Allogene Therapeutics, Inc. 10-Q

Item 1. Financial Statements ALLOGENE THERAPEUTICS, INC. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share amounts) June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 170,667 $ 83,155 Short-term investments 273,961 365,542 Prepaid expenses and other current assets 12,496 10,418 Total current assets 457,124 459,115 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 Other long-term assets 6,439 6,604 Equity method investments 1,134 3,645 Total assets $ 646,883 $ 642,837 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 12,936 $ 5,897 Accrued and other current liabilities 24,369 31,182 Total current liabilities 37,305 37,079 Lease liability, noncurrent 86,989 88,346 Other long-term liabilities 7,551 5,179 Total liabilities 131,845 130,604 Commitments and Contingencies (Notes 6 and 7) Stockholders’ equity: Preferred stock, $ 0.001 par value: 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 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 209 169 Additional paid-in capital 2,209,200 2,075,252 Accumulated deficit ( 1,693,591 ) ( 1,562,233 ) Accumulated other comprehensive loss ( 780 ) ( 955 ) Total stockholders’ equity 515,038 512,233 Total liabilities and stockholders’ equity $ 646,883 $ 642,837 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 Table of Contents ALLOGENE THERAPEUTICS, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (In thousands, except share and per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Collaboration revenue - related party $ — $ 22 $ 22 $ 52 Operating expenses: Research and development 50,355 62,038 102,614 142,276 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 Loss from operations ( 71,431 ) ( 80,540 ) ( 140,935 ) ( 179,632 ) Other income (expense), net: Interest and other income, net 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 Net loss ( 66,358 ) ( 79,232 ) ( 131,358 ) ( 179,200 ) Other comprehensive loss: Net unrealized gain on available-for-sale investments 147 2,083 175 6,075 Net comprehensive loss $ ( 66,211 ) $ ( 77,149 ) $ ( 131,183 ) $ ( 173,125 ) Net loss per share, basic and diluted $ ( 0.35 ) $ ( 0.54 ) $ ( 0.73 ) $ ( 1.23 ) Weighted-average number of shares used in computing net loss per share, basic and diluted 190,026,638 146,795,826 179,577,500 145,685,993 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 Table of Contents ALLOGENE THERAPEUTICS, INC. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share amounts) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance - December 31, 2023 168,642,238 $ 169 $ 2,075,252 $ ( 1,562,233 ) $ ( 955 ) $ 512,233 Issuance of common stock upon exercise of stock options and vesting of RSUs 1,551,729 1 793 — — 794 Vesting of early exercised common stock — — 532 — — 532 Stock-based compensation — — 11,924 — — 11,924 Employee stock purchase plan 259,000 — 856 — — 856 Net loss — — — ( 65,000 ) — ( 65,000 ) Net unrealized gain on available-for-sale investments — — — — 28 28 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 3 Table of Contents Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance - December 31, 2022 144,438,304 $ 144 $ 1,911,632 $ ( 1,234,968 ) $ ( 9,926 ) $ 666,882 Issuance of common stock upon exercise of stock options and vesting of RSUs 942,276 1 ( 1 ) — — — Vesting of early exercised common stock — — 603 — — 603 Stock-based compensation — — 18,770 — — 18,770 Employee stock purchase plan 359,753 1 1,730 — — 1,731 Net loss — — — ( 99,968 ) — ( 99,968 ) Net unrealized gain on available-for-sale investments — — — — 3,992 3,992 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. 4 Table of Contents ALLOGENE THERAPEUTICS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six Months Ended June 30, 2024 2023 Cash flows from operating activities: Net loss $ ( 131,358 ) $ ( 179,200 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 25,483 35,364 Depreciation and amortization 7,199 7,150 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, 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 Other long-term assets 2,122 ( 55 ) Accounts payable 6,690 ( 3,233 ) Accrued and other current liabilities ( 6,670 ) 5,607 Other long-term liabilities 49 ( 621 ) Net cash used in operating activities ( 119,487 ) ( 128,496 ) Cash flows from investing activities: Purchases of property and equipment ( 8 ) ( 1,323 ) Proceeds from sales of investments — 5,623 Proceeds from maturities of investments 220,493 296,309 Purchase of investments ( 123,739 ) ( 170,514 ) Net cash provided by investing activities 96,746 130,095 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 Proceeds from issuance of common stock under the employee stock purchase plan 856 1,731 Net cash provided by financing activities 110,253 91,255 Net change in cash and cash equivalents and restricted cash 87,512 92,854 Cash and cash equivalents and restricted cash — beginning of period 93,447 72,196 Cash and cash equivalents and restricted cash — end of period $ 180,959 $ 165,050 Non-cash operating activities: Right-of-use asset obtained in exchange for lease liability $ 2,409 $ — Non-cash deferred revenue included in other long-term liabilities $ 3,079 $ 3,122 Supplemental disclosure: Cash paid for amounts included in the measurement of lease liabilities $ ( 6,173 ) $ ( 5,989 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents ALLOGENE THERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements 1. Description of Business Allogene Therapeutics, Inc. (the Company or Allogene) was incorporated on November 30, 2017 in the State of Delaware and is headquartered in South San Francisco, California. Allogene is a clinical stage immuno-oncology company pioneering the development of genetically engineered allogeneic T cell product candidates for the treatment of cancer and autoimmune diseases. The Company is developing a pipeline of “off-the-shelf” T cell product candidates that are designed to target and kill cancer cells in patients or eliminate pathogenic autoreactive cells in patients with autoimmune disorders. The Company’s engineered T cells are allogeneic, meaning they are derived from healthy donors for intended use in any patient, rather than from an individual patient for that patient’s use, as in the case of autologous T cells. The Company believes this key difference will enable it to deliver readily available treatments faster, more reliably, at greater scale, and to more patients. 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 The Company has sustained operating losses and expects to continue to generate operating losses for the foreseeable future. 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 $ 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. The Company intends to raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidates. The Company expects that its cash and cash equivalents and investments will be sufficient to fund its operations for at least the next 12 months from the date the accompanying unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (SEC). 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the Company’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Allogene Therapeutics, B.V. The subsidiary was dissolved on January 3, 2024. 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 6 Table of Contents 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 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. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances change. Actual results could differ from those estimates. Significant Accounting Policies 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 There have been no new accounting pronouncements issued or effective that are expected to have a material impact on the Company's condensed consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted The Company continues to monitor new accounting pronouncements issued by the FASB and does not believe any accounting pronouncements issued through the date of this report will have a material impact on the Company's condensed consolidated financial statements. 3. Fair Value Measurements The Company measures and reports its cash equivalents, restricted cash, and investments at fair value. Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1. Investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs, except for investments in U.S. treasury securities which are classified as Level 1. There were no Level 3 assets or liabilities as of June 30, 2024 and as of December 31, 2023. 7 Table of Contents 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 (In thousands) Financial Assets: Money market funds (1) $ 161,543 $ — $ — $ 161,543 Commercial paper — 4,945 — 4,945 Corporate bonds — 104,841 — 104,841 U.S. treasury securities 127,041 — — 127,041 U.S. agency securities — 37,134 — 37,134 Total financial assets $ 288,584 $ 146,920 $ — $ 435,504 December 31, 2023 Level 1 Level 2 Level 3 Fair Value (In thousands) Financial Assets: Money market funds (1) $ 78,536 $ — $ — $ 78,536 Corporate bonds — 97,166 — 97,166 U.S. treasury securities 229,516 — — 229,516 U.S. agency securities — 38,860 — 38,860 Total financial assets $ 308,052 $ 136,026 $ — $ 444,078 (1) Included within cash and cash equivalents on the Company’s condensed consolidated balance sheets . 4. Financial Instruments 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 (In thousands) Money market funds $ 161,543 $ — $ — $ 161,543 Commercial paper 4,949 — ( 4 ) 4,945 Corporate bonds 104,953 9 ( 121 ) 104,841 U.S. treasury securities 127,187 — ( 146 ) 127,041 U.S. agency securities 37,208 — ( 74 ) 37,134 Total cash equivalents and investments $ 435,840 $ 9 $ ( 345 ) $ 435,504 Classified as: Cash equivalents $ 161,543 Short-term investments 273,961 Long-term investments — Total cash equivalents and investments $ 435,504 8 Table of Contents December 31, 2023 Amortized Cost Unrealized Gains Unrealized Losses Fair Value (In thousands) Money market funds $ 78,536 $ — $ — $ 78,536 Corporate bonds 97,265 113 ( 212 ) 97,166 U.S. treasury securities 229,563 132 ( 179 ) 229,516 U.S. agency securities 39,225 — ( 365 ) 38,860 Total cash equivalents and investments $ 444,589 $ 245 $ ( 756 ) $ 444,078 Classified as: Cash equivalents $ 78,536 Short-term investments 365,542 Long-term investments — Total cash equivalents and investments $ 444,078 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 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 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. 5. Balance Sheet Components Property and Equipment, Net Property and Equipment consist of the following: June 30, 2024 December 31, 2023 (In thousands) Leasehold improvements 107,655 108,621 Laboratory equipment 31,953 33,157 Computer equipment and purchased software 4,663 4,663 Furniture and fixtures 4,171 4,121 Total 148,442 150,562 Less: accumulated depreciation ( 56,362 ) ( 51,084 ) 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 9 Table of Contents 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 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. CIRM Award 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. 6. License and Collaboration Agreements Asset Contribution Agreement with Pfizer 10 Table of Contents In April 2018, the Company entered into an Asset Contribution Agreement (the Pfizer Agreement) with Pfizer pursuant to which the Company acquired certain assets, including certain contracts and intellectual property for the development and administration of chimeric antigen receptor (CAR) T cells for the treatment of cancer. 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. 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. The sales milestones in the foregoing sentence are payable on a country-by-country basis until the last to expire of any Pfizer Royalty Term, as described below, for any product in such country in the Territory. In October 2019, the Territory was expanded to all countries in the world. 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. The Company’s royalty obligation with respect to a given product in a given country begins upon the first sale of such product in such country and ends on the later of (i) expiration of the last claim of any applicable patent or (ii) 12 years from the first sale of such product in such country. Research Collaboration and License Agreement with Cellectis As part of the Pfizer Agreement, Pfizer assigned to the Company a Research Collaboration and License Agreement (the Original Cellectis Agreement) with Cellectis S.A. (Cellectis). On March 8, 2019, the Company entered into a License Agreement (the Cellectis Agreement) with Cellectis. In connection with the execution of the Cellectis Agreement, on March 8, 2019, the Company and Cellectis also entered into a letter agreement (the Letter Agreement), pursuant to which the Company and Cellectis agreed to terminate the Original Cellectis Agreement. The Original Cellectis Agreement included a research collaboration to conduct discovery and pre-clinical development activities to generate CAR T cells directed at targets selected by each party, which was completed in June 2018. Pursuant to the Cellectis Agreement, Cellectis granted to the Company an exclusive, worldwide, royalty-bearing license, on a target-by-target basis, with sublicensing rights under certain conditions, under certain of Cellectis’s intellectual property, including its TALEN and electroporation technology, to make, use, sell, import, and otherwise exploit and commercialize CAR T products directed at certain targets, including BCMA, CD70, Claudin 18.2, DLL3 and FLT3 (the Allogene Targets), for human oncologic therapeutic, diagnostic, prophylactic and prognostic purposes. In addition, certain Cellectis intellectual property rights granted by Cellectis to the Company and to Servier pursuant to the Exclusive License and Collaboration Agreement by and between Servier and Pfizer, dated October 30, 2016, which Pfizer assigned to the Company in April 2018, will survive the termination of the Original Cellectis Agreement. Pursuant to the Cellectis Agreement, the Company granted Cellectis a non-exclusive, worldwide, royalty-free, perpetual and irrevocable license, with sublicensing rights under certain conditions, under certain of the Company's intellectual property, to make, use, sell, import and otherwise commercialize CAR T products directed at certain targets (the Cellectis Targets). The Cellectis Agreement provides for development and sales milestone payments by the Company of up to $ 185.0 million per product that is directed against an Allogene Target, with aggregate potential development and sales milestone payments totaling up to $ 2.8 billion. Cellectis is also eligible to receive tiered royalties on annual worldwide net sales of any products that are commercialized by the Company that contain or incorporate, are made using or are claimed or covered by, Cellectis intellectual property licensed to the Company under the Cellectis Agreement (the Allogene Products), at rates in the high single-digit percentages. 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 11 Table of Contents 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. Depending on the Cellectis Target, the Company has a right of first refusal or right of first negotiation to purchase or license from Cellectis rights to develop and commercialize products against such Cellectis Targets. Under the Cellectis Agreement, the Company has certain diligence obligations to progress the development of CAR T product candidates and to commercialize one CAR T product per Allogene Target in one major market country where the Company has received regulatory approval. If the Company materially breaches any of its diligence obligations and fails to cure within 90 days, then with respect to certain targets, such target will cease to be an Allogene Target and instead will become a Cellectis Target. Unless earlier terminated in accordance with its terms, the Cellectis Agreement will expire on a product-by-product and country-by-country basis, upon expiration of all royalty payment obligations with respect to such licensed product in such country. The Company has the right to terminate the Cellectis Agreement at will upon 60 days’ prior written notice, either in its entirety or on a target-by-target basis. Either party may terminate the Cellectis Agreement, in its entirety or on a target-by-target basis, upon 90 days’ prior written notice in the event of the other party’s uncured material breach. The Cellectis Agreement may also be terminated by the Company upon written notice at any time in the event that Cellectis becomes bankrupt or insolvent or upon written notice within 60 days of a consummation of a change of control of Cellectis. All costs the Company incurred in connection with this agreement were recognized as research and development expenses in the condensed consolidated statements of operations. For the three and 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 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 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. 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. The Servier 12 Table of Contents 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. 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 13 Table of Contents 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. The Notch Agreement includes a research collaboration to conduct research and pre-clinical development activities to generate engineered cells directed to Allogene’s exclusive targets, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint development committee. Allogene will reimburse Notch’s costs incurred in accordance with such plan and budget. The term of the research collaboration will expire upon the earlier of (i) the fifth anniversary of the date of the Notch Agreement, (ii) at Allogene’s election, following the joint development committee’s determination that for each exclusive target, Notch has met certain success criteria, or (iii) the joint development committee’s determination that the research collaboration cannot be reasonably pursued against any exclusive target due to technical infeasibility or safety issues. In connection with the execution of the Notch Agreement, Allogene made an upfront payment to Notch of $ 10.0 million in return for a license to access Notch’s technology in order to conduct research pursuant to the Notch Agreement. 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 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. In October 2021, the Company made an additional $ 1.8 million investment in Notch’s common stock. Immediately following this transaction, the Company’s share in Notch was 23 % on a voting interest basis. 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. Notch is also entitled to receive tiered royalties in the mid to high single digit range on Allogene’s sales of licensed products, subject to certain reductions, for a term, on a country-by-country and product-by-product basis, commencing on first commercial sale of such product in such country and continuing until the latest of (i) the date upon which there is no valid claim of the licensed patents in such country of sale that covers such product, (ii) the expiration of applicable data or other regulatory exclusivity in such country of sale or (iii) a defined period from the first commercial sale of such product in such country. The terms of the Notch Agreement will continue on a product-by-product and country-by-country basis until Allogene’s payment obligations with respect to such product in such country have expired. Following such expiration, Allogene’s license with respect to such product and country shall be perpetual, irrevocable, fully paid up and royalty-free. Allogene may terminate the Collaboration Agreement in whole or on a product-by-product basis upon ninety days ’ prior written notice to Notch. Either party may also terminate the Collaboration Agreement with written notice upon material breach by the other party, if such breach has not been cured within a defined period of receiving such notice, or in the event of the other party’s insolvency. On January 25, 2024, the Company entered into an Amended and Restated Collaboration and License Agreement (the Amended Notch Agreement) with Notch. The Amended Notch Agreement amends and restates the Notch Agreement. Under the Amended Notch Agreement, the Company has relinquished its exclusive rights to all original CAR targets (the Released Targets) except for one CAR target, and has agreed to limit its option right to only one additional CAR target. If the option is exercised, the Company will have a minimum funding commitment for the overall development program. If Notch subsequently out-licenses any of the Released Targets, the Company will be entitled to receive a percentage of upfront and/or milestone payments associated therewith up to a set cap of $ 30.0 million, and will be entitled to a low, single-digit royalty on net sales of products containing a Released Target. In addition, with respect to the Company’s previous equity investment in Notch, the Amended Notch Agreement grants the Company certain anti-dilution protections up to certain limits for certain pre-IPO equity financings. As of 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. 14 Table of Contents 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 On October 6, 2020, the Company entered into a strategic five-year collaboration agreement with The University of Texas MD Anderson Cancer Center (MD Anderson) for the preclinical and clinical investigation of allogeneic CAR T cell product candidates. The Company and MD Anderson are collaborating on the design and conduct of preclinical and clinical studies with oversight from a joint steering committee. Under the terms of the agreement, the Company has committed up to $ 15.0 million of funding for the duration of the agreement. Payment of this funding is contingent on mutual agreement to study orders in order for any study to be included under the alliance. The Company made an upfront payment of $ 3.0 million to MD Anderson in the year ended December 31, 2020 and made an additional upfront payment of $ 3.0 million to MD Anderson in the year ended December 31, 2023. The Company is obligated to make further payments to MD Anderson each year upon the anniversary of the agreement effective date through the duration of the agreement term. These costs are expensed to research and development as MD Anderson renders the services under the strategic alliance. The agreement may be terminated by either party for material breach by the other party. Individual studies may be terminated for, among other things, material breach, health and safety concerns or where the institutional review board, the review board at the clinical site with oversight of the clinical study, requests termination of any study. Where any legal or regulatory authorization is finally withdrawn or terminated, the relevant study will also terminate automatically. 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 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. 15 Table of Contents 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 (Overland Licensed Products), 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 (Allogene Overland PRC). Promises that the Company concluded were distinct performance obligations in the License Agreement included: (1) the license of intellectual property and delivery of know-how, (2) the manufacturing license, related know-how and support, (3) know-how developed in future periods, and (4) participation in the joint steering committee. In order to determine the transaction price, the Company evaluated all the consideration to be received over the duration of the contract. Fixed consideration exists in the form of the upfront payment and Seed Preferred Shares in Allogene Overland. Regulatory milestones and royalties were considered variable consideration. The Company constrains the estimated variable consideration when it assesses it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods. Milestone fees were constrained and not included in the transaction price due to the uncertainties of research and development. The Company re-evaluates the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company estimated the fair value of the shares of Seed Preferred Stock at $ 79.0 million, using probability adjusted future cash infusions based on the upfront and certain quarterly cash payments of $ 117.0 million committed by Overland. The probability for the future quarterly cash payments of 65 % was developed based on consideration of the Company’s expectations for future cash infusions from Overland and was applied on a cumulative basis for each quarterly payment. The present value of the future quarterly cash payments was estimated using 11.9 % annual discount rate. The fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement. The Company determined that the initial transaction price consists of the upfront payment of $ 40.0 million and noncash consideration of $ 79.0 million received in the form of the shares of Seed Preferred Stock. The allocation of the transaction price is performed based on standalone selling prices, which are based on estimated amounts that the Company would charge for a performance obligation if it were sold separately. The initial transaction price of $ 119.0 million was allocated as follows: (i) $ 114.0 million to the license of intellectual property and delivery of know-how, which was recognized upon grant of license and delivery of know-how in the consolidated financial statements for the year ended December 31, 2021 when the know-how was delivered; (ii) $ 2.3 million to the manufacturing license, related know-how and support, which will be recognized as services are delivered; (iii) $ 2.1 million to the know-how developed in future periods, which will be recognized as services are delivered, and (iv) $ 0.6 million to participation in the joint steering committee, which will be recognized over time as the services are delivered. Funds received in advance are recorded as deferred revenue and will be recognized as the performance obligations are satisfied. 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. 16 Table of Contents 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 On January 5, 2022, the Company entered into an exclusive collaboration and global license agreement (Antion Collaboration and License Agreement) with Antion Biosciences SA (Antion) for Antion’s miRNA technology (miCAR), to advance multiplex gene silencing as an additional tool to develop next generation allogeneic CAR T products. Pursuant to the agreement, Antion will exclusively collaborate with the Company on oncology products for a defined period. The Company will also have exclusive worldwide rights to commercialize products incorporating Antion technology developed during the collaboration. The Antion Collaboration and License Agreement includes an exclusive research collaboration to conduct research and development of the use of Antion’s proprietary technologies to produce certain products for a defined period, which will be conducted in accordance with an agreed research plan and budget under the oversight of a joint steering committee. The Company will reimburse Antion's costs incurred in accordance with such plan and budget. In connection with the execution of the Antion Collaboration and License Agreement, the Company made an upfront payment to Antion of $ 3.5 million in return for a license to access Antion’s technology in order to conduct research pursuant to the agreement. The upfront payment was fully recognized as research and development expense as the license had no foreseeable alternative future use. In addition, the Company made a $ 3.0 million investment in Antion’s preferred stock. The Company accounts for its investment in Antion’s preferred stock as an equity investment measured at cost less any impairment. In connection with this investment, a Company representative was appointed to Antion’s Board of Directors. In July 2023, the Company and Antion entered into an amendment to the Antion Collaboration and License Agreement. Under the terms of this amendment, Antion’s exclusivity obligation relating to the collaboration was terminated; however, Antion agreed to certain restrictions on its ability to pursue products directed against specific targets. Also, in lieu of the Company’s prior obligation to make a $ 3.0 million investment in Antion following the completion of certain milestones, the Company agreed to make a $ 2.0 million investment in Antion's preferred stock and acquired warrants to purchase an additional $ 3.0 million of Antion's preferred stock. Under the Antion Collaboration and License Agreement, Antion will be eligible to receive up to $ 35.3 million for four products upon achievement of certain development and regulatory milestones. For each additional product, Antion will be eligible to receive $ 2.0 million upon achievement of a regulatory milestone. 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 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 On January 3, 2024, the Company entered into a Strategic Collaboration Agreement with Foresight Diagnostics, Inc. (Foresight Diagnostics) (the Foresight Agreement). Pursuant to the Foresight Agreement, the parties have agreed to collaborate 17 Table of Contents 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 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. 7. Commitments and Contingencies Leases In August 2018, the Company entered into an operating lease agreement (HQ Lease) for office and laboratory space which consists of approximately 68,000 square feet located in South San Francisco, California. The lease term was 127 months beginning August 2018 through February 2029 with an option to extend the term for seven years which was not reasonably assured of exercise. The Company has made certain tenant improvements, including the addition of laboratory space, and has received $ 5.0 million of tenant improvement allowances through December 31, 2020. The rent payments began on March 1, 2019 after an abatement period. In December 2021, the Company amended its lease agreement to lease an additional 47,566 square feet of office and laboratory space in South San Francisco, California, as part of the same building as the Company’s current headquarters. The lease term commenced in April 2022 and is for a period of 120 months. The rent payments for the expansion premises began in August 2022 after an abatement period. The lease term for the existing premises was also extended and the lease for both the existing and expansion premises will expire on March 31, 2032 with an option to extend the term for eight years which is not reasonably assured of exercise. In October 2018, the Company entered into an operating lease agreement for office and laboratory space which consists of 14,943 square feet located in South San Francisco, California. The lease term was 124 months beginning November 2018 through February 2029, with an option to extend the term for another seven years which was not reasonably assured of exercise. The Company has made certain tenant improvements, including the upgrading of current office and laboratory space with a lease incentive allowance of $ 0.8 million. Rent payments began in November 2018. 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 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. The lease term is 188 months and began in November 2020. Upon certain conditions, the Company has two ten-year options to extend the lease, both of which are not reasonably assured of exercise. The Company has received $ 3.0 million of tenant improvement allowances for costs related to the design and construction of certain Company improvements. In February 2023, the Company entered into a sublease with Bellco Capital Advisors Inc. (Bellco) for 2,218 square feet of office space in Los Angeles, California. The sublease term is 115 months, subject to certain early termination rights. The sublease commenced on January 1, 2024. The Company maintains letters of credit for the benefit of landlords which is disclosed as restricted cash in the condensed consolidated balance sheets. Restricted cash related to letters of credit due to landlords was $ 6.0 million as of June 30, 2024 and December 31, 2023. The balance sheet classification of our lease liabilities were as follows (in thousands): June 30, 2024 December 31, 2023 Operating lease liabilities Current portion included in accrued and other current liabilities $ 7,221 $ 6,775 Long-term portion of lease liabilities 86,989 88,346 Total operating lease liabilities $ 94,210 $ 95,121 18 Table of Contents The components of lease costs for operating leases, which were recognized in operating expenses, were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Operating lease cost $ 3,011 $ 3,175 $ 6,031 $ 6,356 Variable lease cost 508 672 1,375 1,363 Total lease costs $ 3,519 $ 3,847 $ 7,406 $ 7,719 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: (In thousands) 2024 (remaining 6 months) $ 6,382 2025 12,920 2026 13,163 2027 13,612 2028 14,076 2029 and thereafter 65,386 Total undiscounted lease payments 125,539 Less: Present value adjustment ( 31,329 ) Total $ 94,210 Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company uses its estimated incremental borrowing rate. The weighted average discount rate used to determine the operating lease liability was 6.24 %. As of June 30, 2024, the weighted average remaining lease term for our operating leases is 8.58 years. Other Commitments In July 2020, the Company entered into a Solar Power Purchase and Energy Services Agreement for the installation and operation of a solar photovoltaic generating system and battery energy storage system at the Company's cell therapy manufacturing facility in Newark, California. The agreement has a term of 20 years and commenced in September 2022. The Company is obligated to pay for electricity generated from the system at an agreed rate for the duration of the agreement term. Termination of the agreement by 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 June 30, 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 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 June 30, 2024, the Company had non-cancellable purchase commitments of $ 0.7 million. 19 Table of Contents 8. Equity Method Investments Notch Therapeutics In conjunction with the execution of the Notch Agreement (see Note 6), the Company also entered into a Share Purchase Agreement with the Company acquiring shares of Notch’s Series Seed convertible preferred stock for a total investment cost of $ 5.1 million which includes transaction costs of $ 0.1 million, resulting in a 25 % ownership interest in Notch. In February 2021, the Company made a $ 15.9 million investment in Notch’s Series A preferred stock. Immediately following this transaction, the Company’s share in Notch was 20.7 % on a voting interest basis. In October 2021, the Company made an additional $ 1.8 million investment in Notch’s common stock. Immediately following this transaction, the Company’s share in Notch was 23.0 % on a voting interest basis. 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. 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. 9. Stock-Based Compensation In June 2018, the Company adopted its 2018 Equity Incentive Plan (Prior 2018 Plan). The Prior 2018 Plan provided for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the Company’s Board of Directors and consultants of the Company under terms and provisions established by the Company’s Board of Directors. In September 2018, the Board of Directors adopted a new amended and restated 2018 Equity Incentive Plan as a successor to and continuation of the Prior 2018 Plan, which became effective in October 2018 (the 2018 Plan), which authorized additional shares for issuance and provided for an automatic annual increase to the number of shares issuable under the 2018 Plan by an amount equal to 5 % of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The term of any stock option granted under the 2018 Plan cannot exceed 10 years. The Company generally grants stock-based awards with service conditions only. Options granted typically vest over a four-year period but may be granted with different vesting terms. Restricted Stock Units granted typically vest annually over a four-year period but may be granted with different vesting terms. Options shall not have an exercise price less than 100 % of the fair market value of the Company’s common stock on the grant date. If the individual possesses more than 10 % of the combined voting power of all classes of stock of the Company, the exercise price shall not be less than 110 % of the fair market value of a common share of stock on the date of grant. This requirement is applicable to incentive stock options only. 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. 20 Table of Contents Stock Option Exchange Program On June 21, 2022, the Company commenced an offer to exchange certain eligible options held by eligible employees of the Company for new options (the Exchange Offer). The Exchange Offer expired on July 19, 2022. Pursuant to the Exchange Offer, 199 eligible holders elected to exchange, and the Company accepted for cancellation, eligible options to purchase an aggregate of 3,666,600 shares of the Company’s common stock, representing approximately 93.5 % of the total shares of common stock underlying the eligible options. On July 19, 2022, immediately following the expiration of the Exchange Offer, the Company granted new options to purchase 3,666,600 shares of common stock, pursuant to the terms of the Exchange Offer and the 2018 Plan. The exercise price of the new options granted pursuant to the Exchange Offer was $ 13.31 per share, which was the closing price of the common stock on the Nasdaq Global Select Market on the grant date of the new options. The new options are subject to a new three-year vesting schedule, vesting in equal annual installments over the vesting term. Each new option has a maximum term of seven years . The exchange of stock options was treated as a modification for accounting purposes. The incremental expense of $ 5.2 million for the modified options was calculated using a lattice option pricing model. The incremental expense and the unamortized expense remaining on the exchanged options as of the modification date are being recognized over the new three-year service period. Stock Option Activity The following summarizes option activity under the 2018 Plan: Outstanding Options Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contract Term Aggregate Intrinsic Value (in years) (in thousands) Balance, December 31, 2023 21,812,946 $ 9.93 7.53 $ 662 Options granted 5,643,898 3.12 9.06 Options exercised ( 357,993 ) 2.27 $ 597 Options forfeited ( 3,076,605 ) 11.15 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 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 June 30, 2024. 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: Six Months Ended June 30, 2024 2023 Expected term in years 5.27 - 6.08 5.27 - 6.08 Expected volatility 72.85 % - 73.50 % 73.37 % - 73.85 % Expected risk-free interest rate 3.94 % - 4.32 % 3.45 % - 4.10 % Expected dividend 0 % 0 % Restricted Stock Unit Activity 21 Table of Contents The following summarizes restricted stock unit activity under the 2018 Plan: Outstanding Restricted Stock Units Restricted Stock Units Weighted- Average Grant Date Fair Value per Share Weighted Average Remaining Vesting Life Aggregate Intrinsic Value (in years) (in thousands) Unvested December 31, 2023 12,180,471 $ 6.68 2.00 $ 39,099 Granted 4,566,042 4.25 1.52 Vested ( 1,572,790 ) 9.27 Forfeited ( 2,050,309 ) 7.96 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 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 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. 10. Related Party Transactions Collaboration Revenue and Equity Method Investment In December 2020, the Company entered into the License Agreement with Allogene Overland, a corporate joint venture entity and related party (see Note 6). The License Agreement was subsequently assigned to a wholly-owned subsidiary of Allogene Overland, Allogene Overland HK. On April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene Overland 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. 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 (see Note 8). 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. 22 Table of Contents Sublease Agreement In December 2018, the Company entered into a sublease with Bellco Capital LLC for 1,293 square feet of office space in Los Angeles, California for a three year term. On April 1, 2020, Bellco assumed all rights, title, interests and obligations under the sublease from Bellco Capital LLC. In November 2021, the sublease was extended to June 30, 2025. The sublease was amended, effective in July 2022, to move to a nearby location, with office space of 737 square feet. The Company’s executive chairman, Arie Belldegrun, M.D., FACS, is a trustee of the Belldegrun Family Trust, which controls Bellco. In 2023, the Company exercised its early termination right under the sublease agreement and the sublease was terminated effective December 31, 2023. In February 2023, the Company entered into a new sublease agreement with Bellco for 2,218 square feet of office space in Los Angeles, California. The sublease term is 115 months, subject to certain early termination rights. The sublease commenced on January 1, 2024. 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 In June 2018, the Company entered into a services agreement with Two River Consulting, LLC (Two River), a firm affiliated with the Company’s President and Chief Executive Officer, the Company’s Executive Chair of the board of directors, and a director of the Company to provide various managerial, clinical development, administrative, accounting and financial services to the Company. 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 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. Pursuant to the consulting agreement, Bellco Capital LLC provides certain services for the Company, which are performed by Dr. Belldegrun, the Company's executive chair, and inc lude without limitation, providing advice and analysis with respect to the Company’s business, business strategy and potential opportunities in the field of allogeneic CAR T cell therapy and any other aspect of the CAR T cell therapy business as the Company may agree. In consideration for these services, the Company paid Bellco Capital LLC $ 40,217 per month in arrears commencing January 2022. The Company may also, at its discretion, pay Bellco Capital LLC an annual performance award in an amount up to 60 % of the aggregate compensation payable to Bellco Capital LLC in a calendar year. The Company also reimburses Bellco Capital LLC for out of pocket expenses incurred in performing the services. The costs incurred for services provided, bonus, and out-of-pocket expenses incurred under this consulting agreement were $ 0.2 million 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. 11. Income Taxes The Company has a history of losses and expects to record a loss in 2024. The Company continues to maintain a full valuation allowance against its net deferred tax assets. 12. Net Loss Per Share The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the period presented due to their anti-dilutive effect: June 30, 2024 2023 Stock options to purchase common stock 24,022,246 21,943,774 Restricted stock units subject to vesting 13,123,414 12,833,995 Expected shares to be purchased under Employee Stock Purchase Plan 1,088,167 1,749,295 Early exercised stock options subject to future vesting — 82,051 Total 38,233,827 36,609,115 23 Table of Contents