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Item 2. Management’s Discussion and Analysis

2024-05-13 compared with 2023-11-02 · 139 added, 132 removed, 162 unchanged (63% of the section changed)

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

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2022 (Annual Report), which was filed with the Securities and Exchange Commission (SEC) on February 28, 2023.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company”, “Allogene,” “we,” “us” and “our” refer to Allogene Therapeutics, Inc., and references to “Servier” collectively refer to Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS.

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (Quarterly Report) and the audited financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023 (Annual Report), which was filed with the Securities and Exchange Commission (SEC) on March 14, 2024.

Unless the context requires otherwise, references in this Quarterly Report to the “Company”, “Allogene,” “we,” “us” and “our” refer to Allogene Therapeutics, Inc., and references to “Servier” collectively refer to Les Laboratoires Servier SAS and Institut de Recherches Internationales Servier SAS.

In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.

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In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements .

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).

In the first quarter of 2023, we initiated the EXPAND trial, which is expected to enroll approximately 70 patients with R/R LBCL and is intended to demonstrate the overall contribution of ALLO-647 to the benefit to risk ratio of the lymphodepletion regimen for ALLO-501A.

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

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

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

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

TurboCAR TM 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.

Our 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) is ongoing.

Subject to ongoing results in the TRAVERSE trial, we intend to complete planned dose exploration and initiate expansion cohort enrollment in early 2024.

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 240 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.

The efficacy analysis is expected to occur in 2026 and will include the Independent Data Safety Monitoring Board (IDSMB) interim efficacy analysis in the first half of 2026 and the data readout of the primary analysis is expected in the second half of 2026 with a biologics license application (BLA) submission targeted for 2027.

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.

We plan to file an investigational new drug (IND) application in the first quarter of 2025.

We expect to initiate the Phase 1 trial with ALLO-329 in early 2025 and have proof-of-concept by year-end 2025.

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.

We estimate that the expansion of our license for the CD19 Products to the European Union and United Kingdom will substantially increase our market opportunity in 1L consolidation LBCL and R/R/ CLL from more than $6.0 billion in the U.S.

alone to more than $9.5 billion across the U.S., European Union and United Kingdom, in turn increasing the potential future revenue opportunity for cema-cel by more than 50%.

Since inception, we have had significant operating losses.

Our net losses were $61.3 million and $238.0 million for the three and nine months ended September 30, 2023, respectively.

As of September 30, 2023, we had an accumulated deficit of $1.5 billion.

As of September 30, 2023, we had $497.7 million in cash and cash equivalents and investments and we expect our cash runway to fund operations into 2H 2025.

Our net loss was $65.0 million for the three months ended March 31, 2024.

As of March 31, 2024, we had an accumulated deficit of $1.6 billion.

As of March 31, 2024, we had $397.3 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.

Recent Developments

We continue enrollment in the potentially pivotal Phase 2 ALPHA2 trial of ALLO-501A in relapsed/refractory (R/R) large B cell lymphoma (LBCL).

In addition to previous regulatory approvals to initiate the ALPHA2 trial in the U.S.

and Canada, during the third quarter of 2023, we received regulatory approvals to expand this trial to include European and Australian clinical trial sites, and we have initiated the trial at a number of sites.

We expect to complete enrollment in the first half of 2024 with the first data readout planned by the end of 2024.

We also continue enrollment in our EXPAND trial, which is expected to support licensure of ALLO-647, the Company’s anti-CD52 monoclonal antibody used in conjunction with standard low-dose FC (fludarabine, 30 mg/m2 and cyclophosphamide 300 mg/m2, daily for 3 days) lymphodepletion regimens.

In addition to previous regulatory approval to initiate the EXPAND trial in the U.S., during the third quarter of 2023, we received regulatory approval to include European clinical trial sites and have opened enrollment in that region.

Effective August 2, 2023, Eric T.

Schmidt, Ph.D.

resigned from his position as our Chief Financial Officer and on October 16, 2023, we appointed Geoffrey Parker as our Chief Financial Officer.

On August 14, 2023, we appointed Earl Douglas as our General Counsel.

Our Research and Development and License Agreements

Asset Contribution Agreement with Pfizer

In April 2018, we entered into an Asset Contribution Agreement (Pfizer Agreement) with Pfizer pursuant to which we acquired certain assets and assumed certain liabilities from Pfizer, including agreements with Cellectis and Servier as described below, and other intellectual property for the development and administration of CAR T cells for the treatment of cancer.

In April 2018, we entered into the Pfizer Agreement with Pfizer pursuant to which we acquired certain assets and assumed certain liabilities from Pfizer, including agreements with Cellectis and Servier as described below, and other intellectual property for the development and administration of CAR T cells for the treatment of cancer.

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

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

Exclusive License and Collaboration Agreement with Servier

In October 2015, Pfizer entered into an Exclusive License and Collaboration Agreement (Servier Agreement) with Servier to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR products, including UCART19, in the United States with the option to obtain the rights over certain additional allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

Exclusive License Agreement with Servier

In October 2015, Pfizer entered into the Servier Agreement with Servier to develop, manufacture and commercialize certain allogeneic anti-CD19 CAR products, including UCART19, in the United States with the option to obtain the rights over certain additional allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell product candidates directed against one additional target.

In April 2018, Pfizer assigned the agreement to us pursuant to the Pfizer Agreement.

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

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

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

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

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

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

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

While we do not believe Servier has such an audit right, we submitted to a review of our manufacturing costs of CD19 Products to recover outstanding manufacturing costs owed by Servier to us.

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

We disagree with the material breach allegations and we are disputing such allegations.

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

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

In May 2024 we entered into the Servier Amendment with Servier under which the parties settled disputes relating to each party’s performance under the Servier Agreement.

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 mutual releases with respect to such claims were granted.

Additionally, the Servier Amendment expanded our territory under the Servier Agreement to include the European Union and the United Kingdom, and provides for an option to further expand our 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 us entering into a strategic partnership covering those countries.

Additionally, we 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.

Additionally, under the Servier Amendment all of our 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 under the Servier-Cellectis Agreement.

As amended by the Servier Amendment, the Servier Agreement provides for aggregate potential payments by us to Servier of up to €75 million, of which €60 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 million due for each subsequent indication, and aggregate potential payments by us to Servier of up to €80 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 us, these milestone payments would terminate, and we 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.

As part of the settlement, we agreed to transfer €20 million into an escrow account in connection with a potential future milestone payment, which is included in the remaining €60 million in milestone payments referenced above.

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

(1) we dose 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) we submit 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 corresponding milestone under the Servier-Cellectis Agreement has occurred and the €20 million payment is due to Cellectis.

The royalties under the Servier Agreement were also amended.

The amended 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 our 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 Servier-Cellectis Agreement be assigned to us, 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 we 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 Servier-Cellectis Agreement.

For more information, see “Risk Factors— Servier’s discontinuation of its involvement in the development of CD19 Products and Servier's disputes with Cellectis, or future disputes with us, may have adverse consequences.

See Notes 6 and 13 to our condensed consolidated financial statements included elsewhere in this report for further description of the Servier Agreement and the Servier Amendment.

Collaboration and License Agreement with Notch

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

In connection with the execution of the Notch Agreement,

we made an upfront payment to Notch of $10.0 million.

In connection with the execution of the Notch Agreement, we made an upfront payment to Notch of $10.0 million.

In addition, we made a $5.0 million investment in Notch’s series seed convertible preferred stock, resulting in us having a 25% ownership interest in Notch’s outstanding capital stock on a fully diluted basis immediately following the investment.

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

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.

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 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 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.

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

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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.

On December 14, 2020, we entered into a License Agreement with Allogene Overland Biopharm (CY) Limited (Allogene Overland) (the License Agreement), 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).

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See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the Antion Agreement and the July 2023 amendment.

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.

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

Components of Results of Operations

As of September 30, 2023, our revenue has been exclusively generated from our collaboration and license agreement with Allogene Overland Biopharm (PRC) Co., Limited.

See Note 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the Allogene Overland Biopharm (PRC) Co., Limited agreement.

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

As of March 31, 2024, our revenue has been exclusively generated from the License Agreement with Allogene Overland Biopharm (PRC) Co., Limited.

See Note 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the License 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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To date, our research and development expenses have related primarily to discovery efforts, preclinical and clinical development, and manufacturing of our product candidates.

Research and development expenses for the three and nine months ended September 30, 2023 included costs associated with our clinical and preclinical stage pipeline candidates and research into

newer technologies.

Research and development expenses for the three months ended March 31, 2024 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

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

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

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

Research and development activities are central to our business model.

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In addition, the probability of success for each product candidate will depend on numerous factors, including safety, efficacy, competition, manufacturing capability and commercial viability.

We will determine which programs to pursue and

how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

Because our product candidates are still in clinical and preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of product candidates or whether, or when, we may achieve profitability.

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 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.

Other Expenses

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

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and 2022

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

Three Months Ended September 30, Change

Comparison of the Three Months Ended March 31, 2024 and 2023

The following sets forth our results of operations for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Three Months Ended March 31, Change

2024 2023 $ %

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Net Loss $ (65,000) $ (99,968) $ 34,968 (35) %

* Change in excess of 100%

Collaboration revenue - related party

Collaboration revenue was less than $0.1 million for the three months ended September 30, 2023 and 2022.

Revenue recognized in the three months ended September 30, 2023 and 2022 was due to the delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Collaboration revenue recognized for the three months ended March 31, 2024 and 2023 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

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.

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

Three Months Ended March 31,

2024 2023 Change

Personnel $ 22,752 $ 34,173 $ (11,421)

Development costs 16,705 31,261 (14,556)

Facilities and depreciation 10,502 11,193 (691)

Other 2,300 3,611 (1,311)

Total research and development expenses 52,259 80,238 (27,979)

Our research and development expenses included $25.5 million of internal expenses and $26.8 million of external expenses for the three months ended March 31, 2024.

Our research and development expenses included $35.2 million of internal expenses and $45.1 million of external expenses for the three months ended March 31, 2023.

Research and development expenses were $52.3 million and $80.2 million for the three months ended March 31, 2024 and 2023, respectively.

The decrease of $28.0 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 $14.6 million and a decrease in personnel related costs of $11.4 million, including $6.1 million related to a decrease in stock-based compensation expense.

General and Administrative Expenses

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 $17.3 million and $18.9 million for the three months ended March 31, 2024 and 2023, respectively.

The decrease of $1.6 million was primarily due to a decrease in personnel related costs of $1.7 million, including $0.8 million related to a decrease in 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.

Interest and other income, net was $5.4 million and $2.1 million for the three months ended March 31, 2024 and 2023, respectively.

The increase of $3.4 million was due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Comparison of the Nine Months Ended September 30, 2023 and 2022

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

Nine Months Ended September 30, Change

2023 2022 $ %

Collaboration revenue - related party $ 139 $ 196 $ (57) (29) %

Operating expenses:

Research and development 188,253 180,968 7,285 4 %

General and administrative 54,449 58,303 (3,854) (7) %

Total operating expenses 242,702 239,271 3,431 1 %

Loss from operations (242,563) (239,075) (3,488) 1 %

Other income (expense), net:

Interest and other income, net 12,042 1,809 10,233 *

Other Expenses

Total other income (expense), net 4,555 1,290 3,265 *

Net Loss $ (238,008) $ (237,785) $ (223) — %

* Change in excess of 100%

Collaboration revenue - related party

Collaboration revenue was $0.1 million for the nine months ended September 30, 2023 and 2022.

Revenue recognized in the nine months ended September 30, 2023 and 2022 was due to the delivery of the know-how performance obligations related to the License Agreement entered into with Allogene Overland on December 14, 2020.

Research and Development Expenses

Research and development expenses were $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 $1.7 million, offset by a decrease in personnel related costs of $10.9 million, of which $12.2 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 $3.0 million.

General and Administrative Expenses

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 $3.5 million, of which $3.4 million was stock-based compensation expense.

Interest and Other Income, Net

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 due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Other expenses were $0.9 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively.

The decrease in other expenses of $2.0 million was primarily due to a decrease in the share of net losses in our equity method investments.

Liquidity and Capital Resources

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

As of September 30, 2023, we had $497.7 million in cash and cash equivalents and investments.

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

As of March 31, 2024, we had $397.3 million in cash and cash equivalents and investments.

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 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, 2019, we sold an aggregate of 1,965,082 shares of common stock in ATM offerings resulting in net proceeds of $54.2 million.

During the year ended December 31, 2020, we sold an aggregate of 848,663 shares of common stock in ATM offerings resulting in net proceeds of $26.2 million.

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

During the three months ended March 31, 2024, we did not sell any shares of common stock in ATM offerings.

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.

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.

In March 2024, we filed a sales agreement prospectus within a registration statement on Form S-3, registering the offering, issuance and sale of up to $250.0 million of our common stock in ATM offerings.

The following table summarizes our cash flows for the periods indicated:

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Financing activities 1,650 1,731

Net increase (decrease) in cash, cash equivalents and restricted cash $ 7,342 $ (98,957)

Net increase (decrease) in cash and cash equivalents and restricted cash $ (32,116) $ 48,027

Operating Activities

During the nine months ended September 30, 2023, cash used in operating activities of $184.0 million was attributable to a net loss of $238.0 million, partially offset by non-cash charges of $65.9 million and an increase of $11.9 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $50.7 million, depreciation of $10.7 million, our share of equity investments' net losses and impairment for the period of $7.5 million, net amortization and accretion on investment securities of $3.5 million, and non-cash rent expense of $0.5 million.

The change in operating assets and liabilities was primarily due to a $7.2 million decrease in accounts payable, a $7.1 million decrease in accrued and other current liabilities, a $0.6 million decrease in deferred revenue, and a $0.4 million increase in other long-term assets, offset by a $3.6 million decrease in prepaid expenses and other current assets.

During the nine months ended September 30, 2022, cash used in operating activities of $158.4 million was attributable to a net loss of $237.8 million, partially offset by non-cash charges of $86.5 million and an increase of $7.1 million in our net operating assets and liabilities.

During the three months ended March 31, 2024, cash used in operating activities of $55.9 million was attributable to a net loss of $65.0 million, a decrease of $4.4 million in our net operating assets and liabilities, partially offset by non-cash charges of $13.5 million.

The non-cash charges consisted primarily of stock-based compensation expense of $11.9 million, depreciation of $3.6 million, our share of equity investments' net losses for the period of $0.9 million, offset by net amortization and accretion on investment securities of $2.8 million.

The change in operating assets and liabilities was primarily due to a $5.7 million decrease in accrued and other current liabilities, offset by a $1.4 million decrease in other long-term assets.

During the three months ended March 31, 2023, cash used in operating activities of $66.6 million was attributable to a net loss of $100.0 million, partially offset by non-cash charges of $25.9 million and an increase of $7.4 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $18.8 million, depreciation of $3.5 million, our share of equity investments’ net losses for the period of $2.9 million, net amortization and accretion on investment securities of $0.5 million, and non-cash rent expense of $0.2 million.

The change in operating assets and liabilities was primarily due to a $3.2 million increase in other long-term assets, a $2.8 million increase in prepaid expenses and other current assets, a $1.4 million decrease in accrued and other current liabilities, and a $2.1 million decrease in other long-term liabilities, offset by a $1.9 million increase in accounts payable and a $0.5 million increase in deferred revenue.

The change in operating

assets and liabilities was primarily due to a $5.7 million increase in accrued and other current liabilities, a $1.3 million decrease in prepaid expenses and other current assets, and a $1.1 million increase in accounts payable, offset by a $0.6 million decrease in other long-term liabilities.

Investing Activities

During the nine months ended September 30, 2023, net cash provided by investing activities of $95.8 million was related to cash provided by investment maturities of $461.5 million and cash provided by investment sales of $5.6 million, offset by cash used in purchases of investments of $369.9 million and cash used in the purchase of property and equipment of $1.3 million.

During the nine months ended September 30, 2022, net cash provided by investing activities of $56.6 million was related to cash provided by investment maturities of $260.4 million, offset by cash used in purchases of investments of $200.3 million and cash used in the purchase of property and equipment of $3.5 million.

During the three months ended March 31, 2024, net cash provided by investing activities of $22.1 million was related to cash provided by investment maturities of $103.3 million, offset by cash used in the purchase of investments of $81.1 million.

During the three months ended March 31, 2023, net cash provided by investing activities of $112.9 million was related to cash provided by investment maturities of $143.4 million and cash provided by proceeds from sales of investments of $5.6 million, offset by cash used in the purchase of investments of $35.1 million and cash used in the purchase of property and equipment of $1.0 million.

Financing Activities

During the nine months ended September 30, 2023, cash provided by financing activities of $95.5 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 $1.9 million of cash provided by the issuance of common stock upon exercise of stock options.

During the nine months ended September 30, 2022, cash provided by financing activities of $2.9 million was related to $2.5 million of cash provided by the sale of common stock through our employee stock purchase plan and $0.4 million of cash provided by the issuance of common stock upon exercise of stock options.

During the three months ended March 31, 2024, cash provided by financing activities of $1.7 million was related to $0.9 million of cash provided by the sale of common stock through our employee stock purchase plan and $0.8 million of cash provided by the issuance of common stock upon exercise of stock options.

During the three months ended March 31, 2023, cash provided by financing activities of $1.7 million was related to cash provided by the sale of common stock through our employee stock purchase plan.

Material Cash Commitments and Requirements

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The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements.

As of September 30, 2023, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

As of March 31, 2024, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

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

1 unchanged sentence

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

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

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 September 30, 2023, we 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.

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.

2 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.

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 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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Actual results may differ from these estimates under different assumptions or conditions.

We believe that the assumptions and estimates associated with accrued research and development expenditures and stock-based compensation have the most significant impact on our condensed consolidated financial statements.

We believe that the assumptions and estimates associated with accrued research and development expenditures, stock-based compensation and leases have the most significant impact on our condensed consolidated financial statements.

Therefore, we consider these to be our critical accounting policies and estimates.

There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Operations” included in our Annual Report.

Recent Accounting Pronouncements

There have been no new accounting pronouncements issued or effective that are expected to have a material impact on our unaudited condensed financial statements.

There have been no new accounting pronouncements issued or effective that are expected to have a material impact on our unaudited condensed consolidated financial statements.

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 2. Management’s Discussion and Analysis