What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-23 compared with 2021-02-25 · 162 added, 255 removed, 832 unchanged (33% of the section changed)

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For the years ended December 31, 2021 and 2020

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Financial Statements:

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Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Allogene Therapeutics, Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020 and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, statements of stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Research and Development Costs

Accrued Clinical Trial Expenses

Description of the Matter

As discussed in Note 1 liabilities are recorded for estimated unpaid costs of research and development activities conducted by the Company and its collaboration partners and third-party service providers, which include the conduct of preclinical and clinical studies, and contract manufacturing activities.

Total research and development expenses were $193 million during the year ended December 31, 2020 and include the estimated costs of accrued research and development activities for services provided but not yet invoiced.

The accrual for these costs is determined after consideration of several factors, including budgets and estimates of the work completed in accordance with agreements established with the Company’s collaboration partners and third-party service providers.

Auditing accrued research and development costs was complex due to significant judgments and estimates made by management in determining the required accruals.

As discussed in Note 1 liabilities are recorded for estimated unpaid costs of research and development activities conducted by the Company and its third-party service providers, which include the conduct of preclinical and clinical studies, and contract manufacturing activities.

Accrued research and development expenses were $13.5 million as of December 31, 2021 and includes the estimated costs of accrued clinical trial expenses incurred but not yet invoiced under agreements with investigative clinical trial sites that conduct research and development activities on behalf of the Company (“Accrued Clinical Trial Expenses”).

The accrual for these Accrued Clinical Trial Expenses is determined after consideration of several factors, including estimates of the work completed.

Auditing these Accrued Clinical Trial Expenses was complex due to the required analysis of extensive data in determining the estimated unpaid expenses.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of relevant controls over the Company’s determination of accrued research and development costs, including controls over the determination of significant assumptions and the completeness and accuracy of the data used in determining accrued costs.

Our audit procedures included, among others, examining, on a test basis, evidence regarding the estimated accrued amounts through comparison of expenses incurred to budgeted amounts and to expenses incurred in prior periods and obtaining an understanding of the reasons for changes.

We verified that accrued amounts were in accordance with key terms and conditions through review of the underlying agreements with the Company’s collaboration partners and third-party service providers.

We verified expenses incurred by obtaining confirmation from the Company’s collaboration partners and further validated accrued amounts based on information provided by third-party service providers.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of relevant controls over the Company’s determination of Accrued Clinical Trial Expenses, including controls over the determination of significant assumptions and the completeness and accuracy of the data used in determining these accrued costs.

Our audit procedures included, among others, testing the accuracy and completeness of the inputs used in management’s analysis to determine Accrued Clinical Trial Expenses.

We verified that the accrued amounts were in accordance the terms and conditions of the underlying agreements and the information provided by third-party service providers.

We also evaluated management’s estimates of the progress of the clinical trials by making direct inquiries of the Company’s personnel that oversee the clinical trials.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2018.

San Jose, California

Redwood City, California

February 23, 2022

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Property and equipment, net 122,990 118,840

Intangible assets, net — 151

Restricted cash 10,292 9,449

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Total assets $ 1,038,634 $ 1,227,829

Liabilities, convertible preferred stock and stockholders’ equity

Liabilities and stockholders’ equity

Current liabilities:

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Accumulated deficit ( 903,348 ) ( 646,343 )

Accumulated other comprehensive income 268 1,145

Accumulated other comprehensive (loss) income ( 2,567 ) 268

Total stockholders’ equity 916,406 1,079,617

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(In thousands, except share and per share amounts)

Years Ended December 31,

Year Ended December 31,

2021 2020 2019

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

Operating expenses:

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Other income (expense), net:

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

Interest expense — — ( 3,358 )

Interest and other income, net 1,714 9,164 17,351

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ALLOGENE THERAPEUTICS, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share data)

Series A Convertible

Preferred Stock Subscriptions

Stockholders Common Stock Notes

Stockholders Additional

Common Stock Additional

Capital Accumulated

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Comprehensive

Income (Loss) Total

Stockholders’

Equity (Deficit)

Shares Amount Shares Amount

Shares Amount

Balance — December 31, 2018 121,482,671 $ 121 $ 914,265 $ ( 211,528 ) $ 306 $ 703,164

Issuance of Series A convertible preferred shares at $ 35.06 per share, net of issuance costs of $ 635

7,557,990 264,365 — — — — — — — —

Issuance of Series A-1 convertible preferred shares at $ 35.06 per share in connection with asset acquisition

3,187,772 111,770 — — — — — — — —

Issuance of Series A-1 convertible preferred shares at $ 35.06 per share, net of issuance costs of $ 84

998,225 34,917 — — — — — — — —

Proceeds received from common stockholders for issuance of founders' stock at inception

— — — — — 5 — — — 5

Subscriptions receivable from preferred stockholders

— — ( 150,000 ) — — — — — — ( 150,000 )

Proceeds received from preferred stockholders

— — 150,000 — — — — — — 150,000

Issuance of common stock for early exercise of stock options

— — — 5,020,580 5 — — — — 5

Issuance of common stock upon initial public offering, net of issuance costs of $ 29.3 million

— — — 20,700,000 21 — 343,308 — — 343,329

Conversion of Series A convertible preferred stock

( 11,743,987 ) ( 411,052 ) — 61,655,922 62 — 410,990 — — 411,052

Issuance of common stock upon conversion of convertible notes

— — — 7,856,176 7 — 141,403 — — 141,410

Adjustment for fractional shares from forward stock split

Issuance of common stock upon exercise of stock options and vesting of RSU's

711,623 1 2,958 — — 2,959

Vesting of early exercised common stock — — 4,590 — — 4,590

Stock-based compensation — — 46,063 — — 46,063

— — — — — — 18,566 — — 18,566

Employee stock purchase plan 107,982 — 1,783 — — 1,783

Issuance of common stock from ATM offering, net of commissions and offering costs of $ 1.6 million

1,965,082 2 54,217 — — 54,219

Net loss — — — ( 184,594 ) — ( 184,594 )

Net unrealized gain on available-for-sale investments — — — — 839 839

— — — — — — — — 306 306

Balance — December 31, 2019 124,267,358 124 1,023,876 ( 396,122 ) 1,145 629,023

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848,663 1 26,202 — — 26,203

Issuance of common stock from public offering, net of commissions and offering costs of $ 36.8 million

13,457,447 13 595,717 — — 595,730

Net unrealized gain on available-for-sale investments

— — — ( 250,221 ) — ( 250,221 )

Net unrealized loss on available-for-sale investments

— — — — ( 877 ) ( 877 )

Balance — December 31, 2020 140,474,305 140 1,725,552 ( 646,343 ) $ 268 1,079,617

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187,206 — 3,617 — — 3,617

Issuance of common stock from ATM offering, net of commissions and offering costs of $ 0.6 million

— — — ( 257,005 ) — ( 257,005 )

Issuance of common stock from public offering, net of commissions and offering costs of $ 36.8 million

— — — 13,457,447 13 — 595,717 — — 595,730

— — — — — — — ( 250,221 ) — ( 250,221 )

Net unrealized loss on available-for-sale investments

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Adjustments to reconcile net loss to net cash used in operating activities:

Acquired in-process research and development — — 109,436

Stock-based compensation 80,818 65,261 46,063

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Non-cash rent expense 2,611 3,955 6,777

Change in fair value of convertible notes payable — — 21,211

Debt issuance costs on convertible notes payable — — 3,358

Income tax benefit — — ( 331 )

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Purchase of investments ( 525,583 ) ( 1,037,591 ) ( 252,628 )

Cash paid for acquisition of assets — — ( 2,098 )

Net cash provided by (used in) investing activities 163,655 ( 505,123 ) 164,084

Cash flows from financing activities:

Proceeds from issuance of convertible preferred stock, net of issuance costs — — 299,281

Proceeds from issuance of convertible notes, net of issuance costs — — 116,842

Proceeds from early exercise of stock options — — 11,370

Proceeds from issuance of common stock, net of commissions and issuance costs 621,933 54,219 343,689

Proceeds from issuance of common stock from ATM offering, net of commissions and issuance costs — 26,203 54,219

Proceeds from issuance of common stock from public offering, net of commissions and issuance costs — 595,730 —

Proceeds from issuance of common stock and upon exercise of stock options 8,346 8,815 2,958

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Net cash provided by 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

Cash, cash equivalents and restricted cash — beginning of period 192,800 179,425 93,731

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Non-cash operating, investing and financing activities:

Common stock issued on conversion of convertible preferred stock $ — $ — $ 411,052

Common stock issued on conversion of convertible notes payable $ — $ — $ 141,410

Series A-1 convertible preferred stock issued in asset acquisition $ — $ — $ 111,770

PP&E and other assets acquired in asset acquisition $ — $ — $ 111,770

Right-of-use asset obtained in exchange for lease liability $ 20,079 $ — $ 13,827

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(the Company or Allogene) was incorporated on November 30, 2017 in the State of Delaware and is headquartered in South San Francisco, California.

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

Allogene is a clinical-stage immuno-oncology company pioneering the development of genetically engineered allogeneic T cell therapies for the treatment of cancer.

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

For the period from November 30, 2017 (inception) to December 31, 2017, the Company incurred $ 2,000 in start-up costs to establish the Company.

Principal operations commenced in April 2018 when Allogene acquired certain assets from Pfizer Inc.

(Pfizer) (see Note 6) and completed a Series A and A-1 preferred stock financing (see Note 11).

Public Offerings

In October 2018, the Company completed an initial public offering (IPO) of its common stock.

In connection with its IPO, the Company issued and sold 20,700,000 shares of its common stock, which included 2,700,000 shares of its common stock issued pursuant to the over-allotment option granted to the underwriters, at a price to the public of $ 18.00 per share.

As a result of the IPO, the Company received $ 343.3 million in net proceeds, after deducting underwriting discounts and commissions of $ 26.1 million and offering expenses of $ 3.2 million payable by the Company.

At the closing of the IPO, 11,743,987 shares of outstanding convertible preferred stock were automatically converted into 61,655,922 shares of common stock and the 2018 Notes (see Note 11) were automatically converted into 7,856,176 shares of common stock.

Following the IPO, there were no shares of convertible preferred stock or preferred stock outstanding.

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

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Net proceeds to the Company after deducting the underwriting discounts and commissions and other expenses were approximately $ 595.7 million.

Forward Stock Split

On October 1, 2018, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a forward split of shares of the Company’s common stock on a 1-for-5.25 basis (the Forward Stock Split).

In connection with the Forward Stock Split, the conversion ratio for the Company’s outstanding convertible preferred stock was proportionately adjusted such that the common stock issuable upon conversion of such preferred stock was increased in proportion to the Forward Stock Split.

The par value of the common stock was not adjusted as a result of the Forward Stock Split.

All references to common stock, options to purchase common stock, early exercised options, share data, per share data, convertible preferred stock (to the extent presented on an as-converted to common stock basis) and related information contained in these financial statements have been retrospectively adjusted to reflect the effect of the Forward Stock Split for all periods presented.

Need for Additional Capital

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The Company’s ultimate success depends on the outcome of its research and development activities as well as the ability to commercialize the Company’s product candidates.

The Company had cash, cash equivalents and investments of $ 1.0 billion as of December 31, 2020.

The Company had cash, cash equivalents and investments of $ 809.5 million as of December 31, 2021.

Since inception through December 31, 2021, the Company has incurred cumulative net losses of $ 903.3 million.

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The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of expenses during the reporting period.

Significant estimates and assumptions made in the accompanying consolidated financial statements include but are not limited to the fair value of common stock, the fair value of stock options, the fair value of investments, the fair value of convertible notes payable upon conversion, income tax uncertainties, and certain accruals.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances change.

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The Company has issued letters of credit under separate lease and other agreements which have been collateralized by restricted cash.

This cash is classified as long-term restricted cash on the accompanying consolidated balance sheet based on the terms of the underlying agreements.

This cash is classified as long-term restricted cash on the accompanying consolidated balance sheets based on the terms of the underlying agreements.

Investments are available-for-sale and are carried at estimated fair value.

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Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, generally three to seven years .

Maintenance and

repairs are charged to operations as incurred.

Maintenance and repairs are charged to operations as incurred.

Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheet and the resulting gain or loss is reflected in other expense.

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The lease liability is determined as the present value of future lease payments using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the lease commencement date.

The right-of-use asset is based on the liability adjusted for any prepaid or deferred rent.

The right-of-use asset is based on the liability

adjusted for any prepaid or deferred rent.

The lease term at the commencement date is determined by considering whether renewal options and termination options are reasonably assured of exercise.

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Variable Interest Entities

For entities in which the Company has variable interests, the Company focuses on identifying if one of the entities is the primary beneficiary through having the power to direct the activities that most significantly impact the variable interest entity’s economic performance and having the obligation to absorb losses or the right to receive benefits from the variable

interest entity.

If the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in the Company’s consolidated financial statements.

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Management makes an assessment of the likelihood that the resulting deferred tax assets will be realized.

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

A valuation allowance is provided when it is

more likely than not that some portion or all of a deferred tax asset will not be realized.

Due to the Company’s historical operating performance and net losses, the net deferred tax assets have been fully offset by a valuation allowance.

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Comprehensive Loss

Comprehensive loss includes net loss and certain changes in stockholders’ equity (deficit) that are excluded from net loss.

Comprehensive loss includes net loss and certain changes in stockholders’ equity that are excluded from net loss.

For the years ended December 31, 2021, 2020 and 2019 this was comprised of unrealized gains and losses, net of tax, on the Company’s investments.

Definite-Lived Intangible Assets

Identifiable intangible assets consist of in-process research and development and workforce associated with the Pfizer asset acquisition.

Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis, generally two years .

Acquired in-process research and development intangible assets with no alternative future use are charged to research and development expense when acquired.

The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

Intangible assets are carried at cost less accumulated amortization.

Amortization of intangible assets is included in research and development expenses.

Impairment of Long-Lived Assets

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If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset.

There were impairment losses related to equipment disposals of zero and $ 0.2 million for the years ended December 31, 2020 and 2019, respectively.

There were impairment losses related to equipment disposals of less than $ 0.1 million and $ 0.2 million for the years ended December 31, 2021 and 2019, respectively.

There were no impairment losses related to equipment disposals for the year ended December 31, 2020.

Revenue Recognition

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

The terms of these agreements are anticipated 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.

The Company’s revenue has been 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.

The Company will analyze its 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.

The Company analyzes its 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.

For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of Topic 606, Revenue from Contracts with Customers (ASC 606).

from Contracts with Customers (ASC 606).

For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606.

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Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses:

Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance:

ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11.

The standard requires measurement and recognition of expected credit losses for financial assets by requiring an allowance to be recorded as an offset to the amortized cost of such assets.

For available-for-sale debt securities, expected credit losses should be estimated when the fair value of the debt securities is below their associated amortized costs.

This standard became effective for fiscal years beginning after December 15, 2019, with early adoption permitted beginning the first quarter of 2019.

The Company’s financial instruments that are in the scope of ASU 2016-13 include, but are not limited to, other receivables and available-for-sale debt securities.

The Company adopted this standard on January 1, 2020 and applied the modified retrospective approach.

Adoption of the new guidance had no significant impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update No.

2018-15, Intangibles – Goodwill and other – Internal-Use Software (Subtopic 350-40) , which amended its guidance for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

This new standard also requires customers to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement.

This standard became effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

The Company adopted this standard on January 1, 2020, on a prospective basis for applicable implementation costs.

As of December 31, 2020, $ 4.2 million of implementation costs related to cloud computing service arrangements were capitalized and included in other long term assets on the consolidated balance sheets.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 , which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer.

In addition, Topic 808 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction.

This standard is effective for fiscal years beginning after December 31, 2019, with early adoption permitted.

The Company adopted this standard on January 1, 2020.

Adoption of the new guidance had no significant impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Update No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12) , which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

This standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company early adopted this standard as of January 1, 2020 on a prospective basis in accordance with ASC 250, Accounting Changes and Error Corrections.

The adoption resulted in the Company no longer needing to determine the tax effect from unrealized gains on available for sale securities, which previously had been disclosed in the consolidated statement of operations as a benefit from income taxes.

In January 2020, the FASB issued Accounting Standard Update No.

2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), which clarifies the interactions between Topics 321 and 323 in applying or discontinuing the equity method of accounting for investments.

This guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company adopted this standard on January 1, 2021 on a prospective basis.

Adoption of the new guidance had no significant impact on the Company's consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In January 2020, the FASB issues Accounting Standard Update No.

2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323) , which clarifies the interactions between topics 321 and 323 in applying or discontinuing the equity method of accounting for investments.

This guidance will be effective for the Company in the first quarter of 2021, and early adoption is permitted.

The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

The Company continues to monitor new accounting pronouncements issued by the FASB and does not believe any accounting pronouncements issued through the date of this report will have a material impact on the Company's consolidated financial statements.

Fair Value Measurements

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As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The Company measures and reports its cash equivalents, restricted cash, investments and convertible notes payable at fair value.

The Company measures and reports its cash equivalents, restricted cash, and investments at fair value.

Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1.

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Money market funds ¹ $ 102,039 $ — $ — $ 102,039

Commercial paper — 58,975 — 58,975

Corporate bonds — 262,757 — 262,757

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agency securities — 80,039 — 80,039

Certificates of deposit — 1,000 — 1,000

Total financial assets $ 549,035 $ 401,771 $ — $ 950,806

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Money market funds $ 102,039 $ — $ — $ 102,039

Commercial paper 58,969 8 ( 2 ) 58,975

Corporate bonds 262,349 444 ( 36 ) 262,757

1 unchanged sentence

agency securities 80,012 30 ( 3 ) 80,039

Certificates of deposit 1,000 — — 1,000

Total cash equivalents and investments $ 950,095 $ 764 $ ( 53 ) $ 950,806

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The Company believes that it is more likely than not that investments in an unrealized loss position will be held until maturity and all interest and principal will be received.

The Company does not intent to sell these investments and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis.

The Company does not intend to sell these investments and it is more likely than not that the Company will not be required to sell the investment before recovery of its amortized cost basis.

The fair values of available-for-sale debt investments by contractual maturity as of December 31, 2021 and 2020 were as follows:

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Total cash equivalents and investments $ 752,034 $ 950,806

As of December 31, 2020 and 2019, the remaining contractual maturities of available-for-sale securities were less than three years and two years , respectively.

As of December 31, 2021 and 2020, the remaining contractual maturities of available-for-sale securities were less than three years .

There have been no significant realized losses on available-for-sale securities for the years ended December 31, 2021, 2020 and 2019.

As of December 31, 2020 and 2019, unrealized losses on available-for-sale investments are not attributed to credit risk.

As of December 31, 2021 and 2020, unrealized losses on available-for-sale securities are not attributed to credit risk.

The Company believes that it is more likely than not that investments in an unrealized loss position will be held until maturity and all interest and principal will be received.

The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s marketable securities are due to market factors.

As of December 31, 2020 and 2019, securities with a fair value of $ 5.0 million and zero respectively, were in a net unrealized loss position for more than 12 months.

To date, the Company has not recorded any impairment charges on marketable securities.

As of December 31, 2020 and 2019, the Company recognized $ 2.8 million and $ 2.4 million of accrued interest receivable from available-for-sale investments within prepaid expenses and other current assets on the consolidated balance sheets.

The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s available-for-sale securities are due to market factors.

As of December 31, 2021 and 2020, securities with a fair value of zero and $ 5.0 million, respectively, were in a continuous net unrealized loss position for more than 12 months.

To date, the Company has not recorded any impairment charges on available-for-sale securities.

As of December 31, 2021 and 2020, the Company recognized $ 1.9 million and $ 2.8 million of accrued interest receivable from available-for-sale securities within prepaid expenses and other current assets on the consolidated balance sheets.

Balance Sheet Components

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(in thousands)

Construction in progress $ 68,944 $ 12,390

Leasehold improvements $ 108,353 $ 31,518

2 unchanged sentences

Furniture and fixtures 3,920 3,388

Construction in progress 39 68,944

Total 146,351 131,748

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Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was $ 10.5 million, $ 7.4 million and $ 4.6 million respectively.

Disposals of property and equipment were zero , $ 0.2 million and zero for the years ended December 31, 2020, 2019 and 2018, respectively.

Disposals of property and equipment were less than $ 0.1 million, zero and $ 0.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Accrued Liabilities

7 unchanged sentences

Total accrued and other current liabilities $ 37,496 $ 44,938

Asset Acquisition

In April 2018, the Company entered into an Asset Contribution Agreement (the Pfizer Agreement) with Pfizer pursuant to which the Company acquired certain assets, including certain contracts described in Note 7, and intellectual property for the development and administration of chimeric antigen receptor (CAR) T cells for the treatment of cancer.

As consideration for the purchased assets, the Company issued Pfizer 3,187,772 shares of its Series A-1 convertible preferred stock with an estimated fair value of $ 111.8 million or $ 35.06 per share.

The Company also incurred $ 2.1 million of direct expenses related to the asset acquisition, bringing the total consideration to $ 113.9 million.

The fair value of the Series A-1 convertible preferred stock was established using the price per share paid by third-party investors in the concurrent closing of the Series A and A-1 convertible preferred stock financing at $ 35.06 per share as well as the price per share paid by Pfizer to purchase additional shares of Series A-1 convertible preferred stock at $ 35.06 per share at the same time and at the same price per share as the rest of Series A and A-1 shares sold in such financing (see Note 11 for additional details).

The Series A-1 convertible preferred shares issued to Pfizer had the same rights, preferences and privileges as the Series A convertible preferred shares issued to the third-party investors.

The Company accounted for the transaction as an asset acquisition as substantially all of the estimated fair value of the gross assets acquired was concentrated in a single identified asset, anti-CD19 CAR T cell therapy, thus satisfying the requirements of the screen test in ASU 2017-1.

The assets acquired in the transaction were measured based on the fair value of the Series A-1 convertible preferred stock issued to Pfizer and direct transaction costs of $ 2.1 million, as the fair value of the equity given was more readily determinable than the fair value of the assets received.

The following table summarizes the fair value of assets acquired (in thousands):

Property and equipment $ 3,258

In-process research and development (IPR&D):

Anti-CD19 CAR T cell therapy 103,936

Anti-BCMA CAR T cell therapy 5,500

Assembled workforce 1,206

Total assets acquired $ 113,900

The estimated fair values of anti-CD19 CAR T cell therapy and anti-BCMA CAR T cell therapy were determined using a risk-adjusted discounted cash flow approach, which used the present value of the direct cash flows expected to be generated by anti-CD19 CAR T cell therapy and anti-BCMA CAR T cell therapy during their estimated economic lives, net of returns on contributory assets such as working capital, property and equipment, and the assembled workforce.

The discount rate of 16.5 % was based on rates of return available from alternative investments of similar type and quality as of the valuation date.

The remaining IPR&D targets were determined to be more conceptual in nature with nominal value being attributed to them.

The estimate of the fair value of the assembled workforce was determined using a replacement cost approach, based on the estimated cost of recruiting and training an equivalent workforce as of the acquisition date.

The amount allocated to intangible IPR&D assets was charged to research and development expenses as these assets had no alternative future use at the time of the acquisition transaction.

The remaining intangible asset relates to the assembled workforce which was capitalized and is being amortized over its estimated economic life of two years to research and development expenses.

In addition, under the terms of the Pfizer Agreement, the Company was also required to make milestone payments to Pfizer of $ 30.0 million or $ 60.0 million per target (depending on the target, and up to $ 840.0 million in the aggregate for all targets) upon successful completion of certain regulatory and sales milestones for certain targets covered by the Pfizer Agreement.

No milestone payments were made or became due in the years ended December 31, 2020, 2019 and 2018.

These contingent payments were not part of the consideration for the purchased assets.

As part of the asset acquisition, the Company also assumed licensing agreements Pfizer had entered into with two third-party entities holding certain intellectual property.

Both agreements cover use of the intellectual property held by the parties and certain research collaboration activities.

See Note 7 for additional details on these agreements.

Under the Pfizer Agreement, the Company was required to use commercially reasonable efforts to develop and seek regulatory approval in and for the United States and the European Union for certain products covered by the Pfizer Agreement and to commercialize each product covered by the Pfizer Agreement in the applicable royalty territory in which regulatory approval for such product has been obtained.

License and Collaboration Agreements

Asset Contribution Agreement with Pfizer

In connection with the Pfizer Agreement (see Note 6), the Company is required to make milestone payments upon successful completion of regulatory and sales milestones on a target-by-target basis for the targets including CD19 and B-cell maturation antigen (BCMA), covered by the Pfizer Agreement.

In April 2018, the Company entered into an Asset Contribution Agreement (the Pfizer Agreement) with Pfizer pursuant to which the Company acquired certain assets, including certain contracts and intellectual property for the development and administration of chimeric antigen receptor (CAR) T cells for the treatment of cancer.

The Company is required to make milestone payments upon successful completion of regulatory and sales milestones on a target-by-target basis for the targets including CD19 and B-cell maturation antigen (BCMA), covered by the Pfizer Agreement.

The aggregate potential milestone payments upon successful completion of various regulatory milestones in the United States and the European Union are $ 30.0 million or $ 60.0 million, depending on the target, with aggregate potential regulatory and development milestones of up to $ 840.0 million, provided that the Company is not obligated to pay a milestone for regulatory approval in the European Union for an anti-CD19 allogeneic CAR T cell product, to the extent Servier has commercial rights to such territory.

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Research Collaboration and License Agreement with Cellectis

As part of the Pfizer Agreement (see Note 6), Pfizer assigned to the Company a Research Collaboration and License Agreement (the Original Cellectis Agreement) with Cellectis S.A.

As part of the Pfizer Agreement, Pfizer assigned to the Company a Research Collaboration and License Agreement (the Original Cellectis Agreement) with Cellectis S.A.

On March 8, 2019, the Company entered into a License Agreement (the Cellectis Agreement) with Cellectis.

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Pursuant to the Cellectis Agreement, Cellectis granted to the Company an exclusive, worldwide, royalty-bearing license, on a target-by-target basis, with sublicensing rights under certain conditions, under certain of Cellectis’s intellectual property, including its TALEN and electroporation technology, to make, use, sell, import, and otherwise exploit and commercialize CAR T products directed at certain targets, including BCMA, FLT3, DLL3 and CD70 (the Allogene Targets), for human oncologic therapeutic, diagnostic, prophylactic and prognostic purposes.

In addition, certain Cellectis intellectual property rights granted by Cellectis to the Company and to Servier pursuant to the Exclusive License and Collaboration Agreement by and between Servier and Pfizer, dated October 30, 2016, which Pfizer assigned to the Company in April 2018, will survive the termination of the Original Cellectis Agreement.

property, to make, use, sell, import and otherwise commercialize CAR T products directed at certain targets (the Cellectis Targets).

In addition, certain Cellectis intellectual property rights granted by Cellectis to the Company and to Servier pursuant to the Exclusive License and Collaboration

Agreement by and between Servier and Pfizer, dated October 30, 2016, which Pfizer assigned to the Company in April 2018, will survive the termination of the Original Cellectis Agreement.

Pursuant to the Cellectis Agreement, the Company granted Cellectis a non-exclusive, worldwide, royalty-free, perpetual and irrevocable license, with sublicensing rights under certain conditions, under certain of the Company's intellectual property, to make, use, sell, import and otherwise commercialize CAR T products directed at certain targets (the Cellectis Targets).

The Cellectis Agreement provides for development and sales milestone payments by the Company of up to $ 185.0 million per product that is directed against an Allogene Target, with aggregate potential development and sales milestone payments totaling up to $ 2.8 billion.

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All costs the Company incurred in connection with this agreement were recognized as research and development expenses in the consolidated statement of operations.

For the year ended December 31, 2019, $ 5.0 million of costs were incurred related to the achievement of a clinical development milestone under this agreement.

No clinical development milestones were achieved for the years ended December 31, 2020 and 2018.

For the years ended December 31, 2021 and 2019, $ 10 million and $ 5 million, respectively, of costs were incurred related to the achievement of clinical development milestones under this agreement.

Zero clinical development milestones were achieved for the year ended December 31, 2020.

License and Collaboration Agreement with Servier

As part of the Pfizer Agreement (see Note 6), Pfizer assigned to the Company an Exclusive License and Collaboration Agreement (the Servier Agreement), with Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS (collectively, Servier) to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR T cell product candidates, including UCART19, in the United States with the option to obtain the rights over additional anti-CD19 product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

As part of the Pfizer Agreement, Pfizer assigned to the Company an Exclusive License and Collaboration Agreement (the Servier Agreement), with Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS (collectively, Servier) to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR T cell product candidates, including UCART19, in the United States with the option to obtain the rights over additional anti-CD19 product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

In October 2019, the Company agreed to waive its rights to the one additional target.

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The Company is not required to make any additional payments to Servier to exercise an option.

Company opts-in to another product candidate, Servier has the right to obtain rights to such product candidate outside the United States and to share development costs for such product candidate.

If the Company opts-in to another product candidate, Servier has the right to obtain rights to such product candidate outside the United States and to share development costs for such product candidate.

Under the Servier Agreement, the Company is required to use commercially reasonable efforts to develop and obtain marketing approval in the United States in the field of anti-tumor adoptive immunotherapy for at least one product directed against CD19, and Servier is required to use commercially reasonable efforts to develop and obtain marketing approval in the European Union, and one other country in a group of specified countries outside of the European Union and the United States, in the field of anti-tumor adoptive immunotherapy for at least one allogeneic adaptive T cell product directed against a certain Company-selected target.

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Unless earlier terminated in accordance with the Servier Agreement, the Servier Agreement will continue, on a licensed product-by-licensed product and country-by-country basis, until the Servier Royalty Term with respect to the sale of such licensed product in such country expires.

For the year ended December 31, 2020, the Company recorded $ 8.5 million of net cost recoveries under the cost-sharing terms as a reduction to research and development expenses.

For the years ended December 31, 2019 and 2018, the Company recorded $ 7.3 million and $ 4.2 million, respectively, of costs incurred under the collaboration agreement with Servier as research and development expenses.

As of December 31, 2020, amounts due from Servier of $ 3.8 million were recorded in other current assets in the accompanying consolidated balance sheets.

As of December 31, 2019, amounts due to Servier of $ 2.2 million were recorded in accrued and other current liabilities in the accompanying consolidated balance sheets.

For the years ended December 31, 2021 and 2020, the Company recorded $ 17.1 million and $ 8.5 million, respectively, of net cost recoveries under the cost-sharing terms as a reduction to research and development expenses.

For the year ended December 31, 2019, the Company recorded $ 7.3 million of costs incurred under the collaboration agreement with Servier as research and development expenses.

As of December 31, 2021 and 2020, amounts due from Servier of $ 4.1 million and $ 3.8 million, respectively, were recorded in other current assets in the accompanying consolidated balance sheets.

Research Collaboration and License Agreement with Notch Therapeutics

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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 Allogene’s exclusive targets, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint development committee.

Allogene will reimburse Notch’s costs incurred

in accordance with such plan and budget.

Allogene will reimburse Notch’s costs incurred in accordance with such plan and budget.

The term of the research collaboration will expire upon the earlier of (i) the fifth anniversary of the date of the Notch Agreement, (ii) at Allogene’s election, following the joint development committee’s determination that for each exclusive target, Notch has met certain success criteria, or (iii) the joint development committee’s determination that the research collaboration cannot be reasonably pursued against any exclusive target due to technical infeasibility or safety issues.

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

In connection with this investment, David Chang, M.D., Ph.D., the Company's President, Chief Executive Officer and Board member, was appointed to Notch’s board of directors.

In connection with this investment, an Allogene representative serves on the Notch Board of Directors.

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

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

Immediately following this transaction, the Company's share in Notch was 23.0 % on a voting interest basis.

The Company did not have a controlling interest in Notch as of December 31, 2021, and continued to account for its investment in Notch as an equity method investment.

Under the Notch Agreement, Notch will be eligible to receive up to $ 7.25 million upon achieving certain agreed research milestones, up to $ 4.0 million per exclusive target upon achieving certain pre-clinical development milestones, and up to $ 283.0 million per exclusive target and cell type (i.e., T cell or NK cell) upon achieving certain clinical, regulatory and commercial milestones.

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Either party may also terminate the Collaboration Agreement with written notice upon material breach by the other party, if such breach has not been cured within a defined period of receiving such notice, or in the event of the other party’s insolvency.

The Company has determined that Notch is a variable interest entity as of December 31, 2020 and 2019, respectively.

The Company does not have the power to direct the activities which most significantly affect Notch's economic performance.

Accordingly, for the years ended December 31, 2020 and 2019, the Company did not consolidate Notch because the Company determined that it was not the primary beneficiary.

For the years ended December 31, 2020 and 2019, the Company recorded $ 3.2 million and $ 0.1 million, respectively, in collaboration costs as research and development expenses.

For the years ended December 31, 2021, 2020, and 2019, the Company recorded $ 4.3 million, $ 3.2 million, and $ 0.1 million, respectively, in collaboration costs as research and development expenses.

For the year ended December 31, 2021, $ 0.3 million in costs were incurred related to the achievement of a research milestone under this agreement.

Strategic Alliance with The University of Texas MD Anderson Cancer Center

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These costs are expensed to research and development as MD Anderson renders the services under the strategic alliance.

As of December 31, 2020, no research and development costs had been incurred under the alliance.

The agreement may be terminated by either party for material breach by the other party.

Individual studies may be terminated for, among other things, material breach, health and safety concerns or where the institutional review board, the review board at the clinical site with oversight of the clinical study, requests termination of any study.

Individual studies may be terminated for, among other things, material breach, health and safety concerns or where the institutional review board, the

review board at the clinical site with oversight of the clinical study, requests termination of any study.

Where any legal or regulatory authorization is finally withdrawn or terminated, the relevant study will also terminate automatically.

For the years ended December 31, 2021 and 2020, the Company recorded $ 1.0 million and zero , respectively, in collaboration costs as research and development expenses.

Joint Venture and License Agreement with Allogene Overland Biopharm (CY) Limited

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As consideration, the Company 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.

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

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

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

The Company has determined that Allogene Overland is a variable interest entity as of December 31, 2020.

The Company has determined that Allogene Overland is a variable interest entity as of December 31, 2021 and 2020, respectively.

The Company does not have the power to independently direct the activities which most significantly affect Allogene Overland's economic performance.

Accordingly, for the year ended December 31, 2020, the Company did not consolidate Allogene Overland because the Company determined that it was not the primary beneficiary.

Accordingly, for the years ended December 31, 2021 and 2020, the Company did not consolidate Allogene Overland because the Company determined that it was not the primary beneficiary.

For the years ended December 31, 2021 and 2020, the Company recognized $ 38.5 million and zero , respectively, of collaboration revenue, primarily related to the delivery of a performance obligation consisting of a license of intellectual property and related know-how which was delivered in the first quarter of 2021.

For the year ended December 31, 2020, the Company recorded the $ 40.0 million upfront cash payment received from Allogene Overland as deferred revenue, of which $ 39.0 million was current, on the consolidated balance sheet.

Commitments and Contingencies

In August 2018, the Company entered into an operating lease agreement for new office and laboratory space which consists of approximately 68,000 square feet located in South San Francisco, California.

The lease term is 127 months beginning August 2018 through February 2029 with an option to extend the term for another seven years which is not reasonably assured of exercise.

In August 2018, the Company entered into an operating lease agreement (HQ Lease) for new office and laboratory space which consists of approximately 68,000 square feet located in South San Francisco, California.

The lease term was 127 months beginning August 2018 through February 2029 with an option to extend the term for seven years which was not reasonably assured of exercise.

The Company has made certain tenant improvements, including the addition of laboratory space, and has received $ 5.0 million of tenant improvement allowances up to December 31, 2021.

The rent payments began on March 1, 2019 after an abatement period.

In December 2021, the Company amended its lease agreement to lease an additional 47,566 square feet of office and laboratory space in South San Francisco, California, as part of the same building as the Company’s current headquarters.

The lease term is 120 months and is expected to commence in April 2022.

The rent payments for the expansion premises are expected to begin in August 2022 after an abatement period.

The lease term for the existing premises was also extended and the lease for both the existing and expansion premises will expire on March 31, 2032 with an option to extend the term for eight years which is not reasonably assured of exercise.

In October 2018, the Company entered into an operating lease agreement for new office and laboratory space which consists of 14,943 square feet located in South San Francisco, California.

The lease term is 124 months beginning November 2018 through February 2029, with an option to extend the term for another seven years which is not reasonably assured of exercise.

The lease term was 124 months beginning November 2018 through February 2029, with an option to extend the term for another seven years which was not reasonably assured of exercise.

The Company has made certain tenant improvements, including the upgrading of current office and laboratory space with a lease incentive allowance of $ 0.8 million.

Rent payments began in November 2018.

In December 2021, the Company amended its lease agreement to extend the term of the lease to be co-terminus with the HQ Lease.

The lease term will expire March 31, 2032 with an option to extend the term for eight years which is not reasonably assured of exercise.

In February 2019, the Company entered into a lease agreement for approximately 118,000 square feet of space to develop a cell therapy manufacturing facility in Newark, California.

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Upon certain conditions, the Company has two ten-year options to extend the lease, both of which are not reasonably assured of exercise.

The Company is entitled to a tenant improvement allowance of $ 2.9 million for costs related to the design and construction of certain Company improvements, and has received $ 1.6 million of tenant improvement allowances up to December 31, 2020.

The Company received $ 2.7 million of tenant improvement allowances.

The Company maintains letters of credit for the benefit of landlords which is disclosed as restricted cash in the consolidated balance sheet.

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Termination of the agreement by the Company will result in a termination payment due of approximately $ 4.3 million.

In connection with the agreement, the Company maintains a letter of credit for the benefit of the service provider in the amount of $ 4.3 million which is disclosed as restricted cash in the consolidated balance sheet as of December 31, 2020.

License Agreements for Intellectual Property

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In the normal course of business, the Company enters into various purchase commitments with third-party contract manufacturers for the manufacture and processing of our product candidates and related raw materials, and we have entered into other contracts in the normal course of business with contract research organizations for clinical trials and other vendors for other services and products for operating purposes.

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

These agreements generally provide for termination or cancellation, other

than for costs already incurred.

As of December 31, 2021, the Company had non-cancellable purchase commitments of $ 3.7 million.

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In conjunction with the execution of the Notch Agreement (see Note 6), the Company also entered into a Share Purchase Agreement with the Company acquiring shares of Notch’s Series Seed convertible preferred stock for a total investment cost of $ 5.1 million which includes transaction costs of $ 0.1 million, resulting in a 25 % ownership interest in Notch.

In February 2021, the Company made a $ 15.9 million investment in Notch's Series A preferred stock.

Immediately following this transaction, the Company's share in Notch was 20.7 % on a voting interest basis.

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

Immediately following this transaction, the Company's share in Notch was 23.0 % on a voting interest basis.

The Company’s total equity investment in Notch as of December 31, 2021 and 2020 was $ 18.0 million and $ 3.7 million, respectively, based on the cost method of accounting.

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The Company accounts for its investment in Allogene Overland as an equity method investment at carrying value.

The Company's total equity investment is Allogene Overland was zero as of December 31, 2020.

The Company's total equity investment in Allogene Overland was zero as of December 31, 2021.

The Company’s equity investment in Allogene Overland as of December 31, 2021 had a zero carryover basis.

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See Note 6 for further details.

Convertible Notes Payable (2018 Notes)

In September 2018, the Company entered into a note purchase agreement pursuant to which it sold and issued an aggregate of $ 120.2 million in convertible promissory notes (convertible notes payable or 2018 Notes) and received net cash proceeds of $ 116.8 million.

On issuance, the fair value of the 2018 Notes was determined to be equal to $ 120.2 million, which is the principal amount of the 2018 Notes.

The 2018 Notes did not accrue interest.

The 2018 Notes were settled in 7,856,176 shares of common stock in connection with the closing of the Company’s IPO (see Note 1) at a settlement price equal to 85 % of the IPO price per share.

On issuance, the Company elected to account for the 2018 Notes at fair value with any changes in estimated fair value being recognized through the statements of operations and comprehensive loss until the 2018 Notes settled.

The fair value of the 2018 Notes was determined to be $ 141.4 million upon settlement.

For the years ended December 31, 2020 and 2019, the Company recognized zero and $ 21.2 million, respectively, of expense in the accompanying statements of operations and comprehensive loss for the change in fair value of the 2018 Notes.

On issuance, total debt issuance costs of $ 3.4 million were expensed and recognized as interest expense in the accompanying statements of operations and comprehensive loss.

Convertible Preferred Stock and Stockholders’ Equity

Convertible Preferred Stock

As discussed in Note 6, the Company issued 3,187,772 shares of its Series A-1 convertible preferred stock to Pfizer in connection with the Pfizer Agreement entered into in April 2018.

In April 2018, the Company issued 7,557,990 shares of its Series A convertible preferred stock at a price per share of $ 35.06 for net cash proceeds of $ 264.4 million and issued 998,225 shares of Series A-1 convertible preferred stock at a price per share of $ 35.06 for net cash proceeds of $ 34.9 million.

Fifty percent of the aggregate purchase price of $ 300.0 million was paid in April 2018.

The remaining subscriptions receivable of $ 150.0 million was received in July and August 2018, at the election of the Company’s board of directors.

On the completion of the IPO (see Note 1), all outstanding shares of convertible preferred stock were automatically converted into 61,655,922 shares of common stock.

Stockholders’ Equity

Preferred Stock

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Pursuant to the Amended and Restated Certificate of Incorporation filed on October 15, 2018, as amended, the Company is authorized to issue a total of 200,000,000 shares of common stock, of which 142,623,065 and 140,474,305 shares were issued and outstanding at December 31, 2021 and 2020, respectively.

In connection with the issuance of the Company’s Series A convertible preferred stock in April 2018, the Company’s founders agreed to modify their common shares outstanding to include vesting provisions that require continued service to the Company in order to vest in those shares.

As such, the 26,249,993 modified shares of common stock became compensatory upon such modification.

The total compensation cost resulting from the modification is approximately $ 59.5 million and is being recognized over the four year vesting term.

Common stockholders are entitled to dividends if and when declared by the Company’s Board of Directors subject to the prior rights of the preferred stockholders.

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Vested and expected to vest, December 31, 2021 4,261,108 $ 26.37 1.72 $ 63,576

For the years ended December 31, 2020 and 2019, the Company granted zero and 57,361 performance based restricted stock units to a certain executive officer pursuant to the 2018 Plan.

The 2019 granted performance awards are subject to the holder's continued service to the Company through each applicable vesting event.

Through December 31, 2020, the Company believes that the achievement of the requisite performance conditions for these awards are not probable and as a result, no compensation expense has been recognized related to these awards in the year ended December 31, 2020.

For the years ended December 31, 2020 and 2019, total stock-based compensation expense related to restricted stock units was $ 17.2 million and $ 8.8 million, respectively.

For the year ended December 31, 2019, the Company granted 57,361 performance based restricted stock units to a certain executive officer pursuant to the 2018 Plan.

These performance awards are subject to the holder's continued service to the Company through each applicable vesting event.

During the year ended December 31, 2021, the Company determined that the achievement of the first requisite performance condition for these awards was probable, and as a result, recognized $ 0.5 million in stock-based compensation expense related to these awards as of December 31, 2021.

For the years ended December 31, 2021 and 2020, total stock-based compensation expense related to restricted stock units and performance based restricted stock units was $ 26.6 million and $ 17.2 million, respectively.

As of December 31, 2021 and 2020, there was $ 90.7 million and $ 51.1 million, respectively, of unrecognized stock-based compensation which is expected to be recognized over a weighted average period of 2.92 years.

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Founders’ Stock

In 2018, the Company’s founders agreed to modify their common shares outstanding to include vesting provisions that require continued service to the Company in order to vest in those shares.

Stock-based compensation expense is recognized for shares of founders’ stock as vesting conditions are met.

In relation to the modification described in Note 11, 24,230,750 shares of founders’ stock remained unvested at the modification date in April 2018.

For the years ended December 31, 2020 and 2019, $ 13.7 million and $ 13.7 million of stock-based compensation expense was recognized related to the vesting of 6,057,684 and 6,057,684 shares, respectively, of founders' stock.

At December 31, 2020 and 2019, there was $ 17.1 million and $ 30.9 million of unrecognized stock-based compensation expense related to 7,572,119 and 13,629,803 shares of unvested founders’ stock which is expected to be recognized over 1 year, 3 months and 2 years, 3 months , respectively.

In relation to the modification, 24,230,750 shares of founders’ stock remained unvested at the modification date in April 2018.

For the years ended December 31, 2021, 2020 and 2019, $ 13.7 million, $ 13.7 million, and $ 13.7 million of stock-based compensation expense was recognized related to the vesting of 6,057,695 , 6,057,684 , and 6,057,684 shares, respectively, of founders' stock.

At December 31, 2021 and 2020, there was $ 3.4 million and $ 17.1 million of unrecognized stock-based compensation expense related to 1,514,424 and 7,572,119 shares of unvested founders’ stock which is expected to be recognized over 3 months and 15 months, respectively.

The weighted-average fair value at grant date for founders’ stock was $ 2.27 per share.

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The proceeds are reclassified to paid-in capital as the repurchase right lapses.

During the years ended December 31, 2020 and 2019, zero options were early exercised.

During the years ended December 31, 2021 and 2020, 293,594 and zero options were early exercised.

As of December 31, 2021 and 2020, there was $ 2.9 million and $ 2.8 million recorded in accrued and other liabilities and $ 2.5 million and $ 1.1 million recorded in other long-term liabilities related to shares held by employees and directors that were subject to repurchase.

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Related Party Transactions

As of December 31, 2020 and 2019, Pfizer held 22,032,040 shares of Common Stock and had appointed one member to the Company’s Board of Directors.

PF Equity Holdings 2 B.V.

held 22,032,040 shares of Common Stock based on the Schedule 13D/A filed on September 17, 2021 with the SEC.

According to the Schedule 13D/A filing, PF Equity Holdings 2 B.V.

is a wholly-owned subsidiary of Pfizer formed for the purpose of holding certain assets owned or controlled by Pfizer or its direct or indirect subsidiaries.

In April 2018, the Company and Pfizer entered into a transition services agreement (the Pfizer TSA) for Pfizer to provide professional services to the Company related to research and development, project management, and other administrative functions.

In September 2019, the Company and Pfizer terminated the Pfizer TSA.

For the years ended December 31, 2020, 2019 and 2018, the costs incurred under the Pfizer TSA were zero , $ 4.5 million and $ 10.1 million, respectively.

For the years ended December 31, 2021 and 2020, zero costs were incurred under the Pfizer TSA.

For the year ended December 31, 2019, the costs incurred under the Pfizer TSA were $ 4.5 million.

The Company also purchased certain lab supplies and services from Pfizer in connection with its research and development activities.

For the years ended December 31, 2020, 2019 and 2018, total lab supplies and services purchased from Pfizer were zero , $ 1.4 million and $ 10.4 million, respectively.

As of December 31, 2020 and 2019, the Company had amounts payable to Pfizer of zero and $ 0.1 million, respectively, which were recorded in the accompanying consolidated balance sheets.

For the years ended December 31, 2021 and 2020, zero lab supplies and services were purchased from Pfizer.

For the year ended December 31, 2019, total lab supplies and services purchased from Pfizer were $ 1.4 million.

During the year ended December 31, 2021, the Company sold $ 0.1 million in excess raw materials to Pfizer.

Collaboration Revenue

In December 2020, the Company entered into a license agreement with Allogene Overland, a corporate joint venture entity and related party (see Note 6).

The license agreement was subsequently assigned to a wholly-owned subsidiary of Allogene Overland, Allogene Overland BioPharm (HK) Limited.

During the years ended December 31, 2021 and 2020, the Company recognized $ 38.5 million and zero , respectively, of collaboration revenue under this arrangement.

For the years ended December 31, 2021 and 2020, the Company recorded $ 0.2 million and zero , respectively, of net cost recoveries under the terms of the license agreement as a reduction to research and development expenses.

Consulting Agreements

In June 2018, the Company entered into a services agreement with Two River Consulting LLC (Two River) a firm affiliated with the Company’s President and Chief Executive Officer, the Company’s Executive Chairman of the board of directors, and a director of the Company to provide various managerial, administrative, accounting and financial services to the

In June 2018, the Company entered into a services agreement with Two River Consulting LLC (Two River) a firm affiliated with the Company’s President and Chief Executive Officer, the Company’s Executive Chair of the board of directors, and a director of the Company to provide various managerial, clinical development, administrative, accounting and financial services to the Company.

The costs incurred for services provided under this agreement were $ 0.6 million, $ 0.4 million and $ 0.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Belldegrun and include without limitation, providing advice and analysis with respect to the Company’s business, business strategy and potential opportunities in the field of allogeneic CAR T cell therapy and any other aspect of the CAR T cell therapy business as the Company may agree.

In consideration for these services, the Company paid Bellco $ 33,333 per month in arrears commencing January 2019 and $ 37,000 per month in arrears commencing January 2020.

In consideration for these services, the Company paid Bellco $ 33,333 per month in arrears commencing January 2019, $ 37,000 per month in arrears commencing January 2020, and $ 38,583 per month in arrears commencing January 2021.

The Company may also, at its discretion, pay Bellco an annual performance award in an amount up to 60 % of the aggregate compensation payable to Bellco in a calendar year.

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assumed all rights, title, interests and obligations under the sublease from Bellco Capital LLC.

The Company’s executive chairman, Arie Belldegrun, M.D., FACS, is a trustee of the Belldegrun Family Trust, which controls Bellco Capital Advisors Inc.

In November 2021, the sublease was extended to June 30, 2025.

The Company’s executive chair, Arie Belldegrun, M.D., FACS, is a trustee of the Belldegrun Family Trust, which controls Bellco Capital Advisors Inc.

The total right of use asset and associated liability recorded related to this related party lease was $ 0.3 million and $ 0.1 million at December 31, 2021 and 2020, respectively.

4 unchanged sentences

In October 2020, the sublease agreement between the Company and ByHeart was terminated.

Sublease income for the years ended December 31, 2020 and 2019 was $ 0.3 million and $ 0.3 million, respectively, and was recognized as other income.

Allogene Overland Biopharm (CY) Limited

On December 14, 2020, the Company entered into an agreement with Overland to create a joint venture for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies for patients in greater China, Taiwan, South Korea and Singapore.

In December 2020, the joint venture company, Allogene Overland, was established and obtained its business license in the Cayman Islands.

Upon consummation of the joint venture, the Company and Overland received a 49 % and 51 % equity interest, respectively, in the entity in exchange for their contributions to the entity.

See Notes 7 and 9 for further discussion.

Sublease income for the years ended December 31, 2021 and 2020 was zero and $ 0.3 million, respectively, and was recognized as other income.

In April 2018, the Company began to sponsor a 401(k) retirement savings plan for the benefit of its employees.

1 unchanged sentence

The Company made contributions to the plan for eligible participants, and recorded contribution expenses of $ 1.8 million, $ 1.4 million and $ 0.9 million related to matched contributions for the years ended December 31, 2021, 2020 and 2019, respectively.

For the years ended December 31, 2020, 2019 and 2018, the Company recorded income tax related to minimum state taxes.

The Company has incurred net operating losses for all the periods presented.

7 unchanged sentences

State — — ( 81 )

— ( 332 ) ( 119 )

Benefit for income taxes $ — $ — $ ( 331 )

7 unchanged sentences

Research tax credits ( 2,942 ) ( 2,319 ) ( 1,714 )

Write-off of in-process R&D — — 5,247

Change in fair value of convertible notes — — 4,454

Change in valuation allowance 52,265 72,538 49,989

14 unchanged sentences

Investments 1,543 175 —

Other 358 12 —

Total deferred tax assets 229,970 176,173 105,111

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Investments — — ( 393 )

Other ( 71 ) — —

Total deferred tax liabilities ( 13,259 ) ( 11,728 ) ( 13,207 )

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Tax credits, state $ 11,691 Indefinite

California Competes Tax credits, state $ 3,000 2026

Current federal and California tax laws include substantial restrictions on the utilization of NOLs and tax credit carryforwards in the event of an ownership change of a corporation.

4 unchanged sentences

Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

This guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted.

This guidance was effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption was permitted.

The Company early adopted this standard as of January 1, 2020 on a prospective basis in accordance with ASC 250, Accounting Changes and Error Corrections.

The adoption resulted in the Company no longer

needing to determine the tax effect from unrealized gains on available for sale securities, which previously had been disclosed in the consolidated statement of operations as a benefit from income taxes.

The impact of the adoption is that the benefit from income taxes in the consolidated statement of operations and comprehensive loss is zero.

For the years ended December 31,

2019 and 2018, the Company recorded a tax benefit of $ 0.3 million and $ 0.1 million respectively, in other comprehensive income, related to available-for-sale securities.

For the years ended December 31, 2021 and 2020, the Company recorded a tax benefit of zero .

For the year ended December 31, 2019, the Company recorded a tax benefit of $ 0.3 million, in other comprehensive income, related to available-for-sale securities.

We apply the provisions of ASC Topic 740 to account for uncertain income tax positions.

3 unchanged sentences

Balance at beginning of the year:

$ 6,161 $ 3,148 $ 920

Additions based on tax positions related to current year 3,637 3,013 2,228

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Subsequent Events

In February 2021, the Company made a $ 15.9 million investment in Notch's Series A preferred stock.

Immediately following this transaction, the Company's share in Notch was 17 % on a fully diluted basis.

On January 5, 2022, the Company entered into an exclusive collaboration and global license agreement (Antion Collaboration and License Agreement) with Antion Biosciences SA (Antion) for Antion’s miRNA technology (miCAR), to advance multiplex gene silencing as an additional tool to develop next generation allogeneic CAR T products.

Pursuant to the agreement, Antion will exclusively collaborate with the Company on oncology products for a defined period.

The Company will also have exclusive worldwide rights to commercialize products incorporating Antion technology developed during the collaboration.

The Antion Collaboration and License Agreement includes an exclusive research collaboration to conduct research and development of the use of Antion’s proprietary technologies to produce certain products for a defined period, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint steering committee.

The Company will reimburse Antion's costs incurred in accordance with such plan and budget.

In connection with the execution of the Antion Collaboration and License Agreement, the Company made an upfront payment to Antion of $ 3.3 million.

In addition, the Company made a $ 3.0 million investment in Antion's preferred stock.

In connection with this investment, a Company representative was appointed to Antion’s Board of Directors.

Under the Antion Collaboration and License Agreement, Antion will be eligible to receive up to $ 35.3 million for four products upon achievement of certain development and regulatory milestones.

For each additional product, Antion will be eligible to receive $ 2.0 million upon achievement of a regulatory milestone.

Antion is also entitled to receive a low single-digit royalty on the Company’s sales of licensed products, subject to certain reductions .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data