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Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-19 · 104 added, 141 removed, 199 unchanged (55% of the section changed)

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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.

Our lead product candidate, ADI-001, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is being developed for the potential treatment of autoimmune diseases and relapsed or refractory aggressive B cell non-Hodgkin's lymphoma (NHL).

Our pipeline also includes our lead preclinical candidate, ADI-270, an armored gamma delta CAR T cell product candidate targeting renal cell carcinoma, with potential for other CD70+ solid tumor and hematological malignancies indications.

Our lead product candidate, ADI-001, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is being developed for the potential treatment of autoimmune diseases.

We are also pursuing ADI-270, an armored gamma delta CAR T cell product candidate designed to address multiple CD70+ solid tumor and hematological malignancies indications, with renal cell carcinoma (RCC) as the initial indication.

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 autoimmune diseases and cancer based on our gamma delta T cell platform using either previously validated antigens or those that we identify and target using CAR and other technology.

We plan to file one new Investigational New Drug (IND) application every 12-18 months, including an IND for ADI-270 in the first half of 2024.

Autoimmune Diseases

We plan to file one new Investigational New Drug (IND) application every 12-18 months.

In December 2023, the U.S.

Food and Drug Administration (FDA) cleared our IND application for ADI-001 in lupus nephritis, an autoimmune disease caused by systemic lupus erythematosus (SLE).

Lupus nephritis is a serious complication of SLE which affects approximately 40% of the estimated 325,000 patients with SLE in the U.S.

We expect to initiate a Phase 1 clinical trial of ADI-001 for the treatment of lupus nephritis in the second quarter of 2024 and expand development of the candidate into one to two additional autoimmune indications in the second and third quarters of 2024, subject to clearance of INDs in those indications.

We believe the potential market opportunity for ADI-001 in B cell mediated autoimmune diseases is substantial based on the prevalence in the U.S., EU5, China and Japan of greater than 1.7 million patients with autoimmune diseases where CAR-T cell therapy has demonstrated clinical proof-of-concept, including SLE (which includes lupus nephritis), systemic sclerosis and idiopathic inflammatory myopathies.

We anticipate providing preliminary clinical data from our Phase 1 clinical trial of ADI-001 in lupus nephritis in the fourth quarter of 2024 or first quarter of 2025, subject to study site activation and enrollment, and to begin to provide preliminary clinical data in the additional autoimmune indications starting in the fourth quarter of 2024 or first half of 2025, subject to clearance of INDs in those indications as well as successful site initiation and patient enrollment in the relevant clinical protocols.

Relapsed or Refractory Aggressive B cell NHL

In March 2021, we initiated the first-in-human Phase 1 (GLEAN) trial to assess safety and efficacy of ADI-001 in patients with relapsed or refractory aggressive B cell NHL.

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 April 2022, the FDA granted fast track designation for ADI-001 for NHL.

As of the May 4, 2023 cutoff date, of the 24 evaluable subjects in the GLEAN trial, 18 had

large B cell lymphoma (LBCL), five had mantle cell lymphoma (MCL), and one patient had follicular lymphoma.

Most patients were heavily pre-treated, with a median four lines of prior therapy, and twelve patients (50%) had previously progressed following CAR T cell therapy.

Despite the advanced nature of patients at baseline, we observed a high complete response (CR) rate and favorable durability in MCL patients.

Across all doses of MCL patients, we observed an 80% (4/5 patients) overall response rate (ORR), an 80% CR rate (4/5 patients) and a 60% CR rate (3/5 patients) at six months.

As of May 4, 2023, the safety profile of ADI-001 was generally favorable, with no significant risk of cytokine release syndrome (CRS), immune effector cell-associated neurotoxicity syndrome (ICANS), or T cell malignancy observed.

In November 2023, we initiated an expansion cohort, EXPAND, in post-CAR T LBCL.

In January 2024, we announced our decision to deprioritize enrolling LBCL patients in the GLEAN trial in order to focus on advancing MCL enrollment.

We expect to provide a clinical update from the Phase 1 study in NHL patients which will include efficacy data, including six-month CR rate, and safety data from additional MCL patients in the second half of 2024.

Subject to clinical data and regulatory feedback, in the first half of 2025, we plan to define the regulatory path for a potentially pivotal Phase 2 study for ADI-001 in MCL and provide a further clinical update in the second half of 2025.

We have expanded manufacturing capabilities of ADI-001 by transferring the manufacturing process to an additional contract development and manufacturing organization (CDMO) that is capable of operating at a larger scale of production.

ADI-270 is an investigational allogeneic gamma delta CAR T cell therapy targeting CD70 via the CD27-ligand for the treatment of renal cell carcinoma (RCC) and with potential in other solid tumor indications.

ADI-270 is designed to home to solid tumors, with a highly specific targeting moiety for CD70 and an armoring technology of transforming growth factor (TGF) beta dominant-negative receptor to address immunosuppressive factors in the tumor microenvironment.

Food and Drug Administration (FDA) cleared our IND application for ADI-001 in lupus nephritis (LN).

In August 2024, we expanded our ADI-001 autoimmune clinical development program to include systemic lupus erythematosus (SLE), systemic sclerosis (SSc) and anti-neutrophil cytoplasmic autoantibody associated vasculitis (AAV).

In September 2024, we activated sites for our Phase 1 clinical trial of ADI-001 in autoimmune diseases and opened enrollment for patients with LN.

In October 2024, we received clearance for our IND amendment to evaluate ADI-001 in idiopathic inflammatory myopathies (IIM) and stiff person syndrome (SPS) as part of our Phase 1 clinical trial in autoimmune diseases.

We expect to initiate enrollment for patients with SLE, SSc, IIM and SPS in the second quarter of 2025, and for patients with AAV in the second half of 2025.

We believe the favorable safety profile, cellular kinetics and B cell depletion in peripheral blood and secondary lymphoid tissue demonstrated with ADI-001 clinical experience to date is favorable for development in autoimmune diseases.

In June 2024, the FDA granted Fast Track Designation to ADI-001 for the potential treatment of relapsed/refractory class III or class IV LN.

In February 2025, the FDA granted Fast Track Designation to ADI-001 for the potential treatment of adult patients with refractory SLE with extrarenal involvement and for SSc.

In November 2024, we dosed our first LN patient, and in February 2025, reported that we have dosed a total of three LN patients, in our Phase 1 clinical trial of ADI-001 in autoimmune diseases.

We plan to report preliminary LN clinical data from this trial in the first half of 2025, and data for other autoimmune diseases in the second half of 2025, subject to study site initiation and patient enrollment.

Due to the prioritization of ADI-001 in autoimmune indications, patient enrollment in the Phase 1 clinical study of ADI-001 in mantle cell lymphoma has been closed.

ADI-270 is an investigational allogeneic gamma delta CAR T cell therapy targeting CD70 via the CD27-ligand for the treatment of RCC and with potential in other solid tumor and hematological malignancies indications.

ADI-270 is designed to home to solid tumors, with a highly specific targeting moiety for CD70 and an armoring technology of transforming growth factor beta dominant-negative receptor to address immunosuppressive factors in the tumor microenvironment.

Building on gamma delta 1 tissue tropism to solid tumors and three mechanisms of anti-tumor activity (CAR, innate and adaptive), CAR gamma delta 1 T cells may be well positioned to address solid tumors.

We plan to file an IND application for ADI-270 in RCC in the second quarter of 2024 and provide clinical data in the first half of 2025, subject to regulatory clearance and study initiation activities.

We are also considering potential expansion into additional CD70+ tumor indications in the first half of 2025, with potential clinical data from such studies in the second half of 2025, subject to regulatory clearance and study initiation activities.

In June 2024, we received FDA clearance for our IND application for ADI-270 in RCC.

In July 2024, we also received FDA Fast Track Designation for ADI-270 for the potential treatment of patients with metastatic/advanced clear cell RCC (ccRCC).

In December 2024, we dosed our first RCC patient, and in February 2025 reported that we have enrolled a total of three RCC patients, in our Phase 1 multicenter, open-label clinical trial to assess the safety and anti-tumor activity of ADI-270.

We plan to share preliminary clinical data in the first half of 2025.

Recent Developments

1000 Bridge Parkway Lease and Letter of Credit

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

The Third Amendment further amends the Redwood City Lease and increases the tenant improvement allowance as of January 1, 2023 by an additional $3.0 million.

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.

On August 7, 2023, we entered into a fourth lease amendment (the Fourth Amendment) with Westport.

The Fourth Amendment amended the period over which the tenant improvement allowance received in the Third Amendment will be amortized and identified our monthly amortization payable.

On September 1, 2023, we amended our letter of credit with Westport.

The amendment reduced the amount of the letter of credit associated with our 1000 Bridge Parkway facility by $2.1 million resulting in an updated letter of credit amount of $2.1 million.

Option Repricing

On August 8, 2023, our board of directors approved a stock option repricing (the Option Repricing) to be effective on August 14, 2023 (the Effective Date) in accordance with the terms of our 2015 Stock Incentive Plan and 2018 Plan (together, the Plans).

Pursuant to the Option Repricing and subject to a one year cliff period, the exercise price of each stock option previously granted under the Plans, totaling 6,431,910 options, was amended to reduce the exercise price of such options to $2.14 per share, the closing price of our common stock on the Nasdaq Global Market on the Effective Date.

Under the terms of the Option Repricing, a repriced option will revert to its original exercise price if, prior to the one-year anniversary of the Effective Date, (a) the option holder’s employment is terminated by us with cause or by the option holder or (b) the option is exercised.

The repriced options otherwise retained their existing terms and conditions as set forth in the Plans and applicable award agreements.

In addition, as of the Effective Date, we issued 1,418,042 options to purchase shares of common stock under the 2018 Plan to eligible employees who held inducement awards as of August 8, 2023.

These new options were issued to eligible employees because their inducement awards granted under Nasdaq Listing Rule 5635(c)(4) are not eligible for repricing.

The prior inducement awards remain outstanding under their original terms.

Underwritten Public Offering

On January 22, 2024, we entered into an Underwriting Agreement (the Underwriting Agreement) with Jefferies LLC and Guggenheim Securities, LLC, as representatives of the underwriters (the Underwriters), related to an underwritten public offering (the Offering) of 32,379,667 shares of our common stock, which included 5,325,000 shares sold and issued upon the exercise in full by the Underwriters of their option to purchase additional shares of common stock, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 8,445,333 shares of common stock.

The shares of common stock were sold at a public offering price of $2.40 per share and the pre-funded warrants were sold at a public offering price of $2.3999 per pre-funded warrant, which represents the per share public offering price of each share of common stock minus the $0.0001 per share exercise price for each pre-funded warrant.

We received net proceeds from the Offering, after deducting the underwriting discount and commissions and other estimated offering expenses, of approximately $91.8 million.

We may receive nominal proceeds, if any, from the exercise of the pre-funded warrants.

Termination of the Loan and Security Amendment

On November 27, 2024, Adicet Therapeutics, Inc.

(Adicet Therapeutics), a Delaware corporation and our wholly-owned subsidiary, and Banc of California executed a payoff letter (the Payoff Letter) to repay in full all outstanding indebtedness and terminate all commitments and obligations, subject to certain exceptions, under that certain Loan and Security Agreement (the Loan Agreement), dated as of April 28, 2020, as amended.

Under the Payoff Letter, we agreed to pay Banc of California approximately $10,000 in administrative fees and establish cash collateral accounts and execute pledge and security agreements to secure ancillary services provided by Banc of California.

As of December 31, 2024, we have $2.9 million of restricted cash held in cash collateral accounts.

No termination penalty was paid in connection with the Payoff Letter.

Research and Development Activities in China

In May 2024, we initiated research and development activities in China through a series of contractual agreements entered into and among Shanghai Adicet Biotechnology Co., Ltd.

(the Adicet VIE), Adicet (Shanghai) Biotechnology Co., Ltd.

(Adicet Shanghai), a wholly owned subsidiary of Adicet Therapeutics, and the shareholders of the Adicet VIE.

We are the primary beneficiary of the Adicet VIE, which is considered a consolidated entity under accounting principles generally accepted in the United States of America (U.S.

At-the-Market (ATM) Offering

In January 2024, we sold an aggregate of 6,350,000 shares of common stock in a series of sales in accordance with our “at-the-market” offering program (ATM Program) with JonesTrading Institutional Services LLC (Sales Agent), at an average price of $3.13 per share, for aggregate net proceeds of approximately $19.3 million, after deducting sales agent commissions, but before deducting any expenses related to such sales.

As of the date of this Annual Report on Form 10-K, up to $80.1 million of our common stock remains available for sale from time to time under our ATM Program.

In March 2024, we terminated our ATM Program.

On March 22, 2024, we entered into an Open Market Sales Agreement SM (the Jefferies Sales Agreement) with Jefferies to sell shares of our common stock, from time to time, through an ATM equity offering program under which Jefferies will act as sales agent or principal (the Jefferies ATM Program).

As of December 31, 2024, no shares of common stock have been sold under the Jefferies Sales Agreement.

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 have been generated from our License and Collaboration Agreement with Regeneron Pharmaceuticals, Inc.

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

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, 2023.

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.

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

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.

The cumulative effect of revisions to estimated costs to complete our performance obligations is recorded in the period in which changes are identified and amounts can be reasonably estimated.

Research and Development

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

• costs incurred under agreements with consultants, CDMOs and contract research organizations (CROs);

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

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

• allocated facility-related costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and amortization, information technology costs and general support services.

We do not allocate our costs by product candidate, as a significant amount of research and development expenses are not tracked by product candidate, and we believe the allocation of such costs would be arbitrary and would not provide a meaningful assessment as we have used our employee and infrastructure resources across multiple product candidate research and development programs.

We allocate our external costs by product candidate.

We do not allocate our internal costs by product candidate as a significant amount of internal research and development expenses are not tracked by product candidate, and we believe the allocation of such costs would be arbitrary and would not provide a meaningful assessment as we have used our employee and infrastructure resources across multiple product candidate research and development programs.

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

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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.

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.

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 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.

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This amount is recognized as a goodwill impairment charge for the period.

The Company performed an interim test for goodwill impairment in the third quarter of 2023 and determined that the entire balance of goodwill was impaired.

The Company performed an interim test for goodwill impairment in the year ended December 31, 2023 and determined that the entire balance of goodwill was impaired.

Interest Income

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

Interest income consists primarily of interest earned on our cash, cash equivalents, restricted cash and short-term investments in treasury securities.

Interest Expense

Interest expense consists primarily of the non-cash amortization of costs incurred in connection with the Loan Agreement (as defined below).

Interest expense consists primarily of the non-cash amortization of costs incurred in connection with the Loan Agreement (as defined in our Liquidity and Capital Resources section below).

Other Expense, Net

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Twelve Months Ended December 31,

Revenue – related party

Operating expenses

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Income tax provision

Revenue decreased by $25.0 million, or 100%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The decrease was due to no revenue recognized under the Regeneron Agreement in the current period.

Our obligations under the combined performance obligation with Regeneron were completed during the first quarter of 2022, resulting in revenue fully recognized under the agreement as of March 31, 2022.

Research and Development

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(2) Allocated facility-related costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and amortization, information technology costs and general support services.

Research and development expenses increased by $34.8 million, or 49%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase in research and development expenses was primarily due to a $10.7 million increase in expenses related to CDMOs and other externally conducted research and development and a $11.5 million increase in payroll and personnel expenses resulting from an increase in overall headcount.

In addition, there was an $8.5 million increase in allocated facility expenses and a $4.1 million increase in laboratory expenses for the period.

This increase was partially offset by a $0.2 million decrease in professional fees.

Research and development expenses decreased by $6.7 million, or 6%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.

The decrease in research and development expenses was primarily due to a $7.7 million decrease in expenses related to CDMOs.

This decrease was partially offset by a $0.6 million increase in lab expenses as well as a $0.5 million increase in professional fees.

General and Administrative

General and administrative expenses increased by $1.8 million, or 7%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase in general and administrative expenses was primarily due to a $3.3 million increase in payroll and personnel expenses, which includes an increase in salaries and benefits of $1.0 million, contractor fees of $0.9 million, stock-based compensation of $1.2 million and recruiting fees of $0.3 million.

These increases were the result of increased headcount for the period.

The increase was partially offset by a $2.6 million decrease in allocated facility expenses.

There was also a $0.5 million decrease in professional fees for the period.

The increase in general and administrative expenses was primarily due to a $0.9 million increase in professional fees for the period.

There was also a $0.4 million increase in payroll and personnel expenses, which includes an increase in salaries and benefits of $0.5 million and stock-based compensation of $0.4 million, partially offset by a decrease of $0.3 million in recruiting fees.

The increase was also due to a $0.3 million increase in depreciation expense as well as a $0.2 million increase in allocated facility expense for the period.

Goodwill Impairment

Goodwill impairment charges increased by $19.5 million, or 100%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Goodwill impairment charges decreased by $19.5 million, or 100%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.

Beginning in the third quarter of 2023, we experienced a significant decline in our stock price.

We concluded that the decrease in stock price was sustained and that it was more likely than not that the fair value of our single reporting unit was less than its carrying amount.

As such, we performed an interim goodwill impairment test as of

September 30, 2023.

Therefore, we performed an interim goodwill impairment test in the third

quarter of 2023.

Based on our interim impairment test, we recorded a goodwill impairment charge of $19.5 million during the year ended December 31, 2023, representing the entire balance of goodwill.

Interest Income

Interest income increased by $6.2 million, or 165%, during the year ended December 31, 2023 compared to the year ended December 31, 2022, which was primarily due to higher interest rates as well as our investments in treasury securities and money market funds.

Interest income increased by $0.7 million, or 7%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase was primarily due to higher cash balances, investments in treasury securities, and higher interest rates for the period.

Other Expense, Net

Other expense decreased by $0.3 million, or 38%, during the year ended December 31, 2023 compared to the year ended December 31, 2022, which was primarily due to a decrease in franchise and capital taxes for the period.

Other expense, net decreased by $0.4 million, or 62%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.

This was due to a decrease in franchise taxes and realized losses related to foreign exchange rates.

Income Tax Benefit

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We have historically funded our operations primarily through a collaboration and licensing arrangement, public and private placements of equity securities and debt, and cash received in our merger with resTORbio, Inc.

In August 2022, we received net proceeds of $43.6 million from the sale of shares of our common stock under our ATM Program with the Sales Agent and, in January 2024, we received net proceeds of $19.3 million from the sale of shares of our common stock under our ATM Program.

Up to $80.1 million of shares of our common stock remains available for sale under our ATM Program, providing us with an additional source of liquidity, subject to market conditions.

In March 2024, we terminated our ATM Program.

In addition, in January 2024, we completed the Offering, which resulted in net proceeds to us, after deducting the underwriting discount and commissions and other estimated offering expenses, of approximately $91.8 million.

We may also receive nominal proceeds, if any, from the exercise of the Pre-Funded Warrants.

As of December 31, 2023, we had cash and cash equivalents of $159.7 million.

We expect that our cash and cash equivalents, together with the proceeds raised subsequent to year-end through our ATM Program and the Offering, 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.

In January 2024, we raised aggregate net proceeds of approximately $19.3 million through the JonesTrading ATM Program.

In March 2024, we terminated the JonesTrading ATM Program and entered into the Jefferies ATM Program.

As of December 31, 2024, no shares of common stock have been sold through the Jefferies ATM Program.

On January 22, 2024, we entered into an underwriting agreement (the Underwriting Agreement) with Jefferies LLC (Jefferies) and Guggenheim Securities, LLC, as representatives of the underwriters (the Underwriters), related to an underwritten public offering (the Offering) of 32,379,667 shares of our common stock, which included 5,325,000 shares sold and issued upon the exercise in full by the Underwriters of their option to purchase additional shares of common stock, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 8,445,333 shares of common stock.

The purchase price paid by the Underwriters to us was $2.256 per share and $2.2559 per pre-funded warrant, representing a discount to the Underwriters of 6.0%.

We received net proceeds from the Offering, after deducting the underwriting discount and commissions and other estimated offering expenses, of approximately $91.7 million.

We may receive nominal proceeds, if any, from the exercise of the pre-funded warrants.

As of December 31, 2024, we had cash, cash equivalents and short-term investments of $176.3 million and restricted cash of $2.9 million.

We expect that our cash, cash equivalents and short-term investments 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 April 28, 2020, we entered into a Loan and Security Agreement, as amended on July 8, 2020, September 14, 2020, September 15, 2020, October 21, 2021, December 2, 2022 and May 30, 2023 (the Loan Agreement), with Banc of California (formerly known as Pacific Western Bank) to finance leasehold improvements for our facilities in Redwood City, California and other purposes permitted under the Loan Agreement.

On May 30, 2023, we amended our Loan Agreement with Banc of California (the 2023 Loan Amendment).

On April 28, 2020, we entered into a Loan and Security Agreement (the Loan Agreement) with Banc of California (formerly known as Pacific Western Bank) to finance leasehold improvements for our facilities in Redwood City, CA and other purposes permitted under the Loan Agreement.

On October 21, 2021, we amended the Loan Agreement (as amended, the 2021 Loan Amendment) under which Banc of California 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.

Per the terms of the Loan Agreement, 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.

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%.

On December 2, 2022, we further amended the Loan Agreement (the 2022 Loan Amendment).

The 2022 Loan Amendment extended the drawdown period for any Term Loan by one year, which expired on April 19, 2024.

Furthermore, the 2022 Loan Amendment extended 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.

On May 30, 2023, we entered into the 2023 Loan Amendment.

Pursuant to the 2023 Loan Amendment, we must maintain the lesser of (i) $35.0 million or (ii) all of our combined balances in demand deposit accounts, money market accounts, and/or insured cash sweep accounts with Banc of California.

If our total cash and investments drop to less than $35.0 million, the 2023 Loan Amendment permits us to maintain cash and/or investments in one or more accounts outside of Banc of California up to a total of $2.5 million.

As of December 31, 2023, we have $12.7 million available under the Loan Agreement.

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.

In April 2024, the Term Loan availability under our Loan Agreement expired.

The Non-Formula Ancillary Services, which shall not exceed $5.5 million in the aggregate, remained available.

On November 27, 2024, we executed a payoff letter (the Payoff Letter) with Banc of California to repay in full all outstanding indebtedness and terminate all commitments and obligations, subject to certain exceptions, under the Loan Agreement.

We paid the $10,000 administrative fees in December 2024.

As of December 31, 2024, we have $2.9 million of restricted cash held in cash collateral accounts.

No termination penalty was paid in connection with the Payoff Letter.

Future Funding Requirements

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As of December 31, 2024, we had an accumulated deficit of $497.9 million.

As of December 31, 2023, we had cash and cash equivalents of $159.7 million.

Subsequent to December 31, 2023, we raised aggregate net proceeds of approximately $19.3 million through our ATM Program and approximately $91.8 million through the Offering.

We believe that our cash and cash equivalents, together with the proceeds raised subsequent to year-end through our ATM Program and the Offering, will be sufficient for us to fund our operations for at least 12 months from the issuance date of our consolidated financial statements as of, and for the year ended, December 31, 2023 included elsewhere in this Annual Report on Form 10-K.

As of December 31, 2024, we had cash, cash equivalents, and short-term investments of $176.3 million.

We believe that our cash, cash equivalents and short-term investments will be sufficient for us to fund our operations for at least twelve months from the issuance date of our consolidated financial statements as of, and for the year ended, December 31, 2024 included elsewhere in this Annual Report on Form 10-K.

We have based these estimates on assumptions that may prove to be wrong, and we could deplete our available capital resources sooner than we expect.

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See the section of this Annual Report on Form 10-K titled “ Risk Factors ” for additional risks associated with our substantial capital requirements.

See the section of this Annual Report on Form 10-K entitled “ Risk Factors ” for additional risks associated with our substantial capital requirements.

Summary Statement of Cash Flows

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):

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

Twelve Months Ended December 31,

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Net cash used in operating activities was $92.4 million for the year ended December 31, 2024.

Cash used in operating activities consisted of net loss offset by non-cash adjustments of $30.3 million and a net decrease in operating assets and liabilities of $5.5 million.

Non-cash items primarily included stock-based compensation expense of $22.2 million, depreciation and amortization of $6.5 million and non-cash lease expense of $3.2 million.

The net decrease in assets and liabilities was primarily due to a decrease of $3.7 million in operating lease liability, a decrease of $2.0 million in accrued and other current and non-current liabilities and a decrease of $1.3 million in prepaid expenses and other current assets.

The decrease was partially offset by an increase in accounts payable of $1.1 million and an increase in other non-current assets of $0.4 million.

Net cash used in operating activities was $93.7 million for the year ended December 31, 2023.

Cash used in operating activities consisted of net loss offset by non-cash adjustments of $48.7 million and a net increase in operating assets and liabilities of $0.3 million.

Non-cash items primarily included goodwill impairment of $19.5 million, stock-based compensation expense of $20.3 million, depreciation and amortization of $6.1 million and non-cash lease expense of $2.8 million.

The net increase in assets and liabilities was primarily due to an increase of $0.9 million in prepaid expenses and other current assets and an increase of $0.4 million in other non-current assets accounts.

The net increase in assets and liabilities was primarily due to an increase of $0.9 million in prepaid expenses and other current assets

and an increase of $0.4 million in other non-current assets accounts.

There was also an increase in accrued and other current and non-current liabilities of $0.8 million.

The increase was partially offset by a decrease in accounts payable of $1.7 million.

Net cash used in operating activities was $44.8 million for the year ended December 31, 2022.

Cash used in operating activities consisted of net loss and non-cash adjustments of $22.3 million as well as an increase in assets and liabilities of $2.7 million.

Non-cash items primarily included stock-based compensation expense of $17.1 million, non-cash lease expense of $2.4 million and depreciation and amortization of $2.6 million.

The net change in assets and liabilities was primarily due to an increase in accrued and other current and non-current liabilities of $5.8 million, an increase in accounts payable of $1.7 million and an increase in prepaid expenses and other current assets of $1.3 million.

The increase was partially offset by a decrease in deferred revenue of $4.8 million related to the Regeneron Agreement and a decrease in operating lease liability of $2.3 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $4.5 million for the year ended December 31, 2023, which consisted of purchases of property and equipment related to the construction of our facilities in Redwood City, California.

Net cash used in investing activities was $119.2 million for the year ended December 31, 2024, which consisted of $129.1 million of purchases of short-term treasury securities and $1.1 million of purchases of lab equipment for our GMP cell processing suite at 1000 Bridge Parkway.

We received $11.0 million related to the maturities of short-term treasury securities.

Cash Flows from Financing Activities

Net cash provided by financing activities was $111.3 million for the year ended December 31, 2024, which included approximately $91.7 million in net proceeds from the issuance of our common stock and pre-funded warrants in the Offering and approximately $19.3 million in net proceeds from the issuance of our common stock under the JonesTrading ATM Program.

Net cash provided by financing activities was $0.2 million for the year ended December 31, 2023, which was primarily related to $0.4 million in net proceeds from the issuance of common stock in connection with our employee stock purchase plan.

This was partially offset by $0.2 million of cash paid for taxes withheld on the net share settlement of equity awards.

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 our ATM Program and $1.7 million in cash proceeds from the exercise of stock options and purchases under our Employee Stock Purchase Plan.

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.

Critical Accounting Policies, Significant Judgments and Use of Estimates

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The fair value of the option granted is recognized on a straight-line basis over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period, which usually is the vesting period.

For awards that have a performance condition, the Company recognizes compensation expense based on its assessment of the probability that the performance condition will be achieved, using an accelerated attribution model, over the explicit or implicit service period.

For awards that have a performance condition, we recognize compensation expense based on its assessment of the probability that the performance condition will be achieved, using an accelerated attribution model, over the explicit or implicit service period.

We account for forfeitures as they occur.

In determining fair value of the stock options granted, we use the Black–Scholes option-pricing model, which requires the input of subjective assumptions.

These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (expected term), the estimated volatility of our common stock price over the expected term (expected volatility), risk-free interest rate and expected dividends.

Changes in the following assumptions can materially affect the estimate of fair value and ultimately how much stock-based compensation expense is recognized;

and the resulting change in fair value, if any, is recognized in our consolidated statements of operations during the period the related services are rendered.

These inputs are subjective and generally require significant analysis and judgment to develop.

Changes in the following assumptions can materially affect the estimate of the fair value of stock-based compensation:

• Expected Term — The expected term is calculated using the simplified method which is used when there is insufficient historical data about exercise patterns and post-vesting employment termination behavior.

The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting.

The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method.

For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term.

• Expected Volatility — The Company has limited trading history.

As such, the expected volatility was determined by examining the historical volatilities of a peer group of comparable publicly traded companies in biotechnology and pharmaceutical related industries to be representative of our expected future stock price volatility.

For purposes of identifying these peer companies, we consider the industry, stage of development, size and financial leverage of potential comparable companies.

For each grant, we measure historical volatility over a period equivalent to the expected term.

• Risk-Free Interest Rate — The risk-free interest rate is based on the implied yield currently available on United States Treasury zero-coupon issues with a remaining term equivalent to the expected term of the stock award.

• Expected Dividend Rate — We have not paid and do not anticipate paying dividends in the near future.

Accordingly, we estimate the dividend yield to be zero.

In determining fair value of the stock options granted, we use the Black–Scholes option-pricing model, which requires the input of subjective assumptions, including but not limited to, expected term, volatility and risk-free interest rates.

Changes in these assumptions can materially affect the estimate of the fair value of stock-based compensation:

Goodwill represents the excess of the purchase price over the fair value of net tangible and identified intangible assets acquired in a business combination.

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Recently Issued and Adopted Accounting Pronouncements

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.

See the section entitled “ 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.

Quantitative and Qualitat ive Disclosures About Market Risk.

Interest Rate Risk

As of December 31, 2023, we had cash and cash equivalents of $159.7 million, which consisted of cash and treasury securities.

As of December 31, 2024, we had cash, cash equivalents and short-term investments of $176.3 million, which consisted of cash and funds invested in treasury securities and money market funds.

Interest income is sensitive to general level of interest rates;

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Inflation Risk

Our assets are primarily monetary, consisting of cash and cash equivalents.

Our assets are primarily monetary, consisting of cash, cash equivalents, restricted cash and short-term investments in treasury securities.

Because of their liquidity, these assets are not directly affected by inflation.

Since we intend to retain and continue to use our equipment, furniture, fixtures and office equipment, computer hardware and software and leasehold improvements, we believe that the incremental inflation related to

replacement costs of such items will not materially affect our operations.

Since we intend to retain and continue to use our equipment, furniture, fixtures and office equipment, computer hardware and software and leasehold improvements, we

believe that the incremental inflation related to replacement costs of such items will not materially affect our operations.

Inflation generally affects us by increasing our cost of labor, clinical trial and manufacturing costs.

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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 7. Management’s Discussion and Analysis