What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-03-15 compared with 2022-03-15 · 139 added, 181 removed, 215 unchanged (60% of the section changed)

14 unchanged sentences

Recent Sales of Unregistered Securities

Securities Purchase Agreement

On February 12, 2021, we entered into a stock purchase agreement with certain existing investors for $15.0 million of shares of our common stock, with an initial closing for certain investors held simultaneously with the closing of our February 2021 public offering and a subsequent closing for certain additional investors.

Pursuant to the terms of the private placement, we issued 1,153,840 shares of common stock at a price of $13.00 per share, which was the price per share of our February 2021 public offering (the Private Placement Shares).

We received the full proceeds from the sale and did not pay any underwriting discounts or commissions with respect to the shares of common stock that sold in the concurrent private placement.

Proceeds from the private placement will be used primarily to fund activities related to our internal discovery research, other pipeline candidates and to fund the continued development of our gamma delta T cell platform;

the external costs for the development of ADI-001 through the completion of a Phase 1 dose expansion study for ADI-001 in NHL;

and the remainder, if any, to fund working capital and other general corporate purposes.

The private placement was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering.

Pursuant to the terms of the private placement, we subsequently filed a Registration Statement on Form S-3 (File No.

333-256088), dated May 21, 2021, pursuant to which we registered the Private Placement Shares.

We have agreed to maintain the effectiveness of the registration statement until such time as all Private Placement Shares covered by the registration statements have been sold or may be sold under Rule 144 without manner of sale restrictions or volume limitations, subject to certain exceptions.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

8 unchanged sentences

We are advancing a pipeline of “off-the-shelf”

gamma delta T cells, engineered with chimeric antigen receptors (CAR) and T cell receptor-like antibodies (TCRL), to enhance selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and improve persistence for durable activity in patients.

gamma delta T cells, engineered with chimeric antigen receptors (CARs) and chimeric adaptors (CAds), to enhance selective tumor targeting and facilitate innate and adaptive anti-tumor immune response for durable activity in patients.

Our approach to activate, engineer and manufacture allogeneic gamma delta T cell product candidates derived from the peripheral blood cells of unrelated donors allows us to generate new product candidates in a rapid and cost-efficient manner.

Our lead product candidate, ADI-001, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is in an ongoing Phase 1 study for the treatment of Non-Hodgkin's Lymphoma (NHL).

Our pipeline also includes ADI-002, an allogeneic gamma delta CAR-T cell therapy expressing a GPC3-targeted CAR and a cell intrinsic soluble form of interluiken-15 (IL-15), for the treatment of solid tumors In addition, we are engaged in discovery and preclinical stage activities directed to expansion of our pipeline of product candidates for both hematological malignancies and solid tumors.

Our proprietary engineering and manufacturing process begins with isolating and expanding gamma delta T cells from the blood of unrelated donors, and results in the potential to treat up to 1,000 patients per batch depending on dosing and the CAR target.

The potential to administer product candidates based on gamma delta T cells to patients without inducing a graft versus host immune response could mean that our products can potentially be used as “off-the-shelf”

Our allogeneic "off-the-shelf" manufacturing process is designed to allow product from unrelated donors to be stored and sold on demand to treat patients without inducing a graft versus host immune response.

This is in contrast to products based on alpha beta T cells, which either must be manufactured for each patient from his or her own T cells, or require significant gene editing to manufacture if the T cells are derived from donors that are unrelated to the patient.

Based on what we believe is the unique potential of these cells and associated modifications, we are initially developing product candidates in oncology, both for hematological malignancies and for solid tumors.

In October 2020, the U.S.

Food and Drug Administration (FDA) cleared our Investigational New Drug (IND) application for ADI-001, our lead product candidate, for the treatment of Non-Hodgkin’s Lymphoma (NHL).

In March 2021, we initiated the first-in-human clinical trial to assess safety and efficacy of ADI-001 in NHL patients.

The Phase 1 study for ADI-001 will enroll up to 80 late-stage NHL patients at a number of cancer centers across the United States.

Our lead product candidate, ADI-001, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is in an ongoing Phase 1 study for the treatment of relapsed or refractory B-cell non-Hodgkin’s lymphoma (NHL).

Our pipeline also includes ADI-925, a novel engineered CAd gamma delta T cell product candidate targeting tumor stress ligands.

Our pipeline has several additional internal gamma delta T cell therapy programs in discovery and preclinical development for both hematological malignancies and solid tumors.

We expect to continue to develop product candidates in oncology based on the gamma delta T cell platform using either previously validated antigens or those that we identify and target using CAR, CAd and other technology.

In March 2021, we initiated the first-in-human Phase 1 trial to assess safety and efficacy of ADI-001 in NHL patients.

The Phase 1 study for ADI-001 may enroll up to 80 late-stage NHL patients at a number of cancer centers across the United States.

The study includes a dose escalation portion followed by dose expansion cohorts to explore the activity of ADI-001 in multiple subtypes of NHL.

In December 2021, we announced positive interim clinical data from the initial dose escalation portion of this study.

In April 2022, the FDA granted Fast Track Designation for ADI-001 for NHL.

In December 2022, interim results from the trial were presented at the American Society of Hematology (ASH) annual meeting.

See “—

ADI-001, an Anti-CD20 CAR Gamma Delta T Cell Product Candidate Targeting NHL—Results from Ongoing ADI-001 Phase 1 Trial ”

section of this Annual Report on Form 10-K for information regarding the results.

Subject to further patient follow-up, we plan to discuss with the FDA during the second quarter of 2023 and later with the EMA on a path forward for a potential pivotal program for ADI-001.

We intend to initiate a first potential pivotal study in post-CAR T large B-cell lymphoma (LBCL) patients in the second half of 2023, potentially in the third quarter.

We also expect to provide an additional clinical update for the ADI-001 Phase 1 study in the first half of 2023.

Recent Developments

Public Offerings and Private Placement

In February 2021, we completed an underwritten public offering of 10,575,513 shares of our common stock, including the exercise in full by the underwriters of their option to purchase up to an additional 1,344,743 shares of common stock at a public offering price of $13.00 per share.

The net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses were approximately $128.8 million.

In connection with the February 2021 offering, we also entered into a stock purchase agreement with certain existing investors to purchase 1,153,840 shares of our common stock for $15.0 million at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.

We received the full proceeds from the sale and did not pay any underwriting discounts or commissions with respect to the shares of common stock that sold in the concurrent private placement.

Pursuant to the terms of the private placement, we subsequently filed a Registration Statement on Form S-3 (File No.

333-256088), dated May 21, 2021, pursuant to which we registered the Private Placement Shares.

In December 2021, we completed an underwritten public offering of 7,187,500 shares of our common stock, including the exercise in full by the underwriters of their option to purchase up to an additional 937,500 shares of common stock, at a public offering price of $14.00 per share.

The net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses were approximately $94.2 million.

At-the-Market (ATM) Offering

On March 12, 2021, we entered into a Sales Agreement (the 2021 Sales Agreement) with JonesTrading Institutional Services (the Agent), pursuant to which we could sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent.

No shares were sold under the 2021 Sales Agreement as of December 31, 2021.

In connection with the 2021 Sales Agreement, we terminated a prior ATM program with Evercore Group L.L.C.

Wainwright & Co., L.L.C.

Loan Agreement

On October 21, 2021, we amended our Loan and Security Agreement (the Loan Agreement) with Pacific Western Bank (PacWest)(the Loan Amendment) under which PacWest will provide one or more Term Loans, as well as Non-Formula Ancillary Services which shall not exceed $5.5 million in the aggregate.

Non-Formula Ancillary Services are defined as automated clearinghouse transactions, corporate credit card services, letters of credit, or other treasury management services.

The aggregate sum of the outstanding Term Loans and Non-Formula Ancillary Services shall at no time exceed $15.0 million, which each Term Loan to be in an amount of not less than $1.0 million.

As of December 31, 2021, we had outstanding Non-Formula Ancillary Services of $4.4 million.

Accordingly, as of December 31, 2021, the Company has $10.6 million available under the Term Loan.

Pursuant to the Loan Amendment, the interest rate for the Term Loans shall be set at an annual rate equal to the greater of (i) 0.25% above the Prime Rate then in effect and (ii) 4.25%.

As of the date of this Annual Report on Form 10-K, we were in compliance with such covenants and had no indebtedness outstanding under the Loan Agreement.

Impact of COVID-19 Pandemic

In December 2019, a novel strain of coronavirus, COVID-19, was reported in China.

The spread of COVID-19 from China to other countries has resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic,”

or a worldwide spread of a new disease, on March 11, 2020.

Since then, COVID-19 has spread globally and new variants of the virus have emerged.

Many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.

The continued spread of COVID-19, despite progress in vaccination efforts, has resulted in significant governmental measures being implemented to control the spread of COVID-19 and its variants.

These measures may result in a period of business, supply, and drug product manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations.

In response to the COVID-19 pandemic, we tasked members of our Executive Leadership team, Human Resources, Facilities and Operations and Employee Communications to develop guidelines and processes intended to raise awareness of new health and well-being protocols and potentially helpful practices for cross-functional teamwork for our employees.

We implemented remote working and shift scheduling, provided our team members practical recommendations based on guidelines from the Centers for Disease Control and Prevention, State of California Department of Health Care Services, State of Massachusetts Department of Public Health, OSHA and other regional government entities.

In addition, we are committed to updating these recommendations and communicating new pertinent information when available.

While doing so we are sensitive to ensuring any guidance provided may vary by locality based on government orders and regulations.

On March 12, 2021, we entered into a Capital On Demand Sales Agreement (Sales Agreement) with JonesTrading Institutional Services LLC (Sales Agent), to provide for the offering, issuance and sale of our common stock from time to time in “at-the-market”

offerings (ATM Program).

In August 2022, pursuant to the Sales Agreement and subject to the limitations thereof, we sold an aggregate of 2,611,723 shares of common stock at $17.23 per share resulting in net proceeds to us of $43.4 million after deducting sales agent commissions and expenses.

On November 8, 2022, we filed a prospectus supplement (the New Prospectus) to the 2021 Shelf Registration Statement, which updated and superseded the Existing Prospectus.

The New Prospectus covered the offer and sale of up to $100.0 million of shares of our common stock from time to time through JonesTrading, acting as our sales agent, under the ATM Program, which includes the $30.0 million of shares of our common stock not sold pursuant to the Existing Prospectus and up to an additional $70.0 million of shares of our common stock.

Change Order for 1000 Bridge Parkway Construction

On March 18, 2022, our wholly-owned subsidiary Adicet Therapeutics, Inc.

(Adicet Therapeutics) entered into Change Order No.

3 (the Change Order No.

3) to a construction agreement between Adicet Therapeutics and CP Enterprises, Inc.

d/b/a CP Construction (CP Construction) (the Construction Agreement).

The Construction Agreement provides for pre-construction and construction services at our office and laboratory space at 1000 Bridge Parkway for consideration of approximately $13.8

million to CP Construction, including previous change orders.

The Change Order No.

3 increased the budget for the construction by approximately $5.3 million in order to build one GMP cell processing suite and one vector manufacturing suite in addition to controlled materials warehousing at 1000 Bridge Parkway.

Second Lease Amendment for 1200 Bridge Parkway

On June 16, 2022, Adicet Therapeutics entered into a second lease amendment with Westport Office Park, LLC (the Second Amendment).

The Second Amendment further amends the lease agreement, dated as of October 31, 2018, as amended on December 30, 2020, for the premises located at 1000 Bridge Parkway.

The Second Amendment expands the space leased by Adicet Therapeutics at 1000 Bridge Parkway to include a portion of 1200 Bridge Parkway, increasing Adicet Therapeutics’

leased space by 12,204 square feet (the Expansion Space).

Adicet Therapeutics will pay a monthly fee for the Expansion Space increasing annually from $73,224.00 to $78,439.38 over the 36 month term of the Second Amendment.

The Second Amendment also provides Adicet Therapeutics with an allowance to construct improvements to the Expansion Space.

Third Lease Amendment for Additional Tenant Improvement Allowance

On January 9, 2023, Adicet Therapeutics entered into a third lease amendment with Westport Office Park, LLC (the Third Amendment).

The Third Amendment further amends the lease agreement, dated as of October 31, 2018, as amended on December 30, 2020, for the premises located at 1000 Bridge Parkway.

The Third Amendment increases the tenant improvement allowance as of January 1, 2023 for an additional $3.0 million, and we expect to utilize the full allowance for the continued buildout of office and laboratory space at 1000 Bridge Parkway.

Per the terms of this amendment, this additional allowance will be repaid through equal monthly payments of principal amortization and interest on a monthly basis over the term of the lease at an interest rate of eight percent (8%) per annum.

We received the allowance on February 21, 2023.

COVID-19 Pandemic

Global events and macroeconomic conditions such as the COVID-19 pandemic have impacted and may continue to impact our business.

Thus far we have not experienced a significant disruption or delay in our operations as it relates to the clinical development of our drug candidates.

However, we anticipate that the impact of the COVID-19 pandemic may create difficulties in our clinical trials for a variety of reasons, including future regulations regarding, or the inability or unwillingness of patients to, travel to participate in clinical trials, or to participate in clinical trials that are administered in medical facilities that also treat COVID-19, potential delays in the FDA’s review and approval processes and/or shortages of medical supplies that may force medical professionals to focus on non-clinical procedures, including treatment of COVID-19.

The duration and ultimate impact of the ongoing COVID-19 pandemic on clinical trials generally, and on our trials particularly, is currently unknown.

In addition, the spread of COVID-19, which has caused a broad impact globally, may materially affect us economically.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction resulting from the spread of COVID-19 and its variants could materially affect our business.

Possible effects may also include absenteeism in our labor workforce, unavailability of products and supplies used in operations, and a decline in value of assets held by us, including property and equipment, and marketable debt securities.

However, we anticipate that the impact of the COVID-19 pandemic may continue to create difficulties in our clinical trials for a variety of reasons, including future regulations regarding, or the inability or unwillingness of patients to, travel to participate in clinical trials, or to participate in clinical trials that are administered in medical facilities that also treat COVID-19, potential delays in the FDA’s review and approval processes and/or shortages of medical supplies that may force medical professionals to focus on non-clinical procedures, including treatment of COVID-19.

The duration and ultimate impact of the COVID-19 pandemic on clinical trials generally, and on our trials particularly, is still unknown.

In addition, any resurgence of or spread of new variants of COVID-19 may materially affect us economically.

COVID-19 has resulted in, and a similar widespread pandemic could result in, significant disruption of global financial markets, including reduced ability to access capital, which could in the future negatively affect our liquidity.

A recession or market correction resulting from the spread of new COVID-19 variants could materially affect our business.

Financial Operations Overview

We have no products approved for commercial sale and do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for our product candidates, which we expect will not be for at least several years, if ever.

Our revenues to date are generated from our License and Collaboration Agreement with Regeneron Pharmaceuticals, Inc.

Our revenues to date have been generated from our License and Collaboration Agreement with Regeneron Pharmaceuticals, Inc.

(Regeneron) and the agreement referred to as the “Regeneron Agreement.”

The primary purpose of the Regeneron Agreement is to establish a strategic relationship to identify and validate appropriate targets and work together to develop a pipeline of engineered immune cell products (Collaboration ICPs) for the selected targets.

The Regeneron Agreement provides for the following:

(i) licenses to our technology, (ii) research and development services, (iii) services or obligations in connection with participation in the research committee, (iv) information sharing, and (v) manufacturing services to manufacture of Collaboration ICPs for the research programs.

The Regeneron Agreement provides Regeneron an option to obtain an exclusive, royalty-bearing development and commercial license under our intellectual property to develop and commercialize the optioned Collaboration ICPs ready for an IND submission.

We received a non-refundable upfront payment of $25.0 million from Regeneron upon execution of the Regeneron Agreement on July 29, 2016 and have received an aggregate of $20.0 million of additional payments for research funding from Regeneron as of December 31, 2022.

In addition, Regeneron may have to pay us additional amounts in the future consisting of up to an aggregate of $80.0 million of option exercise fees for a certain number of Collaboration ICPs.

Our obligations under the Regeneron Agreement were completed during the first quarter of 2022.

Regeneron may have to pay us additional amounts in the future consisting of up to an aggregate of $80.0 million of option exercise fees for a certain number of Interprofessional Collaboration Practices (ICPs).

On January 28, 2022, we received a payment of $20.0 million from Regeneron for exercise of its option to license exclusive rights to ADI-002 and Regeneron potentially has additional options to other Collaboration ICP targets under the Regeneron Agreement.

We declined to exercise our option to co-fund the development of ADI-002 with Regeneron, and accordingly, Regeneron must also pay us high single digit royalties as a percentage of net sales for ADI-002 or any other optioned ICPs to targets for which it has exclusive rights and low single digit royalties as a percentage of net sales on any non-ICP product comprising a target generated by us through the use of Regeneron’s proprietary mice.

We must pay Regeneron mid-single to low double digit royalties as a percentage of net sales of Collaboration ICPs to targets for which we have exercised exclusive rights, and low to mid-single digit royalties as a percentage of net sales of targeting moieties generated from our license to use Regeneron’s proprietary mice.

percentage of net sales of targeting moieties generated from our license to use Regeneron’s proprietary mice.

Royalties are payable until the longer of the expiration or invalidity of the licensed patent rights or 12 years from first commercial sale.

We use a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize under the Regeneron Agreement.

In applying the cost-based input method of revenue recognition, we use actual costs incurred relative to budgeted costs to fulfill the combined performance obligation.

Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as we complete our performance obligations over the research term of five years.

We used a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize under the Regeneron Agreement.

In applying the cost-based input method of revenue recognition, we used actual costs incurred relative to budgeted costs to fulfill the combined performance obligation.

Revenue was recognized based on actual costs incurred as a percentage of total budgeted costs as we completed our performance obligations over the research term.

A cost-based input method of revenue recognition requires us to estimate costs to complete our performance obligations, which requires significant judgment to evaluate assumptions related to cost estimates.

5 unchanged sentences

employee related costs, including salaries, benefits and stock-based compensation expenses for research and development employees;

costs incurred under agreements with consultants, contract manufacturing organizations (CMOs) and contract research organizations (CROs);

costs incurred under agreements with consultants, CDMOs and CROs;

lab materials, supplies, and maintenance of equipment used for research and development activities;

16 unchanged sentences

retention of key research and development personnel.

A change in the outcome of any of these variables with respect to the development of a product candidate could significantly change the costs, timing and viability associated with the development of that product candidate.

For example, if the FDA, or another regulatory authority, were to require us to conduct clinical trials beyond those that it currently anticipates will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.

We are focusing substantially all of our resources on the development of our product candidates.

We expect our research and development expenses to increase substantially during the next few years, as we seek to initiate clinical trials for our product candidates, complete our clinical program, pursue regulatory approval of our product candidates and prepare for a possible commercial launch.

Predicting the timing or the cost to complete our clinical program or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control.

For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans.

Adequate funding may not be available to us on acceptable terms or at all.

Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies.

If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to other rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.

General and Administrative

General and administrative expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock based compensation expenses, professional fees for legal, consulting, accounting and tax services, allocated overhead expenses, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase for the foreseeable future due to anticipated expenses related to the Merger and future expenses related to operating as a public company, including expenses related to personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with the applicable Nasdaq and SEC requirements, investor relations costs and director and officer insurance premiums.

We anticipate that our general and administrative expenses will increase for the foreseeable future due to expenses related to operating as a public company, including expenses related to personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with the applicable Nasdaq and SEC requirements, investor relations costs and director and officer insurance premiums.

Interest Income

Interest income consists primarily of interest income earned on our cash and cash equivalents and marketable debt securities.

Interest income consists primarily of interest earned on our cash and cash equivalents.

Interest Expense

Interest expense consists primarily of the non-cash amortization of costs incurred in connection with the Loan Agreement entered into with PacWest in April 2020, and subsequently amended in October 2021.

Other Income (Expense), Net

In 2020, other income (expense), net primarily consists of changes in the fair value of our redeemable convertible preferred stock tranche liability and redeemable convertible preferred stock warrant liability prior to their conversion to warrants to purchase common stock upon closing of the Merger.

In 2021, other income (expense), net primarily consists of state franchise and capital taxes not related to income.

Interest expense consists primarily of the non-cash amortization of costs incurred in connection with the Loan Agreement entered into with PacWest in April 2020, subsequently amended in October 2021, and further amended in December 2022.

Other Expense, Net

Other expense, net primarily consists of state franchise and capital taxes not related to income.

Results of Operations

1 unchanged sentence

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

Year Ended December 31,

Twelve Months Ended December 31,

Revenue –

7 unchanged sentences

Interest expense

Other income (expense), net

Loss before income tax benefit

Income tax expense (benefit)

* Not meaningful

Revenue decreased by $8.2 million, or 46%, for the year ended December 31, 2021 compared to the year ended December 31, 2020 resulting from the decrease in revenue recognized under the Regeneron Agreement.

This decrease in revenue was primarily due to our achievement of a milestone under the Regeneron Agreement in June 2020 relating to the selection of a clinical candidate for ADI-002.

This resulted in an increase in the transaction price of $10.0 million and recognition of an additional cumulative catch-up of revenue of $5.0 million in June 2020.

Other expense, net

Loss before income tax provision

Income tax provision

Revenue increased by $15.3 million, or 157%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase was primarily due to the exercise of an option by Regeneron related to ADI-002 which resulted in a $20.0 million payment received, and recognized as revenue during the year ended December 31, 2022.

Research and development

Year Ended December 31,

Twelve Months Ended December 31,

Payroll and personnel expenses (1)

Costs incurred under agreements with consultants, CMOs, and CROs

Lab materials, supplies, and maintenance of equipment used for research

and development activities

Costs incurred under agreements with consultants, CDMOs, and CROs

Facility allocation expenses

Lab materials, supplies, and maintenance of equipment

used for research and development activities

Other research and development expenses (2)

3 unchanged sentences

Research and development expenses increased by $22.3 million, or 46%, during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase in research and development expenses was primarily due to an increase of $5.8 million in personnel expenses, including salaries, benefits, and bonuses due to increases in headcount of employees involved in research and development activities, as well as an increase in stock-based compensation expense of $3.1 million due to higher option grant activity.

In addition, there was an increase of $3.7 million in fees incurred for CRO, CMO, consultants, and other externally sponsored research and $4.9 million increase in facility and other expenses.

This increase was primarily due to ramping up of clinical development activities related to ADI-001, our leading product candidate.

The increase in research and development expenses was primarily due to a $9.9 million increase in payroll and personnel expenses resulting from an increase in overall headcount, a net $4.4 million increase in expenses related to CDMO, CRO and consultant costs related to our lead product candidate ADI-001, a $4.2 million increase in facility allocation and other expenses and a $2.3 million increase in lab expenses.

The increases in facilities and lab expense is primarily due to our move to our new facilities in Redwood City and setting up our labs.

General and administrative

General and administrative expenses decreased by $0.5 million, or 2%, during the year ended December 31, 2021 as compared to the same period in 2020.

The decrease in general and administrative expenses was primarily due to a decrease of $6.3 million in professional fees primarily related to decreases of $5.1 million in legal fees and $1.7 million in audit fees, due to higher expenses associated with the Merger in 2020.

These decreases in professional fees were offset by an increase of $0.5 million in other professional fees consisting of investor relations, IT management, and other enterprise solutions.

In addition, the decreases in general and administrative expenses were offset by a $3.1 million increase in payroll and personnel expenses, which includes salaries, benefits, bonuses, and temporary contractor fees due to higher stock-based compensation expenses of $4.2 million caused by increased option grant activity and higher salaries and benefits of $1.0 million reduced by lower temporary contractor fees of $2.2 million.

Further, there was an increase of $2.8 million in facilities and other expenses, primarily related to rent, depreciation costs, and director and officer liability insurance.

General and administrative expenses increased by $4.1 million, or 18%, during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase in general and administrative expenses was primarily due to a $4.8 million increase in payroll and personnel expenses, which includes an increase in stock based compensation of $2.1 million, salaries and benefits of $2.0 million and contractor fees of $0.5 million.

These increases were primarily due to increased headcount for the

There was also an increase of $0.4 million in professional fees.

These increases were partially offset by a $1.2 million decrease in facilities related expenses.

Interest income

Interest income decreased by $0.7 million, or 88%, during the year ended December 31, 2021 compared to the year ended December 31, 2020, which was primarily attributable to the decrease in average balance of marketable debt securities in 2021 and decrease in interest rates, which lowered return on investments.

Interest income increased by $3.7 million, or 4,032%, during the year ended December 31, 2022 compared to the year ended December 31, 2021 which was primarily due to higher interest rates and higher cash and cash equivalents balances for the period.

Interest Expense

Interest expense increased by less than $0.1 million during the year ended December 31, 2021 as compared to the same period in 2020 due to the non-cash amortization of costs incurred in connection with the Loan Agreement that was entered in April 2020 and subsequently amended in October 2021.

Other income (expense), net

Other income (expense), net decreased by $0.3 million, or 36%, during the year ended December 31, 2021 compared to the year ended December 31, 2020.

The decrease was primarily due to a realized gain recognized in 2020 related to a change in fair value of the redeemable preferred stock warrant liability prior to their conversion to warrants to purchase common stock upon closing of the Merger in September 2020 offset by $0.2 million related to the derecognition of fixed assets related to the sublease of the Boston lease in August 2021, $0.6 million of franchise taxes, and less than $0.1 million of realized loss due to foreign exchange.

Income tax expense (benefit)

We recognized an income tax benefit of $0.1 million during the year ended December 31, 2021 compared to the income tax benefit of $2.8 million for the year ended December 31, 2020.

The reduction in benefit relates to the nature of discrete tax benefit during the year ended December 31, 2020, as a result of the recognition of a net operating loss carryback under the CARES Act.

Income tax benefit of $0.1 million for the year ended December 31, 2021 was primarily due to the tax effect of the reduction in the deferred tax liability associated with the basis differences from in-process research and development (IPR&D).

Interest expense decreased by $0.1 million, or 55%, during the year ended December 31, 2022 compared to the year ended December 31, 2021 due to decreased noncash amortization of costs incurred in connection with the October 2021 and December 2022 amendments to the term loan agreement with PacWest.

Other expense, net

Other expense increased by $0.3 million, or 52%, during the year ended December 31, 2022 compared to the year ended December 31, 2021.

This was primarily due to an increase in franchise and capital taxes.

Income tax benefit

There was no income tax expense or benefit for the year ended December 31, 2022.

Income tax benefit for the year ended December 31, 2021 was $0.1 million.

Liquidity and Capital Resources

As of December 31, 2021, our principal source of liquidity was cash and cash equivalents, which totaled $277.5 million.

Our net losses were $62.0 million and $36.7 million for the years ended December 31, 2021 and 2020, respectively.

Sources of Liquidity

Since our formation in 2014, we have funded our operations with an aggregate of $116.3 million in gross cash proceeds from the sale of redeemable convertible preferred stock and an aggregate of $45.0 million received to date from Regeneron under the Regeneron Agreement.

In September 2020, following the closing of the Merger, all outstanding shares of the redeemable

convertible preferred stock converted into 12,048,671 shares of common stock.

From our formation in 2014 until our initial public offering, we funded our operations with an aggregate of $116.3 million in gross cash proceeds from the sale of redeemable convertible preferred stock.

We also acquired $64.1 million of cash, cash equivalents and restricted cash owned by resTORbio, as part of the merger.

In February 2021, we completed an underwritten public offering of 10,575,513 shares of our common stock at a public offering price of $13.00 per share.

The net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses were approximately $128.8 million.

In connection with the offering, we also entered into a stock purchase agreement with certain existing investors to purchase 1,153,840 shares of our common stock for $15.0 million at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.

In connection with the offering, we also entered into a stock purchase agreement with certain existing investors for $15.0 million of shares of our common stock at a price per share equal to the public offering price, with an initial closing for certain investors held simultaneously with the closing of the offering and a subsequent closing for certain additional investors.

We also received $45.0 million to date from Regeneron under the Regeneron Agreement as well as an additional $20.0 million from Regeneron related to their exercise of the option to license exclusive rights to ADI-002.

The net proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses were approximately $94.2 million.

In March 2021, we entered into the Sales Agreement, pursuant to which we could sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Sales Agent.

In August 2022, pursuant to this agreement, we sold an aggregate of 2,611,723 shares of common stock at a price per share of $17.23 to two healthcare-focused institutional investors for net proceeds of approximately $43.4 million.

On November 8, 2022, we filed the New Prospectus, which updated and superseded the Existing Prospectus.

As of December 31, 2022, we had cash and cash equivalents of $257.7 million.

We expect that the cash and cash equivalents will be sufficient to fund our forecasted operating expenses, capital expenditure requirements and debt service payments for at least the next twelve months from the issuance of the consolidated financial statements included in this Annual Report on Form 10-K.

Loan Agreement

On October 21, 2021, we amended the Loan Agreement with PacWest (the Loan Amendment) under which PacWest will provide one or more Term Loans, as well as Non-Formula Ancillary Services which shall not exceed $5.5 million in the aggregate.

On October 21, 2021, we amended our Loan Agreement with PacWest (as amended, the 2021 Loan Amendment) under which PacWest will provide one or more Term Loans (as defined in the 2021 Loan Amendment), as well as certain Non-Formula Ancillary Services which shall not exceed $5.5 million in the aggregate.

Non-Formula Ancillary Services are defined as automated clearinghouse transactions, corporate credit card services, letters of credit, or other treasury management services.

The aggregate sum of the outstanding Term Loans and Non-Formula Ancillary Services shall at no time exceed $15.0 million, which each Term Loan to be in an amount of not less than $1.0 million.

As of December 31, 2021, we had outstanding Non-Formula Ancillary Services of $4.4 million.

Accordingly, as of December 31, 2021, the Company has $10.6 million available under the Term Loan.

On December 2, 2022, we further amended our Loan Agreement with PacWest (the 2022 Loan Amendment) The 2022 Loan Amendment extends the drawdown period for any Term Loan by one year from April 19, 2023 to April 19, 2024.

In addition, pursuant to the 2022 Loan Amendment, if we receive at least $60.0 million from the sale or issuance of our equity securities and/or up-front cash payments from strategic partnerships other than payments from Regeneron on or before September 30, 2023, then the Interest Only End Date (as defined in the 2022 Loan Amendment) will be extended another six months from April 19, 2024 to October 19, 2024.

Furthermore, the 2022 Loan Amendment extends the final maturity date of any Term Loan by one year from October 19, 2025 to October 19, 2026, and the maturity date of non-formula ancillary services to November 30, 2023.

As of December 31, 2022, we have $10.6 million available under the Term Loan.

Pursuant to the 2021 Loan Amendment, the interest rate for the Term Loans shall be set at an annual rate equal to the greater of (i) 0.25% above the Prime Rate then in effect and (ii) 4.25%.

As of the date of this Annual Report on Form 10-K, we were in compliance with such covenants and had no indebtedness outstanding under the Loan Agreement.

At-the-Market (ATM) Offering

On March 12, 2021, we entered into the 2021 Sales Agreement with the Agent, pursuant to which we could sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent.

No shares were sold under the 2021 Sales Agreement as of December 31, 2021.

As of the date of this Annual Report on Form 10-K, we were in compliance with covenants of the 2022 Loan Amendment and had no indebtedness outstanding under the Term Loan.

Future Funding Requirements

5 unchanged sentences

Because of the risks and uncertainties associated with research, development, and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements.

All of our revenue to date is generated from the Regeneron Agreement, which is a collaboration and license agreement.

All of our revenue to date has been generated from the Regeneron Agreement, which is a collaboration and license agreement.

We do not expect to generate any significant product revenue until we obtain regulatory approval of and commercialize any of our product candidates or enter into additional collaborative agreements with third parties, and we do not know when, or if, either will occur.

2 unchanged sentences

We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future.

We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with

corporate sources, or through other sources of financing.

We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing.

We anticipate that we will need to raise substantial additional capital, the requirements for which will depend on many factors, including:

the scope, timing, rate of progress and costs of our drug discovery efforts, preclinical development activities, laboratory testing and clinical trials for our product candidates;

the number and scope of clinical programs we decide to pursue;

the timing, number and scope of clinical programs we decide to pursue;

the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;

19 unchanged sentences

The following table sets forth the primary sources and uses of our cash, cash equivalents, and restricted cash for each of the periods presented below (in thousands):

Year Ended December 31,

Twelve Months Ended December 31,

Net cash provided by (used in):

2 unchanged sentences

Financing activities

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash Flows from Operating Activities

The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

The increases in cash used in operating activities for the years ended December 31, 2021 and 2020 were primarily due to increased external research and development expenses as we continue to develop our product candidates, and increased internal and external expenses related to the initiation of our Phase 1 clinical trial.

Higher costs associated with increased employee headcount related to expanded development activities also contributed to the increase in cash used in operating activities.

These factors were partially offset by lower professional services costs in 2021.

Non-cash charges for the year ended December 31, 2021 also include $12.5 million of stock-based compensation expense, compared to $5.3 million for the year ended December 31, 2020.

The decrease in cash used in operating activities for the year ended December 31, 2022 compared to the year ended December 31, 2021 were primarily due to increased non-cash charges for stock-based compensation expense as well as an increase in accrued expenses with our CDMOs and CROs for the period as we continue to develop our product candidates.

There was also a higher accounts payable balance at period end due to company growth and the timing of payments.

The changes in prepaid expenses and other current assets, accounts payable, and accrued and other liabilities resulted from the timing of payments to our service providers.

We currently lease an office space in Boston, MA under a non-cancellable operating lease (the Boston Lease), with an expiration date of July 31, 2026.

The Boston Lease was amended on April 1, 2019, to relocate into a premises in the same building with additional space.

The initial annual base rent for this lease was $0.6 million and increases 2% annually.

On July 19, 2021, we subleased the office space in Boston, MA.

The term of the sublease started on September 1, 2021 and will end on July 30, 2026.

The aggregate base rent due to us under the Sublease Agreement is approximately $3.5 million.

Pursuant to the Sublease Agreement, we agreed to transfer certain furniture located in the subleased premises to the sublessee for $1.00.

We remain liable for the lease payments under the Boston Lease.

We also have an office facility in Menlo Park, CA under a non-cancellable operating lease (the Menlo Park Lease), with an expiration date of March 31, 2022 (subject to any optional extension).

This lease was amended on June 25, 2021 to extend the term of lease from March 31, 2022 to June 30, 2022 and replace the previously leased premises (known as 173 and 175-177 Jefferson Drive) with a nearby premises (known as 235 Constitution Drive).

The lease commenced on July 15, 2021 and expires on June 30, 2022.

In connection with these changes, we incur monthly rent payments ranging from $87,286 to $89,904, increasing over the remaining term of the lease.

This lease was amended on September 30, 2019 to include additional office space, with an expiration date of March 31, 2022 (subject to any optional extension).

The initial annual base rent for the Menlo Park Lease is an aggregate of $1.0 million, and such amount will increase 3% annually.

On October 28, 2018, we executed an additional non-cancelable lease agreement for a new office and laboratory facility in Redwood City, CA (the Redwood City Lease), with an expiration date of February 28, 2030.

The initial annual base rent for the Redwood City Lease is an aggregate of $1.3 million, and such amount will increase 3% annually.

On July 30, 2021, we entered a short-term lease agreement with the Boston Properties, Inc.

for a temporary office space located at 200 Clarendon Street, Boston, MA.

The initial lease term commenced on July 30, 2021 and expire on November 30, 2021.

In October 2021, we extended the lease term to March 31, 2022 and most recently, in February 2022, extended the lease term to July 31, 2022.

The base rent is less than $0.1 million per month.

Cash Flows from Investing Activities

Net cash used in investing activities was $2.8 million for the year ended December 31, 2021, which consisted of purchases of property and equipment of $13.0 million related to the construction of our new building in Redwood City, CA, partially offset by proceeds from sales and maturities of marketable debt securities of $10.3 million.

Net cash provided by investing activities was $115.2 million for the year ended December 31, 2020, which consisted of cash and restricted cash acquired in connection with the Merger of $64.1 million, proceeds from maturities of marketable debt securities of $57.8 million, partially offset by purchases of marketable debt securities of $5.7 million and purchases of property and equipment of $1.0 million.

Net cash used in investing activities was $16.8 million for the year ended December 31, 2022, which consisted of purchases of property and equipment related to the construction of our facilities in Redwood City, CA.

Net cash used in investing activities was $2.8 million for the year ended December 31, 2021, which consisted of purchases of property and equipment of $13.0 million related to the construction of our facilities in Redwood City, CA, partially offset by proceeds from sales and maturities of marketable debt securities of $10.3 million.

Cash Flows from Financing Activities

Net cash provided by financing activities was $242.7 million for the year ended December 31, 2021, which was related to net cash proceeds received from our public offerings and concurrent private placement in February 2021 and December 2021 of $238.1 million, and cash proceeds of $4.8 million from exercise of stock options and purchases under our Employee Stock Purchase Plan (ESPP), offset by debt issuance costs of approximately $0.2 million.

Net cash provided by financing activities was $0.3 million for the year ended December 31, 2020, due to cash proceeds of $0.5 million from exercise of stock options partly offset by payment of debt issuance costs of $0.2 million.

Net cash provided by financing activities was $41.5 million for the year ended December 31, 2022 which primarily consisted of $43.4 million in proceeds from the issuance of common stock pursuant to an

ATM offering and $1.7 million in cash proceeds from the exercise of stock options and purchases under our Employee Stock purchase plan (ESPP).

Net cash provided by financing activities was partially offset by $3.2 million of taxes withheld and paid related to net share settlement of employee equity awards and $0.4 million related to deferred issuance costs.

Net cash provided by financing activities was $242.7 million for the year ended December 31, 2021, which was related to net cash proceeds received from our public offerings and concurrent private placement in February 2021 and December 2021 of $238.1 million, and cash proceeds of $4.8 million from exercise of stock options and purchases under our ESPP, offset by deferred issuance costs of approximately $0.3 million.

Critical Accounting Policies, Significant Judgments and Use of Estimates

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting practices (GAAP).

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in our consolidated financial statements.

2 unchanged sentences

Revenue Recognition

We earn all of our revenue in connection with our license and collaboration agreement with Regeneron, which allows Regeneron to utilize our technology and know-how to develop product candidates.

For elements of collaboration arrangements that are accounted for pursuant to ASC Topic 606, Revenue from Contracts with Customers, or ASC 606, we identify the performance obligations and allocate the total consideration we expect to receive on a relative standalone selling price basis to each performance obligation.

We have earned all of our revenue in connection with our License and Collaboration Agreement with Regeneron, which allows Regeneron to utilize our technology and know-how to develop product candidates.

For elements of collaboration arrangements that are accounted for pursuant to ASC Topic 606, Revenue from Contracts with Customers (ASC 606), we identify the performance obligations and allocate the total consideration we expect to receive on a relative standalone selling price basis to each performance obligation.

Key assumptions to determine the standalone selling price may include forecasted revenues, development timelines, reimbursement rates for personnel costs, the expected number of targets or indications expected to be pursued, discount rates and probabilities of technical and regulatory success.

3 unchanged sentences

Revenue to be recognized is equal to the total transaction price multiplied by the ratio of actual expense incurred divided by total forecasted expense.

Accrued CMO, CRO, and Research and Development Expenses

We have entered into various agreements with CMOs and CROs.

Accrued CDMO, CRO, and Research and Development Expenses

We have entered into various agreements with CDMOs and CROs.

Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs.

1 unchanged sentence

If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly.

Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the consolidated balance sheets until the services are rendered.

Payments made to CDMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the consolidated balance sheets until the services are rendered.

To date, our estimated accruals have not differed materially from the actual costs.

26 unchanged sentences

Accordingly, we estimate the dividend yield to be zero.

Common Stock Valuations

Prior to our Merger, the estimated fair value of the common stock underlying our stock options and stock awards was determined at each grant date by our board of directors, with assistance from management and external appraisers.

All options to purchase shares of our common stock were intended to be exercisable at a price per share not less than the per-share fair value of our common stock underlying those options on the date of grant.

The approach to estimate the fair value of our common stock was consistent with the methods outlined in the American Institute of Certified Public Accountants’

Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (Practice Aid).

Subsequent to the Merger, the fair value of our common stock is determined based on the closing market price.

Emerging Growth Company and Smaller Reporting

In April 2012, the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) was enacted.

In April 2012, the Jumpstart Our Business Startups Act of 2012 (JOBS Act) was enacted.

Section 107 of the JOBS Act provides that an emerging growth company (EGC), can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards.

6 unchanged sentences

(3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period;

and (4) last day of the fiscal year ending after the fifth anniversary of our initial public offering, which would be December 31, 2023.

and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering, which would be December 31, 2023.

We are also a smaller reporting company meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year.

1 unchanged sentence

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Specifically, as a smaller reporting company we may choose to present only the two

most recent fiscal years of audited financial statements in this Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Recently Issued and Adopted Accounting Pronouncements

See the section titled “Summary of Significant Accounting Policies”

See the section titled “

Summary of Significant Accounting Policies ”

in Note 2 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity