What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2021-11-04 · 115 added, 175 removed, 456 unchanged (39% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

2022 December 31,

23 unchanged sentences

Preferred stock, $ 0.001 par value:

10,000,000 shares authorized as of September 30, 2021 and December 31, 2020;

no shares were issued and outstanding as of September 30, 2021 and December 31, 2020

10,000,000 shares authorized as of March 31, 2022 and December 31, 2021;

no shares were issued and outstanding as of March 31, 2022 and December 31, 2021

Common stock, $ 0.001 par value:

200,000,000 shares authorized as of September 30, 2021 and December 31, 2020;

142,439,829 and 140,474,305 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

200,000,000 shares authorized as of March 31, 2022 and December 31, 2021;

143,569,902 and 142,623,065 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,847,534 1,822,179

Accumulated deficit ( 983,198 ) ( 903,348 )

Accumulated other comprehensive (loss) income ( 398 ) 268

Accumulated other comprehensive (loss) ( 9,249 ) ( 2,567 )

Total stockholders’ equity 855,230 916,406

5 unchanged sentences

(In thousands, except share and per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Collaboration revenue - related party $ 61 $ 38,345

7 unchanged sentences

Other expenses ( 350 ) ( 325 )

Total other income (expense), net ( 516 ) 1,843 ( 238 ) 7,230

Total other income, net 142 186

Net loss ( 79,850 ) ( 33,015 )

10 unchanged sentences

Shares Amount

Balance - June 30, 2021 142,120,731 $ 142 $ 1,774,298 $ ( 750,294 ) $ ( 334 ) $ 1,023,812

Issuance of common stock upon exercise of stock options and vesting of RSUs

229,918 — 750 — — 750

Vesting of early exercised common stock

— — 1,142 — — 1,142

Stock-based compensation — — 20,856 — — 20,856

Employee stock purchase plan

89,180 — 1,632 — — 1,632

Net loss — — — ( 78,186 ) — ( 78,186 )

Net unrealized loss on available-for-sale investments

— — — — ( 64 ) ( 64 )

Balance - September 30, 2021 142,439,829 $ 142 $ 1,798,678 $ ( 828,480 ) $ ( 398 ) $ 969,942

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity

Shares Amount

Balance - December 31, 2021 142,623,065 $ 142 $ 1,822,179 $ ( 903,348 ) $ ( 2,567 ) $ 916,406

9 unchanged sentences

— — — — ( 6,682 ) ( 6,682 )

Balance - September 30, 2021 142,439,829 $ 142 $ 1,798,678 $ ( 828,480 ) $ ( 398 ) $ 969,942

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ALLOGENE THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders’

Shares Amount

Balance - June 30, 2020 139,233,450 $ 139 $ 1,673,026 $ ( 511,576 ) $ 1,830 $ 1,163,419

Issuance of common stock upon exercise of stock options and vesting of RSUs

431,812 1 2,446 — — 2,447

Vesting of early exercised common stock

— — 710 — — 710

Stock-based compensation

— — 17,823 — — 17,823

Employee stock purchase plan 90,577 — 1,406 — — 1,406

Net loss — — — ( 66,197 ) — ( 66,197 )

Net unrealized loss on available-for-sale investments

— — — — ( 877 ) ( 877 )

Balance - September 30, 2020 139,755,839 $ 140 $ 1,695,411 $ ( 577,773 ) $ 953 $ 1,118,731

Balance - March 31, 2022 143,569,902 $ 143 $ 1,847,534 $ ( 983,198 ) $ ( 9,249 ) $ 855,230

Common Stock Additional

2 unchanged sentences

Comprehensive

Income (Loss) Total

Stockholders’

8 unchanged sentences

Employee stock purchase plan 98,026 — 1,984 — — 1,984

Issuance of common stock from public ATM offering, net of commissions and offering costs of $ 0.3 million

570,839 1 14,844 — — 14,845

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

13,457,447 13 595,685 — — 595,698

Net loss — — — ( 33,015 ) — ( 33,015 )

1 unchanged sentence

— — — — ( 369 ) ( 369 )

Balance - September 30, 2020 139,755,839 $ 140 $ 1,695,411 $ ( 577,773 ) $ 953 $ 1,118,731

Balance - March 31, 2021 141,470,075 $ 141 $ 1,749,097 $ ( 679,358 ) $ ( 101 ) $ 1,069,779

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation 22,315 16,792

Amortization of other intangible assets acquired — 151

Depreciation and amortization 3,692 1,918

1 unchanged sentence

Non-cash rent expense 466 2,007

Share of losses from equity method investments 1,766 376

Share of loss from equity method investment 3,800 325

Changes in operating assets and liabilities:

9 unchanged sentences

Purchase of stock in equity method investment — ( 15,938 )

Proceeds (loss) from sales of investments — 4,877

Proceeds from maturities of investments 68,680 268,249

2 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of common stock from ATM offering, net of commissions and issuance costs — 14,845

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

Proceeds from issuance of common stock upon exercise of stock options 283 4,060

6 unchanged sentences

Property and equipment purchases in accounts payable and accrued and other current liabilities $ 725 $ 8,299

Capitalized cloud computing costs included in accounts payable and accrued and other current liabilities $ 111 $ 277

Supplemental disclosure:

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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 and cash equivalents and investments of $ 861.7 million as of September 30, 2021.

Since inception through September 30, 2021, the Company has incurred cumulative net losses of $ 828.5 million.

The Company had cash and cash equivalents and investments of $ 733.1 million as of March 31, 2022.

Since inception through March 31, 2022, the Company has incurred cumulative net losses of $ 983.2 million.

Management expects to incur additional losses in the future to fund its operations and conduct product research and development and recognizes the need to raise additional capital to fully implement its business plan.

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All material intercompany balances and transactions have been eliminated during consolidation.

The condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021 and 2020, the condensed consolidated statements of stockholders’ equity as of September 30, 2021 and 2020, the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020, and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or for any other future annual or interim period.

The condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity as of March 31, 2022 and 2021, the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other future annual or interim period.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 23, 2022.

5 unchanged sentences

Significant Accounting Policies

There have been no significant changes to the accounting policies during the three and nine months ended September 30, 2021, as compared to the significant accounting policies described in Note 1 of the “Notes to Financial Statements” in the Company’s audited financial statements included in its Annual Report, with the exception of revenue recognition related to the collaboration revenue recognized in the three and nine months ended September 30, 2021 and the recently adopted accounting pronouncements in the section below.

Revenue Recognition

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 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).

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.

For elements of those arrangements that the Company determines should be accounted for under ASC 606, the Company assesses which activities in the collaboration agreements are performance obligations that should be accounted for separately and determine the transaction price of the arrangement, which includes the assessment of the probability of achievement of future milestones and other potential consideration.

A performance obligation represents a promise in a contract to transfer a distinct good or service to a customer, which represents a unit of accounting in accordance with ASC 606.

A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract.

The Company considers a performance obligation satisfied once the Company has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service.

A portion of the consideration should be allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

The total consideration which the Company expects to collect in exchange for the Company’s products is an estimate and may be fixed or variable.

The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods.

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 the Company 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.

Funds received in advance are recorded as deferred revenue and are recognized as the related performance obligation is satisfied.

There have been no significant changes to the accounting policies during the three months ended March 31, 2022, as compared to the significant accounting policies described in Note 1 of the “Notes to Financial Statements” in the Company’s audited financial statements included in its Annual Report.

Recently Adopted Accounting Pronouncements

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 condensed consolidated financial statements.

There have been no new accounting pronouncements issued or effective that are expected to have a material impact on the Company's condensed financial statements.

Recent Accounting Pronouncements Not Yet Adopted

3 unchanged sentences

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

Investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs, except for investments in U.S.

Investments are measured at fair value based on inputs including quoted prices that are derived from observable market data and are classified as Level 2 inputs, except for investments in U.S.

treasury securities which are classified as Level 1.

There were no Level 3 assets or liabilities as of September 30, 2021 and as of December 31, 2020.

Financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of September 30, 2021 and as of December 31, 2020 are presented in the following tables:

September 30, 2021

There were no Level 3 assets or liabilities as of March 31, 2022 and as of December 31, 2021.

Financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2022 and as of December 31, 2021 are presented in the following tables:

March 31, 2022

Level 1 Level 2 Level 3 Fair Value

19 unchanged sentences

Financial Instruments

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of September 30, 2021 and as of December 31, 2020 are presented in the following tables:

September 30, 2021

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of March 31, 2022 and as of December 31, 2021 are presented in the following tables:

March 31, 2022

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

25 unchanged sentences

Total cash equivalents and investments $ 752,034

As of September 30, 2021, the remaining contractual maturities of available-for-sale securities were less than 3 years.

As of March 31, 2022, the remaining contractual maturities of available-for-sale securities were less than 3 years.

There have been no significant realized losses on available-for-sale securities for the periods presented.

As of September 30, 2021, unrealized losses on available-for-sale investments are not attributed to credit risk.

As of March 31, 2022, 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 September 30, 2021 and December 31, 2020, securities with a fair value of zero and $ 5.0 million, 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.

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 March 31, 2022 and December 31, 2021, no securities 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 March 31, 2022 and December 31, 2021, the Company recognized $ 1.9 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

1 unchanged sentence

Property and Equipment consist of the following:

September 30,

2022 December 31,

8 unchanged sentences

Total property and equipment, net $ 120,200 $ 122,990

License Agreements

License and Collaboration Agreements

Asset Contribution Agreement with Pfizer

5 unchanged sentences

In October 2019, the Territory was expanded to all countries in the world.

No milestone or royalty payments were made in the three and nine months ended September 30, 2021 or 2020.

No milestone or royalty payments were made in the three months ended March 31, 2022 or 2021.

Pfizer is also eligible to receive, on a product-by-product and country-by-country basis, royalties in single-digit percentages on annual net sales for products covered by the Pfizer Agreement or that use certain Pfizer intellectual property and for which an investigational new drug application (IND) is first filed on or before April 6, 2023.

24 unchanged sentences

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

For the three and nine months ended September 30, 2021, $ 5.0 million and $ 10.0 million, respectively, in costs were incurred related to the achievement of clinical development milestones under this agreement.

For the three and nine months ended September 30, 2020, zero costs were incurred related to the achievement of a clinical development milestone under this agreement.

For the three months ended March 31, 2022 and 2021, zero and $ 5.0 million, respectively, in costs were incurred related to the achievement of clinical development milestones under this agreement.

License and Collaboration Agreement with Servier

18 unchanged sentences

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 three and nine months ended September 30, 2021, the Company recorded $ 5.1 million and $ 13.2 million, respectively of net cost recoveries under the cost-sharing terms of the Servier Agreement as a reduction to research and development expenses.

For the three and nine months ended September 30, 2020, the Company recorded $ 4.1 million and $ 5.9 million, respectively, of net cost recoveries.

As of September 30, 2021 and December 31, 2020, amounts due from Servier of $ 9.3 million and $ 3.8 million, respectively, were recorded in other current assets in the accompanying condensed consolidated balance sheets.

For the three months ended March 31, 2022 and 2021, the Company recorded $ 5.1 million and $ 3.9 million, respectively, of net cost recoveries under the cost-sharing terms of the Servier Agreement as a reduction to research and development expenses.

As of March 31, 2022 and December 31, 2021, amounts due from Servier of $ 9.4 million and $ 4.1 million, respectively, were recorded in other current assets in the accompanying condensed consolidated balance sheets.

Research Collaboration and License Agreement with Notch

On November 1, 2019, the Company entered into a Collaboration and License Agreement (the Notch Agreement) with Notch Therapeutics Inc.

(Notch), pursuant to which Notch granted to Allogene an exclusive, worldwide, royalty-bearing, sublicensable license under certain of Notch’s intellectual property to develop, make, use, sell, import, and otherwise commercialize therapeutic gene-edited T cell and/or natural killer (NK) cell products from induced pluripotent stem cells directed at certain CAR targets for initial application in non-Hodgkin lymphoma, acute lymphoblastic leukemia and multiple

In addition, Notch has granted Allogene an option to add certain specified targets to its exclusive license in exchange for an agreed per-target option fee.

3 unchanged sentences

In connection with the execution of the Notch Agreement, Allogene made an upfront payment to Notch of $ 10.0 million in return for a license to access Notch's technology in order to conduct research pursuant to the Notch Agreement.

The Company recognized a research and development expense of $ 10 million during the year ended December 31, 2019 as the license had no foreseeable alternative future use.

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 September 30, 2021, and continued to account for its investment in Notch as an equity method investment.

The Company did not have a controlling interest in Notch as of March 31, 2022, 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.

4 unchanged sentences

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.

For the three and nine months ended September 30, 2021, the Company recorded $ 0.8 million and $ 3.9 million, respectively, in collaboration costs as research and development expenses.

For the three and nine months ended September 30, 2020, the Company recorded $ 1.2 million and $ 2.0 million, respectively, in collaboration costs as research and development expenses.

For the three months ended March 31, 2022 and 2021, the Company recorded $ 0.8 million and $ 1.2 million, respectively, in collaboration costs as research and development expenses.

Strategic Alliance with The University of Texas MD Anderson Cancer Center

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

For the three and nine months ended September 30, 2021, the Company recorded $ 0.4 million and $ 0.8 million in collaboration costs as research and development expenses.

For the three months ended March 31, 2022 and 2021, the Company recorded $ 0.3 million and less than $ 0.1 million in collaboration costs as research and development expenses.

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

21 unchanged sentences

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 September 30, 2021 and December 31, 2020.

The Company has determined that Allogene Overland is a variable interest entity as of March 31, 2022 and December 31, 2021.

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

Accordingly, the Company did not consolidate Allogene Overland because the Company determined that it was not the primary beneficiary.

For the three and nine months ended September 30, 2021, the Company recognized less than $ 0.1 million and $ 38.4 million, respectively, of collaboration revenue, primarily related to the license of intellectual property and delivery of the know-how performance obligation which was delivered in the first quarter of 2021.

For the three months ended March 31, 2022 and 2021, the Company recognized less than $ 0.1 million and $ 38.3 million of collaboration revenue, respectively.

For the three months ended March 31, 2022 and 2021, the Company recorded $ 0.3 million and zero , respectively, of net cost recoveries under the terms of the license agreement as a reduction to research and development expenses.

Collaboration and License Agreement with Antion

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 $ 3.5 million in return for a license to access Antion's technology in order to conduct research pursuant to the agreement.

The upfront payment was fully recognized as research and development expense as the license had no foreseeable alternative future use.

In addition, the Company made a $ 3.0 million investment in Antion's preferred stock and is expected to make an additional $ 3.0 million investment in Antion's preferred stock upon achievement of an agreed milestone.

The Company accounts for its investment in Antion's preferred stock as an equity investment measured at cost less any impairment.

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.

For the three months ended March 31, 2022, the Company recorded $ 3.5 million in research and development expenses related to the upfront payment and collaboration costs, of which $ 0.2 million is recorded in accrued and other liabilities as of March 31, 2022.

The Company's total equity investment in Antion was $ 3.0 million as of March 31, 2022 and is recognized in other long-term assets in the condensed consolidated balance sheets.

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 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.

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

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.

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 office and laboratory space which consists of 14,943 square feet located in South San Francisco, California.

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.

The lease has a term of 188 months and commenced in November 2020.

The lease term is 188 months beginning November 2020 through July 2036.

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 $ 2.7 million of tenant improvement allowances up to September 30, 2021.

The Company has received $ 3.0 million of tenant improvement allowances for costs related to the design and construction of certain Company improvements up to March 31, 2022.

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

Restricted cash related to letters of credit due to landlords was $ 5.2 million and $ 4.3 million as of September 30, 2021 and December 31, 2020, respectively.

Restricted cash related to letters of credit due to landlords was $ 6.0 million and $ 6.0 million as of March 31, 2022 and December 31, 2021, respectively.

The balance sheet classification of our lease liabilities were as follows (in thousands):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Operating lease liabilities

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Operating lease cost $ 2,122 $ 1,862

1 unchanged sentence

Total lease costs $ 2,577 $ 2,189

Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2021 was $ 4.1 million and was included in net cash used in operating activities in our condensed consolidated statements of cash flows.

The undiscounted future lease payments under the lease agreements as of September 30, 2021 were as follows:

Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2022 was $ 2.0 million and was included in net cash used in operating activities in our condensed consolidated statements of cash flows.

The undiscounted future lease payments under the lease agreements as of March 31, 2022 were as follows:

Year ending December 31:

4 unchanged sentences

Present value adjustment ( 33,133 )

Tenant improvement allowance ( 325 )

Total $ 72,623

2 unchanged sentences

The weighted average discount rate used to determine the operating lease liability was 6.36 %.

As of September 30, 2021, the weighted average remaining lease term for our operating leases is 9.86 years.

As of March 31, 2022, the weighted average remaining lease term for our operating leases is 10.99 years.

Other Commitments

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

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

The agreement has a term of 20 years and is expected to commence in the second half of 2022.

The Company is obligated to pay for electricity generated from the system at an agreed rate for the duration of the agreement term.

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 condensed consolidated balance sheet as of September 30, 2021.

The Company has entered into certain license agreements for intellectual property which is used as part of our development and manufacturing processes.

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These agreements require payment of annual license fees and may include conditional milestone payments for achievement of specific research, clinical and commercial events, and royalty payments.

The timing and likelihood of any significant conditional milestone payments or royalty payments becoming due was not probable as of September 30, 2021.

The timing and likelihood of any significant conditional milestone payments or royalty payments becoming due was not probable as of March 31, 2022.

The Company enters into contracts in the normal course of business that includes arrangements with clinical research organizations, vendors for preclinical research and vendors for manufacturing.

These agreements generally allow for cancellation with notice.

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

Equity Method Investment

As of March 31, 2022, the Company had non-cancellable purchase commitments of $ 2.8 million.

Equity Method Investments

Notch Therapeutics

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

The Company’s total equity investment in Notch as of September 30, 2021 and December 31, 2020 was $ 17.9 million and $ 3.7 million, respectively, and the Company accounted for the investment using the equity method of accounting.

Allogene Overland Biopharm (CY) Limited

of Allogene Overland’s Seed Preferred Shares representing a 49 % ownership interest as partial consideration for entering into a License Agreement which had a carrying value of zero .

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 March 31, 2022 and December 31, 2021 was $ 14.2 million and $ 18.0 million, respectively, and the Company accounted for the investment using the equity method of accounting.

During the three months ended March 31, 2022 and 2021, the Company recognized its share of Notch's net loss under the other expenses caption within the condensed consolidated statement of operations.

Allogene Overland

In conjunction with the execution of the License Agreement with Allogene Overland (see Note 6), the Company also entered into a Share Purchase Agreement and Shareholders' Agreement with the joint venture company acquiring shares of Allogene Overland’s Seed Preferred Shares representing a 49 % ownership interest in exchange for entering into a License Agreement which had a carrying value of zero .

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

The Company's total equity investment in Allogene Overland was zero as of September 30, 2021 and December 31, 2020, respectively.

The Company’s equity investment in Allogene Overland as of September 30, 2021 and December 31, 2020 had a zero carryover basis.

The Company's total equity investment in Allogene Overland was zero as of March 31, 2022 and December 31, 2021.

The Company’s equity investment in Allogene Overland as of March 31, 2022 and December 31, 2021 had a zero carryover basis.

Therefore, the Company did not account for its share of losses incurred by Allogene Overland.

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The Prior 2018 Plan provided for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the Company’s Board of Directors and consultants of the Company under terms and provisions established by the Company’s Board of Directors.

In September 2018, the Board of Directors adopted a new amended and restated 2018 Equity Incentive Plan as a successor to and continuation of the Prior 2018 Plan, which became effective in October 2018 (the 2018 Plan), which authorized additional shares for issuance and provided for an automatic annual increase to the number of shares issuable under the 2018 Plan by an amount equal to 5 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year.

The term of any stock option granted under the 2018 Plan cannot exceed 10 years.

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Restricted Stock Units granted typically vest annually over a four-year period but may be granted with different vesting terms.

As of September 30, 2021, there were 16,937,335 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

As of March 31, 2022, there were 14,142,447 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

Stock Option Activity

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Forfeited ( 221,691 ) 28.64

Balance, September 30, 2021 10,109,169 $ 21.10 7.83 $ 70,846

Exercisable, September 30, 2021 7,517,410 $ 19.73 7.69 $ 59,485

Vested and expected to vest, September 30, 2021 10,109,169 $ 21.10 7.83 $ 70,846

The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Global Select Market on September 30, 2021.

For the nine months ended September 30, 2021, the estimated weighted-average grant-date fair value of employee options granted was $ 20.31 per share.

As of September 30, 2021, there was $ 81.9 million of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 2 years, 205 days .

Balance, March 31, 2022 17,055,544 $ 16.34 8.53 $ 12,845

Exercisable, March 31, 2022 7,850,808 $ 20.18 7.29 $ 12,193

Vested and expected to vest, March 31, 2022 17,055,544 $ 16.34 8.53 $ 12,845

For the three months ended March 31, 2022, the estimated weighted-average grant-date fair value of employee options granted was $ 6.24 per share.

As of March 31, 2022, there was $ 108.0 million of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 2 years, 360 days .

The fair value of employee, consultant and director stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

Nine Months Ended September 30,

Three Months Ended March 31,

Expected term in years 6.07

Expected volatility 70.82 %

71.42 % - 72.14 %

Expected risk-free interest rate 1.61 % - 2.34 %

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Outstanding Restricted Stock Units

Value at Date

Weighted Average Remaining Vesting Life Aggregate Intrinsic Value

Average Grant Date Fair

Share Weighted Average Remaining Vesting Life Aggregate Intrinsic Value

(in years) (in thousands)

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Forfeited ( 137,168 ) 27.40

Unvested September 30, 2021 3,393,604 $ 28.70 1.76 $ 87,216

Vested and expected to vest, September 30, 2021 3,393,604 $ 28.70 1.76 $ 87,216

As of September 30, 2021, there was $ 82.8 million of unrecognized stock-based compensation related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2 years, 327 days .

Unvested March 31, 2022 5,512,146 $ 20.13 1.99 $ 50,216

Vested and expected to vest, March 31, 2022 5,512,146 $ 20.13 1.99 $ 50,216

As of March 31, 2022, there was $ 98.1 million of unrecognized stock-based compensation related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2 years, 346 days .

Total stock-based compensation related to stock options, restricted stock units, employee stock purchase plan and vesting of the founders’ common stock was as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Research and development $ 11,080 $ 7,920

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In May 2021, 293,594 options were early exercised, resulting in proceeds of $ 5.3 million.

As of September 30, 2021 and December 31, 2020 there was $ 3.6 million and $ 2.8 million, respectively, recorded in accrued and other liabilities and $ 3.0 million and $ 1.1 million, respectively, recorded in other long-term liabilities related to shares held by employees and directors that were subject to repurchase.

As of March 31, 2022 and December 31, 2021 there was $ 2.3 million and $ 2.9 million, respectively, recorded in accrued and other liabilities and $ 1.9 million and $ 2.5 million, respectively, recorded in other long-term liabilities related to shares held by employees and directors that were subject to repurchase.

The underlying shares are shown as outstanding in the condensed consolidated financial statements since the exercise date but the shares which are subject to future vesting conditions are not included in the calculation of earnings per share.

Related Party Transactions

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.

During the second quarter of 2021, the Company sold excess raw materials to Pfizer.

As of September 30, 2021 and December 31, 2020, the Company had an amount receivable from Pfizer of $ 0.1 million and zero , respectively, which was recorded in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

Collaboration Revenue

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

During the three and nine months ending September 30, 2021, the Company recognized less than $ 0.1 million and $ 38.4 million, respectively, of collaboration revenue under this arrangement.

During the three months ended March 31, 2022 and 2021, the Company recognized less than $ 0.1 million and $ 38.3 million, respectively, of collaboration revenue under this arrangement.

Sublease Agreement

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

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

The Company’s executive chairman, 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 zero at September 30, 2021 and $ 0.1 million at December 31, 2020.

The total right of use asset and associated liability recorded related to this related party lease was $ 0.3 million at March 31, 2022 and December 31, 2021.

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, clinical development, administrative, accounting and financial services to the Company.

The costs incurred for services provided under this agreement were $ 0.2 million and $ 0.4 million for the three and nine months ended September 30, 2021, respectively, and $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2020, respectively.

In June 2018, the Company entered into a services agreement with Two River, 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 $ 0.2 million and $ 0.1 million for the three months ended March 31, 2022 and 2021, respectively.

In August 2018, the Company entered into a consulting agreement with Bellco.

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The Company also reimburses Bellco for out of pocket expenses incurred in performing the services.

The cost incurred for services provided and out-of-pocket expenses incurred under this consulting agreement were $ 0.2 million and $ 0.6 million for the three and nine months ended September 30, 2021, respectively, and $ 0.2 million and $ 0.6 million for the three and nine months ended September 30, 2020, respectively.

The cost incurred for services provided and out-of-pocket expenses incurred under this consulting agreement were $ 0.2 million for the three months ended March 31, 2022 and 2021 .

The Company has a history of losses and expects to record a loss in 2022.

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The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the period presented due to their anti-dilutive effect:

September 30,

Stock options to purchase common stock 17,055,544 11,107,162

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Subsequent Events

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.

In October 2021, the U.S.

Food and Drug Administration (FDA) placed a hold on the Company's clinical trials.

At this stage, the Company cannot assess the likely timing to complete the clinical hold review process with the FDA, and for the clinical hold to be removed.

If the Company is unable to resolve the clinical hold in a timely manner, its results of operations, financial position and prospects as a company, will be materially adversely affected.

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

What changed 10-Q

Item 1. Financial Statements