interests in Juventas (see Note 4).

Under the Supplementary Agreement, Juventas and the Company will jointly market CNCT19, including, but not limited to, establishing medical teams, developing medical strategies, conducting post-marketing clinical studies, establishing Standardized Cell Therapy Centers, establishing and training providers with respect to cell therapy, testing for cell therapy, and monitoring quality controls (cell collection and transfusion, etc.), and patient management (adverse reactions treatment, patients’ follow-up visits, and establishment of a database). The Company also will reimburse Juventas for a portion of Juventas’ marketing expenses as reviewed and approved by a joint commercial committee to be constituted. The Company will continue to be responsible for recruiting and establishing a sales team to commercialize CNCT19.

BioInvent International AB

In October 2020, the Company entered into an exclusive licensing agreement with BioInvent International AB (“BioInvent”) for the development and commercialization of novel anti-FcγRIIB antibody, BI-1206, in mainland China, Taiwan, Hong Kong and Macau. BioInvent is a biotechnology company focused on the discovery and development of first-in-class immune-modulatory antibodies for cancer immunotherapy. BI-1206 is BioInvent’s lead drug candidate and is being investigated in a Phase 1/2 trial, in combination with anti-PD1 therapy Keytruda® (pembrolizumab), in solid tumors, and in a Phase 1/2a trial in combination with MabThera® (rituximab) in patients with relapsed/refractory non-Hodgkin lymphoma (NHL).

Under the terms of the agreement, BioInvent and CASI will develop BI-1206 in both hematological malignancies and solid tumors, with CASI responsible for commercialization in China and associated markets. CASI made a $5.9 million upfront payment in November 2020 to BioInvent and will pay up to $83 million in development and commercial milestone payments plus tiered royalties in the high-single to mid-double-digit range on net sales of BI-1206. Because BI-1206 underlying the acquired rights has not reached technological feasibility and has no alternative uses, the Company expensed $5.9 million as acquired in-process research and development in the fourth quarter of 2020.

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Black Belt Therapeutics Limited:

In April 2019, the Company entered into a license agreement with Black Belt Therapeutics Limited (“Black Belt”) for exclusive worldwide rights to CID-103, an investigational anti-CD38 monoclonal antibody (Mab) (formerly known as TSK011010). The CID-103 Phase 1 study began in the EU in March 2021. The Company expects that its clinical materials and commercial inventory will be supplied by one or more contract manufacturers with whom the Company is in current discussions. Under the terms of the agreement, CASI obtained global rights to CID-103 for an upfront payment of 5 million euros ($5.7 million) as well as certain milestone and royalty payments. Because CID-103 underlying the acquired rights has not reached technological feasibility and has no alternative uses, the Company expensed 5 million euros as acquired in-process research and development in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019.

Cleave Therapeutics, Inc.

In March 2021, the Company entered into an exclusive license with Cleave Therapeutics, Inc. (“Cleave”) for the development and commercialization of CB-5339, an oral novel VCP/p97 inhibitor, in both hematological malignancies and solid tumors, in Mainland China, Hong Kong, Macau and Taiwan. Cleave is a clinical-stage biopharmaceutical company focused on valosin-containing protein (VCP)/p97 as a novel target in protein homeostasis, DNA damage response and other cellular stress pathways for therapeutic use in cancer.

CB-5339 is being evaluated in a Phase 1 clinical trial in patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS), while the National Cancer Institute (NCI) is sponsoring and will be evaluating CB-5339 in a future Phase 1 clinical trial of patients with solid tumors and lymphomas. Because CB-5339 has not reached technological feasibility and has no alternative uses, the Company expensed $5.5 million as acquired in-process research and development in the accompanying consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021.

Pharmathen Global BV

On October 29, 2019, the Company entered into an exclusive distribution agreement with Pharmathen Global BV ("Pharmathen") for the development and distribution of octreotide long acting injectable (Octreotide LAI) microsphere in China. Octreotide LAI formulations, which are approved in various European countries, are considered a standard of care for the treatment of acromegaly and the control of symptoms associated with certain neuroendocrine tumors. Subject to regulatory and marketing approvals, the Company intends to advance and commercialize these established products in China.

The terms of the agreement include an upfront payment of 1 million euros which was paid by the Company in 2019, and up to 2 million euros of additional milestone payments, of which 1.5 million euros ($1.7 million) was expensed in the year ended December 31, 2020 as acquired in-process research and development following Pharmathen’s achievement of certain milestones. CASI is responsible for the development, import drug registration, product approval and commercialization in China. CASI has a 10-year non-royalty exclusive distribution period after the product launch at agreed supply costs for the first three years.

Riemser Pharma GmbH

In August 2019, the Company entered into a distribution agreement in China with Riemser Pharma GmbH (“Riemser”) to a novel formulation of thiotepa, a chemotherapeutic agent, which has multiple indications including use as a conditioning treatment for use prior to allogenic hematopoietic stem cell transplantation. Thiotepa has a long history of established use in the hematology/oncology setting. Pursuant to the distribution agreement, CASI obtained the exclusive distribution right of the products in China, and Riemser will be responsible for manufacturing and supplying CASI with clinical materials and commercial inventory. Subject to regulatory and marketing approvals, the Company intends to advance and commercialize these established products in China.

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3. Summary of Significant Accounting Policies

Revenue Recognition

Product sales recognized in the consolidated statements of operations are considered revenue from contracts with customers and, accordingly, the Company recognizes revenue using the following steps:

●

Identification of the contract, or contracts, with a customer;

●

Identification of the performance obligations in the contract;

●

Determination of the transaction price, including the identification and estimation of variable consideration;

●

Allocation of the transaction price to the performance obligations in the contract; and

●

Recognition of revenue when the Company satisfies a performance obligation.

The Company recognizes revenue on sales of EVOMELA® when the control of the product is transferred to the distributor, which occurs upon delivery of the product to the carrier appointed by the distributor, in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for the product, excluding amounts collected on behalf of third parties (e.g. value-added taxes). Payment terms for these sales are due within 90 days. The arrangement does not include any variable consideration.

The costs of assurance type warranties that provide the customer the right to exchange purchased product that does not meet appropriate quality standards are recognized when they are probable and are reasonably estimable. As of March 31, 2021, the Company did not incur, and therefore did not defer, any material costs to obtain or fulfill contracts. The Company did not have any contract assets or contract liabilities as of March 31, 2021.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s significant accounting estimates relate to recoverability of operating lease right-of-use assets, intangible assets and long-term investments, net realizable value and obsolescence allowance for inventory, deferred tax assets and valuation allowance, allowance for doubtful accounts, stock-based arrangements and fair value of investments. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances. Actual results may differ from those estimates, and such differences may be material to the consolidated financial statements.

4. Investment in equity securities, at fair value and long-term investments

Investment in equity securities, at fair value

MaxCyte Inc.

The Company has an equity investment in the common stock of MaxCyte, a publicly traded company. The Company’s investment in this equity security is carried at its fair value, with changes in fair value reported in the statement of operations each reporting period.

The fair value of this security was measured using its quoted market price, a Level 1 input, and was $4.6 million as of March 31, 2021 and $2.7 million as of December 31, 2020 (see Note 16).

BioInvent International AB

In October 2020, in conjunction with its license agreement entered into with BioInvent (see Note 2), a publicly traded company, CASI made a $6.3 million investment (equivalent to SEK 53.8 million) to acquire 1.2 million new shares (after 25:1 reverse stock split) of BioInvent, and 14,700,000 warrants, each warrant with a right to subscribe for 0.04 shares (after 25:1 reverse stock split) in BioInvent within a period of five years.

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The investments in the ordinary shares and warrants of BioInvent are carried at fair value, with changes in fair value reported in the statement of operations each reporting period. The fair value of the ordinary shares was measured using its quoted market price, a Level 1 input, and was $6.4 million as of March 31, 2021 and $6.6 million as of December 31, 2020 (see Note 16).

The fair value of the warrants was measured using observable market-based inputs other than quoted prices in active markets for identical assets or liabilities, level 2 inputs. The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of warrants. The fair value of the warrants was $769,000 as of March 31, 2021 and $840,000 as of December 31, 2020 (see Note 16), with assumptions including an expected life of 4.66 years, an assumed volatility of 47.2%, and a risk-free interest rate of -0.14 %.

The following table summarizes the Company’s investment in equity securities at Fair Value as of March 31, 2021:


				Gross
(In thousands)				unrealized		Aggregate fair
Description	Classification	Cost		gains		value
MaxCyte - equity interest	Investment	$	—	$	4,591	$	4,591
BioInvent - equity interest	Investment	$	5,661	$	696	$	6,357

Unrealized gains or (losses) on the Company’s equity investment for the three months ended March 31, 2021 and 2020 were $1,568,000 and $(15,000), respectively. Unrealized gains or (losses) on the Company’s equity investment are recognized as change in fair value of investment in equity securities in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Long-term investments

Long-term investments consisted of the following:


	March 31,		December 31,
(In thousands)	2021		2020
Available-for-sale debt securities:
Black Belt Tx Limited - convertible loan	$	169	$	83
Securities measured at fair value:
BioInvent International AB - warrants		769		840
Cleave Therapeutics, Inc. - convertible loan		5,500		—
Equity securities without readily determinable fair value:
Black Belt Tx Limited - equity interest		2,250		2,250
Juventas Cell Therapy Ltd - equity interest		25,973		26,059
Juventas Cell Therapy Ltd - put option		209		210
Total	$	34,870	$	29,442

Black Belt Tx Limited

In April 2019, in conjunction with its license agreement the Company entered into with Black Belt (see Note 2), the Company made a 2 million euros ($2,249,600) equity investment in the ordinary shares of a newly established, privately held UK Company, Black Belt Tx Limited ("Black Belt Tx"), representing a 14.1% equity interest with the right to appoint a non-voting board observer.

As the Company does not have significant influence over operating and financial policies of Black Belt Tx, and the equity interests do not have readily determinable fair value, the investment in Black Belt Tx is stated at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment. The Company did not record any adjustments or impairments during the three months ended March 31, 2021 related to this investment.

In July 2020, the Company entered into a three-year convertible loan agreement with Black Belt Tx (the "Black Belt Tx Loan") in the amount of 211,800 euros ($250,000) with a non-compounding annual interest rate of 6% payable, together with the principal balance, at maturity.

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The loan principal will be disbursed in three equal installments of 70,600 euros. The first tranche of 70,600 euros ($83,000) was disbursed upon execution of the loan agreement in August 2020. The second tranche of 70,600 euros ($86,000) was disbursed in February 2021. In the first quarter of 2021, Black Belt Tx reached certain operational targets as stipulated in the loan agreement, and Black Belt Tx’s Board of Directors met in February 2021 to approve disbursement of the second tranche. The third tranche will be disbursed if Black Belt Tx reaches certain additional operational targets as stipulated in the loan agreement, subject to approval by Black Belt Tx's Board of Directors.

In the event that Black Belt Tx, on or prior to the maturity date, completes an equity financing round of at least 5,000,000 euros ($5.9 million), then the outstanding principal amount shall be automatically converted into such shares at 80% of the price per share issued divided by a compensating factor based on the number of years that the Black Belt Tx Loan has been outstanding. The investment in convertible loan is accounted for as investment in debt securities as available-for-sale instrument.

Juventas Cell Therapy Ltd

In June 2019, in conjunction with its license agreement entered into with Juventas (see Note 2), the Company, through CASI Biopharmaceuticals, made an RMB 80 million ($11,788,000) investment in Juventas, a privately held, China-based company, in Juventas’ Series A plus equity, which represented a 16.327% equity interest on a fully diluted basis, and the right to appoint a non-voting board observer. The Company is entitled to substantive liquidation preference over the founding shareholder of Juventas. In addition, the Juventas’ founding shareholder provided a put option to the Company pursuant to which the Company can put the equity investment to the founding shareholder at a fixed return of 8% per annum upon occurrence of certain events. The investment in the equity interests of the Juventas and the investment in put option to the founding shareholder were accounted for as investments in equity securities using the measurement alternative at its cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, as the fair value of the equity securities of Juventas is not readily determinable. The consideration of RMB 80 million ($11,788,000) was allocated into investment in equity interests and investment in put option based on their relative fair value on the transaction date.

In September 2020, in conjunction with the Supplementary Agreement entered into with Juventas (see Note 2), the Company obtained additional Series A plus equity interest in Juventas with substantive liquidation preference over Juventas' founding shareholder, resulting in the Company's equity ownership increasing to 16.45% (post-Juventas Series B financing) on a fully diluted basis. CASI Biopharmaceuticals is also entitled to appoint a director to Juventas’ board of directors. Juventas’ founding shareholder also provided a put option to the Company pursuant to which the Company can put the additional equity investment to the founding shareholder at RMB 70 million plus a fixed return of 8% per annum upon occurrence of certain events. The transaction closed on September 29, 2020. The fair value of the Company’s additional equity interest in Juventas and the new put option was RMB 83.7 million ($12.3 million) and RMB 0.4 million ($64,000) on September 29, 2020, respectively, which was estimated using significant estimates and assumptions, including multiples of selected comparable companies in applying the market approach model.

Since the equity interest with substantive liquidation preference is not in-substance common stock, the investment in the additional equity interests of Juventas was accounted for as an investment in equity securities at transaction date fair value with a corresponding credit to Other Liabilities. The profit-sharing liability represents the Company’s obligation to pay an increased share of future profits pursuant to the Supplementary Agreement (see Note 2) which was conveyed by the Company in exchange for the additional equity interests in Juventas. The Company views this as a payment from a vendor that should reduce cost of revenues over the period of royalty payments. The long-term liability will be derecognized as payments are made on a systematic and rational basis representing the pattern in which the Company expects to settle the profit-sharing payment during the commercialization period of CNCT19.

The investments are measured using the measurement alternative at its cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, as the fair value of the equity securities of Juventas is not readily determinable. The Company did not record any adjustments or impairments during the three months ended March 31, 2021 related to this investment.

In June 2020, the Company entered into a one-year loan agreement with Juventas in the amount of RMB 30,000,000 ($4,243,000) with an annual interest rate of 20%. In August 2020, the Company entered into another one-year loan with Juventas in the amount of RMB 40 million ($5,790,000) for one year with an annual interest rate of 20%. In September 2020, the Company received early repayments for both principals and accrued interest from Juventas.

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Cleave Therapeutics, Inc.

In March 2021, Cleave and the Company entered into a license agreement. Cleave and the Company will develop CB-5339 in both hematological malignancies and solid tumors, with CASI responsible for development and commercialization in China and associated markets. Cleave received a $5.5 million upfront payment and is eligible to receive up to $74 million in development and commercial milestone payments plus tiered royalties in the high-single to mid-double-digit range on net sales of CB-5339. In addition to the upfront cash payment, CASI made a $5.5 million investment in Cleave through a three-year convertible note with a non-compounding annual interest rate of 3% payable at maturity. The principal balance is also due at maturity. The proceeds will support and advance Cleave’s programs and general operations.

In the event that Cleave, on or prior to the maturity date, completes an equity financing round of preferred stock of at least $10.0 million, then the outstanding principal amount and accrued interest shall be automatically converted into such shares at 80% of the price per share issued. The investment in the convertible loan is designated an investment measured at fair value through profit or loss.

5. Inventories

Inventories at March 31, 2021 and December 31, 2020 consisted of the following:


(In thousands)	March 31, 2021		December 31, 2020
Finished goods	$	2,994	$	1,356
Raw materials		—		—
Total	$	2,994	$	1,356

No provisions to write down the carrying amount of inventory have been recorded in the three months ended March 31, 2021 and 2020.

6. Leases

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term.

Operating lease liabilities (see below) are included in accrued liabilities and other liabilities (noncurrent) in the unaudited condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020.

All of the Company’s existing leases as of March 31, 2021 are classified as operating leases. For the quarter ended March 31, 2021, the Company had seven material operating leases for land, facilities and office equipment with remaining terms expiring from 2021 through 2069 and a weighted average remaining lease term of 38.12 years. The Company has fair value renewal options for many of the Company’s existing leases, none of which are considered reasonably certain of being exercised or included in the minimum lease term. Weighted average discount rates used in the calculation of the lease liability is 3.55%. The discount rates reflect the estimated incremental borrowing rate, which includes an assessment of the credit rating to determine the rate that the Company would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to the lease payments in a similar economic environment.

In November 2019, CASI Wuxi entered into a fifty-year lease agreement for the right to use state-owned land in China for the construction of a manufacturing facility. The land parcel is 74,028.40 square meters. The Company classifies this lease as an operating lease. The Company prepaid all of the lease payments for the land use right in 2019 in the amount of RMB 45 million (equivalent to $6.5 million).

In the first quarter of 2021, one operating lease expired. Since the office space was no longer needed, it was not renewed.

Rent expense for the three months ended March 31, 2021 and 2020 was $400,000 and $377,000, respectively. There were no variable lease costs or sublease income for leased assets for the three months ended March 31, 2021 and 2020.

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Right of use assets and liabilities as of March 31, 2021 and December 31, 2020 in the condensed consolidated balance sheets were as follows:


	March 31,		December 31,
(In thousands)	2021		2020
Right of use assets	$	8,323	$	8,696

Accrued liabilities	$	814	$	939
Other liabilities		769		965
Total lease liabilities	$	1,583	$	1,904

Supplemental cash flow information related to leases was as follows:

A maturity analysis of the Company’s operating leases as of March 31, 2021 follows:

Future undiscounted cash flows:


(In thousands)
2021 (remaining nine months)	$	682
2022		626
2023		280
Thereafter		42
Total		1,630

Discount factor		(47)
Lease liability		1,583
Amounts due within 12 months		814
Non-current lease liability	$	769

7. Intangible Assets

Intangible assets include ANDAs that were acquired as part of 2018 asset acquisitions of U.S. marketed generic products and capitalized costs related to a cloud computing arrangement (CCA). These intangible assets were originally recorded at relative estimated fair values based on the purchase price for the asset acquisitions and are stated net of accumulated amortization and impairment, if any.

The ANDAs are amortized over their estimated useful lives of 13 years, using the straight-line method. The CCA is being amortized over its useful life of 5 years.

In February 2020, the Company entered into an agreement with Chartwell Rx Sciences, LLC (“Chartwell”) in which the Company sold and transferred the control of seven U.S. FDA-approved ANDAs to Chartwell in exchange for $450,000 in cash, which the Company received in March 2020. These ANDAs had a net book value of $0 at the time of sale. The Company is entitled to an additional $1 million, contingent upon Chartwell receiving certain FDA approvals relating to certain of these ANDAs. The Company recognized a gain on disposal of intangible assets in the amount of $450,000 in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2020. The additional $1 million is treated as variable consideration. Because the amount of variable consideration is highly susceptible to factors outside the Company's influence and the Company’s experience with similar types of contracts is limited, the Company did not include the amount of variable consideration in recognition of gain on disposal of intangible assets for the three months ended March 31, 2020. The Company will recognize the variable consideration and additional gain on disposal of intangible assets when the constraint on variable consideration

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is resolved, i.e., Chartwell receives relevant FDA approvals. As of March 31, 2021, no FDA approvals has been made to Chartwell on those products.

Intangible assets at March 31, 2021 consists of the following:


(In thousands)
Asset	Purchase Price		Accumulated Amortization		Estimated useful lives
ANDAs	$	15,832	$	(3,086)	13 years
Others		197		(109)	5 years
Total	$	16,029	$	(3,195)

The changes in intangible assets for three months ended March 31, 2021 are as follows:


(In thousands)
Balance as of December 31, 2020	$	13,210
Amortization expense		(337)
Foreign currency translation adjustment		(39)
Balance as of March 31, 2021	$	12,834

Expected future amortization expense, is as follows:


(In thousands)
2021 (remaining nine months)	$	987
2022		1,316
2023		1,316
2024		1,284
2025		1,284
2026 and thereafter		6,647

8. Grants

In April 2020, CASI Wuxi received RMB 15.9 million (equivalent to $2.2 million) from the Jiangsu Province Wuxi Huishan Economic Development Zone as a government grant for this development project which was recorded as deferred income in April 2020. The grant will be amortized over the term of the lease of the land. Since April 2020, the Company has recognized RMB 321,000 in deferred income as of March 31, 2021, and therefore, RMB 15.6 million (equivalent to $2.4 million) remain as deferred income in the unaudited condensed balance sheet as of March 31, 2021. The Company recognized $12,000 and $0 of other income during the three months ended March 31, 2021 and 2020, respectively.

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9. Bank Borrowings

On November 3, 2020, Beijing Branch of China CITIC Bank Corporation Limited approved a guaranteed line of Credit (“Bank Borrowings) to the Company with maximum borrowings of RMB 10.0 million ($1.5 million). The joint and several liability guarantee was provided by Beijing Capital Financing Guarantee Co, Ltd. At December 31, 2020, the Company had outstanding borrowings under the Bank Borrowings of RMB 5.4 million ($826,000), which matures on November 7, 2021, and bears interest at a fixed rate of 3.35% per annum.

On February 3, 2021, the Company had additional bank borrowings of RMB 4.6 million ($0.7 million), of which RMB 3.0 million ($0.5 million) matures on September 2, 2021 and the remainder balance matures on November 7, 2021. These additional bank borrowings bear interest at a fixed rate of 3.72% per annum.

Interest expense of $11,000 was recorded in the three months ended March 31, 2021.

10. Notes Payable

On April 27, 2020, M&T Bank approved a $465,595 loan to the Company under the Paycheck Protection Program (PPP) pursuant to the Coronavirus Aid, Relief and Economic Security (CARES) Act that was signed into law on March 27, 2020. The loan, evidenced by a promissory note to M&T Bank as lender and dated April 29, 2020, has a term of two years, is unsecured, and is guaranteed by the Small Business Administration (SBA). The loan bears interest at a fixed rate of one percent per annum. Some or all of the loan may be forgiven if the Company complies with certain relevant conditions. In June 2020, the PPP was amended through enactment of the Paycheck Protection Program Flexibility Act of 2020 (PPPFA). Under the new act, the Company’s payments of principal and interest are deferred until October 2021. The Company has until August 2021 to apply for loan forgiveness before potential loan payments would begin.

Interest expense of $1,000 was recorded in the three months ended March 31, 2021.

11. Redeemable Noncontrolling Interest

On December 26, 2018, the Company, together with Wuxi Jintou Huicun Investment Enterprise, a limited partnership organized under Chinese law (“Wuxi LP”) established CASI Wuxi to build and operate a manufacturing facility in the Wuxi Huishan Economic Development Zone in Jiangsu Province, China. The Company holds 80% of the equity interests in CASI Wuxi and will invest, over time, $80 million in CASI Wuxi. The Company’s investment will consist of (i) $21 million in cash (paid in February 2019), (ii) a transfer of selected ANDAs valued at $30 million (transferred in May 2019), and (iii) an additional $29 million cash payment within three years from the date of establishment of CASI Wuxi. Wuxi LP holds 20% of the equity interest in CASI Wuxi through its investment in RMB of $20 million in cash (paid in March 2019). As the transfer of ANDAs valued at $30 million was to the Company’s consolidated subsidiary (CASI Wuxi), the Company recognized the transfer of the ANDAs at their carrying value and did not recognize a gain on the transfer.

Pursuant to the investment contract between the Company and Wuxi LP and Articles of Association of CASI Wuxi, the Company has the call option to purchase the 20% equity interest in CASI Wuxi held by Wuxi LP at any time within 5 years from the date of establishment of CASI Wuxi (i.e. up to December 26, 2023). Wuxi LP has the put option to require the Company to redeem the 20% equity interest in CASI Wuxi at any time after December 26, 2023. The redemption value under both the Company’s embedded put option and Wuxi LP’s embedded call option is equal to $20 million plus interest at the bank loan interest rate issued by the People's Bank of China for the period beginning with the initial capital contribution by Wuxi LP to the date of redemption. In addition, Wuxi LP has the put option to require the Company to redeem the 20% equity interest in CASI Wuxi at $20 million upon the occurrence of any of the following conditions: (i) the Company fails to fulfill its investment obligation to CASI Wuxi; (ii) CASI Wuxi suffers serious losses, discontinued operation, dissolution, goes into process of bankruptcy liquidation; or (iii) the Company substantially violates the investment contract and Articles of Association of CASI Wuxi.

The investment of Wuxi LP in CASI Wuxi is treated as redeemable noncontrolling interest and is classified outside of permanent equity on the consolidated balance sheets because (1) the noncontrolling interest is not mandatorily redeemable financial instruments, and (2) it is redeemable at the option of the holder, or upon the occurrence of an event that is not solely within the control of the Company. The Company initially recorded the redeemable noncontrolling interest at its fair value of $20 million. The carrying

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amount of the redeemable noncontrolling interest is subsequently recorded at the greater of the amount of (1) the initial carrying amount, increased or decreased for the redeemable noncontrolling interest’s share of net income or loss in CASI Wuxi or (2) the redemption value, assuming the noncontrolling interest is redeemable at the balance sheet date. Accretion of the carrying amount of redeemable noncontrolling interest to the redemption value is recorded in additional paid-in capital.

Changes in redeemable noncontrolling interest during the three month period ended March 31, 2021 and 2020 are as follows:


	Three Months Ended March 31,
(In thousands)	2021		2020
Balance at beginning of period	$	22,033	$	20,670
Cash contribution by Wuxi LP		—		—
Share of CASI Wuxi net (loss)/income		(349)		(109)
Accretion of redeemable noncontrolling interest		548		317
Foreign currency translation adjustment		(68)		—
Balance at end of period	$	22,164	$	20,878

12. Stockholders’ Equity

March 2021 Underwritten Public Offering

Pursuant to the underwriting agreement, the Company’s directors and executive officers entered into agreements in substantially the form agreed to by the Underwriters providing for a 90-day “lock-up” period with respect to sales of specified securities, subject to certain exceptions.

As a result of the Company’s failure to timely file a periodic report with the SEC in connection with the adoption of its amended and restated bylaws, the Company is ineligible to use the current shelf registration or file new short form registration statements on Form S-3 until October 1, 2021, assuming the Company continues to timely file the Company’s required Exchange Act reports. In the interim, however, the Company may raise capital pursuant to a registration statement on Form S-1 or on a private placement basis.

The Company is using the net proceeds of this offering for working capital and general corporate purposes, which include, but are not limited to advancing the Company’s product portfolio, acquiring the rights to new product candidates and general and administrative expenses.

Common Stock Sales Agreements

The Company has a Common Stock Sales Agreement (the “Sales Agreement”) with H.C. Wainwright & Co., LLC (“HCW”). On July 19, 2019, the Company entered into an amendment to the Sales Agreement reducing the maximum amount that may be sold under the Sales Agreement to $20 million. As of March 31, 2021, subject to complying with its terms and conditions, $19.5 million remained available under the Sales Agreement.

On July 19, 2019, the Company entered into an Open Market Sale Agreement^SM with Jefferies LLC (the “Open Market Agreement”) in which the Company may elect to sell from time to time, at its option, up to $30 million in shares of the Company’s common stock, through Jefferies LLC, as sales agent. As of March 31, 2021, subject to complying with its terms and conditions, $28.4 million remained available under the Open Market Agreement.

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Underwriters providing for a 90-day “lock-up” period with respect to sales of specified securities, subject to certain exceptions. For the three months ended March 31, 2021, no shares were issued under either the Sales Agreement or the Open Market Agreement.

Stock purchase warrants activity for the three months ended March 31, 2021 is as follows:


	Number of	Weighted Average
	Warrants	Exercise Price
Outstanding at December 31, 2020	8,271,709	$	4.58
Issued	—	$	—
Exercised	—	$	—
Expired	—	$	—
Outstanding at March 31, 2021	8,271,709	$	4.58
Exercisable at March 31, 2021	8,271,709	$	4.58

All outstanding warrants are equity classified.

13. Net Loss Per Share

The following table sets forth the basic and diluted net loss per share computation and provides a reconciliation of the numerator and denominator for the periods presented:


	Three Months Ended
(In thousands, except per share data)	March 31, 2021		March 31, 2020
Numerator:
Net loss attributable to CASI Pharmaceuticals, Inc.	$	(13,883)	$	(8,441)
Denominator:
Weighted average number of common shares		124,825		98,773
Denominator for basic and diluted net loss per share calculation		124,825		98,773
Net loss per share
— Basic and diluted	$	(0.11)	$	(0.09)

As of March 31, 2021, and 2020, outstanding stock options totaling 15,989,238 and 15,815,052, respectively, and outstanding warrants totaling 8,271,709 and 9,761,416, respectively, were anti-dilutive, and therefore, were not included in the computation of weighted average shares used in computing diluted loss per share.

14. Stock-Based Compensation

As of March 31, 2021, a total of 10,722,923 shares remained available for grant under the Company’s 2011 Long-Term Incentive Plan.

The Company’s net loss for the three months ended March 31, 2021 and 2020 includes $2.0 million and $1.9 million, respectively, of non-cash compensation expense related to the Company’s share-based compensation awards. The compensation expense related to the Company’s share-based compensation arrangements is recorded as components of general and administrative expense, selling and marketing expense, and research and development expense, as follows:


	Three Months Ended March 31,
(In thousands)	2021		2020
Research and development	$	75	$	116
Sales and Marketing		33		—
General and administrative		1,890		1,789
Share-based compensation expense	$	1,998	$	1,905

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Compensation expense related to stock options is recognized over the requisite service period, which is generally the option vesting term of up to five years. Awards with performance conditions are expensed when it is probable that the performance condition will be achieved. For the three month periods ended March 31, 2021 and 2020, $26,000 and $21,000 was expensed for stock option awards with performance conditions that were probable during the period, respectively.

The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of service based and performance-based stock options granted to employees. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an award. These assumptions include the risk-free interest rate, expected dividend yield, expected volatility, and the expected life of the award.

Following are the weighted-average assumptions used in valuing the stock options granted to employees during the three month periods ended March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020
Expected volatility	80.43	%	75.84	%
Range of risk free interest rate	0.72% to 0.76	%	1.77	%
Expected term of option	6.25	years	6.25	years
Expected dividend yield	0.00	%	0.00	%

The weighted average fair value of stock options granted during the three month periods ended March 31, 2021 and 2020 were $2.45 and $2.10, respectively.

A summary of changes in options under the Company’s stock option plans during the three month period ended March 31, 2021 is as follows:


		Weighted Average
	Number of Options	Exercise Price
Outstanding at December 31, 2020	16,746,238	$	2.71
Exercised	—	$	—
Granted	395,000	$	3.55
Expired	(331,500)	$	4.81
Forfeited	(820,500)	$	2.63
Cancelled	—	$	—
Outstanding at March 31, 2021	15,989,238	$	2.69
Vested and expected to vest at March 31, 2021	15,989,238	$	2.69
Exercisable at March 31, 2021	9,465,817	$	2.29

Cash received from option exercises under all share-based payment arrangements for the three month periods ended March 31, 2021 and 2020 was $0 million and $3.8 million, respectively.

15. Income Taxes

At December 31, 2020, the Company had a $2.1 million unrecognized tax benefit. The Company recorded a full valuation allowance on the deferred tax asset after offsetting unrecognized tax benefit recognized in the consolidated financial statements as of December 31, 2020.

During the three months ended March 31, 2021, there were no material changes to the measurement of unrecognized tax benefits in various tax jurisdictions.

16. Fair Value Measurements

The majority of the Company’s financial instruments (consisting of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, notes payable and bank borrowings) are carried at cost which approximates their fair values due to the

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short-term nature of the instruments. The Company’s investments in equity securities are carried at fair value, and investments in convertible loans are carried at fair value (see Note 4).

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

●

Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

●

Level 2—Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities.

●

Level 3—Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the hierarchy.

The Company has equity investments in the common stock of two publicly traded companies. The Company’s investments in these equity securities are carried at their estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4). The fair value of the common stock is based on quoted market price for the investees’ common stock, a Level 1 input.

The Company has an equity investment in the warrants of a publicly traded company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4). The fair value of the warrants was measured using observable market-based inputs other than quoted prices in active markets for identical assets or liabilities, level 2 inputs. The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of warrants. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the fair value determination of a warrant.

The Company has an investment in the convertible debt of a privately held UK Company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4) using Level 3 input.

The Company has an investment in the convertible debt of a privately held California Company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4) using Level 3 input.

The following tables present the Company’s financial assets and liabilities accounted for at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, by level within the fair value hierarchy:


(In thousands)	Fair Value at
Description	March 31, 2021		Level 1		Level 2		Level 3
Investments in Current and non-Current Assets
Investments in common stock	$	10,948	$	10,948	$	—	$	—
Investment in warrants -Designated as investment measured at FVTPL	$	769	$	—	$	769	$	—
Investment in convertible loan-AFS	$	169	$	—	$	—	$	169
Investment in convertible loan-Designated as investment measured at FVTPL	$	5,500	$	—	$	—	$	5,500

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(In thousands)	Fair Value at
Description	December 31, 2020		Level 1		Level 2		Level 3
Investments in Current and non-Current Assets
Investments in common stock	$	9,309	$	9,309	$	—	$	—
Investment in warrants-Designated as investment measured at FVTPL		840	$	—	$	840	$	—
Investment in convertible loan-AFS	$	83	$	—	$	—	$	83

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company has no financial assets and liabilities that are measured at fair value on a non- recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has no non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company has no non-financial assets and liabilities that are measured at fair value on a non- recurring basis.

17. Related Party Transactions

Juventas. On July 1, 2019 the Company entered into a one-year equipment lease with Juventas in the amount of RMB 80,000 ($15,000) a month, which is classified as an operating lease. Transactions with Juventas are considered to be related party transactions as the Company’s CEO and Chairman is the chairman and one of the founding shareholders of Juventas. In August 2020, the lease was renewed for another year retroactive to July 1, 2020 with the same monthly lease income. During the three months ended March 31, 2021, the Company recognized lease income of RMB 240,000 and expects to recognize RMB 240,000 of additional lease income related to this lease through June 30, 2021, at which time the lease expires. The lease can be extended for one more year.

Spectrum/Acrotech. In 2018, the Company entered into commercial purchase obligation commitments for EVOMELA® from Spectrum Pharmaceuticals, Inc. (“Spectrum”), a 6.8% stockholder of the Company, totaling $9.2 million under a short-term supply agreement for EVOMELA®. The amount due to Spectrum was $0.2 million as of December 31, 2019 which was paid in 2020. There have been no transactions with Spectrum during the three months ended March 31, 2021. The Company also accrued $2.6 million for material costs related to EVOMELA® during the year ended December 31, 2019. As of March 31, 2021, all amounts due to Spectrum have been settled.

BioCheck. In June 2019, the Company entered into a one-year agreement primarily for the sublease of certain office and lab space with BioCheck Inc. (“BioCheck”) in the amount of $60,000 ($5,000 a month), which is classified as an operating lease. Transactions with BioCheck are considered to be related party transactions because the Company’s Chairman and CEO is also the Chairman of BioCheck. Transactions with ETP, parent of BioCheck, and a more than 5% shareholder of the Company, are also considered to be related party transactions because Dr. Wei-Wu He is also the chairman of ETP.

Since the Company required additional office space, in January 2020, the agreement was amended for annualized rents in the amount of $144,000 ($12,000 a month) with a stipulation that the new rent was retroactive to October 1, 2019. The lease expires on June 9, 2021. The Company has provided BioCheck a notification of non-renewal as per the lease agreement. During the three months ended March 31, 2021, the Company recognized rent expense of $36,000 and expects to recognize $27,000 of additional rent expense in 2021 related to the remainder of this lease.

March 2021 Underwritten Public Offering Transactions. On March 26, 2021, the Company closed an underwritten public offering of 15,853,658 shares of the Company’s common stock (the “Offering”) at a price to the public of $2.05 per share. The gross proceeds to CASI from the Offering were $32.5 million before deducting the underwriting discounts and commissions and offering expenses payable by CASI.

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ETP Global Fund L.P. (“ETP Global”), whose founding and managing member is CASI's Chairman and CEO, purchased shares of common stock in the Offering at the public offering price and on the same terms as the other purchasers in the Offering. ETP Global, which is a current shareholder of CASI, purchased 3,000,000 shares at the public offering price of $2.05 per share for a total of $6.15 million.

18. Commitments

In conjunction with the Cleave agreement entered into during 2021 (see Note 2), the Company is responsible for certain milestone and royalty payments. As of March 31, 2021, no milestones have been achieved.

In conjunction with the BioInvent agreement entered into during 2020 (see Note 2), the Company is responsible for certain milestone and royalty payments. As of March 31, 2021, no milestones have been achieved.

In conjunction with the Black Belt agreement entered into during 2019 (see Note 2), the Company is responsible for certain milestone and royalty payments. As of March 31, 2021, no milestones have been achieved.

In conjunction with the Pharmathen agreement entered into during 2019 (see Note 2), the Company is responsible for one remaining milestone payment. As of March 31, 2021, the remaining milestone has not been achieved.

In conjunction with the Laurus Labs agreement entered into during 2018, the Company is responsible for certain remaining milestone payments. As of March 31, 2021, the remaining milestones have not been met.

In November 2019, CASI Wuxi entered into a lease agreement for the right to use state-owned land in China for the construction of a manufacturing facility. On August 27, 2020, CASI Wuxi entered into a Construction Project Contract (the "Construction Contract") with China Electronic System Engineering No. 2 Construction Co., Ltd. ("China Engineering"). Pursuant to the Construction Contract, CASI Wuxi will pay a contract price of RMB 74,588,000 (equivalent to $10,923,000) to retain China Engineering to complete the phase 1 project of CASI Wuxi's research and development production base, consisting of construction and installation of a combined factory building, warehouse, guard house and public works. The estimated completion date is October 2023.

The Company is subject in the normal course of business to various legal proceedings in which claims for monetary or other damages may be asserted. Management does not believe such legal proceedings, unless otherwise disclosed herein, are material.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

CASI Pharmaceuticals, Inc. (“CASI,” the “Company,” or “we” or "our") (Nasdaq: CASI) is a U.S. biopharmaceutical company focused on developing and commercializing innovative therapeutics and pharmaceutical products in China, the United States, and throughout the world. The Company is focused on acquiring, developing and commercializing products that augment its hematology oncology therapeutic focus as well as other areas of unmet medical need. The Company is executing its plan to become a biopharmaceutical leader by launching medicines in the greater China market, leveraging its China-based regulatory, clinical and commercial competencies and its global drug development expertise.

●

BI-1206 is an antibody which has a novel mode-of-action, blocking the inhibitory antibody checkpoint receptor FcγRIIB to unlock anti-cancer immunity in both hematological malignancies and solid tumors for which the Company has licensed exclusive greater China rights from BioInvent International (“BioInvent”). AB BI-1206 is being investigated by BioInvent in a Phase 1/2 trial, in combination with anti-PD1 therapy Keytruda® (pembrolizumab), in solid tumors, and in a Phase 1/2a trial in combination with MabThera® (rituximab) in patients with relapsed/refractory non-Hodgkin lymphoma (NHL). BioInvent International AB, released positive interim results from its Phase 1/2a trial that suggests that novel anti-FcyRIIB antibody BI-1206 restores activity of rituximab in patients with relapsed/refractory non-Hodgkin’s lymphoma. An FDA End of Phase 1 meeting for the NHL development program is planned for the third quarter of 2021.

●

CB-5339 is a novel VCP/p97 inhibitor focused on valosin-containing protein (VCP)/p97 as a novel target in protein homeostasis, DNA damage response and other cellular stress pathways for therapeutic use in cancer. The Company entered into an exclusive license in March 21, 2021 with Cleave Therapeutics, Inc. (Cleave”) for the development and commercialization of CB-5339 in Mainland China, Hong Kong, Macau and Taiwan. CB-5339, an oral second-generation, small molecule VCP/p97 inhibitor, is being evaluated in a Phase 1 clinical trial in patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS), and in a Phase 1 clinical trial of patients with solid tumors and lymphomas.

●

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CASI has built a fully integrated biopharmaceutical company dedicated to the successful development and commercialization of innovative and other therapeutic products. The Company will continue to pursue building a robust pipeline of drug candidates for development and commercialization in China as our primary market, and if rights are available for the rest of the world. For in-licensed products, we use a market-oriented approach to identify pharmaceutical/biotechnology candidates that we believe have the potential for gaining widespread market acceptance, either globally or in China, and for which development can be accelerated under our drug development strategy. We have focused on US/EU approved product candidates, and product candidates with proven targets or product candidates that have reduced clinical risk with a greater emphasis on innovative therapeutics. Our business development strategy is currently focused on acquiring additional targeted drugs and immuno-oncology therapeutics through licensing that will expand our hematology-oncology franchise. In many cases our business development strategy includes direct equity investments in the licensor company.

We believe our China operations offer a significant market and growth potential due to the extraordinary increase in demand for high quality medicines coupled with regulatory reforms in China that facilitate the entry of new pharmaceutical products into the country. We will continue to in-license clinical-stage and late-stage drug candidates, and leverage our cross-border operations and expertise, and hope to be the partner of choice to provide access to the China market. We expect the implementation of our plans will include leveraging our resources and expertise in both the U.S. and China so that we can maximize regulatory, development and clinical strategies in both countries.

Since its inception in 1991, the Company has incurred significant losses from operations and, as of March 31, 2021, has incurred an accumulated deficit of $583.8 million. In 2012, with new leadership, the Company shifted its business strategy to China and has since built an infrastructure in China that includes sales and marketing, medical affairs, regulatory and clinical development and in the foreseeable future, manufacturing. In 2014, the Company changed its name to “CASI Pharmaceuticals, Inc.” The majority of the Company’s operations are now located in China. The Company expects to continue to incur operating losses for the foreseeable future due to, among other factors, its continuing clinical and development activities and expansion of our operations. Our operations in China are conducted primarily through two of our subsidiaries, CASI Pharmaceuticals (China) Co., Ltd. (“CASI China”) and CASI Pharmaceuticals (Wuxi) Co., Ltd. (“CASI Wuxi”). Our Beijing office is primarily responsible for our day-to-day operations and our commercial team of over 80 hematology and oncology sales and marketing specialists based in China. CASI Wuxi is part of the long-term strategy to support our future clinical and commercial manufacturing needs, to manage our supply chain for certain products, and to develop a GMP manufacturing facility in China.

Impact of COVID-19

The Company has experienced operational interruptions as a result of COVID-19, including the temporary disruption of operations in China during the first six months of 2020 due to a Chinese government mandated quarantine protocol, including mandatory business closures, social distancing measures, and various travel restrictions. Although the Company's operations in China have normalized, there can be no assurance that such operations will continue to do so or that there will not be a renewed outbreak of COVID-

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19 due to new variants of the virus or other significant contagious diseases in China or elsewhere. To the extent that such events occur, demand for the Company's products may decline, and the Chinese government or other governments may impose additional restrictions resulting in further shutdowns, further work restrictions, and the disruption of the Company’s supply and distribution channels.

The COVID-19 pandemic has adversely affected, and may continue to adversely affect, the economies and financial markets of many countries, which may result in a period of regional, national, and global economic slowdown or regional, national, or global recessions that could affect the Company's ability to continue to commercialize and expand distribution of EVOMELA® (Melphalan For Injection) or other drugs in the Company’s existing product pipeline. The effectiveness of the Company's sales teams may be negatively impacted by the lack of travel and their reduced ability to engage with decision-makers. In the first quarter 2020, during which the peak of the pandemic occurred in China, the Company experienced some disruptions to their EVOMELA® marketing and sales activities due to travel restrictions and the prioritization of hospitals and physicians to attend to patients with COVID-19 infection. During the variants of remainder of 2020, operations have returned to expected levels; however, there can be no assurance that such restrictions will not be imposed again. In addition, economic and other uncertainties may adversely affect other parties' willingness to negotiate and execute product licenses and thus hamper the Company's ability to in-license clinical-stage and late-stage drug candidates in China or elsewhere.

The Company currently relies on a single source for its supply of EVOMELA® . Due to COVID-19, the Company experienced a disruption to its supply chain for EVOMELA® . That disruption, along with a change in 2020 in the manufacturer of EVOMELA® , contributed to a decrease in the Company's revenue for the second quarter of 2020. The Company has returned to expected levels of sales as indicated by the increase in sales in the second half of 2020.

During the second quarter of 2020, the Company completed the plan to change the manufacturing site for EVOMELA® to an alternative manufacturer that has significantly reduced the cost of revenue for the third quarter of 2020. Due to the manufacturer change, and to the effects of COVID-19 to our marketing and sales activities and supply chain, revenues for the second quarter of 2020 experienced an expected temporary decrease. We have returned to expected levels of sales as indicated by the increases in sales in the second half of 2020, and first quarter of 2021.

Our partner, Juventas, experienced some delay in the start of the CNCT19 clinical trials in the first quarter of 2020 but the Juventas CNCT-19 clinical trials program was back on track with both clinical trials underway in the second half of 2020. The COVID-19 pandemic impacted our targeted start time of our CID-103 trial due to the lock down of many medical facilities in Europe. Nevertheless, the Company has achieved in May 2021, the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, in patients with previously treated, relapsed or refractory multiple myeloma. The study is designed to assess the safety, tolerability, pharmacology and clinical activity of CID-103. As the pandemic continues to unfold, the extent of the pandemic’s effect on our operations will depend in large part on future developments, which cannot be predicted with confidence at this time.

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RESULTS OF OPERATIONS

Three months ended March 31, 2021 Compared with Three months ended March 31, 2020

Operating Items

Revenues

Product Sales

Revenues consist of product sales of EVOMELA® that launched during August 2019. Revenue was $5.7 million for the three months ended March 31, 2021 compared to $3.4 million for the three months ended March 31, 2020. Revenues increased in the first quarter of 2021 as compared to same quarter in 2020 due to the continued growth in EVOMELA® sales. The increase in the first quarter of 2021 as compared to the same quarter in 2020 was also partially due to product sales which during the first quarter of 2020 were adversely affected by restrictions imposed by Chinese authorities in response to COVID-19.

Lease Income

Lease income consists primarily of an equipment lease with Juventas (a related party). Lease income was $36,000 for the three months ended March 31, 2021 compared to $34,000 for the three months period ended March 31, 2020.

Operating Expenses

Cost of Revenues

Cost of revenues consists primarily of the cost of inventories of EVOMELA® and sales-based royalties related to the sale of EVOMELA®.

Costs of revenues were $2.4 million for the three months ended March 31, 2021 compared to $3.2 million for the three months ended March 31, 2020. The decrease in cost of revenues is due to the new alternate manufacturer now in place, resulting in a considerable decrease in the unit cost of inventories of EVOMELA®. The decrease was partially offset by the continued growth in EVOMELA® sales.

Research and Development Expenses

Research and development (R&D) expenses consist primarily of compensation and other expenses related to research and development personnel, research collaborations, costs associated with internal and contract preclinical testing and clinical trials of our product candidates, including the costs of manufacturing drug substance and drug product, regulatory maintenance costs, facilities expenses, and amortization expense of acquired ANDAs.

Research and development expenses for the three months ended March 31, 2021 were $5.3 million, compared with $3.0 million for the three months ended March 31, 2020. The increases in R&D expenses are primarily due to an increase in R&D expenses incurred related to the development of CID-103.

Included in our research and development expenses for the three months ended March 31, 2021 are direct project costs of $3.5 million for preclinical development activities, primarily related to our CID-103 program, $0.5 million related to our ANDAs acquired in 2018, and $0.4 million for drugs in-licensed from Acrotech (previously Spectrum).

Included in our research and development expenses for the three months ended March 31, 2020 are direct project costs of $1.3 million for preclinical development activities primarily related to our CID-103 program, $0.5 million related to our ANDAs acquired in 2018, and $0.5 million for drugs in-licensed from Acrotech (previously Spectrum).

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General and Administrative Expenses

General and administrative expenses include compensation and other expenses related to executive, finance, business development and administrative personnel, professional services, investor relations and facilities.

General and administrative expenses for the three months ended March 31, 2021 were $5.5 million, compared with $4.1 million for the three months ended March 31, 2020. The increase in general and administrative expenses was primarily due to an increase in headcount and payroll expenses as the Company continues to build its sales and marketing force.

Selling and Marketing Expenses

Selling and marketing expenses are the direct costs related to the sales of EVOMELA® that was launched in China in August 2019, such as sales force salaries, commissions, advertising, and other marketing efforts.

Selling and marketing expenses for the three months ended March 31, 2021 were $2.7 million, compared with $1.3 million for the three months ended March 31, 2020.

Gain on disposal of intangible assets

There was no gain (loss) on disposal of intangible assets for the three months ended March 31, 2021.

Gain on disposal of intangible assets for the three months ended March 31, 2020 was $0.5 million. The gain on disposal is due to the $0.5 million gain on the sale of seven ANDAs during the first quarter of 2020.

Acquired in-process Research and Development

Acquired in-process R&D expenses for the three months ended March 31, 2021 was $5.5 million, compared to $1.1 million for the three months ended March 31, 2020. The amount reported for the three months ended March 31, 2021 was the upfront payment to Cleave for the development of CB-5339. The three months ended March 31, 2020 amount relates to milestone fees paid to Pharmathen’s due to the first submission to the National Medical Products Administration in China for Octreotide which was achieved in the first quarter of 2020.

Non-Operating Items

Interest income, net

Interest income, net for the three months ended March 31, 2021 was $106,000 compared with $190,000 for the three months ended March 31, 2020. The decrease in interest income, net, is mainly due to the decrease in rates of return from available cash management strategies due to the current economic environment.

Other income

Other income for the three months ended March 31, 2021 was $20,000 compared with $0 for the three months ended March 31, 2020. Other income of $12,000 recorded relates to the April 2020 CASI Wuxi’s receipt of RMB 15.9 million (equivalent to $2.2 million) from the Jiangsu Province Wuxi Huishan Economic Development Zone as government grant for the development of leased state-owned land in China for the construction of a manufacturing facility. The grant was recorded as deferred income in April 2020. The grant is been amortized over the term of the lease of the land.

Foreign exchange gains

Foreign exchange gains for the three months ended March 31, 2021 were $219,000 compared with gains of $363,000 for the three months ended March 31, 2020. The foreign exchange losses and gains are primarily due to USD denominated cash accounts that are held by our Chinese subsidiaries.

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Change in fair value of investment in equity securities

The changes in fair value of investments in equity securities for the three months ended March 31, 2021 and 2020 were gains of $1,568,000 and losses of $15,000, respectively. The changes represent unrealized gains and losses on the Company’s equity investment securities.

LIQUIDITY AND CAPITAL RESOURCES

To date, we have been engaged primarily in research and development activities. As a result, we have incurred and expect to continue to incur operating losses for the foreseeable future. Based on our current plans, we expect our current available cash and cash equivalents to meet our cash requirements for at least through May 13, 2022.

We will require significant additional funding to fund operations until such time, if ever, we become profitable. We intend to augment our cash balances by pursuing other forms of capital infusion, including strategic alliances or collaborative development opportunities with organizations that have capabilities and/or products that are complementary to our capabilities and products in order to continue the development of our potential product candidates that we intend to pursue to commercialization. If we seek strategic alliances, licenses, or other alternative arrangements, such as arrangements with collaborative partners or others, to raise further financing, we may need to relinquish rights to certain of our existing product candidates, or products we would otherwise seek to develop or commercialize on our own, or to license the rights to our product candidates on terms that are not favorable to us.

We will continue to seek to raise additional capital to fund our commercialization efforts, expansion of our operations, research and development, and for the acquisition of new product candidates, if any. We intend to explore one or more of the following alternatives to raise additional capital:

●

selling additional equity securities;

●

out-licensing product candidates to one or more corporate partners;

●

completing an outright sale of non-priority assets; and/or

●

engaging in one or more strategic transactions.

We also will continue to manage our cash resources prudently and cost-effectively.

There can be no assurance that adequate additional financing under such arrangements will be available to us on terms that we deem acceptable, if at all. If additional funds are raised by issuing equity securities, dilution to existing stockholders may result, or the equity securities may have rights, preferences, or privileges senior to those of the holders of our common stock. If we fail to obtain additional capital when needed, we may be required to delay or scale back our commercialization efforts, our advancement of the Spectrum products, and the ANDA products, or plans for other product candidates, if any.

At March 31, 2021, we had cash and cash equivalents of $68.1 million, with working capital of $79.0 million. As of March 31, 2021, the Company had a consolidated cash balance of $68.1 million; $45.4 million was held by the Company (excluding its subsidiaries), and the Company’s subsidiaries held $4.8 million (CASI China), $17.7 million (CASI Wuxi), and $0.2 million (other subsidiaries).

FINANCING ACTIVITIES

March 2021 Underwritten Public Offering

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Sales Agreements

On February 23, 2018, the Company entered into a Common Stock Sales Agreement (the “Sales Agreement”) with H.C. Wainwright & Co., LLC (“HCW”). Pursuant to the terms of the Sales Agreement, the Company may sell from time to time, at its option, shares of the Company’s common stock, through HCW, as sales agent. On July 19, 2019, the Company entered into an amendment to the Sales Agreement reducing the maximum amount that may be sold under the Sales Agreement to $20 million.

For the three months ended March 31, 2021, no shares were issued pursuant to the Sales Agreement, and a total of 143,248 shares, resulting in net proceeds to the Company of $475,000 have been issued since inception. As of March 31, 2021, subject to complying with its terms and conditions, $19.5 million remained available.

On July 19, 2019, the Company entered into an Open Market Sale Agreement^SM with Jefferies LLC (the “Open Market Agreement”). Pursuant to the terms of the Open Market Agreement, the Company may elect to sell from time to time, at its option, up to $30 million in shares of the Company’s common stock, through Jefferies LLC, as sales agent.

For the three months ended March 31, 2021, no shares were issued pursuant to the terms of the Open Market Agreement, and a total of 493,000 shares, resulting in net proceeds to the Company of $1,539,000, have been issued since inception. As of March 31, 2021, subject to complying with its terms and conditions, $28.4 million remained available under the Sales Agreement.

The Offering is being made by means of a written prospectus supplement and accompanying prospectus forming part of a shelf registration statement on Form S-3, previously filed with the SEC on November 20, 2020, which was declared effective on December 2, 2020. We have filed a final prospectus supplement, dated March 24, 2021, with the SEC relating to the Offering. Pursuant to the Underwriting Agreement, our directors and executive officers entered into agreements in substantially the form agreed to by the Underwriters providing for a 90-day “lock-up” period with respect to sales of specified securities, subject to certain exceptions. For the three months ended March 31, 2021, no shares were issued under either the Sales Agreement or the Open Market Agreement.

INTEREST RATE CHANGES

Management does not believe that our working capital needs are sensitive to changes in interest rates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s Chief Executive Officer and President/Principal Financial Officer have concluded that the Company’s disclosure controls and procedures as

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defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) were effective as of March 31, 2021 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and President/Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject in the normal course of business to various legal proceedings in which claims for monetary or other damages may be asserted. Management does not believe such legal proceedings, unless otherwise disclosed herein, are material.

ITEM 1A. RISK FACTORS

For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors discussion set forth in Item 1A of CASI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the information under “Special Note Regarding Forward-Looking Statements” included in this report. There have been no material changes to our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

EXHIBIT INDEX

1.1		Underwriting Agreement dated March 24, 2021 between CASI and Oppenheimer & Co., Inc. (incorporated by reference from Exhibit 1.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 26, 2021)
3.1		Amended and Restated Bylaws dated September 10, 2020 (incorporated by reference from Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 10, 2021)
10.1		License and Development Agreement for CB-5339 by and between Cleave Therapeutics, Inc. and CASI Pharmaceuticals, Inc. dated March 5, 2021 +**
31.1		Rule 13a-14(a) Certification of Chief Executive Officer**
31.2		Rule 13a-14(a) Certification of Principal Financial Officer**
32.1		Section 1350 Certification of Chief Executive Officer**
32.2		Section 1350 Certification of Principal Financial Officer**
101.INS		Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.**
101.SCH		Inline XBRL Taxonomy Extension Schema Document.**
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.**
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.**
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.**
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.**
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith).

+ Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(B)(10)(IV) of Regulation S-K because it (i) is not material and (ii) would likely cause competitive harm to CASI Pharmaceuticals, Inc. if publicly disclosed.

**Filed Herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		CASI PHARMACEUTICALS, INC.
		(Registrant)


Date: May 13, 2021		/s/ Wei-Wu He
		Wei-Wu He
		Chief Executive Officer


Date: May 13, 2021		/s/ Larry (Wei) Zhang
		Larry (Wei) Zhang
		Principal Financial Officer