Allogene Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2022 (Annual Report), which was filed with the Securities and Exchange Commission (SEC) on February 28, 2023. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company”, “Allogene,” “we,” “us” and “our” refer to Allogene Therapeutics, Inc., and references to “Servier” collectively refer to Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS. In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements . Overview 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. Our engineered T cells are allogeneic, meaning they are derived from healthy donors for intended use in any patient, rather than from an individual patient for that patient’s use, as in the case of autologous T cells. We believe this key difference will enable us to deliver readily available treatments faster, more reliably, at greater scale, and to more patients. We have a deep pipeline of allogeneic chimeric antigen receptor (CAR) T cell product candidates targeting multiple promising antigens in a host of hematological malignancies and solid tumors. Pursuant to our Exclusive Collaboration and License Agreement with Servier (Servier Agreement), we have exclusive rights to ALLO-501 and ALLO-501A, CAR T cell 22 Table of Contents product candidates targeting CD19, in the United States. ALLO-501 and ALLO-501A use Cellectis S.A. (Cellectis) technologies under which Servier holds an exclusive worldwide license from Cellectis. We are conducting long-term follow-up in our Phase 1 clinical trial (the ALPHA trial) of ALLO-501 in patients with relapsed or refractory (R/R) non-Hodgkin lymphoma (NHL). We are also progressing the development of the second-generation version of ALLO-501, known as ALLO-501A. 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. 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 recently initiated 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). Subject to ongoing results in the TRAVERSE trial, we intend to complete planned dose exploration and initiate expansion cohort enrollment in 2023. Since inception, we have had significant operating losses. Our net losses were $78.0 million and $176.7 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2023, we had an accumulated deficit of $1.4 billion. As of June 30, 2023, we had $544.5 million in cash and cash equivalents and investments and we expect our cash runway to fund operations into 2H 2025. 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. Recent Developments On June 15, 2023, we presented updated data at the International Conference on Malignant Lymphoma (ICML) from the Phase 1 ALPHA/ALPHA2 trials of ALLO-501/501A in 33 CAR T naïve patients with relapsed/refractory (r/r) large B-cell lymphoma (LBCL) treated with the Alloy manufacturing process material across different CAR T dosing and lymphodepletion regimens. Earlier in June, data from the 12 patients, a subset of these 33 CAR T naïve patients, who received regimen being utilized in ongoing Phase 2 trials was presented at American Society of Clinical Oncology (ASCO) Annual Meeting. The updated analysis (data cutoff April 20, 2023) of ALPHA/ALPHA2 examined data from all 33 CAR T-naïve patients with r/r LBCL who were treated with a single infusion or consolidation therapy (two planned infusions) of ALLO-501/501A manufactured using the Alloy manufacturing process. Patients received lymphodepletion with fludarabine (30 mg/m2/day x 3 days) and cyclophosphamide (300 mg/m2/day x 3 days) and varying doses of ALLO-647 (from 13 mg/day to 30 mg/day x 3 days). The median time from enrollment to the start of therapy was three days and 100% of patients received product per specifications. No patients received bridging therapy. The dosing breakdown for the 33 patients included in this data set is as follows: 23 Table of Contents • 12 patients treated with a single dose of ALLO-501/501A and FCA90 lymphodepletion (Phase 2 regimen; recap of the ASCO 2023 data presentation) • 6 patients treated with a single dose of ALLO-501/501A and FCA<90 lymphodepletion • 15 patients treated with consolidation dosing of ALLO-501/501A and split lymphodepletion CAR T- Naïve Patients with r/r LBCL Alloy Manufacturing Process All (N=33) Phase 2 Regimen (N=12) FCA<90 (N=6) Consolidation Dosing (N=15) Overall Response Rate (ORR), n (%) 19 (58) 8 (67) 3 (50) 8 (53) Complete Response Rate (CR), n (%) 14 (42) 7 (58) 1 (17) 6 (40) 6 Month Complete Response, n (%) 10 (30) 5 (42) 0 5 (33) Seven of 12 (58%) patients receiving the Phase 2 regimen achieved a CR and five (42%) maintained a CR through Month 6. Of the five patients who were in CR at 6 months, four (80%) remained in CR. The fifth patient had disease progression at 24 months. The median duration of response was 23.1 months with three patients remaining in remission for over 24 months and the longest remaining in remission for over 31 months. Across all 33 patients the CR rate was 42% with 30% maintaining a CR at Month 6. These results indicating complete responses are more common with lymphodepletion regimens containing 90 mg of ALLO-647 (FCA90). Median duration of response for both the overall population (n=33) and the patients treated with the Phase 2 regimen (n=12) was 23.1 months. CAR T- Naïve Patients with r/r LBCL All (N=33) Phase 2 Regimen (N=12) FCA<90 (N=6) Consolidation (N=15) All Gr N (%) Gr 3+ N (%) All Gr N (%) Gr 3+ N (%) All Gr N (%) Gr 3+ N (%) All Gr N (%) Gr 3+ N (%) CRS 8 (24) 0 4 (33) 0 1 (17) 0 3 (20) 0 Neurotoxicity 13 (39) 2 (6) 4 (33) 0 2 (33) 0 7 (47) 2 (13) ICANS 0 0 0 0 0 0 0 0 GvHD 0 0 0 0 0 0 0 0 IRR 16 (49) 3 (9) 8 (67) 0 3 (50) 1 (17) 5 (33) 2 (13) Infection 19 (58) 5 (15) 8 (67) 1 (8) 3 (50) 1 (17) 8 (53) 3 (20) Prolonged Gr3+ Cytopenia — 4 (12) — 2 (17) — 0 — 2 (13) Across the 33 patients, treatment was generally well tolerated with no incidences of Grade 3 or greater cytokine release syndrome, and no cases of immune effector cell-associated neurotoxicity syndrome or graft versus host disease. Cytopenia and infections were manageable and comparable to the experience with autologous CAR T cell therapies in patients with r/r LBCL. The ALPHA/ALPHA2 Phase 1 trials were designed to assess the safety, tolerability, and preliminary efficacy at increasing dose levels of ALLO-501 and ALLO-501A, allogeneic CAR T cell product candidates that target CD19. In addition to exploring multiple cell doses, these studies evaluated various doses of ALLO-647, our proprietary lymphodepleting antibody is designed to prevent premature rejection of AlloCAR T cells. We are currently enrolling the potentially pivotal Phase 2 ALPHA2 trial of ALLO-501A in LBCL and expect to complete enrollment in the first half of 2024 with the first data readout planned by the end of 2024. We are currently enrolling in Canada and expect enrollment in Europe to begin in the third quarter of 2023 and in Australia by year-end. In addition, we are conducting EXPAND, a trial in which patients with LBCL are randomized to receive a lymphodepletion regimen comprised of fludarabine and cyclophosphamide with or without ALLO-647. EXPAND is currently open to enrollment in the US and is expected to be open in additional regions in 2023. 24 Table of Contents Our Research and Development and License Agreements Asset Contribution Agreement with Pfizer In April 2018, we entered into an Asset Contribution Agreement (Pfizer Agreement) with Pfizer pursuant to which we acquired certain assets and assumed certain liabilities from Pfizer, including agreements with Cellectis and Servier as described below, and other intellectual property for the development and administration of CAR T cells for the treatment of cancer. See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the Pfizer Agreement. Research Collaboration and License Agreement with Cellectis In June 2014, Pfizer entered into a Research Collaboration and License Agreement with Cellectis. In April 2018, Pfizer assigned the agreement to us pursuant to the Pfizer Agreement. In March 2019, we terminated the agreement with Cellectis and entered into a new license agreement with Cellectis. See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further descriptions of the prior agreement with Cellectis and the new license agreement with Cellectis. Exclusive License and Collaboration Agreement with Servier In October 2015, Pfizer entered into an Exclusive License and Collaboration Agreement (Servier Agreement) with Servier to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR products, including UCART19, in the United States with the option to obtain the rights over certain additional allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell product candidates directed against one additional target. In April 2018, Pfizer assigned the agreement to us pursuant to the Pfizer Agreement. 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 submitted to a review of our manufacturing costs of CD19 Products to recover outstanding manufacturing costs owed by Servier to us. In July 2023, Servier sent us a second notice for material breach alleging that we overcharged Servier based on Servier and its accounting firm’s review of costs eligible for cost-sharing under the Servier Agreement. We disagree with the material breach allegations and we are disputing such allegations. 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 condensed consolidated financial statements included elsewhere in this report for further description of the Servier Agreement. Collaboration and License Agreement with Notch On November 1, 2019, we entered into a Collaboration and License Agreement (the Notch Agreement) with Notch Therapeutics Inc. (Notch), pursuant to which Notch granted us an exclusive, worldwide, royalty-bearing, sublicensable license under certain of Notch’s intellectual property to develop, make, use, sell, import, and otherwise commercialize therapeutic gene-edited T cell and/or natural killer cell products from induced pluripotent stem cells directed at certain CAR targets for initial application in NHL, B-cell precursor acute lymphoblastic leukemia (ALL) and multiple myeloma. In addition, Notch has granted us an option to add certain specified targets to our exclusive license in exchange for an agreed upon per-target option fee. The Notch Agreement includes a research collaboration to conduct research and pre-clinical development activities to generate engineered cells directed to our exclusive targets, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint development committee. In connection with the execution of the Notch Agreement, 25 Table of Contents we made an upfront payment to Notch of $10.0 million. In addition, we made a $5.0 million investment in Notch’s series seed convertible preferred stock, resulting in us having a 25% ownership interest in Notch’s outstanding capital stock on a fully diluted basis immediately following the investment. In February 2021, we made an additional $15.9 million investment in Notch's Series A preferred stock. In October 2021, we made an additional $1.8 million investment in Notch's common stock. Immediately following this transaction, our share in Notch was 23.0% on a voting interest basis. See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the Notch Agreement. Strategic Alliance with The University of Texas MD Anderson Cancer Center On October 6, 2020, we entered into a strategic five-year collaboration agreement with The University of Texas MD Anderson Cancer Center (MD Anderson) for the preclinical and clinical investigation of allogeneic CAR T cell product candidates. See Note 6 to our consolidated financial statements included elsewhere in this report for further description of the agreement with MD Anderson. License Agreement with Allogene Overland Biopharm (CY) Limited On December 14, 2020, we entered into a License Agreement with Allogene Overland Biopharm (CY) Limited (Allogene Overland), a joint venture established by us and Overland Pharmaceuticals (CY) Inc. (Overland), pursuant to a Share Purchase Agreement, dated December 14, 2020, for the purpose of developing, manufacturing and commercializing certain allogeneic CAR T cell therapies for patients in greater China, Taiwan, South Korea and Singapore (the JV Territory). 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 condensed consolidated financial statements included elsewhere in this report for further description of the License Agreement and Share Purchase Agreement with Allogene Overland. Collaboration and License Agreement with Antion On January 5, 2022, we entered into an exclusive collaboration and global license agreement (Antion Collaboration and License Agreement) with Antion Biosciences SA (Antion) for Antion’s miRNA technology (miCAR), to advance multiplex gene silencing as an additional tool to develop next generation allogeneic CAR T products. On July 11, 2023, we entered into an amendment to the Antion Collaboration and License Agreement, which included a $2 million investment in Antion’s preferred shares and the acquisition of warrants to purchase an additional $3 million of Antion’s preferred shares. See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the Antion Agreement and the July 2023 amendment. Components of Results of Operations Revenues As of June 30, 2023, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland Biopharm (PRC) Co., Limited. See Note 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the Allogene Overland Biopharm (PRC) Co., Limited agreement. In the future, we may generate revenue from a combination of product sales, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestones and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, will be materially adversely affected. Operating Expenses Research and Development To date, our research and development expenses have related primarily to discovery efforts, preclinical and clinical development, and manufacturing of our product candidates. Research and development expenses for the three and six months ended June 30, 2023 included costs associated with our clinical and preclinical stage pipeline candidates and research into 26 Table of Contents newer technologies. The most significant research and development expenses for the year to date 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 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 supplies; and • other significant research and development costs including overhead costs. We expense all research and development costs in the periods in which they are incurred. We accrue for costs incurred as the services are being provided by monitoring the status of the project and the invoices received from our external service providers. 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, 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 believe Servier is required to reimburse us for 40% of the costs associated with the development of ALLO-501 and ALLO-501A. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase in the future as our clinical programs progress and as we seek to initiate clinical trials of additional product candidates. The cost of advancing our manufacturing process as well as the cost of manufacturing product candidates for clinical trials are included in our research and development expense. We also expect to incur increased research and development expenses as we selectively identify and develop additional product candidates. However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following: • per patient trial costs; • biomarker analysis costs; • the cost and timing of manufacturing for the trials; • the number of patients that participate in the trials; • the number of sites included in the trials; • the countries in which the trials are conducted; • the length of time required to enroll eligible patients; • the total number of cells that patients receive; • the drop-out or discontinuation rates of patients; • potential additional safety monitoring or other studies requested by regulatory agencies, including to resolve any future clinical hold; • the duration of patient follow-up; and • the efficacy and safety profile of the product candidates. In addition, the probability of success for each product candidate will depend on numerous factors, including safety, efficacy, competition, manufacturing capability and commercial viability. We will determine which programs to pursue and 27 Table of Contents how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential. Because our product candidates are still in clinical and preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of product candidates or whether, or when, we may achieve profitability. General and Administrative General and administrative expenses consist primarily of salaries and other staff-related costs, including stock-based compensation for options and restricted stock units granted. 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 operating as a public company. These increases are anticipated to include increased costs related to the hiring of additional personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and 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 and cash equivalents and investments, as well as investment gains and losses recognized during the period. Other Income (Expenses) Other income (expenses) consists of non-operating income and expenses, including primarily our share of equity investments' net losses for the period. Results of Operations Comparison of the Three Months Ended June 30, 2023 and 2022 28 Table of Contents The following sets forth our results of operations for the three months ended June 30, 2023 and 2022 (dollars in thousands): Three Months Ended June 30, Change 2023 2022 $ % Collaboration revenue - related party $ 44 $ 86 $ (42) (49) % Operating expenses: Research and development 62,038 57,171 4,867 9 % General and administrative 18,524 19,509 (985) (5) % Total operating expenses 80,562 76,680 3,882 5 % Loss from operations (80,518) (76,594) (3,924) 5 % Other income (expense), net: Interest and other income, net 3,778 315 3,463 * Other (expenses) income (1,249) 1,492 (2,741) * Total other income, net 2,529 1,807 722 40 % Net Loss $ (77,989) $ (74,787) $ (3,202) 4 % * Change in excess of 100% Collaboration revenue - related party Collaboration revenue was less than $0.1 million for the three months ended June 30, 2023 and 2022. Revenue recognized in the three months ended June 30, 2023 and 2022 was due to the delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020. Research and Development Expenses Research and development expenses were $62.0 million and $57.2 million for the three months ended June 30, 2023 and 2022, respectively. The increase of $4.9 million was driven primarily by a decrease in Servier cost recoveries of $11.0 million, offset by a decrease in personnel related costs of $5.2 million and a decrease in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs of $0.9 million. General and Administrative Expenses General and administrative expenses were $18.5 million and $19.5 million for the three months ended June 30, 2023 and 2022, respectively. The decrease of $1.0 million was primarily due to a decrease in personnel related costs of $0.6 million and a decrease in expenses related to outside services of $0.3 million. Interest and Other Income, Net Interest and other income, net was $3.8 million and $0.3 million for the three months ended June 30, 2023 and 2022, respectively. The increase of $3.5 million was due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments. Comparison of the Six Months Ended June 30, 2023 and 2022 29 Table of Contents The following sets forth our results of operations for the six months ended June 30, 2023 and 2022 (dollars in thousands): Six Months Ended June 30, Change 2023 2022 $ % Collaboration revenue - related party $ 96 $ 147 $ (51) (35) % Operating expenses: Research and development 142,276 117,327 24,949 21 % General and administrative 37,408 39,406 (1,998) (5) % Total operating expenses 179,684 156,733 22,951 15 % Loss from operations (179,588) (156,586) (23,002) 15 % Other income (expense), net: Interest and other income, net 5,837 807 5,030 * Other (expenses) income (2,942) 1,142 (4,084) * Total other income, net 2,895 1,949 946 49 % Net Loss $ (176,693) $ (154,637) $ (22,056) 14 % * Change in excess of 100% Collaboration revenue - related party Collaboration revenue was $0.1 million for the six months ended June 30, 2023 and 2022. Revenue recognized in the six months ended June 30, 2023 and 2022 was due to the delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020. Research and Development Expenses Research and development expenses were $142.3 million and $117.3 million for the six months ended June 30, 2023 and 2022, respectively. The increase of $24.9 million was driven primarily by a decrease in Servier cost recoveries of $16.1 million and an increase in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs of $11.0 million, offset by a decrease in personnel related costs of $4.4 million. General and Administrative Expenses General and administrative expenses were $37.4 million and $39.4 million for the six months ended June 30, 2023 and 2022, respectively. The decrease of $2.0 million was primarily due to a decrease in personnel related costs of $1.3 million and a decrease in expenses related to outside services of $0.7 million. Interest and Other Income, Net Interest and other income, net was $5.8 million and $0.8 million for the six months ended June 30, 2023 and 2022, respectively. The increase of $5.0 million was due to higher yields and a corresponding increase 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 June 30, 2023, we had $544.5 million in cash and cash equivalents and investments. We anticipate that the aggregate of our current cash and cash equivalents and investments available for operations will be sufficient to fund our operations for at least the next 12 months from the date this Quarterly Report on Form 10-Q 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 30 Table of Contents 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), 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, 2019, we sold an aggregate of 1,965,082 shares of common stock in ATM offerings resulting in net proceeds of $54.2 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. In June 2023, we sold an aggregate of 20,288,330 shares of common stock in ATM offerings resulting in net proceeds of $87.9 million. As of June 30, 2023, $77.9 million remains available for sale under the sales agreement with Cowen. In June 2020, we sold 13,457,447 shares of our common stock, which included 1,755,319 shares sold pursuant to the full exercise of the underwriters' option to purchase additional shares, in an underwritten public offering at a price of $47.00 per share, which resulted in net proceeds of approximately $595.7 million after deducting the underwriting discounts and commissions and other expenses. Cash Flows The following table summarizes our cash flows for the periods indicated: Six Months Ended June 30, 2023 2022 (In thousands) Net cash (used in) provided by: Operating activities $ (128,496) $ (110,768) Investing activities 130,095 31,657 Financing activities 91,255 1,838 Net increase (decrease) in cash, cash equivalents and restricted cash $ 92,854 $ (77,273) Operating Activities During the six months ended June 30, 2023, cash used in operating activities of $128.5 million was attributable to a net loss of $176.7 million, partially offset by non-cash charges of $45.2 million and an increase of $3.0 million in our net operating assets and liabilities. The non-cash charges consisted primarily of stock-based compensation expense of $35.4 million, depreciation of $7.2 million, our share of equity investments' net losses for the period of $2.9 million, net amortization and accretion on investment securities of $0.6 million, and non-cash rent expense of $0.4 million. The change in operating assets and liabilities was primarily due to a $5.6 million increase in accrued and other current liabilities and a $1.4 million decrease in prepaid expenses and other current assets, offset by a $3.2 million decrease in accounts payable and a $0.7 million decrease in deferred revenue. During the six months ended June 30, 2022, cash used in operating activities of $110.8 million was attributable to a net loss of $154.6 million, partially offset by non-cash charges of $58.8 million and an increase of $14.9 million in our net operating assets and liabilities. The non-cash charges consisted primarily of stock-based compensation expense of $45.2 million, depreciation of $7.4 million, our share of equity investments' net losses for the period of $2.3 million, net amortization and accretion on investment securities of $2.2 million, and non-cash rent expense of $1.6 million. The change in operating assets and liabilities was primarily due to a $8.5 million increase in prepaid expenses and other current assets, a $3.3 million decrease in accrued and other current liabilities, a $2.8 million increase in other long-term assets, and a $1.6 million decrease in other long-term liabilities, offset by a $0.9 million increase in accounts payable and a $0.4 million increase in deferred revenue. Investing Activities During the six months ended June 30, 2023, net cash provided by investing activities of $130.1 million was related to cash provided by investment maturities of $296.3 million and cash provided by investment sales of $5.6 million, offset by cash used in purchases of investments of $170.5 million and cash used in the purchase of property and equipment of $1.3 million. During the six months ended June 30, 2022, net cash provided by investing activities of $31.7 million was related to cash provided by investment maturities of $185.8 million, offset by cash used in purchases of investments of $150.9 million and cash used in the purchase of property and equipment of $3.3 million. 31 Table of Contents Financing Activities During the six months ended June 30, 2023, cash provided by financing activities of $91.3 million was related to $87.9 million in net proceeds from the issuance of common stock through ATM transactions, $1.7 million of cash provided by the sale of common stock through our employee stock purchase plan, and $1.6 million of cash provided by the issuance of common stock upon exercise of stock options. During the six months ended June 30, 2022, cash provided by financing activities of $1.8 million was related to $1.5 million of cash provided by the sale of common stock through our employee stock purchase plan and $0.3 million of cash provided by the issuance of common stock upon exercise of stock options. Material Cash Commitments and Requirements Our primary use of cash is for operating expenses, which consist primarily of clinical manufacturing and research and development expenditures related to our lead product candidates, other research efforts, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses and other current liabilities. Our product candidates are still in the early stages of clinical and preclinical development and the outcome of these efforts is uncertain. Accordingly, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration and license arrangements. If, and when, we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise capital when needed, we will need to delay, reduce or terminate planned activities to reduce costs. Doing so will likely harm our ability to execute our business plans. Our commitments primarily consist of obligations under our agreements with Pfizer, Cellectis, Servier and Notch. Under these agreements we are required to make milestone payments upon successful completion of certain regulatory and sales milestones on a target-by-target and country-by-country basis. The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements. As of June 30, 2023, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales. For additional information regarding our agreements, see Note 6 to our condensed consolidated financial statements included elsewhere in this report. 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 condensed 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. These agreements generally provide for termination or cancellation, other than for costs already incurred. As of June 30, 2023, we had non-cancellable purchase commitments of $0.4 million. On October 6, 2020, we announced we entered into a strategic five-year collaboration agreement with MD Anderson for the preclinical and clinical investigation of allogeneic CAR T cell product candidates. We and MD Anderson are collaborating on the design and conduct of preclinical and clinical studies with oversight from a joint steering committee. Under the terms of the agreement, we have committed up to $15.0 million of funding for the duration of the agreement. 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. We are 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 agreement may be terminated by either party for material breach by the other party. Individual studies may be terminated for, among other things, material breach, health and safety concerns or where the institutional review board, the 32 Table of Contents review board at the clinical site with oversight of the clinical study, requests termination of any study. Where any legal or regulatory authorization is finally withdrawn or terminated, the relevant study will also terminate automatically. 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 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. We also have a Change in Control and Severance Plan that requires the funding of specific payments, if certain events occur, such as a change of control and the termination of employment without cause. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the assumptions and estimates associated with accrued research and development expenditures and stock-based compensation have the most significant impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Operations” included in our Annual Report. Recent Accounting Pronouncements There have been no new accounting pronouncements issued or effective that are expected to have a material impact on our unaudited condensed financial statements.