What changed in this filing

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Item 1. Financial Statements

2024-08-07 compared with 2024-05-13 · 237 added, 172 removed, 483 unchanged (46% of the section changed)

9 unchanged sentences

Total current assets 457,124 459,115

Long-term investments 12,405 —

Operating lease right-of-use asset 58,385 63,703

Property and equipment, net 92,080 99,478

Deposit placed in escrow 21,429 —

Restricted cash 10,292 10,292

6 unchanged sentences

Accrued and other current liabilities 24,369 31,182

Deferred revenue 86 86

Total current liabilities 37,305 37,079

5 unchanged sentences

Preferred stock, $ 0.001 par value:

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

10,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

no shares were issued and outstanding as of June 30, 2024 and December 31, 2023

Common stock, $ 0.001 par value:

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

400,000,000 shares authorized as of June 30, 2024 and December 31, 2023;

209,049,485 and 168,642,238 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 2,209,200 2,075,252

7 unchanged sentences

(In thousands, except share and per share amounts)

Three Months Ended March 31,

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

2024 2023 2024 2023

Collaboration revenue - related party $ — $ 22 $ 22 $ 52

2 unchanged sentences

General and administrative 16,087 18,524 33,354 37,408

Impairment of long-lived assets

4,989 — 4,989 —

Total operating expenses 71,431 80,562 140,957 179,684

2 unchanged sentences

Interest and other income, net

Other expenses ( 929 ) ( 2,935 )

4,988 3,778 10,421 5,837

Other income and expense, net

85 ( 2,470 ) ( 844 ) ( 5,405 )

Total other income (expense), net 5,073 1,308 9,577 432

23 unchanged sentences

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

Issuance of common stock upon exercise of stock options and vesting of RSU's 415,483 1 18 — — 19

Stock-based compensation — — 13,559 — — 13,559

Issuance of common stock from ATM offering 250,000 — 1,021 — — 1,021

Issuance of common stock from registered offering, net of commissions and offering costs of $ 4.7 million

37,931,035 38 105,245 — — 105,283

Net loss — — — ( 66,358 ) — ( 66,358 )

Net unrealized gain on available-for-sale investments — — — — 147 147

Balance - June 30, 2024 209,049,485 $ 209 $ 2,209,200 $ ( 1,693,591 ) $ ( 780 ) $ 515,038

Common Stock Additional

17 unchanged sentences

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

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 — — — ( 79,232 ) — ( 79,232 )

Net unrealized gain on available-for-sale investments — — — — 2,083 2,083

Balance - June 30, 2023 167,133,664 $ 167 $ 2,039,263 $ ( 1,414,168 ) $ ( 3,851 ) $ 621,411

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

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Net amortization/accretion on investment securities ( 4,998 ) ( 566 )

Impairment of long-lived assets 4,989 —

Non-cash rent expense ( 151 ) 357

Non-cash collaboration revenue - related party ( 14 ) ( 34 )

Share of loss from equity method investments 929 2,935

Share of loss from equity method investments, net 554 5,370

Changes in operating assets and liabilities:

Deposit placed in escrow ( 21,429 ) —

Prepaid expenses and other current assets ( 1,953 ) 1,365

2 unchanged sentences

Accrued and other current liabilities ( 6,670 ) 5,607

Deferred revenue — ( 3 )

Other long-term liabilities 49 ( 621 )

7 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of common stock from ATM offering, net of commissions and issuance costs 1,021 87,918

Proceeds from issuance of common stock from registered offering, net of commissions and issuance costs 105,283 —

Proceeds from CIRM award 2,280 —

Proceeds from issuance of common stock upon exercise of stock options 813 1,606

6 unchanged sentences

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

Non-cash deferred revenue included in other long-term liabilities $ 3,079 $ 3,122

Supplemental disclosure:

10 unchanged sentences

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

Registered Offering

On May 13, 2024, the Company entered into (i) an underwriting agreement (Underwriting Agreement) with Goldman Sachs & Co.

LLC (Underwriter) and (ii) a Securities Purchase Agreement (Securities Purchase Agreement) with certain members of the Company’s Board of Directors and executive officers or their respective affiliates (Purchasers), pursuant to which the Company sold and issued to the Underwriter and the Purchasers an aggregate of 37,931,035 shares of common stock of the Company at a purchase price of $ 2.90 per share, in a registered offering transaction (Registered Offering) for aggregate gross proceeds of $ 110.0 million, before deducting the underwriting discount and commissions and estimated offering expenses payable by the Company.

The Registered Offering closed on May 16, 2024.

The aggregate fee payable by the Company to the Underwriter was $ 4.7 million, plus the reimbursement of certain expenses.

The Purchasers purchased an aggregate of 1,034,484 shares of common stock of the Company in the Registered Offering.

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 $ 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.

The Company had cash and cash equivalents and investments of $ 444.6 million as of June 30, 2024.

Since inception through June 30, 2024, the Company has incurred cumulative net losses of $ 1,693.6 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.

9 unchanged sentences

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.

The condensed consolidated balance sheet as of June 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statements of

stockholders’ equity as of June 30, 2024 and 2023, the condensed consolidated statements of cash flows for the six months ended June 30, 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 and six months ended June 30, 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

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

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.

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 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.

There have been no significant changes to the accounting policies during the three and six months ended June 30, 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, with exception of the following.

California Institute for Regenerative Medicine (CIRM) Award

Accounting for the CIRM award does not fall under ASC 606, Revenue from Contracts and Customers, as CIRM does not meet the definition of a customer.

No income associated with the CIRM award will be recognized until it is confirmed with CIRM that the award does not require repayment.

Until then such award will be recognized, along with any interest, as a long-term liability upon cash receipt.

See Note 5 below for more details.

Recently Adopted Accounting Pronouncements

7 unchanged sentences

treasury securities which are classified as Level 1.

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

There were no Level 3 assets or liabilities as of June 30, 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 June 30, 2024 and as of December 31, 2023 are presented in the following tables:

June 30, 2024

Level 1 Level 2 Level 3 Fair Value

18 unchanged sentences

Financial Instruments

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

The fair value and amortized cost of cash equivalents and available-for-sale securities by major security type as of June 30, 2024 and as of December 31, 2023 are presented in the following tables:

June 30, 2024

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

24 unchanged sentences

Total cash equivalents and investments $ 444,078

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.

As of June 30, 2024, the remaining contractual maturities of available-for-sale securities were less than 1 year.

There were no significant realized losses on available-for-sale securities for the three and six months ended June 30, 2024.

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

As of June 30, 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 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.

As of June 30, 2024 and December 31, 2023, securities with a fair value of $ 17.7 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 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.

As of June 30, 2024 and December 31, 2023, the Company recognized $ 2.0 million and $ 1.7 million, respectively, 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

10 unchanged sentences

Total property and equipment, net $ 92,080 $ 99,478

The Company has determined it operates in a single operating segment and has one reportable segment.

The Company reviews for indicators of impairment on quarterly basis which include the change in how its property is being used.

In June 2024, the Company made a decision to sublease one of its leased buildings in South San Francisco.

The Company vacated and ceased occupancy of this building in June 2024 and currently the Company is actively marketing the leased building for sublease.

In connection with the preparation of these condensed consolidated financial statements, the

Company determined that the change in how this building is being used could indicate impairment.

The Company identified this to be sublet property as a separate asset group for purposes of long-lived asset impairment assessment.

The Company concluded that the carrying value of this to be sublet property asset group was not recoverable and the estimated fair value of this asset group was below its carrying value.

The lower fair value of this asset group was mainly due to the lower estimated sublease income compared to the lease payments in accordance with the initial operating lease agreement and higher discount rate.

The Company applied a discounted cash flow method to estimate fair value of its right-of-use asset and leasehold improvements.

Based on this analysis, the Company concluded the fair value of the right-of-use asset and leasehold improvements of $ 2.5 million was lower than its net book value of $ 7.5 million.

The Company recognized a pre-tax long-lived asset impairment charge of $ 5.0 million on the right-of-use asset and leasehold improvements for the three and six months ended June 30, 2024.

The determination of the fair value of the Company’s asset group related to the to be sublet property that is currently being marketed for sublease purposes represents a Level 3 nonrecurring fair value measurement.

Calculating the fair value of the asset involves significant estimates and assumptions.

These estimates and assumptions include, among other things, expected sublease rental income of $ 4.0 million and risk-adjusted annual discount rate of 9 %.

Changes in the factors and assumptions used could materially affect the amount of impairment loss recognized in the period the asset was considered impaired.

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.

The reduction in workforce was completed by June 30, 2024.

During the six months ended June 30, 2024, the Company paid approximately $ 2.8 million for severance and other employee benefits.

As of June 30, 2024, $ 0.3 million of the severance and other employee benefits accrual was included in accrued and other current liabilities on the condensed consolidated balance sheet.

On April 26 2024, the Company was awarded $ 15.0 million from 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).

Pursuant to terms of the award, the disbursements are tied to the achievement of specified operational milestones.

In addition, the terms of the award include a co-funding requirement pursuant to which the Company is required to spend up to approximately $ 25.9 million of its own capital to fund the CIRM funded research project.

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

Under the terms of the CIRM award, the Company is obligated to pay royalties based on a low single digit royalty percentage on net sales of CIRM-funded product candidate.

The maximum royalty that the Company may be required to pay to CIRM is equal to nine times the total amount awarded and paid to the Company.

After completing the CIRM funded research project and at any time after the award period end date (but no later than the ten-year anniversary of the date of the award), the Company has the right, upon its election, to convert the award into a loan.

The terms of conversion into a loan will be determined based on various factors and could result in 80 % to 100 % plus interest at 10 % per annum plus the Secured Overnight Financing Rate of the total award dependent upon the phase of clinical development of the product candidate at the time of the Company's election to be repaid to CIRM.

No income associated with the CIRM award will be recognized until it is confirmed with CIRM that the award does not require repayment.

Upon cash receipt, the CIRM award and accrued interest will be recognized as other long-term liabilities on the Company’s balance sheet.

The Company received $ 2.3 million from CIRM through June 30, 2024 and accounted for the proceeds as a liability within other long-term liabilities on the condensed consolidated balance sheet.

License and Collaboration Agreements

2 unchanged sentences

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

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

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

1 unchanged sentence

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

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

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

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;

(ii) the loss of regulatory exclusivity afforded such product in such country, and (iii) the tenth anniversary of the date of the first commercial sale of such product in such country;

(ii) the loss of regulatory exclusivity

afforded such product in such country, and (iii) the tenth anniversary of the date of the first commercial sale of such product in such country;

however, in no event shall such royalties be payable, with respect to a particular licensed product, past the twentieth anniversary of the first commercial sale for such product.

7 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 months ended March 31, 2024 and 2023, no clinical development milestones were achieved.

For the three and six months ended June 30, 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.

As part of the Pfizer Agreement, Pfizer assigned to the Company an Exclusive License Agreement (the Original 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.

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

Under the Original Servier Agreement, the Company has an exclusive license to develop, manufacture and commercialize licensed products directed against CD19, including UCART19, ALLO-501 and cemacabtagene ansegedleucel (cema-cel, previously ALLO-501A) (collectively, CD19 Products) in the field of anti-tumor adoptive immunotherapy in the United States, with an exclusive option to obtain the same rights for additional product candidates in the United States and, if Servier does not elect to pursue development or commercialization of those product candidates in certain markets outside of the United States pursuant to its license, outside of the United States as well.

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

If the Company opts-in to another product candidate, Servier has the right to obtain rights to such product candidate outside the United States and to share development costs for such product candidate.

Under the Servier Agreement, the Company is required to use commercially reasonable efforts to develop and obtain marketing approval in the United States in the field of anti-tumor adoptive immunotherapy for at least one product directed against CD19, and Servier is required to use commercially reasonable efforts to develop and obtain marketing approval in the European Union, and one other country in a group of specified countries outside of the European Union and the United States, in the field of anti-tumor adoptive immunotherapy for at least one allogeneic adaptive T cell product directed against a certain Company-selected target.

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.

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

The Company is required to make milestone payments to Servier upon successful completion of regulatory and sales milestones.

The Servier Agreement provides for aggregate potential payments by the Company to Servier of up to $ 137.5 million upon successful completion of various regulatory milestones, and aggregate potential payments by the Company to Servier of up to $ 78.0 million upon successful completion of various sales milestones.

Similarly, Servier is required to make milestone payments upon successful completion of regulatory and sales milestones for products directed at the Allogene-target covered by the Servier Agreement that achieves such milestones.

The total potential payments that Servier is obligated to make to the Company under the Servier Agreement upon successful completion of regulatory and sales milestones are $ 42.0 million and € 70.5 million ($ 76.1 million), respectively.

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

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

The royalty rates are in a range from the low tens to the high teen percentages.

On May 10, 2024, the Company and Servier entered into an Amendment and Settlement Agreement with Servier (the Servier Amendment) which restructured the parties’ relationship under the Original Servier Agreement (as amended, the Servier Agreement).

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 Original Servier Agreement to elect a conversion of its license to the CD19 Products to a worldwide license.

Under the Servier Agreement, the Company is required to use commercially reasonable efforts to develop, manufacture and commercialize a CD19 Product.

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).

As amended by the Servier Amendment, all of the Company’s future milestone payments (regulatory and sales) under the Original Servier Agreement were modified to be the same as, and to coincide with, Servier’s milestone payments to Cellectis that are required under the Servier-Cellectis Agreement.

Agreement provides for aggregate potential milestone payments by the Company to Servier of up to € 75.0 million upon successful completion of various regulatory milestones and first commercial sale milestones in the United States, European Union and the United Kingdom for the initial indication of each licensed product, of which € 60.0 million remains for the initial indication for cema-cel, with additional payments of € 55.0 million, due for each subsequent indication, of which € 50.0 million remains for the first subsequent indication for cema-cel, 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.

The Company transferred € 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 for the initial indication for cema-cel.

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.

The Company is obligated 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.

The royalty obligation for each party with respect to a given licensed product in a given country in each party’s respective territory (the Servier Royalty Term) begins upon the first commercial sale of such product in such country and ends after a defined number of years.

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.

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

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

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

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

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.

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 as compared to the Original Servier Agreement.

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.

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 under the Original Servier Agreement with the Company 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.

The parties agreed to waive any and all outstanding claims that were asserted relating to alleged violations of the Original Servier Agreement, including all claims that such party was entitled to various payments or refunds from the other party under the Original 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.

The Company will recognize expense related to the revised milestones and royalties when payments become probable.

There was no gain or loss related to the expanded license territories and ceased Servier co-development.

For the three and six months ended June 30, 2024 and 2023, the Company recorded $ 5.4 million and zero , respectively, in research and development expenses upon achievement of a regulatory milestone.

As of June 30, 2024, the Company recorded € 20.0 million as deposit placed in escrow in the condensed consolidated balance sheets.

Research Collaboration and License Agreement with Notch Therapeutics

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

(Notch), pursuant to which Notch granted to Allogene an exclusive, worldwide, royalty-bearing, sublicensable license under certain of Notch’s intellectual property to develop, make, use, sell, import, and otherwise commercialize therapeutic gene-edited T cell and/or natural killer (NK) cell products from induced pluripotent stem cells directed at certain CAR targets for initial application in non-Hodgkin lymphoma, acute lymphoblastic leukemia and multiple myeloma.

In addition, Notch has granted Allogene an option to add certain specified targets to its exclusive license in exchange for an agreed per-target option fee.

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

In connection with this investment, an Allogene representative serves on the Notch Board of Directors.

In connection with this investment, an Allogene representative served on the Notch Board of Directors.

In February 2021, the Company made an additional $ 15.9 million investment in Notch’s Series A preferred stock.

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Immediately following this transaction, the Company’s share in Notch was 23 % on a voting interest basis.

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.

On May 17, 2024, Notch closed a Series B preferred stock financing with a combination of new and existing investors (Notch Series B Financing).

The Company did not participate in the Notch Series B Financing but received Series B preferred stock as part of its anti-dilution rights.

Immediately following this transaction, the Company’s share in Notch was 13 %.

In connection with the Notch Series B Financing, the Company waived its right to appoint one member of the Notch board of directors, but retained board observation rights.

The Company no longer has any significant influence over Notch and as a result of the decrease in ownership and influence, accounted for its investment in Notch as an equity investment measured at cost less any impairment effective May 17, 2024.

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.

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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.

As of June 30, 2024, no Released Targets were out-licensed by Notch.

On May 17, 2024, in connection with the Notch Series B Financing the Company waived certain of its anti-dilution rights in exchange for a low single digit percentage reduction in the royalty rate for the royalties the Company is obliged to pay to Notch under our Notch intellectual property license should the Company commercialize a licensed product.

For the three and six months ended June 30, 2024, the Company recorded zero collaboration costs.

For the three and six months ended June 30, 2023, the Company recorded $ 0.8 million and $ 1.8 million, respectively, in collaboration costs as research and development expenses.

No milestones were achieved by Notch for the three and six months ended June 30, 2024 and 2023.

As of June 30, 2024, the Company's equity investment in Notch was $ 2.0 million (see Note 8).

Strategic Alliance with The University of Texas MD Anderson Cancer Center

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

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

On December 14, 2020, the Company entered into a License Agreement with Allogene Overland Biopharm (CY) Limited (Allogene Overland), a joint venture established by the Company 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).

For the three and six months ended June 30, 2024, the Company recorded $ 0.3 million in collaboration costs as research and development expenses.

For the three and six months ended June 30, 2023, the Company recorded $ 0.6 million and $ 1.0 million, respectively, in collaboration costs as research and development expenses.

Investment in and License Agreement with Overland Therapeutics, Inc.

On May 24, 2024, the Company, Overland Pharmaceuticals (CY) inc.

(Overland), and Allogene Overland Biopharm (CY) Limited (Allogene Overland) entered into a Share Exchange Agreement (Share Exchange Agreement) pursuant to which Overland’s cell therapy business merged into Allogene Overland (the Organizational Restructuring).

Under the Share Exchange Agreement, Allogene Overland acquired from Overland a 100 % equity interest in Overland Pharmaceuticals (US) Inc.

(Overland US).

Overland US includes certain research and development, clinical, and general and administrative staff, as well as select cell therapy assets, including its lead program, OL-101, an autologous GPRC5D-BCMA bispecific dual targeting CAR-T for refractory multiple myeloma.

Upon completion of the closing of the share exchange, Overland US became a wholly owned subsidiary of Allogene Overland, Overland’s ownership increased to 82 % and the Company’s ownership decreased to 18 %.

Under a separate agreement between Overland and HH BioPharma Holdings Ltd.

(HBP) executed on May 24, 2024, Overland distributed all Series Seed Preferred Shares of Allogene Overland held by Overland to HBP and HBP has assumed all rights and obligations attached to such shares and all rights and obligations of Overland under the Share Exchange Agreement.

As part of the Organizational Restructuring, Allogene Overland was renamed Overland Therapeutics Inc.

(Overland Therapeutics).

On December 14, 2020, the Company entered into a License Agreement (License Agreement) with Allogene Overland, a joint venture established by the Company and Overland, pursuant to a Share Purchase Agreement (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).

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

As of May 24, 2024, the Company and Overland were the sole equity holders in Allogene Overland.

The Company received $ 40.0 million from Allogene Overland as partial consideration for the License Agreement.

Pursuant to the License Agreement, the Company granted Allogene Overland an exclusive license to develop, manufacture and commercialize certain allogeneic CAR T cell candidates directed at four targets, BCMA, CD70, FLT3, and DLL3, in the JV Territory.

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 (Allogene Overland HK).

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

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

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

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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 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.

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.

In connection with the Organizational Restructuring, on May 24, 2024, the Company and Allogene Overland PRC, entered into a First Amendment to the License Agreement (the License Amendment) to amend and supplement certain provisions of the License Agreement.

Under the License Amendment, the Company continues to grant Allogene Overland PRC an exclusive license to develop, manufacture, and commercialize the Licensed Products in the JV Territory, with the Company retaining exclusive rights to the Licensed Products outside the JV Territory, and the royalty obligations to the Company were amended to a flat mid single-digit royalty on net sales in the JV Territory that are no longer subject to reductions.

The License Amendment also provides the Company with additional rights to terminate the License Agreement in its entirety or with respect to the relevant Overland Licensed Products if Allogene Overland PRC fails to initiate manufacturing technology transfer with respect to an Overland Licensed Product as agreed in the License Amendment, or if HBP commits a funding default or a material breach of its representations, warranties, or covenants under the Share Exchange Agreement.

The License Amendment also provides that the License Agreement will terminate automatically if the Company’s ownership in Allogene Overland falls below 7.5 % (other than due to the Company’s sale of the shares of Allogene Overland), unless at that time Allogene Overland PRC and the Company have mutually agreed on the manufacturing technology transfer plan for the Overland Licensed Products and Allogene Overland PRC elects to continue the license for such Overland Licensed Products with increased milestones and royalties.

Under the License Amendment terms such increased milestones and royalties consist of up to $ 115.0 million in milestone payments for each Overland Licensed Product and tiered mid single-digit to low double-digit royalties on net sales in the JV Territory.

The Company determined that the remaining transaction price based on the License Amendment was $ 4.6 million and it was allocated as follows:

(i) $ 1.9 million to the manufacturing license, related know-how and support, which will be recognized as services are delivered and (ii) $ 2.7 million to the know-how developed in future periods, which will be recognized as services are delivered.

As of June 30, 2024, $ 4.6 million of deferred revenue was recorded in other long-term liabilities.

The Company determined that Overland Therapeutics is a variable interest entity as of June 30, 2024 and December 31, 2023.

The Company does not have the power to direct the activities which most significantly affect Overland Therapeutics’ economic performance.

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

After the Organizational Restructuring, the Company has 20 % voting rights of Overland Therapeutics’ board of directors.

The Company concluded that it has significant influence over Overland Therapeutics and continued to account for its investment in Overland Therapeutics as an equity method investment.

In connection with the Organizational Restructuring, the Company recorded an increase in its equity method investment in Overland Therapeutics and corresponding gain of $ 1.1 million.

The Company’s total equity investment in Overland Therapeutics as of June 30, 2024 and December 31, 2023 was $ 1.1 million and zero , respectively (see Note 8).

For the three and six months ended June 30, 2024 and 2023, the Company recognized less than $ 0.1 million of collaboration revenue.

Collaboration and License Agreement with Antion

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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 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 .

For the three and six months ended June 30, 2024, the Company recorded zero research and development expenses related to collaboration costs.

For the three and six months ended June 30, 2023, the Company recorded $ 1.3 million and $ 1.8 million, respectively, in research and development expenses related to collaboration costs.

As of June 30, 2024 and December 31, 2023, the Company’s total equity investment in Antion was zero .

Strategic Collaboration Agreement with Foresight Diagnostics

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(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.

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 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.

For the three and six months ended June 30, 2024, the Company recorded $ 1.7 million and $ 2.2 million, respectively, of research and development expenses related to clinical trials start readiness milestone.

Commitments and Contingencies

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

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

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

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

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

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

Restricted cash related to letters of credit due to landlords was $ 6.0 million as of June 30, 2024 and December 31, 2023.

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Operating lease liabilities

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Operating lease cost $ 3,011 $ 3,175 $ 6,031 $ 6,356

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Total lease costs $ 3,519 $ 3,847 $ 7,406 $ 7,719

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:

Cash paid for amounts included in the measurement of lease liabilities for the six months ended June 30, 2024 was $ 6.2 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 June 30, 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 March 31, 2024, the weighted average remaining lease term for our operating leases is 8.82 years.

As of June 30, 2024, the weighted average remaining lease term for our operating leases is 8.58 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 March 31, 2024 and December 31, 2023.

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 March 31, 2024.

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 June 30, 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 March 31, 2024, the Company had non-cancellable purchase commitments of $ 0.9 million.

As of June 30, 2024, the Company had non-cancellable purchase commitments of $ 0.7 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 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

On May 17, 2024, Notch closed the Notch Series B Financing which caused the Company’s share in Notch to decrease to 13.0 % immediately following this transaction.

Accordingly, effective May 17, 2024, the Company started to account for its investment in Notch as an equity investment measured at cost less impairment.

The Company’s total equity investment in Notch as of June 30, 2024 was $ 2.0 million.

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

For the quarter to date and year to date periods through May 17, 2024, the Company recognized its share of Notch’s net loss of $ 0.8 million and $ 1.7 million, respectively, under the other income and expense, net caption within the condensed consolidated statements of operations.

For the three and six months ended June 30, 2023, the Company recognized its share of Notch’s net loss of $ 1.2 million and $ 2.9 million, respectively, under the other income and expense, net caption within the condensed consolidated statements of operations.

Overland Therapeutics, Inc.

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.

Upon completion of the Organizational Restructuring, Overland’s ownership in Allogene Overland increased to 82 % and the Company’s ownership decreased to 18 %.

As part of the Organizational Restructuring, Overland distributed all Series Seed Preferred Shares of Allogene Overland held by Overland to HBP and Allogene Overland was renamed to Overland Therapeutics.

The Company’s total equity investment in Overland Therapeutics as of June 30, 2024 and December 31, 2023 was $ 1.1 million and zero , respectively, and the Company accounted for the investment using the equity method of accounting.

For the three and six months ended June 30, 2024, the Company recognized its gain from the Organizational Restructuring of $ 1.1 million under the other income and expense, net caption within the condensed consolidated statements of operations.

For the three and six months ended June 30, 2023, the Company recognized its share of Overland Therapeutics’ net loss of $ 1.2 million and $ 2.5 million, respectively, under the other income and expense, net 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 March 31, 2024, there were 9,738,364 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

As of June 30, 2024, there were 9,817,735 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

Stock Option Exchange Program

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Options forfeited ( 3,076,605 ) 11.15

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

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 March 31, 2024.

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.

Balance, June 30, 2024 24,022,246 $ 8.29 7.90 $ 22

Exercisable, June 30, 2024 16,834,976 $ 9.74 7.52 $ 19

Vested and expected to vest, June 30, 2024 24,022,246 $ 8.29 7.90 $ 22

For the six months ended June 30, 2024, the estimated weighted-average grant-date fair value of employee options granted was $ 2.08 per share.

As of June 30, 2024, there was $ 48.2 million of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.2 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:

Three Months Ended March 31,

Six Months Ended June 30,

Expected term in years 5.27 - 6.08

Expected volatility 72.85 % - 73.50 %

73.37 % - 73.85 %

Expected risk-free interest rate 3.94 % - 4.32 %

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Expected dividend 0 %

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

The expected term for option grants is determined using the simplified method.

The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the stock-based awards.

Expected volatility — The Company uses an average historical stock price volatility of comparable public companies within the biotechnology and pharmaceutical industry that were deemed to be representative of future stock price trends as the Company does not have sufficient trading history for its common stock.

The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-free interest rate —The risk-free interest rate is based on the U.S.

Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

Expected dividend —The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock.

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

Restricted Stock Unit Activity

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Forfeited ( 2,050,309 ) 7.96

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.

Unvested June 30, 2024 13,123,414 $ 5.32 1.76 $ 30,578

Vested and expected to vest, June 30, 2024 13,123,414 $ 5.32 1.76 $ 30,578

As of June 30, 2024, there was $ 44.4 million of unrecognized stock-based compensation related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2.3 years.

As of June 30, 2024, the Company had 2,403,260 outstanding performance-based restricted stock units and 1,814,134 outstanding restricted stock units with a market condition granted to certain executive officers and other employees pursuant to the 2018 Plan, including 4,347 performance-based restricted stock units granted in the quarter ended June 30, 2024.

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

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.

Through June 30, 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 for the three and six months ended June 30, 2024 and 2023.

The Company recognized $ 0.7 million and $ 1.4 million in stock-based compensation expense related to the restricted stock units with a market condition for the three and six months ended June 30, 2024, respectively.

The Company recognized $ 0.8 million and $ 0.9 million in stock-based compensation expense related to the restricted stock units with market condition for the three and six months ended June 30, 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.

For the three and six months ended June 30, 2024, the Company recorded $ 13.6 million and $ 25.5 million, respectively, of stock-based compensation expense related to stock options, restricted stock units and employee stock purchase plans as research and development and general and administrative expense in its condensed consolidated statements of operations and comprehensive loss.

For the three and six months ended June 30, 2023, the Company recorded $ 16.6 million and $ 35.4 million, respectively, of stock-based compensation expense related to stock options, restricted stock units and employee stock purchase plans as research and development and general and administrative expense in its condensed consolidated statements of operations and comprehensive loss.

Related Party Transactions

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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.

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).

On April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene Overland PRC.

On May 24, 2024, the License Agreement was amended.

During the three months ended June 30, 2024 and 2023, the Company recognized zero and less than $ 0.1 million of collaboration revenue under this arrangement, respectively.

During the six months ended June 30, 2024 and 2023, the Company recognized less than $ 0.1 million of collaboration revenue under this arrangement.

Sublease Agreement

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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.

The total right of use asset and associated lease liability recorded related to this related party lease was $ 2.5 million as of June 30, 2024.

For the three and six months ended June 30, 2024, the Company recorded $ 0.1 million and $ 0.2 million of rent expense related to this lease, respectively.

Consulting Agreements

1 unchanged sentence

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.

The costs incurred for services provided under this agreement were $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023, respectively.

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

4 unchanged sentences

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 costs incurred for services provided, bonus, and out-of-pocket expenses incurred under this consulting agreement were $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2024, respectively, and $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2023, respectively.

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

7 unchanged sentences

Total 38,233,827 36,609,115

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.

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.

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:

(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.

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.

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