What changed in this filing

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Item 1. Financial Statements

2024-05-13 compared with 2023-11-02 · 203 added, 235 removed, 452 unchanged (49% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

2024 December 31,

9 unchanged sentences

Other long-term assets 5,159 6,604

Equity method investment 5,365 12,817

Equity method investments 2,716 3,645

Total assets $ 586,350 $ 642,837

5 unchanged sentences

Total current liabilities 30,894 37,079

Lease liability, non-current 90,102 95,122

Lease liability, noncurrent 88,916 88,346

Other long-term liabilities 5,173 5,179

3 unchanged sentences

Preferred stock, $ 0.001 par value:

10,000,000 shares authorized as of September 30, 2023 and December 31, 2022;

no shares were issued and outstanding as of September 30, 2023 and December 31, 2022

10,000,000 shares authorized as of March 31, 2024 and December 31, 2023;

no shares were issued and outstanding as of March 31, 2024 and December 31, 2023

Common stock, $ 0.001 par value:

400,000,000 shares authorized as of September 30, 2023 and December 31, 2022;

168,175,221 and 144,438,304 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

400,000,000 shares authorized as of March 31, 2024 and December 31, 2023;

170,452,967 and 168,642,238 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 2,089,357 2,075,252

7 unchanged sentences

(In thousands, except share and per share amounts)

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

2023 2022 2023 2022

Three Months Ended March 31,

Collaboration revenue - related party $ 22 $ 30

10 unchanged sentences

Other comprehensive loss:

Net unrealized gain (loss) on available-for-sale investments 1,440 ( 1,486 ) 7,515 ( 10,391 )

Net unrealized gain on available-for-sale investments 28 3,992

Net comprehensive loss $ ( 64,972 ) $ ( 95,976 )

14 unchanged sentences

Employee stock purchase plan

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

Net unrealized gain on available-for-sale investments

259,000 — 856 — — 856

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

Issuance of common stock from ATM offering, net of commissions and offering costs of $ 1.6 million

20,288,330 20 87,898 — — 87,918

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

1,105,001 1 1,605 — — 1,606

Vesting of early exercised common stock

— — 432 — — 432

Stock-based compensation — — 16,594 — — 16,594

Net loss — — — ( 65,000 ) — ( 65,000 )

1 unchanged sentence

— — — — 28 28

Balance - June 30, 2023 167,133,664 167 2,039,263 ( 1,412,673 ) ( 3,851 ) 622,906

Issuance of common stock from ATM offering, net of offering costs of $ 50.0 thousand

606,235 1 3,193 — — 3,194

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

204,116 — 326 — — 326

Vesting of early exercised common stock

— — 432 — — 432

Stock-based compensation — — 15,354 — — 15,354

Employee stock purchase plan 231,206 — 765 — — 765

Net loss — — — ( 61,315 ) — ( 61,315 )

Net unrealized gain on available-for-sale investments

— — — — 1,440 1,440

Balance - September 30, 2023 168,175,221 $ 168 $ 2,059,333 $ ( 1,473,988 ) $ ( 2,411 ) $ 583,102

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

ALLOGENE THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

Balance - March 31, 2024 170,452,967 $ 170 $ 2,089,357 $ ( 1,627,233 ) $ ( 927 ) $ 461,367

Common Stock Additional

1 unchanged sentence

Deficit Accumulated

Comprehensive Loss Total

Comprehensive

Income (Loss) Total

Stockholders’

6 unchanged sentences

Stock-based compensation

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

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

Net unrealized loss on available-for-sale investments

— — 18,770 — — 18,770

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

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

153,269 1 24 — — 25

Vesting of early exercised common stock

— — 813 — — 813

Stock-based compensation

— — 22,891 — — 22,891

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

Net unrealized loss on available-for-sale investments

— — — — ( 2,223 ) ( 2,223 )

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

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

177,678 — 135 — — 135

Vesting of early exercised common stock

— — 432 — — 432

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

Employee stock purchase plan 359,753 1 1,730 — — 1,731

2 unchanged sentences

— — — — 3,992 3,992

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

Balance - March 31, 2023 145,740,333 $ 146 $ 1,932,734 $ ( 1,334,936 ) $ ( 5,934 ) $ 592,010

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

5 unchanged sentences

Non-cash rent expense ( 55 ) 207

Share of loss from, and impairment of, equity method investment 7,452 3,959

Non-cash collaboration revenue - related party ( 14 ) ( 20 )

Share of loss from equity method investments 929 2,935

Changes in operating assets and liabilities:

13 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of common stock from ATM offering, net of commissions and issuance costs 91,112 —

Proceeds from issuance of common stock upon exercise of stock options 794 —

4 unchanged sentences

Cash and cash equivalents and restricted cash — end of period $ 61,331 $ 120,223

Non-cash investing activities:

Non-cash operating activities:

Right-of-use asset obtained in exchange for lease liability $ 2,409 $ —

Non-cash deferred revenue and other long-term liabilities $ 3,079 $ 3,137

Supplemental disclosure:

Cash paid for amounts included in the measurement of lease liabilities $ ( 3,068 ) $ ( 2,965 )

Cash received for amounts related to tenant improvement allowances $ — $ 325

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

4 unchanged sentences

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

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

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

Public Offerings

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

The aggregate compensation payable to Cowen as the Company's sales agent equals up to 3.0 % of the gross sales price of the shares sold through Cowen pursuant to the sales agreement.

During the nine months ended September 30, 2023, the Company sold an aggregate of 20,894,565 shares of common stock in ATM offerings resulting in net proceeds of $ 91.1 million.

Allogene is 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.

The Company is 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.

The Company’s 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.

The Company believes this key difference will enable it to deliver readily available treatments faster, more reliably, at greater scale, and to more patients.

Need for Additional Capital

1 unchanged sentence

The Company’s ultimate success depends on the outcome of its research and development activities as well as the ability to commercialize the Company's product candidates.

The Company had cash and cash equivalents and investments of $ 497.7 million as of September 30, 2023.

Since inception through September 30, 2023, the Company has incurred cumulative net losses of $ 1.5 billion.

The Company had cash and cash equivalents and investments of $ 397.3 million as of March 31, 2024.

Since inception through March 31, 2024, the Company has incurred cumulative net losses of $ 1,627.2 million.

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

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In the Company’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.

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

The condensed consolidated balance sheet as of September 30, 2023, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022, the condensed consolidated statements of stockholders’ equity as of September 30, 2023 and 2022, the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022, and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited.

The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or for any other future annual or interim period.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2023.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Allogene Therapeutics, B.V.

The subsidiary was dissolved on January 3, 2024.

The condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of stockholders’ equity as of March 31, 2024 and 2023, the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023, and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for any other future annual or interim period.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2024.

Use of Estimates

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

liabilities as of the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period.

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

2 unchanged sentences

Significant Accounting Policies

There have been no significant changes to the accounting policies during the three and nine months ended September 30, 2023, as compared to the significant accounting policies described in Note 1 of the “Notes to Financial Statements” in the Company’s audited financial statements included in its Annual Report.

There have been no significant changes to the accounting policies during the three months ended March 31, 2024, as compared to the significant accounting policies described in Note 1 of the “Notes to Financial Statements” in the Company’s audited financial statements included in its Annual Report.

Recently Adopted Accounting Pronouncements

There have been no new accounting pronouncements issued or effective that are expected to have a material impact on the Company's condensed financial statements.

There have been no new accounting pronouncements issued or effective that are expected to have a material impact on the Company's condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

5 unchanged sentences

treasury securities which are classified as Level 1.

There were no Level 3 assets or liabilities as of September 30, 2023 and as of December 31, 2022.

Financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of September 30, 2023 and as of December 31, 2022 are presented in the following tables:

September 30, 2023

There were no Level 3 assets or liabilities as of March 31, 2024 and as of December 31, 2023.

Financial assets subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2024 and as of December 31, 2023 are presented in the following tables:

March 31, 2024

Level 1 Level 2 Level 3 Fair Value

2 unchanged sentences

Money market funds (1) $ 45,019 $ — $ — $ 45,019

Commercial paper — 4,879 — 4,879

Corporate bonds — 109,071 — 109,071

7 unchanged sentences

Money market funds (1) $ 78,536 $ — $ — $ 78,536

Commercial paper — 4,954 — 4,954

Corporate bonds — 97,166 — 97,166

4 unchanged sentences

Financial Instruments

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of September 30, 2023 and as of December 31, 2022 are presented in the following tables:

September 30, 2023

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of March 31, 2024 and as of December 31, 2023 are presented in the following tables:

March 31, 2024

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

1 unchanged sentence

Money market funds $ 45,019 $ — $ — $ 45,019

Commercial paper 4,886 — ( 7 ) 4,879

Corporate bonds 109,188 31 ( 148 ) 109,071

11 unchanged sentences

Money market funds $ 78,536 $ — $ — $ 78,536

Commercial paper 4,956 — ( 2 ) 4,954

Corporate bonds 97,265 113 ( 212 ) 97,166

7 unchanged sentences

Total cash equivalents and investments $ 444,078

As of September 30, 2023, the remaining contractual maturities of available-for-sale securities were less than 2 years.

Realized losses on available-for-sale securities for the three and nine months ended September 30, 2023 were zero and $ 1.0 million, respectively.

There were no significant realized losses on available-for-sale securities for the three and nine months ended September 30, 2022.

As of September 30, 2023, unrealized losses on available-for-sale securities are not attributed to credit risk.

As of March 31, 2024, the remaining contractual maturities of available-for-sale securities were less than 2 years.

Realized losses on available-for-sale securities for the three months ended March 31, 2024 and 2023 were zero and $ 1.0 million, respectively.

As of March 31, 2024, unrealized losses on available-for-sale securities are not attributed to credit risk.

The Company believes that it is more likely than not that investments in an unrealized loss position will be held until maturity and all interest and principal will be received.

The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s available-for-sale securities are due to market factors.

As of September 30, 2023 and December 31, 2022, securities with a fair value of $ 81.0 million and $ 329.4 million, respectively, were in a continuous net unrealized loss position for more than 12 months.

As of March 31, 2024 and December 31, 2023, securities with a fair value of $ 29.4 million and $ 48.4 million, respectively, were in a continuous net unrealized loss position for more than 12 months.

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

As of September 30, 2023 and December 31, 2022, the Company recognized $ 1.6 million and $ 1.8 million, respectively, of accrued interest receivable from available-for-sale securities within prepaid expenses and other current assets on the condensed consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, the Company recognized $ 1.7 million of accrued interest receivable from available-for-sale securities within prepaid expenses and other current assets on the condensed consolidated balance sheets.

Balance Sheet Components

1 unchanged sentence

Property and Equipment consist of the following:

September 30,

2024 December 31,

4 unchanged sentences

Furniture and fixtures 4,124 4,121

Construction in progress 28 28

Total 150,570 150,562

1 unchanged sentence

Total property and equipment, net $ 95,931 $ 99,478

Accrued and Other Current Liabilities

On January 4, 2024, the Company’s Board of Directors approved a reduction in the Company’s workforce of approximately 22 % of the Company’s employees in connection with the Company’s pipeline prioritization and clinical development strategy.

The reduction in workforce was substantially completed by the end of January 2024.

During the three months ended March 31, 2024, the Company paid approximately $ 2.6 million for severance and other employee benefits.

As of March 31, 2024, $ 0.4 million of the severance and other employee benefits accrual was included in accrued and other current liabilities on the condensed consolidated balance sheet.

License and Collaboration Agreements

6 unchanged sentences

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

No milestone or royalty payments were made in the three and nine months ended September 30, 2023 or 2022.

No milestone or royalty payments were made in the three months ended March 31, 2024 or 2023.

Pfizer is also eligible to receive, on a product-by-product and country-by-country basis, royalties in single-digit percentages on annual net sales for products covered by the Pfizer Agreement.

11 unchanged sentences

Such royalties may be reduced, on a licensed product-by-licensed product and country-by-country basis, for generic entry and for payments due under licenses of third party patents.

Pursuant to the Cellectis Agreement, and subject to certain exceptions, the Company is required to indemnify Cellectis against all third party claims related to the development, manufacturing, commercialization or use of any Allogene Product or arising out of the Company’s material breach of the representations, warranties or covenants set forth in the Cellectis Agreement, and Cellectis is required, subject to certain exceptions, to indemnify the Company against all third party claims related to the development, manufacturing, commercialization or use of CAR T products directed at Cellectis Targets or arising out of Cellectis’s material breach of the representations, warranties or covenants set forth in the Cellectis Agreement.

commercialization or use of CAR T products directed at Cellectis Targets or arising out of Cellectis’s material breach of the representations, warranties or covenants set forth in the Cellectis Agreement.

The royalties are payable, on a licensed-product-by-licensed-product and country-by-country basis, until the later of (i) the expiration of the last to expire of the licensed patents covering such product;

9 unchanged sentences

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

For the three and nine months ended September 30, 2023 and 2022, zero costs were incurred related to the achievement of a clinical development milestone under this agreement.

License and Collaboration Agreement with Servier

As part of the Pfizer Agreement, Pfizer assigned to the Company an Exclusive License and Collaboration Agreement (the Servier Agreement), with Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS (collectively, Servier) to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR T cell product candidates, including UCART19, in the United States with the option to obtain the rights over additional anti-CD19 product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

For the three months ended March 31, 2024 and 2023, no clinical development milestones were achieved.

Exclusive License Agreement with Servier

As part of the Pfizer Agreement, Pfizer assigned to the Company an Exclusive License Agreement (the Servier Agreement), with Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS (collectively, Servier) to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR T cell product candidates, including UCART19, in the United States with the option to obtain the rights over additional anti-CD19 product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

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

4 unchanged sentences

For product candidates that the Company is co-developing with Servier, including UCART19, ALLO-501 and ALLO-501A, the Company is responsible for 60 % of the specified development costs and Servier is responsible for the remaining 40 % of the specified development costs under the applicable global research and development plan.

Subject to certain restrictions, each party has the right to conduct activities that are specific to its territory outside the global research and development plan at such party’s sole expense.

Subject to certain restrictions, each party has the right to conduct activities that are specific to its territory outside the global research and

development plan at such party’s sole expense.

In addition, each party is solely responsible for commercialization activities in its territory at such party’s sole expense.

9 unchanged sentences

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

For the three and nine months ended September 30, 2023, the Company recorded $ 0.1 million and $ 0.4 million, respectively, of net cost recoveries under the cost-sharing terms of the Servier Agreement as a reduction to research and development expenses.

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

As of September 30, 2023, no amounts due from Servier were recorded in the condensed consolidated balance sheet.

As of December 31, 2022, amounts due from Servier of $ 1.5 million were recorded in other current assets in the accompanying condensed consolidated balance sheet.

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.

2 unchanged sentences

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

While the Company does not believe Servier has such an audit right, the Company submitted to a review of the Company's manufacturing costs of CD19 Products to recover outstanding manufacturing costs owed by Servier to the Company.

In July 2023, Servier sent the Company a second notice for material breach alleging that the Company overcharged Servier based on Servier and its accounting firm’s review of costs eligible for cost-sharing under the Servier Agreement.

The Company disagrees with the material breach allegations and the Company is disputing such allegations.

Absent a resolution between the parties, disputed matters may be resolved in arbitration as specified in the Servier Agreement.

The Company subsequently submitted to a review of the Company's manufacturing costs of CD19 Products and in July 2023, Servier sent the Company a second notice for material breach alleging that the Company overcharged Servier based on Servier and its accounting firm’s review of costs eligible for cost-sharing under the Servier Agreement.

In May 2024, the Company entered into an Amendment and Settlement Agreement with Servier (the Servier Amendment).

Under the Servier Amendment, among other things, Servier waived any right to receive a refund for past costs under the cost-sharing, and the parties provided mutual releases for all current disputes and any and all claims either party has or has ever had relating to such disputes.

Subsequent Events for a description of the Servier Amendment.

For the three months ended March 31, 2024 and 2023, the Company recorded zero and $ 0.2 million, respectively, of net cost recoveries under the cost-sharing terms of the Servier Agreement as a reduction to research and development expenses.

As of March 31, 2024 and December 31, 2023, no amounts due from Servier were recorded in the condensed consolidated balance sheets.

Research Collaboration and License Agreement with Notch Therapeutics

3 unchanged sentences

The Notch Agreement includes a research collaboration to conduct research and pre-clinical development activities to generate engineered cells directed to Allogene’s exclusive targets, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint development committee.

Allogene will reimburse Notch’s costs incurred in

accordance with such plan and budget.

Allogene will reimburse Notch’s costs incurred in accordance with such plan and budget.

The term of the research collaboration will expire upon the earlier of (i) the fifth anniversary of the date of the Notch Agreement, (ii) at Allogene’s election, following the joint development committee’s determination that for each exclusive target, Notch has met certain success criteria, or (iii) the joint development committee’s determination that the research collaboration cannot be reasonably pursued against any exclusive target due to technical infeasibility or safety issues.

5 unchanged sentences

Immediately following this transaction, the Company's share in Notch was 23.0 % on a voting interest basis.

The Company did not have a controlling interest in Notch as of September 30, 2023, and continued to account for its investment in Notch as an equity method investment.

The Company did not have a controlling interest in Notch as of March 31, 2024, and continued to account for its investment in Notch as an equity method investment.

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

4 unchanged sentences

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

For the three months ended September 30, 2023, no collaboration costs were recorded by the Company.

For the nine months ended September 30, 2023, the Company recorded $ 1.8 million in collaboration costs as research and development expenses.

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

For the three and nine months ended September 30, 2023, the Company recorded $ 3.0 million in other expenses as impairment loss on its equity method investment in Notch.

No impairment loss was recorded in 2022.

On January 25, 2024, the Company 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.

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

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

If Notch subsequently out-licenses any of the Released Targets, the Company will be entitled to receive a percentage of upfront and/or milestone payments associated therewith up to a set cap of $ 30.0 million, and will be entitled to a low, single-digit royalty on net sales of products containing a Released Target.

In addition, with respect to the Company’s previous equity investment in Notch, the Amended Notch Agreement grants the Company certain anti-dilution protections up to certain limits for certain pre-IPO equity financings.

As of March 31, 2024, no Released Targets were out-licensed by Notch.

For the three months ended March 31, 2024 and 2023, the Company recorded zero and $ 1.0 million, respectively, in collaboration costs as research and development expenses.

No milestones were achieved by Notch for the three months ended March 31, 2024 and 2023.

Strategic Alliance with The University of Texas MD Anderson Cancer Center

3 unchanged sentences

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

The Company 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.

The Company 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 the year ended December 31, 2023.

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

3 unchanged sentences

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

For the three and nine months ended September 30, 2023, the Company recorded $ 0.2 million and $ 1.2 million, respectively, in collaboration costs as research and development expenses.

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

For the three months ended March 31, 2024 and 2023, the Company recorded less than $ 0.1 million and $ 0.4 million, respectively, in collaboration costs as research and development expenses.

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

2 unchanged sentences

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

As of June 30, 2023, the Company and Overland are the sole equity holders in Allogene Overland.

As of March 31, 2024, the Company and Overland are the sole equity holders in Allogene Overland.

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

1 unchanged sentence

As consideration, the Company would also be entitled to additional regulatory milestone payments of up to $ 40.0 million and, subject to certain conditions, tiered low-to-mid single-digit sales royalties.

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

Subsequent to entering into the License Agreement, Allogene Overland 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.

Promises that the Company concluded were distinct performance obligations in the License Agreement included:

(1) the license of intellectual property and delivery of know-how, (2) the manufacturing license, related know-how and support, (3) if and when available know-how developed in future periods, and (4) participation in the joint steering committee.

In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Fixed consideration exists in the form of the upfront payment.

(1) the license of intellectual property and delivery of know-how, (2) the manufacturing license, related know-how and support, (3) know-how developed in future periods, and (4) participation in the joint steering committee.

In order to determine the transaction price, the Company evaluated all the consideration to be received over the duration of the contract.

Fixed consideration exists in the form of the upfront payment and Seed Preferred Shares in Allogene Overland.

Regulatory milestones and royalties were considered variable consideration.

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The Company re-evaluates the transaction price, 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.

The shares of Series Seed Preferred Stock were accounted for as part of the Company’s joint venture and equity method accounting upon formation of the joint venture, and as such, were excluded from the transaction price.

The Company determined that the initial transaction price consists of the upfront payment of $ 40.0 million.

The Company estimated the fair value of the shares of Seed Preferred Stock at $ 79.0 million, using probability adjusted future cash infusions based on the upfront and certain quarterly cash payments of $ 117.0 million committed by Overland.

The probability for the future quarterly cash payments of 65 % was developed based on consideration of the Company's expectations for future cash infusions from Overland and was applied on a cumulative basis for each quarterly payment.

The present value of the future quarterly cash payments was estimated using 11.9 % annual discount rate.

The fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement.

The Company determined that the initial transaction price consists of the upfront payment of $ 40.0 million and noncash consideration of $ 79.0 million received in the form of the shares of Seed Preferred Stock.

The allocation of the transaction price is performed based on standalone selling prices, which are based on estimated amounts that the Company would charge for a performance obligation if it were sold separately.

The transaction price allocated to the license of intellectual property and delivery of know-how will be recognized upon grant of license and delivery of know-how.

The transaction price allocated to (i) the manufacturing license, related know-how and support services, (ii) if and when available know-how developed in future periods, and (iii) participation in the joint steering committee, will be recognized over time as the services are delivered.

The initial transaction price of $ 119.0 million was allocated as follows:

(i) $ 114.0 million to the license of intellectual property and delivery of know-how, which was recognized upon grant of license and delivery of know-how in the consolidated financial statements for the year ended December 31, 2021 when the know-how was delivered;

(ii) $ 2.3 million to the manufacturing license, related know-how and support, which will be recognized as services are delivered;

(iii) $ 2.1 million to the know-how developed in future periods, which will be recognized as services are delivered, and (iv) $ 0.6 million to participation in the joint steering committee, which will be recognized over time as the services are delivered.

Funds received in advance are recorded as deferred revenue and will be recognized as the performance obligations are satisfied.

The Company has determined that Allogene Overland is a variable interest entity as of September 30, 2023 and December 31, 2022, respectively.

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

The Company has determined that Allogene Overland is a variable interest entity as of March 31, 2024 and December 31, 2023.

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

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

For the three and nine months ended September 30, 2023, the Company recognized less than $ 0.1 million and $ 0.1 million, respectively, of collaboration revenue.

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

Revenue recognized was due to delivery of the know-how performance obligations.

For the three months ended September 30, 2023, no net cost recoveries were recorded by the Company.

For the nine months ended September 30, 2023, the Company recorded less than $ 0.1 million of net cost recoveries under the terms of the license agreement as a reduction to research and development expenses.

For the three and nine

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

The Company's total equity investment in Allogene Overland as of March 31, 2024 and December 31, 2023 was zero (see Note 8).

For the three months ended March 31, 2024 and 2023, the Company recognized less than $ 0.1 million of collaboration revenue.

For the three months ended March 31, 2024 and 2023, the Company recorded zero net cost recoveries.

Collaboration and License Agreement with Antion

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The upfront payment was fully recognized as research and development expense as the license had no foreseeable alternative future use.

In January 2022, the Company made a $ 3.0 million investment in Antion's preferred stock.

In addition, the Company made a $ 3.0 million investment in Antion's preferred stock.

The Company accounts for its investment in Antion's preferred stock as an equity investment measured at cost less any impairment.

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Also, in lieu of the Company's prior obligation to make a $ 3.0 million investment in Antion following the completion of certain milestones, the Company agreed to make a $ 2.0 million investment in Antion's preferred stock and acquired warrants to purchase an additional $ 3.0 million of Antion's preferred stock.

The Company accounts for the fair value of the new investment of $ 1.0 million as an equity investment and the remaining $ 1.0 million was recorded as research and development expense.

Under the Antion Collaboration and License Agreement, Antion will be eligible to receive up to $ 35.3 million for four products upon achievement of certain development and regulatory milestones.

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Antion is also entitled to receive a low single-digit royalty on the Company’s sales of licensed products, subject to certain reductions.

For the three months ended September 30, 2023, no collaboration costs were recorded by the Company.

For the nine months ended September 30, 2023, the Company recorded $ 1.8 million in research and development expenses related to collaboration costs.

For the three and nine months ended September 30, 2022, the Company recorded $ 0.6 million and $ 4.5 million, respectively, in research and development expenses related to the upfront payment and collaboration costs.

For the three and nine months ended September 30, 2023, $ 0.4 million in costs were incurred related to the achievement of a milestone under the Antion Collaboration and License Agreement.

For the three and nine months ended September 30, 2022, no costs were incurred related to the achievement of milestone under the Antion Collaboration and License Agreement.

As of September 30, 2023 and December 31, 2022, research and development expenses recorded in accrued and other liabilities were $ 0.4 million and $ 0.5 million, respectively.

As of September 30, 2023 and December 31, 2022, the Company's total equity investment in Antion was $ 4.0 million and $ 3.0 million, respectively, and is recognized in other long-term assets in the condensed consolidated balance sheets.

For the three months ended March 31, 2024, the Company recorded zero research and development expenses related to collaboration costs.

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

As of March 31, 2024 and December 31, 2023, no research and development expenses were recorded in accrued and other liabilities.

As of March 31, 2024 and December 31, 2023, the Company's total equity investment in Antion was zero .

Strategic Collaboration Agreement with Foresight Diagnostics

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

(Foresight Diagnostics) (the Foresight Agreement).

Pursuant to the Foresight Agreement, the parties have agreed to collaborate on a non-exclusive basis in the development of Foresight Diagnostics' minimal residual disease (MRD) assay based on their PhasED-Seq Circulating Tumor DNA Platform as an in vitro diagnostic to identify the MRD+ patient population to be enrolled in the Company's planned ALPHA3 trial of cema-cel, for treatment of large B cell lymphoma.

Under the Foresight Agreement, the Company has agreed to use its 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 its MRD assay for use as an in vitro diagnostic with cema-cel.

The Company has agreed to fund approximately $ 26.2 million in MRD assay development costs, milestone payments for regulatory submissions and assay utilization to process clinical samples.

For the three months ended March 31, 2024, the Company recorded $ 0.5 million of research and development expenses related to clinical trials start readiness milestone.

As of March 31, 2024 and December 31, 2023, zero and $ 0.7 million of research and development expenses, respectively, were recorded in accrued and other liabilities.

Commitments and Contingencies

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

In December 2021, the Company amended its lease agreement to lease an additional 47,566

square feet of office and laboratory space in South San Francisco, California, as part of the same building as the Company’s current headquarters.

In December 2021, the Company amended its lease agreement to lease an additional 47,566 square feet of office and laboratory space in South San Francisco, California, as part of the same building as the Company’s current headquarters.

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

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The Company has received $ 3.0 million of tenant improvement allowances for costs related to the design and construction of certain Company improvements.

In February 2023, the Company entered into a sublease with Bellco Capital Advisors Inc.

(Bellco) for 2,218 square feet of office space in Los Angeles, California.

The sublease term is 115 months, subject to certain early termination rights.

The sublease commenced on January 1, 2024.

The Company maintains letters of credit for the benefit of landlords which is disclosed as restricted cash in the condensed consolidated balance sheets.

Restricted cash related to letters of credit due to landlords was $ 6.0 million as of September 30, 2023 and December 31, 2022.

Restricted cash related to letters of credit due to landlords was $ 6.0 million as of March 31, 2024 and December 31, 2023.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Operating lease liabilities

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Three Months Ended

September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Operating lease cost $ 3,020 $ 3,181

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Total lease costs $ 3,887 $ 3,872

Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2023 was $ 9.0 million and was included in net cash used in operating activities in the Company's condensed consolidated statements of cash flows.

The undiscounted future non-cancellable lease payments under the Company's operating leases as of September 30, 2023 were as follows:

Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2024 was $ 3.1 million and was included in net cash used in operating activities in the Company's condensed consolidated statements of cash flows.

The undiscounted future non-cancellable lease payments under the Company's operating leases as of March 31, 2024 were as follows:

Year ending December 31:

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The weighted average discount rate used to determine the operating lease liability was 6.24 %.

As of September 30, 2023, the weighted average remaining lease term for our operating leases is 9.27 years.

As of March 31, 2024, the weighted average remaining lease term for our operating leases is 8.82 years.

Other Commitments

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

In connection with the agreement, the Company maintains a letter of credit for the benefit of the service provider in the amount of $ 4.3 million which is recorded as restricted cash in the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022.

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

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

These agreements require payment of annual license fees and may include conditional milestone payments for achievement of specific research, clinical and commercial events, and royalty payments.

The timing and likelihood of any significant conditional milestone payments or royalty payments becoming due was not probable as of September 30, 2023.

These agreements require payment of annual license fees and may include conditional milestone payments for achievement of

specific research, clinical and commercial events, and royalty payments.

The timing and likelihood of any significant conditional milestone payments or royalty payments becoming due was not probable as of March 31, 2024.

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

These agreements generally allow for cancellation with notice.

As of September 30, 2023, the Company had non-cancellable purchase commitments of $ 4.0 million.

As of March 31, 2024, the Company had non-cancellable purchase commitments of $ 0.9 million.

Equity Method Investments

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Immediately following this transaction, the Company's share in Notch was 23.0 % on a voting interest basis.

The Company’s total equity investment in Notch as of September 30, 2023 and December 31, 2022 was $ 5.4 million and $ 12.8 million, respectively, and the Company accounted for the investment using the equity method of accounting.

During the three and nine months ended September 30, 2023 and 2022, the Company recognized its share of Notch's net loss under the other expenses caption within the condensed consolidated statements of operations.

During the three and nine months ended September 30, 2023, the Company recognized $ 3.0 million of impairment loss under the other expenses caption within the condensed consolidated statements of operations.

No impairment loss was recorded in 2022.

The Company’s total equity investment in Notch as of March 31, 2024 and December 31, 2023 was $ 2.7 million and $ 3.6 million, respectively, and the Company accounted for the investment using the equity method of accounting.

For the three months ended March 31, 2024 and 2023, the Company recognized its share of Notch's net loss of $ 0.9 million and $ 1.7 million, respectively, under the other expenses caption within the condensed consolidated statements of operations.

Allogene Overland Biopharm (CY) Limited

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

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

The Company's total equity investment in Allogene Overland was zero as of September 30, 2023 and December 31, 2022.

The Company’s equity investment in Allogene Overland as of September 30, 2023 and December 31, 2022 had a zero carryover basis.

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

See Note 6 for further details.

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

The Company’s total equity investment in Allogene Overland as of March 31, 2024 and December 31, 2023 was zero and the Company accounted for the investment using equity method of accounting.

For the three months ended March 31, 2024 and 2023, the Company recognized its share of Allogene Overland's net loss of zero and $ 1.2 million, respectively, under the other expenses caption within the condensed consolidated statement of operations.

Stock-Based Compensation

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This requirement is applicable to incentive stock options only.

As of September 30, 2023, there were 6,730,462 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

As of March 31, 2024, there were 9,738,364 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

Stock Option Exchange Program

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Balance, December 31, 2023 21,812,946 $ 9.93 7.53 $ 662

Granted 9,300,276 5.13

Exercised ( 782,538 ) 2.47 2,283

Forfeited ( 4,097,851 ) 10.85

Balance, September 30, 2023 21,989,462 $ 10.37 7.61 $ 673

Exercisable, September 30, 2023 13,651,398 $ 12.33 6.95 $ 673

Vested and expected to vest, September 30, 2023 21,989,462 $ 10.37 7.61 $ —

The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Global Select Market on September 30, 2023.

For the nine months ended September 30, 2023, the estimated weighted-average grant-date fair value of employee options granted was $ 3.45 per share.

As of September 30, 2023, there was $ 67.0 million of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 2 years, 198 days .

Options granted 4,259,396 3.22 9.50

Options exercised ( 350,118 ) 2.27 $ 584

Options forfeited ( 1,696,808 ) 10.68

Balance, March 31, 2024 24,025,416 $ 8.80 7.80 $ 7,516

Exercisable, March 31, 2024 17,689,533 $ 9.97 7.43 $ 2,262

Vested and expected to vest, March 31, 2024 24,025,416 $ 8.80 7.80 $ 7,516

For the three months ended March 31, 2024, the estimated weighted-average grant-date fair value of employee options granted was $ 2.15 per share.

As of March 31, 2024, there was $ 54.0 million of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.4 years.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Expected term in years 5.85 - 6.06

Expected volatility 73.50 %

70.82 % - 73.39 %

Expected risk-free interest rate 3.94 % - 4.22 %

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Expected dividend 0 %

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

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

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

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

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

Restricted Stock Unit Activity

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Forfeited ( 1,446,452 ) 8.78

Unvested September 30, 2023 12,169,837 $ 7.29 2.14 $ 38,578

Vested and expected to vest, September 30, 2023 12,169,837 $ 7.29 2.14 $ 38,578

As of September 30, 2023, there was $ 60.1 million of unrecognized stock-based compensation related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2 years, 176 days .

For the nine months ended September 30, 2023, the Company granted 3,069,751 performance-based restricted stock units and 1,994,125 restricted stock units with a market condition to certain executive officers and other employees pursuant to the 2018 Plan.

Unvested March 31, 2024 13,609,391 $ 5.52 1.98 $ 60,834

Vested and expected to vest, March 31, 2024 13,609,391 $ 5.52 1.98 $ 60,834

As of March 31, 2024, there was $ 52.4 million of unrecognized stock-based compensation related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2.4 years.

For the year ended December 31, 2023, the Company granted 3,264,750 performance-based restricted stock units and 2,189,125 restricted stock units with a market condition to certain executive officers and other employees pursuant to the 2018 Plan.

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

Through September 30, 2023, the Company believes that the achievement of the requisite performance conditions for these awards are not probable.

As a result, no compensation expense has been recognized related to the performance-based restricted stock units in the quarter ended September 30, 2023.

The Company recognized $ 1.5 million in stock-based compensation expense related to the restricted units with a market condition for the nine months ended September 30, 2023.

Total stock-based compensation expense related to stock options, restricted stock units, employee stock purchase plan and vesting of the founders’ common stock was as follows (in thousands):

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

2023 2022 2023 2022

Research and development $ 6,733 $ 11,016 $ 22,849 $ 35,068

General and administrative 8,621 10,132 27,869 31,286

Total stock-based compensation $ 15,354 $ 21,148 $ 50,718 $ 66,354

Early Exercised Options

The Company allows certain of its employees and its directors to exercise options granted under the Prior 2018 Plan and the 2018 Plan prior to vesting.

The shares related to early exercised stock options are subject to the Company’s lapsing repurchase right upon termination of employment or service on the Company’s Board of Directors at the lesser of the original purchase price or fair market value at the time of repurchase.

In order to vest, the holders are required to provide continued service to the Company.

The proceeds are initially recorded in accrued and other liabilities for the current portion, and other long-term liabilities for the non-current portion.

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

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

As of September 30, 2023 and December 31, 2022, there was $ 1.1 million and $ 1.9 million, respectively, recorded in accrued and other liabilities and zero and $ 0.6 million, respectively, recorded in other long-term liabilities related to shares held by employees and directors that were subject to repurchase.

The underlying shares are shown as outstanding in the condensed consolidated financial statements but the shares which are subject to future vesting conditions are not included in the calculation of earnings per share.

Through March 31, 2024, the Company believes that the achievement of the requisite performance conditions for these awards are not probable.

As a result, no compensation expense has been recognized related to the performance-based restricted stock units in the quarters ended March 31, 2024 and March 31, 2023.

The Company recognized $ 0.7 million and $ 0.1 million in stock-based compensation expense related to the restricted stock units with a market condition in the quarters ended March 31, 2024 and 2023, respectively.

Stock-based compensation expense

For the quarters ended March 31, 2024 and 2023, the Company recorded $ 11.9 million and $ 18.8 million, respectively, of stock-based compensation expense related to stock options, restricted stock units, employee stock purchase plans and vesting of the founders’ common stock as research and development and general and administrative expense in its condensed consolidated statements of operations and comprehensive loss.

Related Party Transactions

Collaboration Revenue

In December 2020, the Company entered into a license agreement with Allogene Overland, a corporate joint venture entity and related party (see Note 6).

The license agreement was subsequently assigned to a wholly-owned subsidiary of Allogene Overland, Allogene Overland BioPharm (HK) Limited.

Collaboration Revenue and Equity Method Investment

In December 2020, the Company entered into the License Agreement with Allogene Overland, a corporate joint venture entity and related party (see Note 6).

The License Agreement was subsequently assigned to a wholly-owned subsidiary of Allogene Overland, Allogene Overland HK.

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

For the three and nine months ended September 30, 2023, the Company recognized less than $ 0.1 million and $ 0.1 million, respectively, of collaboration revenue under this agreement.

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

For the three months ended September 30, 2023, no net cost recoveries were recorded by the Company.

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

During the three months ended March 31, 2024 and 2023, the Company recognized less than $ 0.1 million of collaboration revenue under this arrangement.

For the three months ended March 31, 2024 and 2023, the Company recorded zero and $ 1.2 million, respectively, of its share of Allogene Overland's net loss as other expenses (see Note 8).

Sublease Agreement

In December 2018, the Company entered into a sublease with Bellco Capital LLC (Bellco) for 1,293 square feet of office space in Los Angeles, California for a three year term.

On April 1, 2020, Bellco Capital Advisors Inc.

assumed all rights, title, interests and obligations under the sublease from Bellco Capital LLC.

In December 2018, the Company entered into a sublease with Bellco Capital LLC for 1,293 square feet of office space in Los Angeles, California for a three year term.

On April 1, 2020, Bellco assumed all rights, title, interests and obligations under the sublease from Bellco Capital LLC.

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

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

The Company’s executive chairman, Arie Belldegrun, M.D., FACS, is a trustee of the Belldegrun Family Trust, which controls Bellco Capital Advisors Inc.

The total right of use asset and associated liability recorded related to this related party lease was $ 0.1 million and $ 0.2 million at September 30, 2023 and December 31, 2022, respectively.

In February 2023, the Company subleased an additional 2,030 square feet of office space in Los Angeles, California, from Bellco.

The Company’s executive chairman, Arie Belldegrun, M.D., FACS, is a trustee of the Belldegrun Family Trust, which controls Bellco.

In 2023, the Company exercised its early termination right under the sublease agreement and the sublease was terminated effective December 31, 2023.

In February 2023, the Company entered into a new sublease agreement with Bellco for 2,218 square feet of office space in Los Angeles, California.

The sublease term is 115 months, subject to certain early termination rights.

The sublease is expected to commence January 1, 2024.

The Company paid approximately $ 0.2 million towards the monthly base rent due for the first month of the sublease term and its share of the security deposit.

The total estimated amount of base rent is $ 2.9 million, subject to rent abatement.

The Company also expects to contribute to certain tenant improvements to the space totaling to its share of the total tenant contribution.

The sublease commenced on January 1, 2024.

The total right of use asset and associated lease liability recorded related to this related party lease was $ 2.4 million as of March 31, 2024.

For the three months ended March 31, 2024, the Company recorded $ 0.1 million of rent expense related to this lease.

Consulting Agreements

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

The costs incurred for services provided under this agreement were $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2023, respectively.

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

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

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

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

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

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

The Company also reimburses Bellco for out-of-pocket expenses incurred in performing the services.

The costs incurred for services provided, bonus, and out-of-pocket expenses incurred under this consulting agreement were $ 0.3 million and $ 0.7 million for the three and nine months ended September 30, 2023, respectively.

The costs incurred for services provided and out-of-pocket expenses incurred under this consulting agreement were $ 0.2 million and $ 0.6 million for the three and nine months ended September 30, 2022, respectively.

In December 2023, the service agreement between the Company and Two River was terminated.

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

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

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

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

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

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

The Company also reimburses Bellco Capital LLC for out of pocket expenses incurred in performing the services.

The costs incurred for services provided, bonus, and out-of-pocket expenses incurred under this consulting agreement were $ 0.2 million for the three months ended March 31, 2024 and 2023.

The Company has a history of losses and expects to record a loss in 2024.

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The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the period presented due to their anti-dilutive effect:

September 30,

Stock options to purchase common stock 24,025,416 23,548,486

4 unchanged sentences

Subsequent Events

Servier Amendment and Settlement Agreement

On May 10, 2024, the Company and Servier entered into the Servier Amendment which settles all existing disputes (as described in Note 6) between the Company and Servier relating to each party’s performance under the Servier Agreement.

The Servier Amendment also restructures the parties’ relationship on the following terms:

(1) The Company’s licensed territory was expanded to include the European Union and the United Kingdom.

The Company was also granted an option to further extend its licensed territory to include China and Japan upon the objective showing of sufficient resources to develop licensed products in those countries, which could be met through the Company entering into a strategic partnership covering those countries.

Additionally, the Company agreed to waive certain of its rights under the Servier Agreement to elect a conversion of its license to the CD19 Products to a worldwide license.

(2) Under the Servier Agreement, Servier sublicenses to the Company certain rights which Servier licenses from Cellectis pursuant to a first development and commercialization agreement, dated February 7, 2014, by and between Cellectis and Servier (as amended, the Servier-Cellectis Agreement).

All of the Company’s future milestone payments (regulatory and sales) under the Servier Agreement are modified to be the same as, and to coincide with, Servier’s milestone payments to Cellectis that are required under the Servier-Cellectis Agreement.

As amended by the Servier Amendment, the Servier Agreement provides for aggregate potential payments by the Company to Servier of up to € 75.0 million, of which € 60.0 million remains, upon successful completion of various regulatory milestones in the United States, European Union and the United Kingdom for the initial indication of each licensed product, with additional payments of € 55.0 million due for each subsequent indication, and aggregate potential payments by the Company to Servier of up to € 80.0 million upon achievement of certain net sales milestones for each licensed product.

Should Servier’s rights and obligations under the Servier-Cellectis Agreement be assigned to the Company, these milestone payments would terminate, and the Company would assume Servier’s milestone payment obligation to Cellectis.

In the absence of any such assignment, Servier will remain responsible for making milestone payments that may be due to Cellectis under the Servier-Cellectis Agreement.

(3) The Company agreed to transfer € 20.0 million into an escrow account in connection with a potential future milestone payment, which is included in the remaining € 60.0 million in milestone payments referenced above.

Such milestone payment will be triggered, if at all, upon the occurrence of one of these events:

(1) the Company doses the first subject in its first phase 3 clinical study for a CD19 CAR-T product that is a licensed product under the Servier Agreement, (2) the Company submits a phase 2 clinical study for a licensed product to the U.S.

Food and Drug Administration or the European Medicines Agency, and such phase 2 clinical study is accepted for regulatory approval as a pivotal study, or (3) a final and definitive decision of a tribunal or court finding that under the Servier-Cellectis Agreement the milestone has occurred and the € 20.0 million payment is due to Cellectis.

(4) The Company agreed to pay to Servier royalties on annual net sales of any licensed products that are commercialized by the Company that is directed at CD19.

Such royalties include tiered royalties on annual net sales in the United States and a flat royalty on annual net sales in territories outside the United States.

The United States royalty rates are in a range from the low tens to the mid teen percentages, and the ex-U.S.

royalty rate is 10 %.

Such royalties may be reduced for interchangeable drug entry, expiration of patent rights and amounts paid pursuant to licenses of third-party patents.

This royalty obligation begins upon the first commercial sale of such product in a given country and ends after the later of a defined number of years or the expiration of the last to expire licensed patent covering the product in such country.

The net effect of the Servier Amendment is that the Company’s royalty rate in the United States for the first half of the first tier of net sales was increased by a low single digit percentage.

Should Servier’s rights and obligations under the Servier-Cellectis Agreement be assigned to the Company, each tier of royalty rates in the United States to Servier would be reduced by 10 %, the ex-U.S.

royalties to Servier would terminate, and the Company would assume Servier’s royalty obligations to Cellectis.

In the absence of any such assignment, Servier will remain responsible for making royalty payments that may be due to Cellectis under the Servier-Cellectis Agreement.

(5) Requires that the Company reconcile its net sales reports required to be delivered to Servier under the Servier Agreement at the end of each calendar year to the amount of net sales that would have been applicable if such net sales were calculated in accordance with International Financial Reporting Standards and requires that any shortfall or overpayment, as applicable, be paid by the Company to Servier or credited to the Company by Servier, as applicable.

(6) The parties agreed that co-development performed by the Company and Servier under the Servier Agreement, including all development performed by Servier and for product candidates that the Company was co-developing with Servier (for which specified development costs were split with Allogene responsible for 60 % and Servier responsible for 40 %),

including the CD19 Products, ceased as of December 15, 2022, and that all development costs incurred by either party after that date shall be borne solely by such party.

(7) As soon as practicable after the date of the Servier Amendment but in any event prior to the end of July 2024, the parties will also agree to a transition plan, including transition timing and allocation of costs, to either transfer the sponsorship of the Servier’s long-term follow-up study of patients previously exposed to its UCART19V1 product candidate from Servier to the Company or consolidate the patients in this study into another Company-sponsored long-term follow-up study.

(8) The parties agreed to waive any and all outstanding claims that were asserted relating to alleged violations of the Servier Agreement, including all claims that such party was entitled to various payments or refunds from the other party under the Servier Agreement, and any and all claims that either party now has or may have in the future related to such outstanding claims, and mutual releases with respect to such claims were granted.

California Institute for Regenerative Medicine Grant

On April 26 2024, the Company was awarded a $ 15.0 million grant from the California Institute for Regenerative Medicine (CIRM) to support the clinical development of ALLO-316, an AlloCAR T TM investigational product targeting CD70 in development for the treatment of advanced or metastatic renal cell carcinoma (RCC).

The grant was awarded in accordance with the CIRM Grants Administration Policy for Clinical Stage Projects which may require the grant to be repaid by the Company.

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

What changed 10-Q

Item 1. Financial Statements