What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-04 · 66 added, 74 removed, 178 unchanged (44% of the section changed)

8 unchanged sentences

These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements .

We are a clinical stage immuno-oncology company pioneering the development and commercialization of genetically engineered allogeneic T cell therapies for the treatment of cancer.

We are an immuno-oncology company pioneering the development and commercialization of genetically engineered allogeneic T cell therapies for the treatment of cancer.

We are developing a pipeline of off-the-shelf T cell product candidates that are designed to target and kill cancer cells.

Our engineered T cells are allogeneic, meaning they are derived from healthy donors for intended use in any patient, rather than from an individual patient for that patient’s use, as in the case of autologous T cells.

We believe this key difference will enable us to deliver readily available treatments faster, more reliably, at greater scale, and to more patients.

We have a deep pipeline of allogeneic chimeric antigen receptor (CAR) T cell product candidates targeting multiple promising antigens in a host of hematological malignancies and solid tumors.

Pursuant to the Exclusive Collaboration and License Agreement with Servier (Servier Agreement), we have exclusive rights to ALLO-501 and ALLO-501A, CAR T cell product candidates targeting CD19, in the United States, while Servier retains exclusive rights for these product candidates for

all other countries.

ALLO-501 and ALLO-501A use Cellectis S.A.

(Cellectis) technologies under which Servier holds an exclusive worldwide license from Cellectis.

We are sponsoring a Phase 1 clinical trial (the ALPHA trial) of ALLO-501 in patients with relapsed or refractory (R/R) non-Hodgkin lymphoma (NHL).

We are also progressing the development of the second-generation version of ALLO-501, known as ALLO-501A.

We have removed rituximab recognition domains in ALLO-501A, which we believe will potentially facilitate treatment of more patients, as rituximab is a typical part of a treatment regimen for a patient with NHL.

We initiated a Phase 1/2 clinical trial for ALLO-501A (the ALPHA2 trial) in the second quarter of 2020.

We reported updated data from the ALPHA trial and initial data from the ALPHA2 trial in May 2021, and expect to report additional data in late 2021.

We plan to collect additional data from the ALPHA and ALPHA2 trials, finalize a dose and schedule of ALLO-501A and lymphodepletion for a potential Phase 2 trial, and discuss the chemistry, manufacturing and controls (CMC) as well as the Phase 2 trial design of both ALLO-501A and ALLO-647 with the U.S.

Food and Drug Administration (FDA).

Pending the collection of data and favorable FDA feedback on the design of the trial for the registration of both ALLO-501A and ALLO-647, we may progress to the Phase 2 portion of the ALPHA2 trial at the end of 2021.

We are progressing three programs targeting B-cell maturation antigen (BCMA) for the treatment of multiple myeloma.

We initiated a Phase 1 clinical trial (the UNIVERSAL trial) of ALLO-715 in adult patients with R/R multiple myeloma in the third quarter of 2019.

We presented initial clinical data at the American Society of Hematology annual meeting in December 2020 and expect to report additional data in the fourth quarter of 2021.

In the first quarter of 2021, we initiated a combination trial of ALLO-715 and SpringWorks Therapeutics, Inc.'s gamma secretase inhibitor, nirogacestat, as part of the UNIVERSAL trial.

Finally, we are advancing ALLO-605, an allogeneic CAR T cell product candidate targeting BCMA and our first product candidate to incorporate our TurboCAR technology.

TurboCAR technology allows cytokine signaling to be engineered selectively into CAR T cells and has shown the ability to improve the potency and persistence of the cells and to prevent and delay exhaustion of the cells in preclinical models.

In June 2021, the FDA granted ALLO-605 Fast Track designation for the treatment of R/R multiple myeloma.

We initiated a Phase 1 clinical trial (the IGNITE trial) of ALLO-605 in mid-2021.

We continue to advance the Phase 1 clinical trial (the TRAVERSE trial) of ALLO-316, an allogeneic CAR T cell product candidate targeting CD70, in adult patients with advanced or metastatic clear cell renal cell carcinoma (ccRCC).

We are continuing to enroll patients in the ALPHA trial, ALPHA2 trial, UNIVERSAL trial, IGNITE trial and TRAVERSE trial, however, enrollment of new patients in our trials and the ability to conduct patient follow-up is being adversely impacted by the COVID-19 pandemic.

In October 2021, following a report of a chromosomal abnormality in ALLO-501A CAR T cells in a patient treated in the Phase 1 clinical trial (the ALPHA2 trial) of ALLO-501A, the U.S.

Food and Drug Administration (FDA) placed a hold on the ALPHA2 trial.

The FDA concurrently placed a clinical hold on our other clinical trials, including the Phase 1 clinical trial (the ALPHA trial) of ALLO-501 in patients with relapsed or refractory (R/R) non-Hodgkin lymphoma (NHL), the Phase 1 clinical trial (the UNIVERSAL trial) of ALLO-715 in patients with R/R multiple myeloma, the Phase 1 clinical trial (the IGNITE trial) of ALLO-605 in patients with R/R multiple myeloma and the Phase 1 clinical trial (the TRAVERSE trial) of ALLO-316 in patients with advanced or metastatic clear cell renal cell carcinoma (ccRCC).

We plan to report additional data from the ALPHA, ALPHA2 and UNIVERSAL trials on the patients treated prior to the clinical hold at the American Society of Hematology annual meeting in December 2021.

We are working with the FDA to remove the clinical hold, but at this stage, cannot provide a timeline for any potential resolution and re-commencement of our clinical trials.

In addition, enrollment of patients (prior to the clinical hold) and the ability to conduct patient follow-up has been adversely impacted by the COVID-19 pandemic.

The exact timing of delays and overall impact of the COVID-19 pandemic to our business, preclinical studies and clinical trials is currently unknown, and we are monitoring the pandemic as it continues to rapidly evolve.

Since inception, we have had significant operating losses.

Our net losses were $70.9 million and $104.0 million for the three and six months ended June 30, 2021.

As of June 30, 2021, we had an accumulated deficit of $750.3 million.

As of June 30, 2021, we had $913.2 million in cash and cash equivalents and investments.

Our net losses were $78.2 million and $182.1 million for the three and nine months ended September 30, 2021.

As of September 30, 2021, we had an accumulated deficit of $828.5 million.

As of September 30, 2021, we had $861.7 million in cash and cash equivalents and investments.

We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses and general and administrative expenses will continue to increase.

21 unchanged sentences

In February 2021, we made an additional $15.9 million investment in Notch's Series A preferred stock.

In October 2021, we made an additional $1.8 million investment in Notch's common stock.

Immediately following this transaction, our share in Notch was 23.0% on a voting interest basis.

3 unchanged sentences

See Note 6 to our consolidated financial statements included elsewhere in this report for further description of the agreement with MD Anderson.

License Agreement with Allogene Overland Biopharm (CY) Limited

License Agreement with Allogene Overland

On December 14, 2020, we entered into a License Agreement with Allogene Overland Biopharm (CY) Limited (Allogene Overland), a joint venture established by us and Overland Pharmaceuticals (CY) Inc.

(Overland), pursuant to a Share Purchase Agreement, dated December 14, 2020, for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies for patients in greater China, Taiwan, South Korea and Singapore (the JV Territory).

6 to our condensed consolidated financial statements included elsewhere in this report for further description of the License Agreement and Share Purchase Agreement with Allogene Overland.

Overland subsequently assigned the Licensed Agreement to a wholly-owned subsidiary, Allogene Overland BioPharm (HK) Limited (Allogene Overland HK).

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the License Agreement and Share Purchase Agreement with Allogene Overland.

Components of Results of Operations

As of June 30, 2021, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland Biopharm (CY) limited (Allogene Overland).

See Notes 2 and 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the Allogene Overland agreement.

As of September 30, 2021, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland HK.

See Notes 2 and 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the Allogene Overland HK agreement.

In the future, we may generate revenue from a combination of product sales, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches.

4 unchanged sentences

To date, our research and development expenses have related primarily to discovery efforts and preclinical and clinical development, and manufacturing of our product candidates.

Research and development expenses for the three and six months ended June 30, 2021 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

Research and development expenses for the three and nine months ended September 30, 2021 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

The most significant research and development expenses for the year relate to costs incurred for the development of our most advanced product candidates and include:

16 unchanged sentences

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We expect our research and development expenses to increase in the future as our clinical programs progress and as we seek to initiate clinical trials of additional product candidates.

Assuming resolution of the clinical hold, we expect our research and development expenses to increase in the future as our clinical programs progress and as we seek to initiate clinical trials of additional product candidates.

The cost of advancing our manufacturing process as well as the cost of manufacturing product candidates for clinical trials are included in our research and development expense.

We also expect to incur increased research and development expenses as we selectively

identify and develop additional product candidates.

We also expect to incur increased research

and development expenses as we selectively identify and develop additional product candidates.

However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:

• the ability to resolve the current clinical hold on our trials or any future clinical hold;

• per patient trial costs;

7 unchanged sentences

• the drop-out or discontinuation rates of patients;

• potential additional safety monitoring or other studies requested by regulatory agencies;

• potential additional safety monitoring or other studies requested by regulatory agencies, including to resolve the clinical hold;

• the duration of patient follow-up;

14 unchanged sentences

Results of Operations

Comparison of the Three Months Ended June 30, 2021 and 2020

The following sets forth our results of operations for the three months ended June 30, 2021 and 2020 (dollars in thousands):

Three Months Ended June 30, Change

Comparison of the Three Months Ended September 30, 2021 and 2020

The following sets forth our results of operations for the three months ended September 30, 2021 and 2020 (dollars in thousands):

Three Months Ended September 30, Change

2021 2020 $ %

Collaboration revenue - related party $ 44 $ — $ 44 —

Collaboration revenue - related party $ 49 $ — $ 49 NM

Operating expenses:

6 unchanged sentences

Other expenses (909) (162) (747) 461 %

Total other income (expense), net 93 2,184 (2,091) (96) %

Total other income (expense), net (516) 1,843 (2,359) NM

Net Loss $ (78,186) $ (66,197) $ (11,989) 18 %

NM - Not meaningful

Collaboration revenue - related party

Collaboration revenue was less than $0.1 million and zero for the three months ended June 30, 2021 and 2020, respectively.

Revenue recognized in the three months ended June 30, 2021 was due to delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Collaboration revenue was less than $0.1 million and zero for the three months ended September 30, 2021 and 2020, respectively.

Revenue recognized in the three months ended September 30, 2021 was due to delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland in December 2020.

Research and Development Expenses

Research and development expenses were $52.3 million and $47.3 million for the three months ended June 30, 2021 and 2020, respectively.

The increase of $5.0 million was driven primarily by an increase in personnel related costs of $6.4 million, of which $2.5 million was increased stock-based compensation expense, an increase in building rent and facilities costs of $1.5 million, offset by a decrease in external costs relating to the advancement of our product candidates of $3.5 million due to the timing of product development activities.

Research and development expenses were $58.7 million and $51.4 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $7.3 million was driven primarily by an increase in building rent and facilities costs of $2.9 million, an increase in personnel related costs of $2.0 million, of which $1.2 million was stock-based compensation expense, and an increase in external costs relating to the advancement of our product candidates of $1.6 million.

General and Administrative Expenses

General and administrative expenses were $18.8 million and $15.9 million for the three months ended June 30, 2021 and 2020, respectively.

The net increase of $2.9 million was primarily due to an increase in personnel related costs of $2.7 million, of which $1.8 million was increased stock-based compensation expense.

General and administrative expenses were $19.0 million and $16.6 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $2.4 million was primarily due to an increase in personnel related costs of $1.9 million, of which $1.8 million was stock-based compensation expense.

Interest and Other Income, Net

Interest and other income, net was $0.6 million and $2.3 million for the three months ended June 30, 2021 and 2020, respectively.

Interest and other income, net was $0.4 million and $2.0 million for the three months ended September 30, 2021 and 2020, respectively.

The decrease of $1.6 million was due to lower interest earned on our cash, cash equivalents and investments.

Comparison of the Six Months Ended June 30, 2021 and 2020

The following sets forth our results of operations for the six months ended June 30, 2021 and 2020 (dollars in thousands):

Six Months Ended June 30, Change

Comparison of the Nine Months Ended September 30, 2021 and 2020

The following sets forth our results of operations for the nine months ended September 30, 2021 and 2020 (dollars in thousands):

Nine Months Ended September 30, Change

2021 2020 $ %

Collaboration revenue - related party $ 38,389 $ — $ 38,389 —

Collaboration revenue - related party $ 38,438 $ — $ 38,438 NM

Operating expenses:

6 unchanged sentences

Other expenses (1,766) (376) (1,390) 370 %

Total other income (expense), net 279 5,385 (5,106) (95) %

Total other income (expense), net (238) 7,230 (7,468) NM

Net Loss $ (182,137) $ (181,651) $ (486) — %

NM - Not meaningful

Collaboration revenue - related party

Collaboration revenue was $38.4 million and zero for the six months ended June 30, 2021 and 2020, respectively.

Revenue recognized in the six months ended June 30, 2021 was related to grant of license and delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Collaboration revenue was $38.4 million and zero for the nine months ended September 30, 2021 and 2020, respectively.

Revenue recognized in the nine months ended September 30, 2021 was related to grant of license and delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland in December 2020.

Research and Development Expenses

Research and development expenses were $107.5 million and $89.3 million for the six months ended June 30, 2021 and 2020, respectively.

The increase of $18.1 million was driven primarily by an increase in personnel related costs of $13.0 million, of which $3.8 million was increased stock-based compensation expense, an increase in building rent and facilities costs of $3.2 million, and an increase in external costs relating to the advancement of our product candidates of $1.6 million.

Research and development expenses were $166.2 million and $140.8 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $25.4 million was driven primarily by an increase in personnel related costs of $15.0 million, of which $5.0 million was stock-based compensation expense, an increase in building rent and facilities costs of $6.1 million, and an increase in external costs relating to the advancement of our product candidates of $3.2 million.

General and Administrative Expenses

General and administrative expenses were $35.1 million and $31.5 million for the six months ended June 30, 2021 and 2020, respectively.

The net increase of $3.6 million was primarily due to an increase in personnel related costs of $4.4 million, of which $3.2 million was increased stock-based compensation expense, offset by a decrease in building rent and facilities costs of $0.6 million and a decrease in business expenses and professional service fees of $0.4 million.

General and administrative expenses were $54.1 million and $48.1 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $6.0 million was primarily due to an increase in personnel related costs of $6.4 million, of which $4.9 million was stock-based compensation expense, offset by a decrease in building rent and facilities costs of $0.9 million.

Interest and Other Income, Net

Interest and other income, net was $1.1 million and $5.6 million for the six months ended June 30, 2021 and 2020, respectively.

Interest and other income, net was $1.5 million and $7.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The decrease of $6.1 million was due to lower interest earned on our cash, cash equivalents and investments.

1 unchanged sentence

To date, we have incurred significant net losses and negative cash flows from operations.

As of June 30, 2021, we had $913.2 million in cash and cash equivalents and investments.

As of September 30, 2021, we had $861.7 million in cash and cash equivalents and investments.

We anticipate that the aggregate of our current cash and cash equivalents and investments available for operations will enable us to maintain our operations for a period of at least one year from the date this Quarterly Report on Form 10-Q is filed with the SEC.

Our operations have been financed primarily by net proceeds from the sale and issuance of our convertible preferred stock, the issuance of convertible promissory notes, net proceeds from our IPO, our at-the-market (ATM) offerings, and our June 2020 underwritten public offering.

In connection with our IPO in 2018, we sold an aggregate of 20,700,000 shares of our common stock (inclusive of 2,700,000 shares of common stock pursuant to the over-allotment option granted to the underwriters) at a price of $18.00 per share and received approximately $343.3 million in net proceeds.

In November 2019, we entered into a sales agreement with Cowen and Company, LLC (Cowen) under which we may from time to time issue and sell

shares of our common stock through Cowen in ATM offerings for an aggregate offering price of up to $250.0 million.

In connection with our IPO in 2018, we sold an aggregate of 20,700,000 shares of our

common stock (inclusive of 2,700,000 shares of common stock pursuant to the over-allotment option granted to the underwriters) at a price of $18.00 per share and received approximately $343.3 million in net proceeds.

In November 2019, we entered into a sales agreement with Cowen and Company, LLC (Cowen) under which we may from time to time issue and sell shares of our common stock through Cowen in ATM offerings for an aggregate offering price of up to $250.0 million.

During the year ended December 31, 2020, we sold an aggregate of 848,663 shares of common stock in ATM offerings resulting in net proceeds of $26.2 million.

During the six months ended June 30, 2021, we did not sell any shares of common stock in ATM offerings.

As of June 30, 2021, $167.3 million remains available for sale under the sales agreement with Cowen.

During the nine months ended September 30, 2021, we did not sell any shares of common stock in ATM offerings.

As of September 30, 2021, $167.3 million remains available for sale under the sales agreement with Cowen.

In June 2020, we sold 13,457,447 shares of our common stock, which included 1,755,319 shares sold pursuant to the full exercise of the underwriters' option to purchase additional shares, in an underwritten public offering at a price of $47.00 per share, which resulted in net proceeds of approximately $595.7 million after deducting the underwriting discounts and commissions and other expenses.

9 unchanged sentences

The following table summarizes our cash flows for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

3 unchanged sentences

Financing activities 11,641 620,613

Net increase in cash, cash equivalents and restricted cash $ 40,152 $ 105,253

Net increase (decrease) in cash, cash equivalents and restricted cash $ 6,670 $ (11,838)

Operating Activities

During the six months ended June 30, 2021, cash used in operating activities of $90.5 million was attributable to a net loss of $104.0 million, partially offset by non-cash charges of $48.8 million and an increase of $35.4 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $37.9 million, depreciation of $3.9 million, net amortization and accretion on investment securities of $3.7 million, and non-cash rent expense of $2.4 million.

The change in operating assets and liabilities was primarily due to a $38.7 million decrease in deferred revenue, a $2.5 million decrease in accrued and other current liabilities, and a $0.7 million increase in other long-term assets, offset by a $2.8 million decrease in prepaid expenses and other current assets, a $2.6 million increase in other long-term liabilities, and a $1.1 million increase in accounts payable.

During the nine months ended September 30, 2021, cash used in operating activities of $139.4 million was attributable to a net loss of $182.1 million, partially offset by non-cash charges of $74.7 million and an increase of $32.0 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $58.8 million, depreciation of $6.2 million, net amortization and accretion on investment securities of $5.4 million, non-cash rent expense of $2.6 million, and our share of equity investments' net losses for the period of $1.8 million.

The change in operating assets and liabilities was primarily due to a $38.6 million decrease in deferred revenue, a $2.2 million increase in prepaid expenses and other current assets, and a $1.0 million increase in other long-term assets, offset by a $6.4 million decrease in accrued and other current liabilities, a $2.1 million increase in other long-term liabilities, and a $1.3 million increase in accounts payable.

Investing Activities

During the six months ended June 30, 2021, net cash used in investing activities of $121.4 million was related to cash provided by investment maturities of $484.1 million, offset by cash used in purchases of investments of $329.4 million, cash used in the purchase of stock in equity method investment of $15.9 million and cash used in the purchase of property and equipment of $17.4 million.

During the nine months ended September 30, 2021, net cash provided by investing activities of $134.4 million was related to cash provided by investment maturities of $645.9 million, offset by cash used in purchases of investments of $474.8 million, cash used in the purchase of property and equipment of $20.7 million, and cash used in the purchase of stock in equity method investment of $15.9 million.

Financing Activities

During the six months ended June 30, 2021, cash provided by financing activities of $9.3 million was related to $7.3 million of cash provided by the issuance of common stock upon exercise of stock options and $2.0 million of cash provided by the sale of common stock through our employee stock purchase plan.

During the nine months ended September 30, 2021, cash provided by financing activities of $11.6 million was related to $8.0 million of cash provided by the issuance of common stock upon exercise of stock options and $3.6 million of cash provided by the sale of common stock through our employee stock purchase plan.

Contractual Obligations and Commitments

3 unchanged sentences

The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements.

As of June 30, 2021, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

As of September 30, 2021, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

For additional information regarding our agreements, see “—Our Research and Development and License Agreements” above.

1 unchanged sentence

These agreements generally provide for termination or cancellation, other than for costs already incurred.

As of June 30, 2021, the Company had non-cancellable purchase commitments of $4.2 million.

As of September 30, 2021, the Company had non-cancellable purchase commitments of $2.9 million.

In July 2020, we entered into a Solar Power Purchase and Energy Services Agreement for the installation and operation of a solar photovoltaic generating system and battery energy storage system at our manufacturing facility in Newark, California.

The agreement has a term of 20 years and is expected to commence in the third quarter of 2021.

The agreement has a term of 20 years and is expected to commence in the fourth quarter of 2021.

We are obligated to pay for electricity generated from the system at an agreed rate for the duration of the agreement term.

15 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-Q

Item 2. Management’s Discussion and Analysis