What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-08-09 · 133 added, 107 removed, 521 unchanged (32% 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 June 30, 2022 and December 31, 2021;

no shares were issued and outstanding as of June 30, 2022 and December 31, 2021

10,000,000 shares authorized as of September 30, 2022 and December 31, 2021;

no shares were issued and outstanding as of September 30, 2022 and December 31, 2021

Common stock, $ 0.001 par value:

400,000,000 shares authorized as of June 30, 2022 and 200,000,000 shares authorized as of December 31, 2021;

143,723,171 and 142,623,065 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

400,000,000 shares authorized as of September 30, 2022 and 200,000,000 shares authorized as of December 31, 2021;

144,031,588 and 142,623,065 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,893,908 1,822,179

7 unchanged sentences

(In thousands, except share and per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

7 unchanged sentences

Interest and other income, net 1,002 393 1,809 1,528

Other income (expenses) 1,492 ( 531 ) 1,142 ( 856 )

Other expenses ( 1,661 ) ( 909 ) ( 519 ) ( 1,766 )

Total other income (expense), net ( 659 ) ( 516 ) 1,290 ( 238 )

11 unchanged sentences

Shares Amount

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

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

715,961 1 282 — — 283

Vesting of early exercised common stock

— — 1,228 — — 1,228

Stock-based compensation — — 22,315 — — 22,315

Employee stock purchase plan 230,876 — 1,530 — — 1,530

Net loss — — — ( 79,850 ) — ( 79,850 )

Net unrealized loss on available-for-sale investments

— — — — ( 6,682 ) ( 6,682 )

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

4 unchanged sentences

Stock-based compensation — — 22,891 — — 22,891

Employee stock purchase plan — — — — — —

Net loss — — — ( 74,787 ) — ( 74,787 )

2 unchanged sentences

Balance - June 30, 2022 143,723,171 144 1,871,262 ( 1,057,985 ) ( 11,472 ) 801,949

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

Shares Amount

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

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

4 unchanged sentences

Employee stock purchase plan 130,739 — 931 — — 931

230,876 — 1,530 — — 1,530

Net loss — — — ( 83,148 ) — ( 83,148 )

1 unchanged sentence

— — — — ( 1,486 ) ( 1,486 )

Balance - June 30, 2022 143,723,171 $ 144 $ 1,871,262 $ ( 1,057,985 ) $ ( 11,472 ) $ 801,949

Balance - September 30, 2022 144,031,588 $ 144 $ 1,893,908 $ ( 1,141,133 ) $ ( 12,958 ) $ 739,961

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

5 unchanged sentences

Deficit Accumulated

Comprehensive Loss Total

Comprehensive Income (Loss) Total

Stockholders’

Shares Amount

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

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

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

3 unchanged sentences

Stock-based compensation — — 16,792 — — 16,792

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

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

Net unrealized loss on available-for-sale investments

— — — — ( 369 ) ( 369 )

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

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

650,656 1 3,213 — — 3,214

Vesting of early exercised common stock

— — 854 — — 854

Stock-based compensation — — 21,134 — — 21,134

Employee stock purchase plan — — — — — —

3 unchanged sentences

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

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss) Total

Stockholders’

Shares Amount

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

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

3 unchanged sentences

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

— — 37,926 — — 37,926

Employee stock purchase plan 89,180 — 1,632 — — 1,632

2 unchanged sentences

— — — — ( 64 ) ( 64 )

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

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.

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

29 unchanged sentences

Right-of-use asset obtained in exchange for lease liability $ 31,361 $ —

Property and equipment purchases in accounts payable and accrued and other current liabilities $ 42 $ 1,706

Capitalized cloud computing costs included in accounts payable and accrued and other current liabilities $ 320 $ —

Supplemental disclosure:

12 unchanged sentences

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 $ 686.1 million as of June 30, 2022.

Since inception through June 30, 2022, the Company has incurred cumulative net losses of $ 1.1 billion.

The Company had cash and cash equivalents and investments of $ 637.3 million as of September 30, 2022.

Since inception through September 30, 2022, the Company has incurred cumulative net losses of $ 1.1 billion.

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.

13 unchanged sentences

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

The condensed consolidated balance sheet as of June 30, 2022, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity as of June 30, 2022 and 2021, the condensed consolidated statements of cash flows for the six months ended June 30, 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 and six months ended June 30, 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.

The condensed consolidated balance sheet as of September 30, 2022, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity as of September 30, 2022 and 2021, the condensed consolidated statements of cash flows for the nine months ended September 30, 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 and nine months ended September 30, 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 six months ended June 30, 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.

There have been no significant changes to the accounting policies during the three and nine months ended September 30, 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

7 unchanged sentences

treasury securities which are classified as Level 1.

There were no Level 3 assets or liabilities as of June 30, 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 June 30, 2022 and as of December 31, 2021 are presented in the following tables:

June 30, 2022

There were no Level 3 assets or liabilities as of September 30, 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 September 30, 2022 and as of December 31, 2021 are presented in the following tables:

September 30, 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 June 30, 2022 and as of December 31, 2021 are presented in the following tables:

June 30, 2022

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of September 30, 2022 and as of December 31, 2021 are presented in the following tables:

September 30, 2022

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

25 unchanged sentences

Total cash equivalents and investments $ 752,034

As of June 30, 2022, the remaining contractual maturities of available-for-sale securities were less than 4 years.

As of September 30, 2022, the remaining contractual maturities of available-for-sale securities were less than 2 years.

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

As of June 30, 2022, unrealized losses on available-for-sale securities are not attributed to credit risk.

As of September 30, 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 available-for-sale securities are due to market factors.

As of June 30, 2022 and December 31, 2021, securities with a fair value of $ 16.9 million and zero , respectively, were in a continuous net unrealized loss position for more than 12 months.

As of September 30, 2022 and December 31, 2021, securities with a fair value of $ 153.7 million and zero , 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 June 30, 2022 and December 31, 2021, the Company recognized $ 1.7 million of accrued interest receivable from available-for-sale securities within prepaid expenses and other current assets on the consolidated balance sheets.

As of September 30, 2022 and December 31, 2021, the Company recognized $ 1.5 million and $ 1.9 million, respectively, 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,

16 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 six months ended June 30, 2022 or 2021.

No milestone or royalty payments were made in the three and nine months ended September 30, 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 six months ended June 30, 2022, zero costs were incurred related to the achievement of a clinical development milestone under this agreement.

For the three and six months ended June 30, 2021, zero and $ 5.0 million, respectively, in costs were incurred related to the achievement of a clinical development milestone under this agreement.

For the three and nine months ended September 30, 2022, zero costs were incurred related to the achievement of a clinical development milestone under this agreement.

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 a clinical development milestone 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 six months ended June 30, 2022, the Company recorded $ 11.6 million and $ 16.7 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 six months ended June 30, 2021, the Company recorded $ 4.2 million and $ 8.1 million, respectively, of net cost recoveries.

As of June 30, 2022 and December 31, 2021, amounts due from Servier of $ 10.2 million and $ 4.1 million, respectively, were recorded in other current assets in the accompanying condensed consolidated balance sheets.

For the three and nine months ended September 30, 2022, the Company recorded $ 3.8 million and $ 20.4 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, 2021, the Company recorded $ 5.1 million and $ 13.2 million, respectively, of net cost recoveries.

As of September 30, 2022 and December 31, 2021, amounts due from Servier of $ 4.3 million and $ 4.1 million, respectively, were recorded in other current assets in the accompanying condensed consolidated balance sheets.

On September 15, 2022, Servier sent a notice of discontinuation (Discontinuation) of its involvement in the development of all licensed products directed against CD19, including UCART19, ALLO-501 and ALLO-501A (collectively, CD19 Products), pursuant to the Servier Agreement.

Servier’s Discontinuation provides the Company with the right to elect a license to the CD19 Products outside of the United States (Ex-US Option) and does not otherwise affect the Company's current exclusive license for the development and commercialization of CD19 Products in the United States.

Research Collaboration and License Agreement with Notch

11 unchanged sentences

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 June 30, 2022, 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 September 30, 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 six months ended June 30, 2022, the Company recorded $ 0.9 million and $ 1.7 million, respectively, in collaboration costs as research and development expenses.

For the three and six months ended June 30, 2021, the Company recorded $ 1.8 million and $ 3.1 million, respectively, in collaboration costs as research and development expenses.

For the three and nine months ended September 30, 2022, the Company recorded $ 1.0 million and $ 2.8 million, respectively, in collaboration costs as research and development expenses.

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.

Strategic Alliance with The University of Texas MD Anderson Cancer Center

4 unchanged sentences

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

The Company is obligated to make further payments to MD Anderson each year upon the anniversary of the agreement effective date through the duration of the agreement term.

The Company is obligated to make further payments to MD Anderson each year upon the anniversary of the agreement

effective date through the duration of the agreement term.

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

2 unchanged sentences

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

For the three and six months ended June 30, 2022, the Company recorded $ 0.6 million and $ 0.9 million in collaboration costs as research and development expenses.

For the three and six months ended June 30, 2021, the Company recorded $ 0.3 million in collaboration costs as research and development expenses.

For the three and nine months ended September 30, 2022, the Company recorded $ 0.2 million and $ 1.1 million in collaboration costs as research and development expenses.

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

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

2 unchanged sentences

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

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

As of September 30, 2022, the Company and Overland are the sole equity holders in Allogene Overland.

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

17 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 June 30, 2022 and December 31, 2021.

The Company has determined that Allogene Overland is a variable interest entity as of September 30, 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 six months ended June 30, 2022, the Company recognized less than $ 0.1 million and $ 0.1 million of collaboration revenue, respectively.

For the three and six months ended June 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 and six months ended June 30, 2022, the Company recorded zero and $ 0.3 million, respectively, of net cost recoveries under the terms of the license agreement as a reduction to research and development expenses.

For the three and six months ended June 30, 2021, the Company recorded zero net cost recoveries.

For the three and nine months ended September 30, 2022, the Company recognized less than $ 0.1 million and $ 0.2 million of collaboration revenue, respectively.

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 and nine months ended September 30, 2022, the Company recorded $ 0.3 million and $ 0.6 million, respectively, of net cost recoveries under the terms of the license agreement as a reduction to research and development expenses.

For the three and nine months ended September 30, 2021, the Company recorded zero net cost recoveries.

Collaboration and License Agreement with Antion

12 unchanged sentences

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 and six months ended June 30, 2022, the Company recorded $ 0.4 million and $ 3.9 million in research and development expenses related to the upfront payment and collaboration costs, of which $ 0.4 million is recorded in accrued and other liabilities as of June 30, 2022.

The Company's total equity investment in Antion was $ 3.0 million as of June 30, 2022 and is recognized in other long-term assets in the condensed consolidated balance sheets.

For the three and nine months ended September 30, 2022, the Company recorded $ 0.6 million and $ 4.5 million in research and development expenses related to the upfront payment and collaboration costs, of which $ 0.5 million is recorded in accrued and other liabilities as of September 30, 2022.

The Company's total equity investment in Antion was $ 3.0 million as of September 30, 2022 and is recognized in other long-term assets in the condensed consolidated balance sheets.

Commitments and Contingencies

5 unchanged sentences

The lease term commenced in April 2022 and is for a period of 120 months.

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

The rent payments for the expansion premises began 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.

1 unchanged sentence

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.

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.

6 unchanged sentences

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 $ 6.0 million as of June 30, 2022 and December 31, 2021.

Restricted cash related to letters of credit due to landlords was $ 6.0 million as of September 30, 2022 and December 31, 2021.

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Operating lease liabilities

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

2 unchanged sentences

Total lease costs $ 3,793 $ 2,301 $ 9,944 $ 6,547

Cash paid for amounts included in the measurement of lease liabilities for the six months ended June 30, 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 June 30, 2022 were as follows:

Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2022 was $ 2.6 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, 2022 were as follows:

Year ending December 31:

8 unchanged sentences

The weighted average discount rate used to determine the operating lease liability was 6.19 %.

As of June 30, 2022, the weighted average remaining lease term for our operating leases is 10.45 years.

As of September 30, 2022, the weighted average remaining lease term for our operating leases is 10.21 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 second half of 2022.

The agreement has a term of 20 years and commenced in September 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 sheets as of June 30, 2022.

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

Each of these respective agreements are generally cancellable by the Company.

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 June 30, 2022.

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

As of September 30, 2022, the Company had non-cancellable purchase commitments of $ 0.4 million.

Equity Method Investments

5 unchanged sentences

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 June 30, 2022 and December 31, 2021 was $ 15.7 million and $ 18.0 million, respectively, and the Company accounted for the investment using the equity method of accounting.

During the three and six months ended June 30, 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.

The Company’s total equity investment in Notch as of September 30, 2022 and December 31, 2021 was $ 14.0 million and $ 18.0 million, respectively, and the Company accounted for the investment using the equity method of accounting.

During the three and nine months ended September 30, 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

1 unchanged sentence

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 June 30, 2022 and December 31, 2021.

The Company’s equity investment in Allogene Overland as of June 30, 2022 and December 31, 2021 had a zero carryover basis.

The Company's total equity investment in Allogene Overland was zero as of September 30, 2022 and December 31, 2021.

The Company’s equity investment in Allogene Overland as of September 30, 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.

9 unchanged sentences

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

As of June 30, 2022, there were 12,114,246 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

As of September 30, 2022, there were 12,035,820 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

Stock Option Exchange program

On June 21, 2022, the Company commenced an offer to exchange certain eligible options held by eligible employees of the Company for new options (the Exchange Offer).

The Exchange Offer expired on July 19, 2022.

Pursuant to the Exchange Offer, 199 eligible holders elected to exchange, and the Company accepted for cancellation, eligible options to purchase an aggregate of 3,666,600 shares of the Company’s common stock, representing approximately 93.5 % of the total shares of common stock underlying the eligible options.

On July 19, 2022, immediately following the expiration of the Exchange Offer, the Company granted new options to purchase 3,666,600 shares of common stock, pursuant to the terms of the Exchange Offer and the 2018 Plan.

The exercise price of the new options granted pursuant to the Exchange Offer was $ 13.31 per share, which was the closing price of the common stock on the Nasdaq Global Select Market on the grant date of the new options.

The new options are subject to a new three-year vesting schedule, vesting in equal annual installments over the vesting term.

Each new option has a maximum term of seven years .

The exchange of stock options was treated as a modification for accounting purposes.

The incremental expense of $ 5.2 million for the new options was calculated using a lattice option pricing model.

The incremental expense and the unamortized expense remaining on the exchanged options as of the modification date will be recognized over the new three-year service period.

Stock Option Activity

7 unchanged sentences

Forfeited ( 569,697 ) 24.41

Balance, June 30, 2022 18,248,432 $ 15.74 8.41 $ 32,815

Exercisable, June 30, 2022 15,830,333 $ 15.01 8.37 $ 30,882

Vested and expected to vest, June 30, 2022 18,248,432 $ 15.74 8.41 $ 32,815

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 June 30, 2022.

For the six months ended June 30, 2022, the estimated weighted-average grant-date fair value of employee options granted was $ 6.19 per share.

As of June 30, 2022, there was $ 102.7 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, 316 days .

Cancelled under the Option Exchange ( 3,666,600 ) 26.82

Granted under the Option Exchange 3,666,600 13.31

Balance, September 30, 2022 18,122,447 $ 12.99 8.05 $ 25,996

Exercisable, September 30, 2022 13,657,219 $ 13.04 8.29 $ 24,715

Vested and expected to vest, September 30, 2022 18,122,447 $ 12.99 8.05 $ 25,996

For the nine months ended September 30, 2022, the estimated weighted-average grant-date fair value of employee options granted was $ 9.99 per share.

As of September 30, 2022, there was $ 96.7 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, 324 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:

Six Months Ended June 30,

Nine Months Ended September 30,

Expected term in years 5.25 - 6.08

4 unchanged sentences

Expected dividend 0 %

The fair value of the new options granted under the Option Exchange program was estimated at the date of grant using a lattice option pricing model with the following assumptions:

expected volatility of 73.74 %, expected risk-free rate of 3.06 %, expected dividends of 0 % and expected exercise barrier of 2.57 .

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

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Therefore, the Company used an expected dividend yield of zero .

Expected exercise barrier - The modified options are assumed to be exercised upon vesting and when the ratio of stock market price to exercise price reaches 2.57 , or expiration, whichever is earlier.

Restricted Stock Unit Activity

8 unchanged sentences

Forfeited ( 476,970 ) 22.24

Unvested June 30, 2022 6,186,433 $ 18.16 1.85 $ 70,525

Vested and expected to vest, June 30, 2022 6,186,433 $ 18.16 1.85 $ 70,525

As of June 30, 2022, there was $ 94.3 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, 291 days .

Unvested September 30, 2022 6,108,670 $ 17.41 1.70 $ 65,974

Vested and expected to vest, September 30, 2022 6,108,670 $ 17.41 1.70 $ 65,974

As of September 30, 2022, there was $ 85.0 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, 240 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 June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

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

During the six months ended June 30, 2022 and 2021, zero and 293,594 options were early exercised.

As of June 30, 2022 and December 31, 2021 there was $ 1.9 million and $ 2.9 million, respectively, recorded in accrued and other liabilities and $ 1.5 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.

During the nine months ended September 30, 2022 and 2021, zero and 293,594 options were early exercised.

As of September 30, 2022 and December 31, 2021 there was $ 1.9 million and $ 2.9 million, respectively, recorded in accrued and other liabilities and $ 1.1 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.

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On April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene Overland Biopharm (PRC) Co., Limited.

During each of the three and six months ended June 30, 2022, the Company recognized less than $ 0.1 million of collaboration revenue under this arrangement.

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

For the three and six months ended June 30, 2021, the Company recorded zero net cost recoveries under the terms of the license agreement.

During the three and nine months ended September 30, 2022, the Company recognized less than $ 0.1 million and $ 0.2 million of collaboration revenue under this arrangement, respectively.

During 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 under this arrangement.

For the three and nine months ended September 30, 2021, the Company recorded zero net cost recoveries under the terms of the license agreement.

Sublease Agreement

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

The sublease was amended, effective in July 2022, to move to a nearby location, with office space of 737 square feet.

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 $ 0.2 million and $ 0.3 million at June 30, 2022 and December 31, 2021, respectively.

The total right of use asset and associated liability recorded related to this related party lease was $ 0.2 million and $ 0.3 million at September 30, 2022 and December 31, 2021, respectively.

Consulting Agreements

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 $ 0.3 million and $ 0.5 million for the three and six months ended June 30, 2022, respectively.

The costs incurred for services provided under this agreement were $ 0.1 million for the three and six months ended June 30, 2021.

The costs incurred for services provided under this agreement were $ 0.1 million and $ 0.6 million for the three and nine months ended September 30, 2022, respectively.

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.

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 costs incurred for services provided and out-of-pocket expenses incurred under this consulting agreement were $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2022, respectively.

The costs 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, 2022, respectively.

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

2 unchanged sentences

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 18,122,447 10,109,169

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Subsequent Events

On June 21, 2022, the Company commenced an offer to exchange certain eligible options held by eligible employees of the Company for new options (the “Exchange Offer”).

The Exchange Offer expired on July 19, 2022.

The exercise price of the new options granted pursuant to the Exchange Offer was $ 13.31 per share, which was the closing price of the common stock on The Nasdaq Global Select Market on the grant date of the new options.

The new options will be subject to a new three-year vesting schedule, vesting in equal annual installments over the vesting term.

On October 6, 2022, the Company announced the initiation of the Phase 2 clinical trial of ALLO-501A (the ALPHA2 trial) in patients with relapsed/refractory large B-cell lymphoma.

The Company is also in the process of initiating the EXPAND trial, which is intended to demonstrate the contribution of ALLO-647 to the lymphodepletion regimen.

In accordance with the Servier Agreement, the Company is required to make a milestone payment of $ 8.0 million upon first dosing of the first patient in a Phase 2 clinical trial.

The milestone payment is expected to be recognized in the fourth quarter.

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