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Item 7. Management’s Discussion and Analysis

2023-02-28 compared with 2022-02-23 · 87 added, 67 removed, 246 unchanged (39% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with “Selected Financial Data” and the historical consolidated financial statements and the notes thereto included in “Financial Statements and Supplementary Data”.

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the historical consolidated financial statements and the notes thereto included in “Financial Statements and Supplementary Data”.

This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” section of this Annual Report.

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

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

We are a clinical-stage immuno-oncology company pioneering the development of genetically engineered allogeneic T cell product candidates for the treatment of cancer.

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

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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.

Pursuant to our 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.

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

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We have removed rituximab recognition domains in ALLO-501A, which we believe will potentially facilitate treatment of more patients, as rituximab is a typical part of a treatment regimen for a patient with NHL.

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

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.

In the fourth quarter of 2022, we initiated a Phase 2 clinical trial for ALLO-501A (the ALPHA2 trial) in R/R large B cell lymphoma (LBCL).

The single-arm ALPHA2 trial will utilize a single dose of ALLO-501A at 120 million CAR+ cells with a lymphodepletion regimen comprised of fludarabine (30 mg/m2/day x 3 days) and cyclophosphamide (300 mg/m2/day x 3 days) plus ALLO-647 (90 mg).

We plan to enroll approximately 100 patients who have received at least two prior lines of therapy and have not received any prior anti-CD19 therapy, including CAR T therapy.

The primary endpoint is objective response rate (ORR) and the key secondary endpoint is duration of response (DoR).

We are also in the process of initiating the EXPAND trial, which is expected to enroll approximately 70 patients with R/R LBCL and is intended to demonstrate the overall contribution of ALLO-647 to the benefit to risk ratio of the lymphodepletion regimen for ALLO-501A.

Patients will be randomized to receive the same single 120 million CAR+ cell dose of ALLO-501A as in the ALPHA2 trial and either lymphodepletion with fludarabine and cyclophosphamide (control arm) or the lymphodepletion regimen of the ALPHA2 trial (active arm).

The primary endpoint of this trial is progression free survival, and the key secondary endpoints are ORR, DoR, and the safety of ALLO-647.

Assuming favorable outcomes and subject to

FDA discussions, we plan to seek FDA approval of ALLO-501A and ALLO-647 on the basis of the ALPHA2 trial and the EXPAND companion trial.

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 are currently reviewing and optimizing the manufacturing process for our BCMA program and are not enrolling patients in the UNIVERSAL and IGNITE trials at this time.

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

Enrollment of patients and the ability to conduct patient follow-up has been adversely impacted by the COVID-19 pandemic.

The exact timing of delays and overall impact of the COVID-19 pandemic to our business, preclinical studies and clinical trials is currently unknown, and we are monitoring the pandemic as it continues to rapidly evolve.

Subject to results from the TRAVERSE trial, we may investigate the use of ALLO-316 for other solid tumor and hematologic indications.

Subject to ongoing results in the TRAVERSE trial, we intend to complete planned dose exploration and initiate expansion cohort enrollment in 2023.

We may also investigate ALLO-316 for other CD70 expressing solid tumors and hematologic indications.

Since inception, we have had significant operating losses.

Our net loss was $332.6 million for the year ended December 31, 2022.

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

As of December 31, 2022, we had an accumulated deficit of $1.2 billion.

As of December 31, 2022, we had $576.5 million in cash and cash equivalents and investments.

We expect to continue to incur net losses for the foreseeable

future, and we expect our research and development expenses and general and administrative expenses will continue to increase.

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

Our Research and Development and License Agreements

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

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 us with the right to elect a license to the CD19 Products outside of the United States (Ex-US Option) and does not otherwise affect our current exclusive license for the development and commercialization of CD19 Products in the United States.

Upon any exercise of the Ex-US Option by us, our potential milestone payments with respect to ALLO-501A would increase for any first dosing in Phase 2, first dosing in Phase 3 and regulatory approval by €46 million in the aggregate.

In addition, upon any such exercise of the Ex-US Option, Servier's obligation to reimburse us for 40% of the development costs for CD19 Products would cease.

However, Servier has disputed the implications of the Discontinuation, namely whether development cost contributions continue and the timeframe during which we have the right to elect a license to CD19 Products outside of the United States.

Moreover, in December 2022, Servier sent us a notice for material breach due to our purported refusal to allow an audit of certain manufacturing costs under

our cost share arrangement.

While we do not believe Servier has such an audit right, we are currently progressing such audit with Servier to recover outstanding manufacturing costs owed by Servier to us.

For more information, see “Risk Factors—Servier’s Discontinuation of its involvement in the development of CD19 Products and our disputes with Servier may have adverse consequences."

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

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

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

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

Transition Services Agreement

In connection with the closing of the Pfizer Agreement, we entered into a Transition Services Agreement (TSA) with Pfizer in April 2018, pursuant to which we obtained from Pfizer certain (i) research and development services, including services relating to testing, studies, and clinical trials, project management services, laboratory equipment and operations services, animal care services, data storage services and regulatory strategy services, and (ii) general and administrative services, including business technology services, compliance services, finance/accounting services, and procurement, manufacturing and supply chain services, with respect to the assets that we purchased from Pfizer.

Under the TSA, Pfizer also provided us with certain facilities and facility management services.

The services were provided by certain employees of Pfizer as independent contractors of Allogene.

We believe that it was helpful for Pfizer to provide such services to us under the TSA to help facilitate the efficient operation of our business after the asset purchase.

Pfizer began providing the services in May 2018 and the TSA was terminated in September 2019.

Collaboration and License Agreement with Antion

On January 5, 2022, we entered into an exclusive collaboration and global license agreement (Antion 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 us on oncology products for a defined period.

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

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

Components of Results of Operations

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

See Notes 1 and 6 to our consolidated financial statements appearing elsewhere in this Annual Report for more information related to our recognition of revenue and the Allogene Overland HK agreement.

As of December 31, 2022, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland Biopharm (PRC) Co., Limited.

See Notes 1 and 6 to our consolidated financial statements appearing

elsewhere in this Annual Report for more information related to our recognition of revenue and the Allogene Overland 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.

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Research and development expenses for the year ended December 31, 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:

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

• expenses incurred under agreements with our collaboration partners and third-party contract organizations, investigative clinical trial sites that conduct research and development activities on our behalf, and consultants;

• costs related to the production of clinical materials, including fees paid for raw materials and to contract manufacturers;

• costs related to production of clinical materials, including fees paid for raw materials and to contract manufacturers;

• laboratory and vendor expenses related to the execution of preclinical and clinical trials;

• employee-related expenses, which include salaries, benefits and stock-based compensation;

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

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

• other significant research and development costs including overhead costs.

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We adjust our accrual as actual costs become known.

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

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

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

We have reimbursed 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.

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

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

Collaboration expenses and cost reimbursement are recorded on a net basis as a research and development expense in our consolidated statements of operations and comprehensive loss.

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General and administrative expenses consist primarily of salaries and other staff-related costs, including stock-based compensation for options and restricted stock units granted.

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

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

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

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

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

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

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

Other (Expense) Income, Net:

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 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.

Other Income (Expense), Net:

Interest and Other Income, Net

Interest and other income, net consists of interest earned on our cash, cash equivalents and investments and gains and losses recognized during the period.

Other Expense

Interest and other income, net consists of interest earned on our cash and cash equivalents and investments, as well as investment gains and losses recognized during the period.

Other Expenses

Other expense consists of non-operating expenses, including our share of equity investments' net losses for the period.

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Loss from operations (335,449) (255,792) (258,243) (79,657) 2,451

Other (expense) income, net:

Other income (expense), net:

Interest and other income, net 4,566 1,714 9,164 2,852 (7,450)

Other expense (2,927) (1,142) (268) (1,785) (874)

Other expenses (1,749) (2,927) (1,142) 1,178 (1,785)

Total other income (expense), net 2,817 (1,213) 8,022 4,030 (9,235)

Loss before income taxes (257,005) (250,221) (184,925) (6,784) (65,296)

Benefit from income taxes — — 331 — (331)

Net loss $ (332,632) $ (257,005) $ (250,221) $ (75,627) $ (6,784)

Collaboration revenue - related party

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

Collaboration revenue was $0.2 million and $38.5 million for the years ended December 31, 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 primarily delivered in the first quarter of 2021, under the License Agreement entered into with Allogene Overland in December 2020.

Collaboration revenue was $38.5 million and zero for the years ended December 31, 2021 and 2020, respectively.

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

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Research and development expenses were $256.4 million and $220.2 million for the years ended December 31, 2022 and 2021, respectively.

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

The net increase of $36.2 million was primarily due to an increase in building rent and facilities costs of $15.7 million, an increase in personnel related costs of $15.3 million, of which $2.9 million was increased stock-based compensation expense, and an increase in external costs relating to the advancement of our product candidates of $2.2 million due to the timing of process development activities and manufacturing runs.

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

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

General and Administrative Expenses

General and administrative expenses were $79.3 million and $74.1 million for the years ended December 31, 2022 and 2021, respectively.

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

The net increase of $5.2 million was primarily due to an increase in personnel related costs of $4.7 million, an increase in expenses related to corporate communications of $2.8 million, partially offset by a $1.5 million decrease in business and consulting fees.

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

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

The net increase of $8.8 million was primarily due to an increase in personnel related costs of $10.0

million, of which $7.3 million was increased stock-based compensation expense, partially offset by a decrease in allocated building rent and facilities costs of $1.9 million.

Interest and Other Income, Net

Interest and other income, net was $4.6 million and $1.7 million for the years ended December 31, 2022 and 2021, respectively.

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

The $2.9 million increase was due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

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

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

Liquidity, Capital Resources and Plan of Operations

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

Liquidity and Capital Resources

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

As of December 31, 2022, we had $576.5 million in cash, cash equivalents and investments.

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

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

Our operations have been financed primarily by net proceeds from the sale and issuance of our convertible preferred stock, the issuance of convertible promissory notes, net proceeds from our IPO, our at-the-market (ATM) offerings, our June 2020 underwritten public offering, and upfront cash payment of $40.0 million received in December 2020 pursuant to our License Agreement with Allogene Overland.

In connection with our IPO in 2018, we sold an aggregate of 20,700,000 shares of our common stock (inclusive of 2,700,000 shares of common stock pursuant to the over-allotment option granted to the underwriters) at a price of $18.00 per share and received approximately $343.3 million in net proceeds.

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

In November 2019, we entered into a sales agreement with Cowen and Company, LLC (Cowen), as amended on November 2, 2022, 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 December 31, 2022, $167.3 million remains available for sale under the sales agreement with Cowen.

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

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.

Capital Resources

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During the year ended December 31, 2022, cash used in operating activities of $220.5 million was attributable to a net loss of $332.6 million, substantially offset by non-cash charges of $108.4 million and a net change of $3.7 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation of $83.6 million, depreciation and amortization of $14.3 million, share of losses from equity method investments of $5.2 million, net amortization and accretion on investment securities of $2.9 million, and non-cash rent expense of $2.4 million.

The net change in operating assets and liabilities was primarily due to a $4.9 million increase in accounts payable, a $2.5 million decrease in prepaid expenses and other current assets, a $1.7 million increase in accrued and other current liabilities, and a $0.5 million increase in deferred revenue within current liabilities, offset by an increase in other long term assets of $3.3 million and a decrease in other long-term liabilities of $2.6 million.

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

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

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

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

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

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

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

operating assets and liabilities.

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

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

Investing Activities

During the year ended December 31, 2022, net cash provided by investing activities of $106.2 million was related to cash inflows from maturities of investments of $359.5 million, offset by the purchase of investments of $248.1 million and purchases of property and equipment of $5.2 million.

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

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

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

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

Financing Activities

During the year ended December 31, 2022, net cash provided by financing activities of $3.0 million was related to proceeds from the employee stock purchase plan of $2.5 million and proceeds from the issuance of common stock upon the exercise of stock options of $0.5 million.

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

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

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

Contractual Obligations and Commitments

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As of December 31, 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 consolidated financial statements included elsewhere in this report.

Our operating lease obligations primarily consist of lease payments on our research, lab and office facilities in South San Francisco, California, as well as lease payments on our cell manufacturing facility in Newark, California.

For additional information regarding our lease obligations, see Note 7 to our consolidated financial statements included elsewhere in this report.

Additionally, we have entered into agreements with third-party contract manufacturers for the manufacture and processing of certain of our product candidates for clinical testing purposes, and we have entered and will enter into other contracts in the normal course of business with contract research organizations for clinical trials and other vendors for other services and products for operating purposes.

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

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

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

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

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In July 2020, we 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 our manufacturing facility in Newark, California.

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

The agreement has a term of 20 years and commenced in September 2022.

We are 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 us will result in a termination payment due of approximately $4.3 million.

In connection with the agreement, we maintain a letter of credit for the benefit of the service provider in the amount of $4.3 million which is disclosed as restricted cash in the consolidated balance sheet as of December 31, 2021.

In connection with the agreement, we maintain a letter of credit for the benefit of the service provider in the amount of $4.3 million.

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

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The total consideration which we expect to collect in exchange for our products is an estimate and may be fixed or variable.

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

We constrain the estimated

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

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.

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We recognize compensation costs related to stock-based awards granted to employees and directors, including stock options, based on the estimated fair value of the awards on the date of grant.

We estimate the grant date fair value, and the resulting stock-based compensation, using the Black-Scholes option-pricing model.

The grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.

The Black-Scholes option-pricing model requires the use of subjective assumptions to determine the fair value of stock-based awards.

We estimate the grant date fair value, and the resulting stock-based compensation, using the Black-Scholes option-pricing model or the lattice option pricing model, whichever provides us the more precise grant fair value.

The gr ant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.

The Black-Scholes option-pricing model and the lattice option pricing model require the use of subjective assumptions to determine the fair value of stock-based awards.

These assumptions include:

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

For all grants subsequent to our IPO in October 2018,

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

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

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

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Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

‑ Expected dividend —We have never paid dividends on its common stock and have no plans to pay dividends on our common stock.

‑ Expected dividend —We have never paid dividends on our common stock and have no plans to pay dividends on our common stock.

Therefore, we used an expected dividend yield of zero.

‑ Expected exercise barrier —The modified options in accordance with the Stock Option Exchange Program 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.

For additional information regarding our Stock Option Exchange Program, see Note 10 to our consolidated financial statements included elsewhere in this report.

For the years ended December 31, 2022, 2021 and 2020, stock-based compensation was $83.6 million, $80.8 million and $65.3 million, respectively.

As of December 31, 2021 and 2020, we had $169.6 million and $149.4 million, respectively, of total unrecognized stock-based compensation relating to options, restricted stock units and founders stock.

As of December 31, 2022 and 2021, we had $153.6 million and $169.6 million, respectively, of total unrecognized stock-based compensation.

We early adopted Accounting Standards Update (ASU) No.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis