What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-04 · 70 added, 39 removed, 194 unchanged (36% of the section changed)

10 unchanged sentences

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

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

Our engineered T cells are allogeneic, meaning they are derived from healthy donors for

intended use in any patient, rather than from an individual patient for that patient’s use, as in the case of autologous T cells.

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

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

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

all other countries.

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

6 unchanged sentences

Food and Drug Administration (the FDA) to proceed to Phase 2 on matters such as chemistry, manufacturing and controls (CMC), including for the use of ALLO-501A manufactured at our own manufacturing facility, and trial designs to evaluate both ALLO-501A and ALLO-647.

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

Subject to FDA clearance, we expect to proceed to the Phase 2 portion of the trial in adult patients with R/R large B-cell lymphoma in the coming weeks.

We are sponsoring two clinical trials in adult patients with R/R multiple myeloma, a Phase 1 clinical trial (the UNIVERSAL trial) of ALLO-715 and a Phase 1 clinical trial (the IGNITE trial) of ALLO-605, our first product candidate to incorporate our TurboCAR technology.

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

We expect to provide an update on our R/R multiple myeloma program by the end of 2022.

As part of the UNIVERSAL trial, we have made the decision not to advance ALLO-715 in combination with nirogascestat, provided by SpringWorks Therapeutics, Inc., into dose expansion cohorts.

There was no clear indication that the combination would meaningfully improve the benefit-risk profile of ALLO-715 as a monotherapy.

Our Clinical Trial Collaboration Agreement with SpringWorks Therapeutics, Inc.

is expected to remain in effect until the data from the combination study are fully analyzed.

We expect to provide a further update on our R/R multiple myeloma program by the end of 2022.

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

3 unchanged sentences

Since inception, we have had significant operating losses.

Our net losses were $79.9 million for the three months ended March 31, 2022.

As of March 31, 2022, we had an accumulated deficit of $983.2 million.

As of March 31, 2022, we had $733.1 million in cash and cash equivalents and investments.

Our net losses were $74.8 million and $154.6 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2022, we had an accumulated deficit of $1.1 billion.

As of June 30, 2022, we had $686.1 million in cash and cash equivalents and investments.

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

39 unchanged sentences

Components of Results of Operations

As of March 31, 2022, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland HK.

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

As of June 30, 2022, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland Biopharm (PRC) Co., Limited.

See Note 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the Allogene Overland Biopharm (PRC) Co., Limited agreement.

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

4 unchanged sentences

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

Research and development expenses for the three months ended March 31, 2022 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

Research and development expenses for the three and six months ended June 30, 2022 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

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

10 unchanged sentences

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

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

We adjust our accrual as actual costs

become known.

We accrue for costs

incurred by monitoring the status of clinical trials and the invoices received from Servier.

We adjust our accrual as actual costs become known.

Servier is required to reimburse us for 40% of the costs associated with the development of ALLO-501 and ALLO-501A.

27 unchanged sentences

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

These increases are anticipated to include increased costs related to the hiring of additional personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and increased costs

associated with being a public company such as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, complying with and advancing environmental, social and governance matters, and insurance and investor relations costs.

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

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

Interest and Other Income, Net

3 unchanged sentences

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

The following sets forth our results of operations for the three months ended March 31, 2022 and 2021 (dollars in thousands):

Three Months Ended March 31, Change

Comparison of the Three Months Ended June 30, 2022 and 2021

The following sets forth our results of operations for the three months ended June 30, 2022 and 2021 (dollars in thousands):

Three Months Ended June 30, Change

2022 2021 $ %

Collaboration revenue - related party $ 61 $ 38,345 $ (38,284) NM

Collaboration revenue - related party $ 86 $ 44 $ 42 *

Operating expenses:

5 unchanged sentences

Interest and other income, net 315 624 (309) (50) %

Other expenses (350) (325) (25) 8 %

Other income (expenses) 1,492 (531) 2,023 *

Total other income (expense), net 1,807 93 1,714 *

Net Loss $ (74,787) $ (70,936) $ (3,851) 5 %

NM - Not meaningful

* - Percentage is not meaningful

Collaboration revenue - related party

Collaboration revenue was less than $0.1 million and $38.3 million for the three months ended March 31, 2022 and 2021, respectively.

Collaboration revenue was less than $0.1 million for the three months ended June 30, 2022 and 2021.

Revenue recognized in the three months ended June 30, 2022 and 2021 was due to the delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Research and Development Expenses

Research and development expenses were $57.2 million and $52.3 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $4.9 million was driven primarily by an increase in personnel related costs of $6.1 million, of which $2.5 million was stock-based compensation expense, an increase in facilities costs and depreciation expense of $5.5 million, offset by a $7.7 million decrease in external costs relating to the advancement of our product candidates primarily due to the timing of development activities and manufacturing runs.

General and Administrative Expenses

General and administrative expenses were $19.5 million and $18.8 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $0.7 million was primarily due to an increase in expenses related to corporate communications of $0.8 million.

Interest and Other Income, Net

Interest and other income, net was $0.3 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following sets forth our results of operations for the six months ended June 30, 2022 and 2021 (dollars in thousands):

Six Months Ended June 30, Change

2022 2021 $ %

Collaboration revenue - related party $ 147 $ 38,389 $ (38,242) *

Operating expenses:

Research and development 117,327 107,473 9,854 9 %

General and administrative 39,406 35,146 4,260 12 %

Total operating expenses 156,733 142,619 14,114 10 %

Loss from operations (156,586) (104,230) (52,356) 50 %

Other income (expense), net:

Interest and other income, net 807 1,135 (328) (29) %

Other income (expenses) 1,142 (856) 1,998 *

Total other income (expense), net 1,949 279 1,670 *

Net Loss $ (154,637) $ (103,951) $ (50,686) 49 %

* - Percentage is not meaningful

Collaboration revenue - related party

Collaboration revenue was $0.1 million and $38.4 million for the six months ended June 30, 2022 and 2021, respectively.

The decrease of $38.2 million was due to the revenue recognized related to the license of intellectual property and delivery of the know-how performance obligation, which was delivered in the first quarter of 2021, under the License Agreement entered into with Allogene Overland in December 2020.

Research and Development Expenses

Research and development expenses were $60.2 million and $55.2 million for the three months ended March 31, 2022 and 2021, respectively.

Research and development expenses were $117.3 million and $107.5 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $9.9 million was driven primarily by an increase in personnel related costs of $12.6 million, of which $5.6 million was stock-based compensation expense, and an increase in facilities costs and depreciation expense of $9.7 million, offset by a $14.4 million decrease in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs.

General and Administrative Expenses

General and administrative expenses were $19.9 million and $16.4 million for the three months ended March 31, 2022 and 2021, respectively.

The increase of $3.5 million was primarily due to an increase in personnel related costs of $3.8 million, of which $2.4 million was stock-based compensation expense.

General and administrative expenses were $39.4 million and $35.1 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $4.3 million was primarily due to an increase in personnel related costs of $4.1 million, of which $1.6 million was stock-based compensation expense, mainly driven by our increased headcount.

Interest and Other Income, Net

Interest and other income, net was $0.5 million for the three months ended March 31, 2022 and 2021.

Interest and other income, net was $0.8 million and $1.1 million for the six months ended June 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

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

As of March 31, 2022, we had $733.1 million in cash and cash equivalents and investments.

As of June 30, 2022, we had $686.1 million in cash and cash equivalents and investments.

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

2 unchanged sentences

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

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

As of March 31, 2022, $167.3 million remains available for sale under the sales agreement with Cowen.

As of June 30, 2022, $167.3 million remains available for sale under the sales agreement with Cowen.

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

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

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

5 unchanged sentences

Operating Activities

During the three months ended March 31, 2022, cash used in operating activities of $68.2 million was attributable to a net loss of $79.9 million, partially offset by non-cash charges of $31.6 million and an increase of $20.0 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $22.3 million, our share of equity investments' net losses for the period of $3.8 million, depreciation of $3.7 million, net amortization and accretion on investment securities of $1.3 million, and non-cash rent expense of $0.5 million.

The change in operating assets and liabilities was primarily due to a $9.0 million decrease in accrued and other current liabilities, a $6.7 million increase in prepaid expenses and other current assets, and a $3.1 million increase in other long-term assets, offset by a $0.6 million decrease in other long-term liabilities, and a $0.5 million decrease in accounts payable.

During the six months ended June 30, 2022, cash used in operating activities of $110.8 million was attributable to a net loss of $154.6 million, partially offset by non-cash charges of $58.8 million and an increase of $14.9 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $45.2 million, depreciation of $7.4 million, our share of equity investments' net losses for the period of $2.3 million, net amortization and accretion on investment securities of $2.2 million, and non-cash rent expense of $1.6 million.

The change in operating assets and liabilities was primarily due to a $8.5 million increase in prepaid expenses and other current assets, a $3.3 million decrease in accrued and other current liabilities, a $2.8 million increase in other long-term assets, and a $1.6 million decrease in other long-term liabilities, offset by a $0.9 million increase in accounts payable and a $0.4 million increase in deferred revenue.

Investing Activities

During the three months ended March 31, 2022, net cash used in investing activities of $22.4 million was related to cash used in purchases of investments of $89.2 million and cash used in the purchase of property and equipment of $1.9 million, offset by cash provided by investment maturities of $68.7 million.

During the six months ended June 30, 2022, net cash provided by investing activities of $31.7 million was related to cash provided by investment maturities of $185.8 million, offset by cash used in purchases of investments of $150.9 million and cash used in the purchase of property and equipment of $3.3 million.

Financing Activities

During the three months ended March 31, 2022, cash provided by financing activities of $1.8 million was related to $1.5 million of cash provided by the sale of common stock through our employee stock purchase plan and $0.3 million of cash provided by the issuance of common stock upon exercise of stock options.

During the six months ended June 30, 2022, cash provided by financing activities of $1.8 million was related to $1.5 million of cash provided by the sale of common stock through our employee stock purchase plan and $0.3 million of cash provided by the issuance of common stock upon exercise of stock options.

Material Cash Commitments and Requirements

11 unchanged sentences

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

As of March 31, 2022, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

As of June 30, 2022, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

For additional information regarding our agreements, see Note 6 to our condensed consolidated financial statements included elsewhere in this report.

1 unchanged sentence

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

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

As of June 30, 2022, the Company had non-cancellable purchase commitments of $3.7 million.

On October 6, 2020, we announced we entered into a strategic five-year collaboration agreement with MD Anderson for the preclinical and clinical investigation of allogeneic CAR T cell product candidates.

14 unchanged sentences

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

accounting principles.

The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods.

7 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis