What changed in this filing

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Item 1. Financial Statements

2023-05-03 compared with 2022-11-02 · 126 added, 186 removed, 468 unchanged (40% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

2023 December 31,

23 unchanged sentences

Preferred stock, $ 0.001 par value:

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

10,000,000 shares authorized as of March 31, 2023 and December 31, 2022;

no shares were issued and outstanding as of March 31, 2023 and December 31, 2022

Common stock, $ 0.001 par value:

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

400,000,000 shares authorized as of March 31, 2023 and December 31, 2022;

145,740,333 and 144,438,304 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,932,734 1,911,632

7 unchanged sentences

(In thousands, except share and per share amounts)

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

2022 2021 2022 2021

Three Months Ended March 31,

Collaboration revenue - related party $ 52 $ 61

7 unchanged sentences

Other expenses ( 1,693 ) ( 350 )

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

Total other income, net 366 142

Net loss ( 98,704 ) ( 79,850 )

Other comprehensive loss:

Net unrealized loss on available-for-sale investments ( 1,486 ) ( 64 ) ( 10,391 ) ( 666 )

Net unrealized gain (loss) on available-for-sale investments 3,992 ( 6,682 )

Net comprehensive loss $ ( 94,712 ) $ ( 86,532 )

5 unchanged sentences

(In thousands, except share amounts)

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

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

Shares Amount

6 unchanged sentences

Employee stock purchase plan

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

Net unrealized loss on available-for-sale investments

359,753 1 1,730 — — 1,731

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

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

153,269 1 24 — — 25

Vesting of early exercised common stock

— — 813 — — 813

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

Employee stock purchase plan — — — — — —

Net loss — — — ( 98,704 ) — ( 98,704 )

Net unrealized loss on available-for-sale investments

— — — — ( 2,223 ) ( 2,223 )

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

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

177,678 — 135 — — 135

Vesting of early exercised common stock

— — 432 — — 432

Stock-based compensation — — 21,148 — — 21,148

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

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

Net unrealized loss on available-for-sale investments

Net unrealized gain on available-for-sale investments

— — — — 3,992 3,992

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.

ALLOGENE THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

Balance - March 31, 2023 145,740,333 $ 146 $ 1,932,734 $ ( 1,334,684 ) $ ( 5,934 ) $ 592,262

Common Stock Additional

1 unchanged sentence

Deficit Accumulated

Comprehensive Income (Loss) Total

Comprehensive

Stockholders’

6 unchanged sentences

Stock-based compensation

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

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

Net unrealized loss on available-for-sale investments

— — 22,315 — — 22,315

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 230,876 — 1,530 — — 1,530

2 unchanged sentences

— — — — ( 6,682 ) ( 6,682 )

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

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

229,918 — 750 — — 750

Vesting of early exercised common stock

— — 1,142 — — 1,142

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

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

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

Net unrealized loss on available-for-sale investments

— — — — ( 64 ) ( 64 )

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

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

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

16 unchanged sentences

Purchases of property and equipment ( 1,035 ) ( 1,902 )

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

Proceeds from sales of investments 5,623 —

Proceeds from maturities of investments 143,441 68,680

Purchase of investments ( 35,094 ) ( 89,155 )

Net cash provided by investing activities 56,562 134,405

Net cash provided by (used in) investing activities 112,935 ( 22,377 )

Cash flows from financing activities:

2 unchanged sentences

Net cash provided by financing activities 1,731 1,814

Net change in cash, cash equivalents and restricted cash ( 98,957 ) 6,670

Cash, cash equivalents and restricted cash — beginning of period 183,606 192,800

Cash, cash equivalents and restricted cash — end of period $ 84,649 $ 199,470

Non-cash investing activities:

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

Net change in cash and cash equivalents and restricted cash 48,027 ( 88,800 )

Cash and cash equivalents and restricted cash — beginning of period 72,196 183,606

Cash and cash equivalents and restricted cash — end of period $ 120,223 $ 94,806

Supplemental disclosure:

7 unchanged sentences

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

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

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

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

2 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 $ 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.

The Company had cash and cash equivalents and investments of $ 514.0 million as of March 31, 2023.

Since inception through March 31, 2023, the Company has incurred cumulative net losses of $ 1,334.7 million.

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

The Company intends to raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan.

However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidates.

The Company expects that its cash and cash equivalents and investments will be sufficient to fund its operations for a period of at least one year from the date the accompanying unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (SEC).

The Company cannot at this time predict the specific extent, duration, or full impact that the ongoing COVID-19 pandemic will have on its financial condition and operations.

The impact of the COVID-19 pandemic on the financial performance of the Company will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions.

These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain.

If business conditions, financial markets and/or the overall economy are impacted for an extended period, the Company’s results may be adversely affected.

However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidates.

The Company expects that its cash and cash equivalents and investments will be sufficient to fund its operations for at least the next 12 months from the date the accompanying unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (SEC).

Summary of Significant Accounting Policies

5 unchanged sentences

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

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.

The condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023 and 2022, the condensed consolidated statements of stockholders’ equity as of March 31, 2023 and 2022, the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, 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, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2023.

1 unchanged sentence

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

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

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

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

The Company evaluates its estimates and assumptions on an ongoing basis using historical

experience and other factors and adjusts those estimates and assumptions when facts and circumstances change.

Actual results could differ from those estimates.

Significant Accounting Policies

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.

There have been no significant changes to the accounting policies during the three months ended March 31, 2023, 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

5 unchanged sentences

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

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

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

treasury securities which are classified as Level 1.

There were no Level 3 assets or liabilities as of September 30, 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

There were no Level 3 assets or liabilities as of March 31, 2023 and as of December 31, 2022.

Financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2023 and as of December 31, 2022 are presented in the following tables:

March 31, 2023

Level 1 Level 2 Level 3 Fair Value

19 unchanged sentences

Financial Instruments

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

September 30, 2022

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of March 31, 2023 and as of December 31, 2022 are presented in the following tables:

March 31, 2023

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

25 unchanged sentences

Total cash equivalents and investments $ 526,327

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

As of March 31, 2023, the remaining contractual maturities of available-for-sale securities were less than 2 years.

Realized losses on available-for-sale securities for the three months ended March 31, 2023 and 2022 were $ 1.0 million and zero , respectively.

As of March 31, 2023, 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 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.

As of March 31, 2023 and December 31, 2022, securities with a fair value of $ 279.6 million and $ 329.4 million, respectively, were in a continuous net unrealized loss position for more than 12 months.

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

As of 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.

As of March 31, 2023 and December 31, 2022, the Company recognized $ 1.0 million and $ 1.8 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,

2023 December 31,

12 unchanged sentences

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

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

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

The aggregate potential milestone payments upon reaching certain annual net sales thresholds in North America, Europe, Asia, Australia and Oceania (the Territory) for a certain number of targets covered by the Pfizer Agreement are $ 325.0 million per target.

1 unchanged sentence

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

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

No milestone or royalty payments were made in the three months ended March 31, 2023 or 2022.

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.

The Company’s royalty obligation with respect to a given product in a given country begins upon the first sale of such product in such country and ends on the later of (i) expiration of the last claim of any applicable patent or (ii) 12 years from the first sale of such product in such country.

4 unchanged sentences

The Original Cellectis Agreement included a research collaboration to conduct discovery and pre-clinical development activities to generate CAR T cells directed at targets selected by each party, which was completed in June 2018.

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

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

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

Pursuant to the Cellectis Agreement, Cellectis granted to the Company an exclusive, worldwide, royalty-bearing license, on a target-by-target basis, with sublicensing rights under certain conditions, under certain of Cellectis’s intellectual property, including its TALEN and electroporation technology, to make, use, sell, import, and otherwise exploit and commercialize CAR T products directed at certain targets, including BCMA, CD70, Claudin 18.2, DLL3 and FLT3 (the Allogene Targets), for human oncologic therapeutic, diagnostic, prophylactic and prognostic purposes.

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

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

13 unchanged sentences

The Cellectis Agreement may also be terminated by the Company upon written notice at any time in the event that Cellectis becomes bankrupt or insolvent or upon written notice within 60 days of a consummation of a change of control of Cellectis.

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

For the three and nine months ended September 30, 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.

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

For the three months ended March 31, 2023 and 2022, zero clinical development milestones were achieved.

License and Collaboration Agreement with Servier

1 unchanged sentence

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

Under the Servier Agreement, the Company has an exclusive license to develop, manufacture and commercialize UCART19, ALLO-501 and ALLO-501A in the field of anti-tumor adoptive immunotherapy in the United States, with an exclusive option to obtain the same rights for additional product candidates in the United States and, if Servier does not elect to pursue development or commercialization of those product candidates in certain markets outside of the United States pursuant to its license, outside of the United States as well.

license, outside of the United States as well.

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

8 unchanged sentences

The total potential payments that Servier is obligated to make to the Company under the Servier Agreement upon successful completion of regulatory and sales milestones are $ 42.0 million and € 70.5 million ($ 76.7 million), respectively.

The foregoing milestones are subject to certain adjustments if the Company obtains rights for certain products outside of the United States upon Servier’s election not to pursue such rights.

The foregoing milestones are subject to certain adjustments if the Company obtains rights for certain products outside of the United States.

Each party is also eligible to receive tiered royalties on annual net sales in countries within the paying party’s respective territory of any licensed products that are commercialized by such party that are directed at the targets licensed by such party under the Servier Agreement.

3 unchanged sentences

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

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2023 and 2022, the Company recorded $ 0.2 million and $ 5.1 million, respectively, of net cost recoveries under the cost-sharing terms of the Servier Agreement as a reduction to research and development expenses.

As of March 31, 2023 and December 31, 2022, amounts due from Servier of $ 1.2 million and $ 1.5 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

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

In December 2022, Servier sent the Company a notice for material breach due to the Company's purported refusal to allow an audit of certain manufacturing costs under the cost share arrangement.

While the Company does not believe Servier has such an audit right, the Company is currently progressing such audit with Servier to recover outstanding manufacturing costs owed by Servier to the Company.

Research Collaboration and License Agreement with Notch Therapeutics

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

10 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 September 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 March 31, 2023, and continued to account for its investment in Notch as an equity method investment.

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

4 unchanged sentences

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

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2023 and 2022, the Company recorded $ 1.0 million and $ 0.8 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,

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 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.

For the three months ended March 31, 2023 and 2022, the Company recorded $ 0.4 million and $ 0.3 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 September 30, 2022, the Company and Overland are the sole equity holders in Allogene Overland.

As of March 31, 2023, 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 September 30, 2022 and December 31, 2021.

The Company has determined that Allogene Overland is a variable interest entity as of March 31, 2023 and December 31, 2022, respectively.

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

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

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2023 and 2022, the Company recognized less than $ 0.1 million of collaboration revenue.

For the three months ended March 31, 2023 and 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.

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 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.

For the three months ended March 31, 2023, the Company recorded $ 0.5 million in research and development expenses related to collaboration costs.

For the three months ended March 31, 2022, the Company recorded $ 3.5 million in research and development expenses related to the upfront payment and collaboration costs.

As of March 31, 2023 and December 31, 2022, research and development expenses recorded in accrued and other liabilities was $ 0.5 million.

As of March 31, 2023 and December 31, 2022, the Company's total equity investment in Antion was $ 3.0 million and is recognized in other long-term assets in the condensed consolidated balance sheets.

Commitments and Contingencies

1 unchanged sentence

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

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

The Company has made certain tenant improvements, including the addition of laboratory space, and has received $ 5.0 million of tenant improvement allowances through December 31, 2020.

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

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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.

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

In December 2021, the Company amended

its lease agreement to extend the term of the lease to be co-terminus with the HQ Lease.

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

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

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

The lease term is 188 months and began in November 2020.

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

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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 September 30, 2022 and December 31, 2021.

Restricted cash related to letters of credit due to landlords was $ 6.0 million as of March 31, 2023 and December 31, 2022.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Operating lease liabilities

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Three Months Ended

September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Operating lease cost $ 3,181 $ 2,122

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Total lease costs $ 3,872 $ 2,577

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:

Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2023 was $ 3.0 million and was included in net cash used in operating activities in the Company's condensed consolidated statements of cash flows.

The undiscounted future non-cancellable lease payments under the Company's operating leases as of March 31, 2023 were as follows:

Year ending December 31:

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Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term.

In determining the present value of lease payments, we use our estimated incremental borrowing rate.

In determining the present value of lease payments, the Company uses its estimated incremental borrowing rate.

The weighted average discount rate used to determine the operating lease liability was 6.88 %.

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

As of March 31, 2023, the weighted average remaining lease term for our operating leases is 9.74 years.

Other Commitments

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

In connection with the agreement, the Company maintains a letter of credit for the benefit of the service provider in the amount of $ 4.3 million which is disclosed as restricted cash in the condensed consolidated balance sheets as of September 30, 2022.

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

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 recorded as restricted cash in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.

The Company has entered into certain license agreements for intellectual property which is used as part of its 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 September 30, 2022.

The timing and likelihood of any significant conditional milestone payments or royalty payments becoming due was not probable as of March 31, 2023.

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

These agreements generally allow for cancellation with notice.

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

As of March 31, 2023, the Company had non-cancellable purchase commitments of $ 0.3 million.

Equity Method Investments

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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 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

The Company’s total equity investment in Notch as of March 31, 2023 and December 31, 2022 was $ 11.1 million and $ 12.8 million, respectively, and the Company accounted for the investment using the equity method of accounting.

During the three months ended March 31, 2023 and 2022, the Company recognized its share of Notch's net loss under the other expenses caption within the condensed consolidated statements of operations.

Allogene Overland Biopharm (CY) Limited

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

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

The Company's total equity investment in Allogene Overland was zero as of September 30, 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.

The Company's total equity investment in Allogene Overland was zero as of March 31, 2023 and December 31, 2022.

The Company’s equity investment in Allogene Overland as of March 31, 2023 and December 31, 2022 had a zero carryover basis.

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

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The Company generally grants stock-based awards with service conditions only.

Options shall not have an exercise price less than 100 % of the fair market value of the Company’s common stock on the grant date.

Options granted typically vest over a four-year period but may be granted with different vesting terms.

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

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.

Options shall not have an exercise price less than 100 % of the fair market value of the Company’s common stock on the grant date.

If the individual possesses more than 10 % of the combined voting power of all classes of stock of the Company, the exercise price shall not be less than 110 % of the fair market value of a common share of stock on the date of grant.

This requirement is applicable to incentive stock options only.

As of March 31, 2023, there were 5,111,513 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

Stock Option Exchange Program

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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.

The incremental expense of $ 5.2 million for the modified 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 are being recognized over the new three-year service period.

Stock Option Activity

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Balance, December 31, 2022 17,569,575 $ 12.90 7.73 $ 6,658

Granted 8,627,428 9.64

Exercised ( 174,451 ) 2.33

Forfeited ( 569,697 ) 24.41

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

The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Global Select Market on September 30, 2022.

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 .

Options granted 6,698,130 5.24 9.95

Options exercised — — $ —

Options forfeited ( 719,219 ) 17.32

Balance, March 31, 2023 23,548,486 $ 10.59 8.13 $ 4,001

Exercisable, March 31, 2023 13,913,480 $ 12.01 7.80 $ 4,001

Vested and expected to vest, March 31, 2023 23,548,486 $ 10.59 8.13 $ 4,001

For the three months ended March 31, 2023, the estimated weighted-average grant-date fair value of employee options granted was $ 3.54 per share.

As of March 31, 2023, there was $ 94.1 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, 314 days .

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

Nine Months Ended September 30,

Three Months Ended March 31,

Expected term in years 6.03 - 6.07

Expected volatility 73.85 %

69.73 % - 70.80 %

Expected risk-free interest rate 3.45 % - 4.10 %

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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:

The fair value of the 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 .

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Forfeited ( 340,743 ) 13.79

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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Unvested March 31, 2023 13,587,470 $ 8.28 2.52 $ 67,122

Vested and expected to vest, March 31, 2023 13,587,470 $ 8.28 2.52 $ 67,122

As of March 31, 2023, there was $ 87.4 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, 279 days .

For the quarter ended March 2023, the Company granted 2,665,449 performance-based restricted stock units and 1,902,307 restricted stock units with a market condition to certain executive officers and other employees pursuant to the 2018 Plan.

These awards are subject to the holders' continuous service to the Company through each applicable vesting event.

Through March 31, 2023, the Company believes that the achievement of the requisite performance conditions for these awards are not probable.

As a result, no compensation expense has been recognized related to the performance-based restricted stock units in the quarter ended March 31, 2023.

The Company recognized $ 0.1 million in stock-based compensation expense related to the restricted units with a market condition in the quarter ended March 31, 2023.

Total stock-based compensation expense 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 March 31,

Research and development $ 9,197 $ 11,080

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

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.

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

As of March 31, 2023 and December 31, 2022 there was $ 1.9 million recorded in accrued and other liabilities and zero and $ 0.6 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 but the shares which are subject to future vesting conditions are not included in the calculation of earnings per share.

Related Party Transactions

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

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.

During the three months ended March 31, 2023 and 2022, the Company recognized less than $ 0.1 million of collaboration revenue under this arrangement.

Sublease Agreement

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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 September 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 at March 31, 2023 and December 31, 2022.

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 $ 0.1 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 June 2018, the Company entered into a services agreement with Two River Consulting, LLC (Two River), a firm affiliated with the Company’s President and Chief Executive Officer, the Company’s Executive Chair of the board of directors, and a director of the Company to provide various managerial, clinical development, administrative, accounting and financial services to the Company.

The costs incurred for services provided under this agreement were $ 0.1 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively.

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

Pursuant to the consulting agreement, Bellco provides certain services for the Company, which are performed by Dr.

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

In consideration for these services, the Company paid Bellco $ 38,583 per month in arrears commencing January 2021 and $ 40,217 per month in arrears commencing January 2022.

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

In consideration for these services, the Company paid Bellco $ 40,217 per month in arrears commencing January 2022.

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

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 $ 0.6 million for the three and nine months ended September 30, 2022, respectively.

The costs incurred for services provided, bonus, and out-of-pocket expenses incurred under this consulting agreement were $ 0.2 million for the three months ended March 31, 2023 and 2022.

The Company has a history of losses and expects to record a loss in 2023.

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 23,548,486 17,055,544

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Subsequent Events

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