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Item 7. Management’s Discussion and Analysis

2024-03-14 compared with 2023-02-28 · 270 added, 90 removed, 243 unchanged (60% of the section changed)

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

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

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

We are developing a pipeline of “off-the-shelf” T cell product candidates that are designed to target and kill cancer cells in patients or eliminate pathogenic autoreactive cells in patients with autoimmune disorders.

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

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

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

Assuming favorable outcomes and subject to

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

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

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

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

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

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

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

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

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, solid tumors and autoimmune disease.

Earlier this year, however, we announced our 2024 Platform Vision under which we are now focusing on four core programs.

We are currently focused on developing cemacabtagene ansegedleucel (cema-cel, previously ALLO-501A) in large B-cell lymphoma (LBCL) and chronic lymphocytic leukemia (CLL).

We plan to initiate a pivotal Phase 2 clinical trial (ALPHA3) in mid-2024 for cema-cel as part of a first line (1L) treatment plan for newly diagnosed and treated LBCL patients who are likely to relapse and need further therapy.

The design of the ALPHA3 1L consolidation trial builds upon the results demonstrated in the Phase 1 ALPHA2 trial and leverages an investigational diagnostic test developed by Foresight Diagnostics, Inc.

that we believe will identify patients who have achieved remission by standard disease assessment but who have minimal residual disease (MRD) at the completion of 1L chemoimmunotherapy.

The ALPHA3 trial is designed to study the impact of treating MRD positive patients with cema-cel.

The study will randomize approximately 230 patients who achieve a complete response or partial response to 1L therapy, but who are MRD positive.

The patients will be randomized to either consolidation with cema-cel or the current standard of care, which is observation.

The design, with a primary endpoint of event free survival (EFS), will initially include two lymphodepletion arms (one with standard fludarabine and cyclophosphamide plus ALLO-647 and one with standard fludarabine and cyclophosphamide but without ALLO-647).

One lymphodepletion arm will be discontinued following a planned interim analysis in mid-2025 designed to select the most appropriate regimen for this patient population.

In view of the potential of the earlier line ALPHA3 trial, we have deprioritized the third line (3L) LBCL ALPHA2 and EXPAND trials.

We have initiated the Phase 1b cohort of our ALPHA2 trial to evaluate cema-cel following lymphodepletion with fludarabine/cyclophosphamide and ALLO-647 in patients with relapsed/refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL).

This cohort will include up to 40 patients, and we expect to release initial data by year-end 2024.

We are enrolling a Phase 1 clinical trial (TRAVERSE) of ALLO-316, an allogeneic CAR T cell product candidate targeting CD70, in adult patients with advanced or metastatic RCC.

We presented interim results from the TRAVERSE trial at the American Association of Cancer Research (AACR) Annual Meeting in April 2023.

We have implemented a protocol

amendment that incorporates a diagnostic and treatment algorithm into the study design.

The algorithm is designed to mitigate the treatment-associated hyperinflammatory response without compromising the CAR T function needed to eradicate solid tumors.

The next update from this trial is planned for a medical forum in the second quarter of 2024 and will discuss the algorithm.

A more robust data update from the ongoing trial with the updated protocol is planned for later in 2024.

We are developing ALLO-329, a next-generation allogeneic CAR T cell product candidate targeting both CD19 and CD70 for the treatment of certain autoimmune diseases (AID).

Inclusion of an anti-CD70 CAR in ALLO-329 incorporates the Dagger® technology, which is designed to reduce or eliminate the need for standard chemotherapy by preventing premature rejection while targeting CD19+ B-cells and CD70+ activated T-cells, both of which play a role in AID.

Initiation of this Phase 1 trial with ALLO-329 is expected in early 2025.

We are developing an anti-CD52 monoclonal antibody, ALLO-647, which is a proprietary component of our lymphodepletion regimen.

ALLO-647 may be able to reduce the likelihood of a patient’s immune system rejecting the engineered allogeneic T cells for a sufficient period of time to enable a window of persistence during which our engineered allogeneic T cells can actively target and destroy cancer cells.

During Part A of our pivotal ALPHA3 trial, we will be assessing ALLO-647’s contribution to the overall benefit to risk ratio of the lymphodepletion regimen for cema-cel.

Patients will be randomized to receive cema-cel and a lymphodepletion regimen with fludarabine and cyclophosphamide either with or without ALLO-647.

We plan to select the lymphodepletion regimen with which we will complete enrollment in the study (Part B) in the first half of 2025.

While we have additional programs in our pipeline, our development priorities are focused on cema-cel (1L Consolidation and CLL), ALLO-316, and ALLO-329.

We will explore opportunities to partner with collaborators on product candidates across our pipeline.

On January 4, 2024, our board of directors approved a reduction in our workforce of approximately 22% of our employees in connection with our pipeline prioritization and clinical development strategy.

Since inception, we have had significant operating losses.

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As of December 31, 2023, we had an accumulated deficit of $1.6 billion.

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

As of December 31, 2023, we had $448.7 million in cash and cash equivalents and investments and we expect our cash runway to fund operations into 2026.

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.

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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 Notes 6 to our consolidated financial statements included elsewhere in this report for further description of the Pfizer Agreement.

See Note 6 to our consolidated financial statements included elsewhere in this Annual Report for further description of the Pfizer Agreement.

Research Collaboration and License Agreement with Cellectis

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In March 2019, we terminated the agreement with Cellectis and entered into a new license agreement with Cellectis.

See Note 6 to our consolidated financial statements included elsewhere in this report for further descriptions of the prior agreement with Cellectis and the new license agreement with Cellectis.

See Note 6 to our consolidated financial statements included elsewhere in this Annual Report for further descriptions of the prior agreement with Cellectis and the new license agreement with Cellectis.

Exclusive License and Collaboration Agreement with Servier

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

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

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.

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

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

our cost share arrangement.

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

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

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

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 Servier's disputes with us and Cellectis may have adverse consequences.

See Note 6 to our consolidated financial statements included elsewhere in this Annual 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, 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.

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Immediately following this transaction, our share in Notch was 23.0% on a voting interest basis.

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

See Note 6 to our consolidated financial statements included elsewhere in this Annual Report for further description of the Notch Agreement.

On January 25, 2024, we entered into an Amended and Restated Collaboration and License Agreement (the Amended Notch Agreement) with Notch.

The Amended Notch Agreement amends and restates the Notch Agreement, dated as of November 1, 2019.

Under the Amended Notch Agreement, we have relinquished our exclusive rights to all original CAR targets (the Released Targets) except for one CAR target, and have agreed to limit our option right to only one additional CAR target.

If the option is exercised, we will have a minimum funding commitment for the overall development program.

If Notch subsequently out-licenses any of the Released Targets, we will be entitled to receive a percentage of upfront and/or milestone payments associated therewith up to a set cap, and will be entitled to a low, single-digit royalty on net sales of products containing a Released Target.

In addition, with respect to our previous equity investments in Notch, the Amended Notch Agreement grants us certain anti-dilution protections up to certain limits for certain pre-IPO equity financings.

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.

See Note 6 to our consolidated financial statements included elsewhere in this Annual 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).

(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 consolidated financial statements included elsewhere in this report for further description of the License Agreement and Share Purchase Agreement with Allogene Overland.

See Note 6 to our consolidated financial statements included elsewhere in this Annual 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 Agreement) with Antion Biosciences SA (Antion) for Antion’s miRNA technology (miCAR), to advance multiplex gene silencing as an additional tool to develop next generation allogeneic CAR T products.

Pursuant to the agreement, Antion will exclusively collaborate with us on oncology products for a defined period.

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

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

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 consolidated financial statements included elsewhere in this Annual Report for further description of the Antion Agreement and the July 2023 amendment.

Strategic Collaboration Agreement with Foresight Diagnostics

On January 3, 2024, we entered into a Strategic Collaboration Agreement (the Foresight Agreement) with Foresight Diagnostics, Inc.

(Foresight Diagnostics).

Pursuant to the Foresight Agreement, the parties have agreed to collaborate on a non-exclusive basis in the development of Foresight Diagnostics' MRD assay as an in vitro diagnostic to identify the MRD+ patient population to be enrolled in our planned ALPHA3 trial of cemacabtagene ansegedleucel, or cema-cel (previously known as ALLO-501A) for treatment of large B cell lymphoma (LBCL).

Under the Foresight Agreement, we have agreed to use the commercially reasonable efforts to obtain regulatory approval of cema-cel, and Foresight Diagnostics has agreed to use its commercially reasonable efforts to obtain regulatory approval of an MRD assay for use as an in vitro diagnostic with cema-cel.

Components of Results of Operations

As of December 31, 2023, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland Biopharm (PRC) Co., Limited.

See Notes 1 and 6 to our consolidated financial statements appearing

elsewhere in this Annual Report for more information related to our recognition of revenue and the Allogene Overland Biopharm (PRC) Co., Limited agreement.

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

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

In the future, we may generate revenue from a combination of product sales, 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.

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

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

We adjust our accrual as actual costs become known.

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

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

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

Research and development activities are central to our business model.

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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.

We do not track most of our external research and development expenses by programs or product candidates because most of our external research and development expenses could be used for different programs or product candidates.

General and Administrative

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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 Expenses

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

Interest and other income, net primarily 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 net losses for the period from, and impairment of, our equity method investments and impairment of our equity investment.

Results of Operations

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2023 2022 2021 2023 vs 2022 2022 vs 2021

(As Restated) (As Restated)

Collaboration revenue - related party $ 95 $ 156 $ 114,089 $ (61) $ (113,933)

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General and administrative 71,673 79,305 74,105 (7,632) 5,200

Impairment of long-lived asset 13,245 — — 13,245 —

Total operating expenses 327,832 335,692 294,281 (7,860) 41,411

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Collaboration revenue was $0.1 million and $0.2 million for the years ended December 31, 2023 and 2022, respectively.

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

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

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

Revenue recognized in the years ended December 31, 2023 and 2022 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Collaboration revenue was $0.2 million and $114.1 million for the years ended December 31, 2022 and 2021, respectively.

The decrease of $113.9 million was due to the revenue recognized related to the license of intellectual property and delivery of the know-how, which was delivered in the first quarter of 2021, under the License Agreement entered into with Allogene Overland in December 2020.

Research and Development Expenses

The following table shows the primary components of our research and development expenses for the periods presented:

Year Ended December 31, Change

2023 2022 2021 2023 vs.

2022 2022 vs.

Personnel $ 112,457 $ 129,604 $ 112,903 $ (17,147) $ 16,701

Development costs 74,644 71,293 69,025 3,351 2,268

Facilities and depreciation 44,684 43,457 29,300 1,227 14,157

Other 11,129 12,033 8,948 (904) 3,085

Total research and development expenses 242,914 256,387 220,176 (13,473) 36,211

Our research and development expenses included $119.0 million of internal expense and $123.9 million of external expenses for the year ended December 31, 2023.

Our research and development expenses included $133.6 million of internal expenses and $122.8 million of external expenses for the year ended December 31, 2022.

Research and development expenses were $242.9 million and $256.4 million for the years ended December 31, 2023 and 2022, respectively.

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

The net decrease of $13.5 million was primarily due to a decrease in personnel related costs of $17.1 million, of which $13.5 million was decreased stock-based compensation expense, offset by an increase in external costs related to the advancement of our product candidates of $3.4 million due to the timing of process development activities and manufacturing runs.

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

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

The net increase of $36.2 million was primarily due to an increase in building rent and facilities costs of $14.2 million, an increase in personnel related costs of $16.7 million, of which $3.5 million was increased stock-based compensation expense, and an increase in external costs relating to the advancement of our product candidates of $2.3 million due to the timing of process development activities and manufacturing runs.

General and Administrative Expenses

General and administrative expenses were $71.7 million and $79.3 million for the years ended December 31, 2023 and 2022, respectively.

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

The net decrease of $7.6 million was primarily due to a decrease in personnel related costs of $5.7 million, of which $4.1 million was decreased stock-based compensation expense, and a decrease in expenses related to corporate communications of $1.8 million.

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

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

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

The net increase of $5.2 million was primarily due to an increase in personnel related costs of $3.4 million, an increase in expenses related to corporate communications of $2.8 million, partially offset by a $1.5 million decrease in business and consulting fees.

Impairment of long-lived asset

In December 2023, we made a decision to sublease one of our leased buildings in South San Francisco.

We vacated and ceased occupancy of this building in December 2023 and currently we are actively marketing the leased building for sublease.

We determined that the change in how this property is being used could indicate impairment and recorded long-lived asset impairment loss based on the performed impairment analysis.

Interest and Other Income, Net

Interest and other income, net was $18.3 million and $4.6 million for the years ended December 31, 2023 and 2022, respectively.

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

The $13.7 million increase was primarily due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

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

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

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

Other expenses

Other expenses were $17.8 million and $9.4 million for the years ended December 31, 2023 and 2022, respectively.

The $8.4 million increase was primarily due to impairment loss of $7.0 million related to our equity method investment and equity investment recorded for the year ended December 31, 2023.

Other expenses were $9.4 million and $3.6 million for the years ended December 31, 2022 and 2021, respectively.

The $5.9 million increase was primarily due to higher share of net losses in our equity method investments.

Quarterly Discussion and Analysis

The following discussion should be read in conjunction with our accompanying restated unaudited interim condensed consolidated financial statements disclosed in Part II.

Financial Statements and Supplementary Data, Note 15 "Selected Quarterly Financial Data (Unaudited)", of this Annual Report.

The following sets forth our results of operations for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31, Change

2023 2022 $ %

(As Restated) (As Restated)

Collaboration revenue - related party $ 30 $ 39 $ (9) (23) %

Operating expenses:

Research and development 80,238 60,156 20,082 33 %

General and administrative 18,884 19,897 (1,013) (5) %

Total operating expenses 99,122 80,053 19,069 24 %

Loss from operations (99,092) (80,014) (19,078) 24 %

Other income (expense), net:

Interest and other income, net 2,059 492 1,567 318 %

Other income (expenses), net (2,936) 914 (3,850) (421) %

Total other income (expense), net (877) 1,406 (2,283) (162) %

Net loss (99,969) (78,608) (21,361) 27 %

Collaboration revenue - related party

Collaboration revenue recognized for the three months ended March 31, 2023 and 2022 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Research and Development Expenses

The following table shows the primary components of our research and development expenses for the periods presented:

Three Months Ended March 31,

2023 2022 Change

Personnel $ 34,173 $ 33,079 $ 1,094

Development costs 31,261 14,323 16,938

Facilities and depreciation 11,193 10,070 1,123

Other 3,611 2,684 927

Total research and development expenses 80,238 60,156 20,082

Our research and development expenses included $35.2 million of internal expenses and $45.0 million of external expenses for the three months ended March 31, 2023.

Our research and development expenses included $33.9 million of internal expenses and $26.2 million of external expenses for the three months ended March 31, 2022.

Research and development expenses were $80.2 million and $60.1 million for the three months ended March 31, 2023 and 2022, respectively.

The increase of $20.1 million was driven primarily by an increase in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs of $16.9 million and an increase in facilities costs and depreciation expense of $1.1 million.

General and Administrative Expense

General and administrative expenses were $18.9 million and $19.9 million for the three months ended March 31, 2023 and 2022, respectively.

The decrease of $1.0 million was primarily due to an decrease in personnel related costs.

Interest and Other Income, Net

Interest and other income, net was $2.1 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

The increase of $1.6 million was primarily due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Other income (expenses), Net

Other expenses were $2.9 million for the three months ended March 31, 2023 and other income was $0.9 million for the three months ended March 31, 2022.

The increase in other expenses of $3.8 million was primarily due to higher share of net losses in our equity method investments.

The following sets forth our results of operations for the three and six months ended June 30, 2023 and 2022 (in thousands):

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

2023 2022 $ 2023 2022 $

(As Restated) (As Restated) (As Restated) (As Restated)

Collaboration revenue - related party $ 22 $ 64 $ (42) $ 52 $ 103 $ (51)

Operating expenses:

Research and development 62,038 57,171 4,867 142,276 117,327 24,949

General and administrative 18,524 19,509 (985) 37,408 39,406 (1,998)

Total operating expenses 80,562 76,680 3,882 179,684 156,733 22,951

Loss from operations (80,540) (76,616) (3,924) (179,632) (156,630) (23,002)

Other income (expense), net:

Interest and other income, net 3,778 315 3,463 5,837 807 5,030

Other expenses (2,470) (3,990) 1,520 (5,406) (3,076) (2,330)

Total other income (expense), net 1,308 (3,675) 4,983 431 (2,269) 2,700

Net loss (79,232) (80,291) 1,059 (179,201) (158,899) (20,302)

Collaboration revenue - related party

Collaboration revenue recognized for the three and six months ended June 30, 2023 and 2022 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Research and Development Expenses

The following table shows the primary components of our research and development expenses for the periods presented:

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

2023 2022 Change 2023 2022 Change

Personnel $ 29,574 $ 34,926 $ (5,352) $ 63,748 $ 68,005 $ (4,257)

Development costs 18,218 8,078 10,140 49,479 22,401 27,078

Facilities and depreciation 11,457 11,039 418 22,650 21,110 1,540

Other 2,789 3,128 (339) 6,399 5,811 588

Total research and development expenses 62,038 57,171 4,867 142,276 117,327 24,949

Our research and development expenses included $31.1 million of internal expenses and $30.9 million of external expenses for the three months ended June 30, 2023.

Our research and development expenses included $36.1 million of internal expenses and $21.1 million of external expenses for the three months ended June 30, 2022.

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 $5.4 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.

Our research and development expenses included $66.3 million of internal expenses and $75.9 million of external expenses for the six months ended June 30, 2023.

Our research and development expenses included $70.1 million of internal expenses and $47.2 million of external expenses for the six months ended June 30, 2022.

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 $4.3 million.

General and Administrative Expense

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 $0.4 million and a decrease in expenses related to corporate communications and outside services of $0.3 million.

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 $1.4 million and a decrease in expenses related to corporate communications and outside services of $0.6 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 primarily due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Interest and other income, net was $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 primarily due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Other expenses

Other expenses were $2.5 million and $4.0 million for the three months ended June 30, 2023 and 2022, respectively.

The decrease of $1.5 million was primarily due to lower share of net losses in our equity method investments.

Other expenses were $5.4 million and $3.1 million for the six months ended June 30, 2023 and 2022, respectively.

The increase of $2.3 million was primarily due to higher share of net losses in our equity method investments.

The following sets forth our results of operations for the three and nine months ended September 30, 2023 and 2022 (in thousands):

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

2023 2022 $ 2023 2022 $

(As Restated) (As Restated) (As Restated) (As Restated)

Collaboration revenue - related party $ 22 $ 27 $ (5) $ 74 $ 130 $ (56)

Operating expenses:

Research and development 45,977 63,641 (17,664) 188,253 180,968 7,285

General and administrative 17,041 18,897 (1,856) 54,449 58,303 (3,854)

Total operating expenses 63,018 82,538 (19,520) 242,702 239,271 3,431

Loss from operations (62,996) (82,511) 19,515 (242,628) (239,141) (3,487)

Other income (expense), net:

Interest and other income, net 6,205 1,002 5,203 12,042 1,809 10,233

Other expenses (5,496) (2,733) (2,763) (10,902) (5,809) (5,093)

Total other income (expense), net 709 (1,731) 2,440 1,140 (4,000) 5,140

Net loss (62,287) (84,242) 21,955 (241,488) (243,141) 1,653

Collaboration revenue - related party

Collaboration revenue recognized for the three and nine months ended September 30, 2023 and 2022 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Research and Development Expenses

The following table shows the primary components of our research and development expenses for the periods presented:

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

2023 2022 Change 2023 2022 Change

Personnel $ 26,170 $ 32,748 $ (6,578) $ 89,917 $ 100,753 $ (10,836)

Development costs 6,494 16,799 (10,305) 55,973 39,200 16,773

Facilities and depreciation 11,104 11,349 (245) 33,754 32,459 1,295

Other 2,209 2,745 (536) 8,609 8,556 53

Total research and development expenses 45,977 63,641 (17,664) 188,253 180,968 7,285

Our research and development expenses included $28.1 million of internal expenses and $17.9 million of external expenses for the three months ended September 30, 2023.

Our research and development expenses included $33.6 million of internal expenses and $30.0 million of external expenses for the three months ended September 30, 2022.

Research and development expenses were $46.0 million and $63.6 million for the three months ended September 30, 2023 and 2022, respectively.

The decrease of $17.7 million was driven primarily by a decrease in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs of $10.3 million and a decrease in personnel related costs of $6.6 million, of which $4.3 million was stock-based compensation expense.

Our research and development expenses included $94.5 million of internal expenses and $93.8 million of external expenses for the nine months ended September 30, 2023.

Our research and development expenses included $103.8 million of internal expenses and $77.2 million of external expenses for the nine months ended September 30, 2022.

Research and development expenses were $188.3 million and $181.0 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $7.3 million was driven primarily by a decrease in Servier cost recoveries of $19.7 million and an increase in facilities costs of $1.3 million, offset by a decrease in personnel related costs of $10.8 million, of which $12.4 million was a decrease in stock-based compensation expense, 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 $2.9 million.

General and Administrative Expense

General and administrative expenses were $17.0 million and $18.9 million for the three months ended September 30, 2023 and 2022, respectively.

The decrease of $1.9 million was primarily due to a decrease in personnel related costs of $2.1 million, of which $1.5 million was stock-based compensation expense.

General and administrative expenses were $54.4 million and $58.3 million for the nine months ended September 30, 2023 and 2022, respectively.

The decrease of $3.9 million was primarily due to a decrease in personnel related costs of $3.6 million, of which $3.3 million was stock-based compensation expense.

Interest and Other Income, Net

Interest and other income, net was $6.2 million and $1.0 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $5.2 million was primarily due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Interest and other income, net was $12.0 million and $1.8 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $10.2 million was primarily due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Other expenses

Other expenses were $5.5 million and $2.7 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $2.8 million was primarily due to impairment loss related to our equity method investment recorded for the three months ended September 30, 2023.

Other expenses were $10.9 million and $5.8 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $5.1 million was primarily due to higher share of net losses and impairment of our equity method investments.

Liquidity and Capital Resources

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

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

In November 2019, we entered into a sales agreement with Cowen and Company, LLC (Cowen), 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.

In November 2019, we entered into a sales agreement with Cowen and Company, LLC (Cowen), as amended on November 2, 2022 and November 2, 2023, under which we may from time to time issue and sell shares of our common stock through Cowen in ATM offerings.

During the year ended December 31, 2023, we sold an aggregate of 20,894,565 shares of common stock in ATM offerings resulting in net proceeds of $91.1 million.

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

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

The specified dollar limit on the amount of common stock that may be sold under the sales agreement was removed pursuant to the November 2, 2023 amendment to the sales agreement.

Capital Resources

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During the year ended December 31, 2023, cash used in operating activities of $237.7 million was attributable to a net loss of $327.3 million, substantially offset by non-cash charges of $104.8 million and a net change of $15.3 million in our net operating assets and liabilities.

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

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

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

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

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

The non-cash charges consisted primarily of stock-based compensation of $66.0 million, depreciation and amortization of $14.2 million, share of losses from equity method investments of $10.7 million, impairment of long-lived assets of $13.2 million, impairment of equity investment and equity method investment of $7.0 million, net amortization and accretion on investment securities of $6.8 million, and non-cash rent expense of $0.6 million.

The net change in operating assets and liabilities was primarily due to a $7.5 million decrease in accounts payable, a $6.8 million decrease in accrued and other current liabilities, a $1.5 million increase in other long-term assets, and a $0.6 million decrease in other long-term liabilities, offset by a $1.1 million decrease in prepaid expenses and other current assets.

During the year ended December 31, 2022, cash used in operating activities of $220.5 million was attributable to a net loss of $340.4 million, substantially offset by non-cash charges of $116.0 million and a net change of $3.9 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation of $65.3 million, depreciation and amortization of $7.4 million, non-cash rent expense of $4.0 million and net amortization and accretion on investment securities of $3.3 million.

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

The non-cash charges consisted primarily of stock-based compensation of $83.6 million, depreciation and amortization of $14.3 million, share of losses from equity method investments of $12.9 million, net amortization and accretion on investment securities of $2.9 million, and non-cash rent expense of $2.4 million.

The net change in operating assets and liabilities was primarily due to a $4.9 million increase in accounts payable, a $2.5 million decrease in prepaid expense and other current assets, and a $1.7 million increase in accrued and other current liabilities, offset by an increase in other long-term assets of $3.3 million and a decrease in other long-term liabilities of $1.9 million.

During the year ended December 31, 2021, cash used in operating activities of $184.8 million was attributable to a net loss of $182.1 million, a net change of $31.9 million in our net operating assets and liabilities substantially offset by non-cash charges of $29.2 million.

The non-cash charges consisted primarily of stock-based compensation of $80.8 million, non-cash collaboration revenue from related party of $75.7 million, depreciation and amortization of $10.5 million, net amortization and accretion on investment securities of $7.0 million, share of losses from equity method investments of 4.1 million, and non-cash rent expense of $2.6 million.

The net change in operating assets and liabilities was primarily due to a $38.3 million decrease in deferred revenue within current liabilities, a $0.8 million decrease in accounts payable, and a $0.6 million increase in other long-term assets, offset by a $3.7 million increase in accrued and other current liabilities, a $3.2 million decrease in prepaid expenses and other current assets and a $0.9 million increase in other long-term liabilities.

Investing Activities

During the year ended December 31, 2023, net cash provided by investing activities of $163.3 million was related to cash inflows from maturities of investments of $597.8 million and cash provided by investment sales of $5.6 million, offset by the purchase of investments of $438.6 million and purchases of property and equipment of $1.5 million.

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

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

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

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

Financing Activities

During the year ended December 31, 2023, net cash provided by financing activities of $95.7 million was related to $91.1 million in net proceeds from the issuance of common stock through ATM transactions, $2.5 million of cash provided by the sale of common stock through our employee stock purchase plan, and $2.1 million of cash provided by the issuance of common stock upon exercise of stock options.

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

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

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

Contractual Obligations and Commitments

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

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

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

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

For additional information regarding our lease obligations, see Note 7 to our consolidated financial statements included elsewhere in this Annual 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 December 31, 2022, the Company had non-cancellable purchase commitments of $0.3 million.

As of December 31, 2023, we had non-cancellable purchase commitments of $2.1 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.

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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 made an upfront payment of $3.0 million to MD Anderson in the year ended December 31, 2020 and made an additional upfront payment of $3.0 million to MD Anderson in October 2023.

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.

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

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

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 Significant Judgments and Estimates

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We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service.

A portion of the consideration should be allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

A portion of the consideration should be allocated to each distinct performance obligation.

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

We constrain the estimated

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

We constrain the estimated variable consideration when we assess it is probable that a significant reversal

in the amount of cumulative revenue recognized may occur in future periods.

The transaction price is re-evaluated, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

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

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

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

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

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These assumptions include:

‑ Fair value of common stock —For grants before October 2018 when we were private and there was no public market for our common stock, the fair value of our common stock underlying share-based awards was estimated on each grant date by our board of directors.

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

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

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

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‑ Expected exercise barrier —The modified options in accordance with the Stock Option Exchange Program are assumed to be exercised upon vesting and when the ratio of stock market price to exercise price reaches 2.57, or expiration, whichever is earlier.

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

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

For the years ended December 31, 2023, 2022 and 2021, stock-based compensation was $66.0 million, $83.6 million and $80.8 million, respectively.

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We elected to exclude from our consolidated balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for our long-term real estate leases.

Our long-lived assets, including right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability is measured by comparison of the carrying amount of an asset group to the future net undiscounted cash flows that the assets are expected to generate.

The long-lived assets recoverability test is performed at the asset group level, i.e., the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

If this test indicates that the carrying amount of the asset group is not recoverable, an impairment loss is measured as the amount by which the carrying amount of an asset group exceeds its fair value.

Any impairment loss is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts of those assets, except that the carrying amount of an individual asset shall not be reduced below its fair value.

Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis