What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-23 compared with 2021-02-25 · 67 added, 123 removed, 246 unchanged (44% of the section changed)

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You should carefully read “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

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 a clinical-stage immuno-oncology company pioneering the development 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.

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(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 R/R non-Hodgkin lymphoma (NHL).

We are continuing the ALPHA trial to further explore and optimize the lymphodepletion regimen and treatment.

We are conducting long-term follow-up in our 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 and, subject to data, we plan to progress to the Phase 2 portion of the trial in 2021.

We are also 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, an allogeneic CAR T cell product candidate targeting BCMA, in adult patients with R/R multiple myeloma in the third quarter of 2019.

In January 2020, we entered into a clinical trial collaboration agreement with SpringWorks Therapeutics, Inc.

(SpringWorks) to evaluate ALLO-715 in combination with SpringWorks’ investigational gamma secretase inhibitor, nirogacestat, in patients with R/R multiple myeloma.

In December 2020, the FDA cleared our investigational new drug application (IND) and we recently initiated this combination trial as a cohort 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.

We expect to submit an IND in the first half of 2021 to initiate a Phase 1 clinical trial of ALLO-605.

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

We have also limited the number of staff working at our facilities.

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

Subject to further patient follow-up and FDA discussion, we plan to proceed to the Phase 2 portion of the trial in adult patients with R/R large B-cell lymphoma in mid-2022.

We are sponsoring two clinical trials in adult patients with R/R multiple myeloma, a Phase 1 clinical trial (the UNIVERSAL trial) of ALLO-715 and a Phase 1 clinical trial (the IGNITE trial) of ALLO-605, 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 delay exhaustion of the cells in preclinical models.

We also 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).

Enrollment of patients 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.

In December 2020, the FDA cleared our IND to initiate a 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).

The TRAVERSE trial is expected to initiate in the first quarter of 2021.

Since inception, we have had significant operating losses.

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As of December 31, 2021, we had an accumulated deficit of $903.3 million.

As of December 31, 2020, we had $1.0 billion 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.

As of December 31, 2021, we had $809.5 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.

Our Research and Development and License Agreements

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In April 2018, we entered into an Asset Contribution Agreement (Pfizer Agreement) with Pfizer pursuant to which we acquired certain assets and assumed certain liabilities from Pfizer, including agreements with Cellectis and Servier as described below, and other intellectual property for the development and administration of CAR T cells for the treatment of cancer.

See Notes 6 and 7 to our consolidated financial statements included elsewhere in this report for further description of the Pfizer Agreement.

See Notes 6 to our consolidated financial statements included elsewhere in this report for further description of the Pfizer Agreement.

Research Collaboration and License Agreement with Cellectis

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In October 2015, Pfizer entered into an Exclusive License and Collaboration Agreement (Servier Agreement) with Servier to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR products, including UCART19, in the United States with the option to obtain the rights over certain additional allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

In April 2018, Pfizer assigned the agreement to

us pursuant to the Pfizer Agreement.

In April 2018, Pfizer assigned the agreement to us pursuant to the Pfizer Agreement.

In October 2019, we agreed to waive our rights to the one additional target.

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The Notch Agreement includes a research collaboration to conduct research and pre-clinical development activities to generate engineered cells directed to our exclusive targets, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint development committee.

See Note 7 to our consolidated financial statements included elsewhere in this report for further description of the Notch Agreement.

In connection with the execution of the Notch Agreement, we made an upfront payment to Notch of $10.0 million.

In addition, we made a $5.0 million investment in Notch’s series seed convertible preferred stock.

In February 2021, we made a further investment as part of a Series A preferred stock financing of Notch of approximately $15.9 million.

Immediately following this investment, we had a 17% ownership interest in Notch’s capital stock on a fully diluted basis.

In addition, we made a $5.0 million investment in Notch’s series seed convertible preferred stock, resulting in us having a 25% ownership interest in Notch’s outstanding capital stock on a fully diluted basis immediately following the investment.

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.

See Note 6 to our consolidated financial statements included elsewhere in this report for further description of the Notch Agreement.

Strategic Alliance with The University of Texas MD Anderson Cancer Center

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(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).

Pursuant to the Share Purchase Agreement, we acquired Seed Preferred Shares in Allogene Overland representing 49% of Allogene Overland's outstanding stock as partial consideration for the License Agreement, and Overland acquired Seed Preferred Shares representing 51% of Allogene Overland's outstanding stock for $117.0 million in upfront and certain quarterly cash payments, to support operations of Allogene Overland.

As of December 31, 2020, Allogene and Overland are the sole equity holders in Allogene Overland.

The Company received $40 million from Allogene Overland as partial consideration for the License Agreement .

Pursuant to the License Agreement, we granted Allogene Overland an exclusive license to develop, manufacture and commercialize certain allogeneic CAR T cell candidates directed at four targets, BCMA, CD70, FLT3, and DLL3, in the JV Territory.

As consideration, we would also be entitled to additional regulatory milestone payments of up to $40.0 million and, subject to certain conditions, tiered low-to-mid single-digit sales royalties.

Promises that we concluded were distinct performance obligations in the License Agreement included:

(1) the license of intellectual property and delivery of know-how, (2) the manufacturing license, related know-how and support, (3) if and when available know-how developed in future periods, and (4) participation in the joint steering committee.

In order to determine the transaction price, we evaluated all the payments to be received during the duration of the contract.

Fixed consideration exists in the form of the upfront payment.

Regulatory milestones and royalties were considered variable consideration.

We constrain the estimated variable consideration when we assess it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods.

Milestone fees were constrained and not included in the transaction price due to the uncertainties of research and development.

We re-evaluate the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting

period and as uncertain events are resolved or other changes in circumstances occur.

The shares of Series Seed Preferred Stock were accounted for as part of our joint venture and equity method accounting upon formation of the joint venture, and as such, were excluded from the transaction price.

We determined that the initial transaction price consists of the upfront payment of $40.0 million.

The allocation of the transaction price is performed based on standalone selling prices, which are based on estimated amounts that we would charge for a performance obligation if it were sold separately .

The transaction price allocated to the license of intellectual property and delivery of know-how will be recognized upon grant of license and delivery of know-how.

The transaction price allocated to (i) the manufacturing license, related know-how and support services, (ii) if and when available know-how developed in future periods, and (iii) participation in the joint steering committee, will be recognized over time as the services are delivered.

Funds received in advance are recorded as deferred revenue and will be recognized as the performance obligations are satisfied.

We expect a substantial portion of the upfront payment of $40 million will be recognized during the quarter ending on March 31, 2021.

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

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

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Components of Results of Operations

As of December 31, 2021, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland HK.

See Notes 1 and 6 to our consolidated financial statements appearing elsewhere in this Annual 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.

We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestones and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized.

If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, will be materially adversely affected.

Operating Expenses

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• facilities and other expenses, which include expenses for rent and maintenance of facilities, depreciation and amortization expense and other supplies;

• other significant research and development costs, which include overhead costs.

• other significant research and development costs including overhead costs.

We expense all research and development costs in the periods in which they are incurred.

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Where contingent milestone payments are due to third parties under research and development arrangements or license agreements, milestone payment obligations are expensed when the milestone results are achieved.

We are required to reimburse Servier for 60% of the costs associated with the prior development of UCART19, including for the CALM and PALL clinical trials of UCART19.

We accrue for costs incurred by monitoring the status of

clinical trials and the invoices received from Servier.

We are required to reimburse Servier for 60% of the costs associated with the prior development of UCART19, including for long-term follow-up of patients in the CALM and PALL clinical trials of UCART19.

We accrue for costs incurred by monitoring the status of clinical trials and the invoices received from Servier.

We adjust our accrual as actual costs become known.

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• 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 any future clinical hold;

• the duration of patient follow-up;

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General and administrative expenses also include stock-based compensation expense related to the modification of shares of common stock issued to our founders to include vesting conditions.

Other significant costs include costs relating to facilities and overhead costs, legal fees relating to corporate and patent matters, insurance, investor relations costs, fees for accounting and consulting services, information technology, and other general and administrative costs.

Other significant costs include costs relating to facilities and overhead costs, legal fees relating to corporate and

patent matters, insurance, investor relations costs, fees for accounting and consulting services, information technology, costs and support for our board of directors and board committees, and other general and administrative costs.

General and administrative costs are expensed as incurred, and we accrue for services provided by third parties related to the above expenses by monitoring the status of services provided and receiving estimates from our service providers, and adjusting our accruals as actual costs become known.

We expect our general and administrative expenses to increase over the next several years to support our continued research and development activities, manufacturing activities, potential commercialization of our product candidates and the increased costs of operating as a public company, including additional compliance-related expenses as a result of no longer being an emerging growth company.

These increases are anticipated to include increased costs related to the hiring of additional

personnel, developing infrastructure, fees to outside consultants, lawyers and accountants, and increased costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, insurance and investor relations costs.

These increases are anticipated to include increased costs related to the hiring of additional personnel, developing infrastructure, fees to outside consultants, lawyers and accountants, and increased costs associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules, corporate governance, SEC requirements, insurance and investor relations costs.

Other (Expense) Income, Net:

Change in Fair Value of 2018 Notes

In September 2018, we sold and issued an aggregate of $120.2 million in convertible promissory notes (2018 Notes) and received net cash proceeds of $116.8 million.

We elected on issuance to account for the 2018 Notes at fair value until their settlement.

In the year ended December 31, 2018, the change in fair value of the 2018 Notes was recognized through the statement of operations.

The 2018 Notes settled on the closing of our IPO in October 2018.

Interest Expense

Interest expense consists of debt issuance costs we incurred to issue the 2018 Notes.

The debt issuance costs were expensed on issuance because we elected to record the 2018 Notes at fair value.

Interest and Other Income, Net

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2021 2020 2019 2021 vs 2020 2020 vs 2019

Collaboration revenue - related party $ 38,489 $ — $ — $ 38,489 $ —

Operating expenses:

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Other (expense) income, net:

Change in fair value of convertible note payable — — (21,211) — 21,211

Interest expense — — (3,358) — 3,358

Interest and other income, net 1,714 9,164 17,351 (7,450) (8,187)

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Net loss $ (257,005) $ (250,221) $ (184,594) $ (6,784) $ (65,627)

Collaboration revenue - related party

Collaboration revenue was $38.5 million for the year ended December 31, 2021 and zero for each of the years ended December 31, 2020 and 2019.

Revenue recognized in the year ended December 31, 2021 was related to grant of license and delivery of the know-how performance obligation under the License Agreement entered into with Allogene Overland in December 2020.

Research and Development Expenses

Research and development expenses were $220.2 million and $193.0 million for the years ended December 31, 2021 and 2020, respectively.

The net increase of $48.5 million was primarily due to an increase in personnel related costs of $28.9

million, of which $11.9 million was increased stock-based compensation expense, an increase in external costs relating to the advancement of our product candidates of $16.1 million, and an increase in allocated building rent and facilities costs of $5.3 million, offset by a decrease in TSA expenses of $1.2 million and a decrease in travel related costs of $1.0 million due to the impact of the COVID-19 pandemic.

The net increase of $27.2 million was primarily due to an increase in personnel related costs of $23.1 million, of which $8.3 million was increased stock-based compensation expense, an increase in allocated building rent and facilities costs of $10.8 million, offset by a decrease in external costs relating to the advancement of our product candidates of $9.4 million due to timing of process development activities and manufacturing runs.

Research and development expenses were $193.0 million and $144.5 million for the years ended December 31, 2020 and 2019, respectively.

The net decrease of $7.3 million was primarily due to $109.4 million in expenses related to the acquired in-process research and development assets with no alternative future use, acquired from Pfizer in April 2018.

This was offset by a $102.1 million increase, driven primarily by increased external costs related to the advancement of our pipeline candidates of $44.6 million, increased personnel related costs of $40.8 million, including an increase of $18.0 million in stock-based compensation expense, and increased allocated building rent and facilities costs of $19.2 million, offset by a decrease of $4.0 million in Pfizer TSA costs.

The net increase of $48.5 million was primarily due to an increase in personnel related costs of $28.9 million, of which $11.9 million was increased stock-based compensation expense, an increase in external costs relating to the advancement of our product candidates of $16.1 million, and an increase in allocated building rent and facilities costs of $5.3 million, offset by a decrease in TSA expenses of $1.2 million and a decrease in travel related costs of $1.0 million due to the impact of the COVID-19 pandemic.

General and Administrative Expenses

General and administrative expenses were $74.1 million and $65.3 million for the years ended December 31, 2021 and 2020, respectively.

The net increase of $7.8 million was primarily due to an increase in personnel related costs of $8.4 million, of which $7.3 million was increased stock-based compensation expense, an increase in building rent and facilities costs of $2.4 million, an increase in legal and professional services of $1.2 million, offset by a decrease in TSA expenses of $3.5 million and a decrease in travel related costs of $0.8 million due to the impact of the COVID-19 pandemic.

The net increase of $8.8 million was primarily due to an increase in personnel related costs of $10.0 million, of which $7.3 million was increased stock-based compensation expense, offset by a decrease in allocated building rent and facilities costs of $1.9 million.

General and administrative expenses were $65.3 million and $57.5 million for the years ended December 31, 2020 and 2019, respectively.

The net increase of $16.5 million was primarily due to a $18.6 million increase in personnel related costs, including an increase of $9.7 million in stock-based compensation expense, and increased legal and professional services of $2.7 million.

This was offset by a $5.1 million decrease due to a greater proportion of facilities costs being allocated to research and development expenses and a $1.5 million decrease in expenses incurred under the Pfizer TSA.

Change in Fair Value of 2018 Notes

The change in fair value of convertible notes of $21.2 million for the year ended December 31, 2018 was due to the accretion of the 2018 Notes to their fair value from the date of issuance at $120.2 million to the fair value upon settlement of $141.4 million which occurred in 2018.

There were no similar transactions in the years ended December 31, 2020 and 2019.

Interest Expense

Interest expense of $3.4 million for the year ended December 31, 2018 consists of debt issuance costs that were expensed on issuance of the 2018 Notes.

There were no similar transactions in the years ended December 31, 2020 and 2019.

The net increase of $7.8 million was primarily due to an increase in personnel related costs of $8.4 million, of which $7.3 million was increased stock-based compensation expense, an increase in allocated building rent and facilities costs of $2.4 million, an increase in legal and professional services of $1.2 million, offset by a decrease in TSA expenses of $3.5 million and a decrease in travel related costs of $0.8 million due to the impact of the COVID-19 pandemic.

Interest and Other Income, Net

Interest and other income, net was $1.7 million and $9.2 million for the years ended December 31, 2021 and 2020, respectively.

The $8.2 million decrease was due to lower yields and a corresponding reduction in the interest earned on our cash, cash equivalents and investments.

The $7.5 million decrease was due to lower overall investment balance, lower yields and a corresponding reduction in the interest earned on our cash, cash equivalents and investments.

Interest and other income, net was $9.2 million and $17.4 million for the years ended December 31, 2020 and 2019, respectively.

The $11.6 million increase was due to interest earned on our cash equivalents and investments as our combined cash, cash equivalents and investments interest earning balance was higher on average during the 12 months ended December 31, 2019 compared to the 12 months ended December 31, 2018.

The $8.2 million decrease was due to lower yields and a corresponding reduction in the interest earned on our cash, cash equivalents and investments.

Liquidity, Capital Resources and Plan of Operations

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

As of December 31, 2020, we had $1.0 billion in cash, cash equivalents and investments.

As of December 31, 2021, we had $809.5 million in cash, cash equivalents and investments.

We believe that the aggregate of our current cash and cash equivalents and investments available for operations will be sufficient to fund our operations for at least the next 12 months from the date this Annual Report on Form 10-K 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 the 2018 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.

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, our June 2020 underwritten public offering, and upfront cash payment of $40.0 million received in December 2020 pursuant to our License Agreement with Allogene Overland.

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.

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As of December 31, 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.

share, which resulted in net proceeds of approximately $595.7 million after deducting the underwriting discounts and commissions and other expenses.

Capital Resources

Our primary use of cash is to fund construction projects for our manufacturing facility and operating expenses, which consist primarily of clinical manufacturing and research and development expenditures related to our lead product candidates, other research efforts, and to a lesser extent, general and administrative expenditures.

Our primary use of cash is for operating expenses, which consist primarily of clinical manufacturing and research and development expenditures related to our lead product candidates, other research efforts, and to a lesser extent, general and administrative expenditures.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses and other current liabilities.

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Financing activities 11,963 633,591 58,960

Net increase in cash, cash equivalents and restricted cash $ 13,375 $ 85,694 $ 93,731

Net increase (decrease) in cash, cash equivalents and restricted cash $ (9,194) $ 13,375 $ 85,694

Operating Activities

During the year ended December 31, 2021, cash used in operating activities of $184.8 million was attributable to a net loss of $257.0 million, substantially offset by non-cash charges of $104.3 million and a net change of $32.1 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation of $80.8 million, depreciation and amortization of $10.5 million, net amortization and accretion on investment securities of $7.0 million, share of losses from equity method investments of $3.4 million, and non-cash rent expense of $2.6 million.

The net change in operating assets and liabilities was primarily due to a $38.6 million decrease in deferred revenue within current liabilities, a $0.8 million decrease in accounts payable, and a $0.6 million increase in other long term assets, offset by a decrease in prepaid expenses and other current assets of $3.2 million and a decrease in accrued and other current liabilities of $3.7 million, and an increase in other-long term liabilities $1.0 million.

During the year ended December 31, 2020, cash used in operating activities of $115.1 million was attributable to a net loss of $250.2 million, substantially offset by non-cash charges of $81.2 million and a net change of $53.9 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation of $65.3 million, depreciation and amortization of $7.4 million, non-cash rent expense of $4.0 million and net amortization and accretion on investment securities of $3.3 million.

The net change in operating assets and liabilities was primarily due to a $39.0 million increase in deferred revenue within current liabilities, a $18.7 million increase in accrued and other current liabilities and $0.6 million increase in accounts payable, offset by an increase in prepaid expenses and other current assets of $3.2 million and a decrease in other-long term liabilities of $1.3 million.

During the year ended December 31, 2019, cash used in operating activities of $137.4 million was attributable to a net loss of $184.6 million, substantially offset by non-cash charges of $54.1 million and a net change of $6.9 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation of $46.1 million, non-

cash rent expense of $6.8 million and depreciation and amortization of $4.4 million, offset by net amortization and accretion on investment securities of $3.6 million.

operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation of $46.1 million, non-cash rent expense of $6.8 million and depreciation and amortization of $4.4 million, offset by net amortization and accretion on investment securities of $3.6 million.

The net change in operating assets and liabilities was primarily due to a $6.4 million increase in accrued and other current liabilities, offset by an increase in prepaid expenses and other current assets of $5.4 million, an increase in other long-term assets of $4.4 million and a decrease in other-long term liabilities of $2.4 million.

During the year ended December 31, 2018, cash used in operating activities of $44.7 million was attributable to a net loss of $211.5 million, substantially offset by non-cash charges of $154.8 million and a net change of $12.1 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of acquired in-process research and development expense resulting from the asset acquisition from Pfizer of $109.4 million, change in fair value of convertible notes payable of $21.2 million and $18.6 million of stock-based compensation.

The net change in operating assets and liabilities was primarily due to a $12.1 million increase in accruals and other liabilities driven by increased professional fees and an $8.8 million increase in accounts payable resulting from the timing of payments made to our collaboration partners and Pfizer accrued services.

This was partially offset by a $8.6 million increase in prepaid expenses and other current assets and a $0.2 million increase in other long-term assets.

Investing Activities

During the year ended December 31, 2021, net cash provided by investing activities of $163.7 million was related to cash inflows from maturities of investments of $728.4 million, offset by the purchase of investments of $525.6 million, purchases of property and equipment of $21.4 million, and purchase of stock in equity method investment of $17.7 million.

During the year ended December 31, 2020, net cash used by investing activities of $505.1 million was related to the purchase of investments of $1.0 billion and purchases of property and equipment of $66.0 million, offset by cash inflows from maturities of investments of $593.6 million and cash inflows from sales of investments of $4.8 million.

During the year ended December 31, 2019, net cash provided by investing activities of $164.1 million was related to proceeds from investment maturities of $472.6 million, offset by cash used for investment purchases of $252.6 million, cash used in purchases of property and equipment of $50.8 million and cash used in connection with our investment in Notch’s series seed convertible preferred stock of $5.1 million, inclusive of transaction costs.

During the year ended December 31, 2018, cash used by investing activities of $632.8 million was related to the purchase of investments of $649.3 million, cash transaction costs of $2.1 million incurred in the asset acquisition from Pfizer and the purchase of property and equipment of $3.2 million.

This was offset by cash inflows from maturities of investments of $19.2 million and cash inflows from sales of investments of $2.6 million.

Financing Activities

During the year ended December 31, 2021, net cash provided by financing activities of $12.0 million was related to proceeds from the issuance of common stock upon the exercise of stock options of $8.3 million and proceeds from the employee stock purchase plan of $3.6 million.

During the year ended December 31, 2020, net cash provided by financing activities of $633.6 million was related to net proceeds from the issuance of common stock in ATM offerings and an underwritten public offering of $621.9 million, proceeds from the issuance of common stock upon the exercise of stock options of $8.8 million and proceeds from the employee stock purchase plan of $2.8 million.

During the year ended December 31, 2019, net cash provided by financing activities of $59.0 million was related to net proceeds from the issuance of common stock in ATM offerings of $54.2 million, proceeds from the issuance of common stock upon the exercise of stock options of $3.0 million and proceeds from the employee stock purchase plan of $1.8 million.

During the year ended December 31, 2018, cash provided by financing activities of $771.2 million was related to net proceeds of $299.3 million from the issuance of our Series A and A-1 convertible preferred stock, $116.8 million from the issuance of the 2018 Notes, $343.7 million in net proceeds from our IPO and $11.4 million from the issuance of common stock in connection with stock option exercises.

Contractual Obligations and Commitments

The following table summarizes our commitments and contractual obligations as of December 31, 2020

Payments Due by Period

Total 2021 2022-2024 2025-2027 2028 and After

(in thousands)

Contractual Obligations:

Operating lease obligations ¹ $ 87,653 $ 6,485 $ 24,514 $ 25,995 $ 30,659

Total $ 87,653 $ 6,485 $ 24,514 $ 25,995 $ 30,659

¹ In August 2018, we entered into an operating lease agreement for our headquarters in South San Francisco.

The lease term is 127 months beginning August 2018 through February 2029.

In October 2018, we entered into an operating lease agreement for additional office and laboratory space in South San Francisco near our headquarters.

The lease has a term of ten years and four months commencing on November 1, 2018.

In December 2018, we entered into an operating lease agreement for office space in New York, and another operating lease agreement for office space in Los Angeles.

The lease terms are 79 months and 36 months, respectively, with the leases commencing on December 1, 2018 and December 19, 2018, respectively.

In February 2019, we entered into a lease agreement for manufacturing space in Newark, California.

The lease term is for 188 months beginning November 2020.

Material Cash Commitments and Requirements

Our commitments primarily consist of obligations under our agreements with Pfizer, Cellectis, Servier and Notch.

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Under the terms of the agreement, we have committed up to $15.0 million of funding for the duration of the agreement.

Payment of this funding is contingent on mutual agreement to study orders in order for any study to be included under the alliance.

this funding is contingent on mutual agreement to study orders in order for any study to be included under the alliance.

We made an upfront payment of $3.0 million to MD Anderson in the year ended December 31, 2020.

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We also have a Change in Control and Severance Plan that require the funding of specific payments, if certain events occur, such as a change of control and the termination of employment without cause.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s 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 United States generally accepted accounting principles.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated

financial statements, as well as the reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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We recorded the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced, and includes these costs in the accrued and other current liabilities on the consolidated balance sheets and within research and development expense on the consolidated statements of operations and comprehensive loss.

We accrue for these costs based on factors such as estimates of the work completed and budget provided and in accordance with agreements established with our collaboration partners and third-party service providers.

We make significant judgments and estimates in determining the accrued liabilities balance in each reporting period.

We accrue for these costs based on factors such as estimates of the work completed in accordance with agreements established with our collaboration partners and third-party service providers.

We make estimates in determining the accrued liabilities balance in each reporting period.

As actual costs become known, we adjust its accrued liabilities.

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Revenue Recognition

In the near future, our revenue is anticipated to be generated through collaboration research and license agreements.

The terms of these agreements are expected to contain multiple deliverables which may include (i) grant of licenses, (ii) transfer of know-how, (iii) research and development activities, (iii) clinical manufacturing and, (iv) product supply.

Our revenue is generated through collaboration research and license agreements.

The terms of these agreements may contain multiple deliverables which may include (i) grant of licenses, (ii) transfer of know-how, (iii) research and development activities, (iii) clinical manufacturing and, (iv) product supply.

The payment terms of these agreements may include nonrefundable upfront fees, payments for research and development activities, payments based upon the achievement of certain milestones, royalty payments based on product sales derived from the collaboration, and payments for supplying product.

We will analyze our collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (ASC 808) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities.

We analyze our collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (ASC 808) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities.

This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

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The transaction price is re-evaluated, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The allocation of the transaction price is performed based on standalone selling prices, which are based

on estimated amounts that we would charge for a performance obligation if it were sold separately.

Revenue is recognized when, or as, performance obligations in the contracts are satisfied, in the amount reflecting the expected consideration to be received from the goods or services transferred to the customers.

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In order to determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .

For all grants subsequent to our IPO in October 2018, the fair value of common stock was determined by taking the closing price per share of common stock per Nasdaq.

For all grants subsequent to our IPO in October 2018,

the fair value of common stock was determined by taking the closing price per share of common stock per Nasdaq.

‑ Expected term — The expected term represents the period that stock-based awards are expected to be outstanding.

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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