What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-07 · 176 added, 120 removed, 254 unchanged (54% of the section changed)

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We have a deep pipeline of allogeneic chimeric antigen receptor (CAR) T cell product candidates targeting multiple promising antigens in a host of hematological malignancies, solid tumors, and autoimmune disease.

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

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

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

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

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

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

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

This cohort will include up to 40 patients, and we expect to release initial data in early 2025.

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lymphocytic lymphoma (CLL/SLL).

We will continue to evaluate clinical development and commercial opportunities for cema-cel in CLL/SLL and will provide an update on this program in early 2025.

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

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

We have implemented a protocol amendment that incorporates a diagnostic and treatment algorithm into the study design.

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

A data update from patients with CD70 positive RCC, which will include details on the algorithm, is planned by year-end 2024.

In November 2024, we provided a data update from patients with CD70 positive RCC, and highlighted that the newly implemented diagnostic and management algorithm appears effective in abating IEC-HS while preserving CAR T efficacy.

Additional data from dose escalation cohorts, as well as a newly opened Phase 1b expansion cohort, will be presented in two upcoming scientific meetings, including the 2024 International Kidney Cancer Symposium (IKCS, November 8, 2024) and the Society for Immunotherapy of Cancer’s (SITC) Annual Meeting (November 9, 2024).

As of the October 14, 2024, data cutoff, 39 patients had been enrolled in the ongoing Phase 1 trial, of which 26 were confirmed to have CD70 positive RCC and were evaluable for efficacy outcomes.

The median time from enrollment to the start of therapy was five days.

Data from dose escalation cohorts and ongoing Phase 1b expansion cohort are included in the presentations.

The Phase 1b expansion cohort is evaluating safety and efficacy of ALLO-316 at DL2 (80M CAR T cells) following a standard FC500 (fludarabine (30 mg/m2/day) and cyclophosphamide (500 mg/m2/d) for three days) lymphodepletion regimen.

The Phase 1b expansion cohort is expected to ultimately include approximately 20 patients.

Additional data from the Phase 1b expansion cohort is expected to be announced in mid-2025.

Following a single infusion of ALLO-316 in heavily pretreated patients, the trial demonstrated best Overall Response Rate (ORR) of 50% and Confirmed Response Rate of 33% in those patients with CD70 Tumor Proportion Score (TPS) of ≥50% who received DL2.

Patients with a TPS of ≥50% represents the majority of patients with advanced or metastatic RCC.

Of those with a TPS ≥50, 76% (16/21) experienced a reduction in tumor burden.

Two of six (33%) patients with high TPS who received the Phase 1b expansion regimen showed durable responses ongoing at ≥four months.

Response Rates by CD70 Status and Dose

Patients Evaluable for Disease Outcomes a (N=34)

CD70 Positive (N=26) CD70 Negative or Unknown (N=8)

Best overall response, d n/N (%)

High TPS (≥50)

Low TPS (<50)

0/5 (0) 1/8 (13)

0/2 (0) 6/18 (33)

0/3 (0) 3/8 (38)

0/2 (0) 0/8 (0)

Confirmed ORR, e n/N (%)

High TPS (≥50)

Low TPS (<50)

0/5 (0) 1/8 (13)

0/2 (0) 4/18 (22)

0/3 (0) 2/8 (25)

0/2 (0) 0/8 (0)

a Patients evaluable for disease outcome includes those who received ALLO-316 and had at least one tumor assessment.

b Standard fludarabine and cyclophosphamide plus ALLO-647

c Includes FC300 and FC500

d Best overall response across visits did not require confirmation for CR/PR.

e Confirmed overall response of CR/PR required confirmation at the subsequent visit.

The most common all-grade adverse events were cytokine release syndrome (CRS) (with only one grade ≥3), fatigue (59%), neutropenia (56%), decreased white blood cell count (54%), anemia (51%) and nausea (51%).

Immune effector cell-associated neurotoxicity syndrome (ICANS) was minimal at 8% and no graft-versus-host disease (GvHD) occurred.

Most Prevalent TEAEs (>40% Any Grade Incidence) and AESI

Adverse Event, n(%)

All Patients (N=39)

DL2 FC500 (N=11)

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White blood cell count decreased

Thrombocytopenia

AEs of Special interest

Viral infections

Neurotoxicity b

Graft-versus-host disease

TEAE included all AEs that started from the first dose date of study drug in each treatment period up to start of another treatment period, death, or the date prior to initiation of another anti-cancer agent, whichever occurred first.

IEC-HS includes the preferred terms IEC-HS, HLH, Hemophagocytic lymphohistiocytosis, and atypical HLH.

Two patients developed an inflammatory syndrome prior to the existence of IEC-HS as a term in MedDRA, which has been updated as of September 2023.

a Infection events (62%) were primarily low grade;

the most common was viral infections (33%) with cytomegalovirus infection and COVID-19 (any grade, 18% and 15%;

Grade ≥3, 0% and 5%, respectively).

b Neurotoxicity includes system organ class of nerve system disorders and psychiatric disorders with onset date up to Study Day 30 post ALLO-316 infusion.

Two DLT events of autoimmune hepatitis and cardiogenic shock were reported.

Each event occurred in two separate participants who received FCA (FC300 plus ALLO-647) lymphodepletion and DL2 of ALLO-316.

Three Grade 5 treatment-related adverse events were reported:

1) cardiogenic shock, which was one of the two DLT events;

2) sepsis from multi-drug resistant Klebsiella pneumoniae in a participant who received DL4 of ALLO-316.

This participant had a prior episode of muscle abscess and bacteremia from the same multi-drug resistant Klebsiella and was receiving anakinra and dexamethasone for hyperinflammation;

3) failure to thrive in a participant 16 months after treatment with ALLO-316.

This subject had tumor response of stable disease (SD) at month 12 and no interval scans to evaluate disease status prior to death.

On October 29, 2024, we announced that we had received Regenerative Medicine Advanced Therapy (RMAT) designation for ALLO-316 for adult patients with advanced or metastatic RCC.

We will continue to evaluate the safety and efficacy at the Phase 1b dose level in 2025.

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

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

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

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

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

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In mid-2025, we plan to select the lymphodepletion regimen with which we will complete enrollment in the study (Part B).

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

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

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

In May 2024, we entered into an Amendment and Settlement Agreement (the Servier Amendment) under which we expanded the geographic territory for our license to include the European Union and the United Kingdom.

In May 2024, we entered into an Amendment and Settlement Agreement (the Servier Amendment) under which we expanded the geographic territory for our CD19 license to include the European Union and the United Kingdom.

The Servier Amendment also grants us an option to further expand the 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.

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

We estimate that the expansion of our license for the CD19 Products to the European Union and United Kingdom will substantially increase our market opportunity in 1L consolidation

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LBCL and R/R/ CLL from more than $6.0 billion in the U.S.

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

Since inception, we have had significant operating losses.

Our net losses were $66.4 million and $131.4 million for the three and six months ended June 30, 2024, respectively.

As of June 30, 2024, we had an accumulated deficit of $1.7 billion.

As of June 30, 2024, we had $444.6 million in cash and cash equivalents and investments and we expect our cash runway to fund operations into 2026.

Our net losses were $66.3 million and $197.7 million for the three and nine months ended September 30, 2024, respectively.

As of September 30, 2024, we had an accumulated deficit of $1.8 billion.

As of September 30, 2024, we had $403.4 million in cash and cash equivalents and investments and we expect our cash runway to fund operations into 2026.

We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses and general and administrative expenses will continue to increase.

Our Research and Development and License Agreements

Our Licenses and Collaboration Agreements

Below is a summary of the key terms for certain of our licenses and collaboration agreements.

For a more detailed description of these agreements, see Note 6 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Asset Contribution Agreement with Pfizer

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(Cellectis) and Servier as described below, and other intellectual property for the development and administration of CAR T cells for the treatment of cancer.

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

Research Collaboration and License Agreement with Cellectis

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

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

Exclusive License Agreement with Servier

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

In May 2024, the Servier Amendment expanded our territory under the Original Servier Agreement to include the European Union and the United Kingdom, and provides for an option to further expand our territory to include China and Japan

upon the objective showing of sufficient resources to develop licensed products in those countries, which could be met through us entering into a strategic partnership covering those countries.

Additionally, we agreed to waive certain of our rights under the Servier Agreement to elect a conversion of our license to the licensed products directed against CD19, including UCART19, ALLO-501 and cema-cel (collectively, CD19 Products) to a worldwide license.

Additionally, under the Servier Amendment all of our 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 under a first development and commercialization agreement, dated February 7, 2014, by and between Cellectis and Servier (as amended, the Servier-Cellectis Agreement).

The Servier Agreement provides for aggregate potential payments by us to Servier of up to €75 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 million remains for the initial indication for cema-cel, with additional payments of €55 million due for each subsequent indication, of which €50 million remains for the first subsequent indication for cema-cel, and aggregate potential payments by us to Servier of up to €80 million upon achievement of certain net sales milestones for each licensed product.

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

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

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

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

(1) we dose the first subject in our first phase 3 clinical study for a CD19 CAR-T product that is a licensed product under the Servier Agreement, (2) we submit a phase 2 clinical study for a licensed product to the U.S.

Food and Drug Administration or the European Medicines Agency, and, based on its results, such phase 2 clinical study is accepted for regulatory approval as a pivotal study, or (3) a final and definitive decision of a tribunal or court finding that under the corresponding milestone under the Servier-Cellectis Agreement has occurred and the €20 million payment is due to Cellectis.

The royalties under the Original Servier Agreement were also amended.

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

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

royalty rate is 10%.

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

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

The net effect of the Servier Amendment is that our royalty rate in the United States for the first half of the first tier of net sales was increased by a low single digit percentage as compared to the Original Servier Agreement.

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

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

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

In May 2024, we entered into an Amendment and Settlement Agreement (the Servier Amendment) with Servier under which we:

(1) expanded our territory under the Original Servier Agreement to include the European Union and the United Kingdom, and provides for an option to further expand our territory to include China and Japan, (2) waived certain of our rights to elect to convert certain of our license rights to a worldwide license, (3) revised our future milestone payments to coincide with Servier’s milestone payments to Cellectis under the Servier-Cellectis Agreement, (4) agreed to pre-pay a future €20 million milestone payment into an escrow account, and (5) increased the United States tiered royalty rates to a range from the low tens to the mid teen percentages, and agreed to an ex-U.S.

royalty rate of 10%.

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

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

Collaboration and License Agreement with Notch

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

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

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

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

In February 2021, we made an additional $15.9 million investment in Notch's Series A preferred stock.

In October 2021, we made an additional $1.8 million investment in Notch's common stock.

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

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

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

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

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

On May 17, 2024, Notch completed the Notch Series B Financing.

Although we did not participate in the Notch Series B Financing, we received Series B preferred stock of Notch pursuant to our anti-dilution rights.

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

We also waived our right to appoint one member of the Notch board of directors, but retained board observation rights.

As a result of the Notch Series B Financing, our ownership interest in Notch was reduced from 23% to approximately 13%.

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

If Notch subsequently out-

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

Strategic Alliance with The University of Texas MD Anderson Cancer Center

On October 6, 2020, we entered into a strategic five-year collaboration agreement with The University of Texas MD Anderson Cancer Center (MD Anderson) for the preclinical and clinical investigation of allogeneic CAR T cell product candidates.

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the agreement with MD Anderson.

License Agreement with Allogene Overland Biopharm (PRC) Co., Limited

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

See Note 6 to our condensed consolidated

financial statements included elsewhere in this report for further description of the License Agreement and Share Purchase Agreement.

On May 24, 2024, we, Overland and 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).

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(Overland Therapeutics).

See Note 6 to our condensed consolidated financial statements included elsewhere in this report for further description of the License Agreement, Share Purchase Agreement, and Share Exchange Agreement.

Collaboration and License Agreement with Antion

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On July 11, 2023, we entered into an amendment to the Antion Collaboration and License Agreement, which included a $2.0 million investment in Antion’s preferred shares and the acquisition of warrants to purchase an additional $3.0 million of Antion’s preferred shares.

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

Strategic Collaboration Agreement with Foresight Diagnostics

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

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

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

Components of Results of Operations

As of June 30, 2024, our revenue has been exclusively generated from the License Agreement with Allogene Overland PRC.

As of September 30, 2024, our revenue has been exclusively generated from the License Agreement with Allogene Overland PRC.

See Note 6 to our financial statements appearing elsewhere in this Quarterly Report for more information related to our recognition of revenue and the License Agreement.

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To date, our research and development expenses have related primarily to discovery efforts, preclinical and clinical development, and manufacturing of our product candidates.

Research and development expenses for the three and six months ended June 30, 2024 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

Research and development expenses for the three and nine months ended September 30, 2024 included costs associated with our clinical and preclinical stage pipeline candidates and research into newer technologies.

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

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However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates.

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The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:

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Interest and other income, net consists of interest earned on our cash and cash equivalents and investments, as well as investment gains and losses recognized during the period.

Interest Expense

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Interest expense related to the California Institute of Regenerative Medicine (CIRM) award is accrued upon cash receipt.

Other Income and Expense, Net

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Results of Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

The following sets forth our results of operations for the three months ended June 30, 2024 and 2023 (dollars in thousands):

Three Months Ended June 30, Change

Comparison of the Three Months Ended September 30, 2024 and 2023

The following sets forth our results of operations for the three months ended September 30, 2024 and 2023 (dollars in thousands):

Three Months Ended

September 30, Change

2024 2023 $ %

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Interest and other income, net 6,705 6,205 500 8 %

Interest expense (100) — (100) 100 %

Other income and expense, net

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Collaboration revenue - related party

Collaboration revenue recognized for the three months ended June 30, 2023 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement with Allogene Overland PRC.

Collaboration revenue recognized for the three months ended September 30, 2023 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement with Allogene Overland PRC.

Research and Development Expenses

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

Three Months Ended June 30,

Three Months Ended September 30,

2024 2023 Change

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Total research and development expenses 44,713 45,977 (1,264)

Our research and development expenses included $22.1 million of internal expenses and $28.3 million of external expenses for the three months ended June 30, 2024.

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

Research and development expenses were $50.4 million and $62.0 million for the three months ended June 30, 2024 and 2023, respectively.

The decrease of $11.7 million was driven primarily by a decrease in personnel related costs of $10.4 million, including $2.2 million related to a decrease in stock-based compensation expense and a decrease in facilities and depreciation expense of $1.2 million.

Our research and development expenses included $22.5 million of internal expenses and $22.2 million of external expenses for the three months ended September 30, 2024.

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

Research and development expenses were $44.7 million and $46.0 million for the three months ended September 30, 2024 and 2023, respectively.

The decrease of $1.3 million was driven primarily by a decrease in personnel related costs of $6.5

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million, including $1.8 million related to a decrease in stock-based compensation expense, and a decrease in facilities and depreciation expense of $0.7 million, partially offset by the increase in external costs of $6.0 million relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs.

General and Administrative Expenses

General and administrative expenses were $16.1 million and $18.5 million for the three months ended June 30, 2024 and 2023, respectively.

General and administrative expenses were $16.3 million and $17.0 million for the three months ended September 30, 2024 and 2023, respectively.

The decrease of $0.7 million was primarily due to a decrease in personnel related costs of $0.6 million, including $0.2 million related to a decrease in stock-based compensation expense.

Impairment of long-lived asset

In June 2024, we made a decision to sublease one of our leased buildings in South San Francisco.

We vacated and ceased occupancy of this building in June 2024 and currently we are actively marketing the leased building for sublease.

We recorded long-lived asset impairment charge based on the performed impairment analysis.

In September 2024, we identified additional impairments as the carrying values of to-be-sublet property asset groups were not recoverable due to current market conditions.

We revised the valuations of the assets within these groups based on a non-binding letter of intent with a potential subtenant for a portion of one of the buildings within one of the asset groups and based on new market data for both asset groups.

For the three months ended September 30, 2024, we recorded long-lived asset impairment charge of $10.7 million.

No such expense was recorded for the three months ended September 30, 2023.

Interest and Other Income, Net

Interest and other income, net was $5.0 million and $3.8 million for the three months ended June 30, 2024 and 2023, respectively.

The increase of $1.2 million was due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Interest and other income, net was $6.7 million and $6.2 million for the three months ended September 30, 2024 and 2023, respectively.

The increase of $0.5 million was primarily due to foreign exchange rate gain as a result of strengthening U.S.

dollar against other currencies.

Interest Expense

Interest expense was related to the CIRM award proceeds received for the three months ended September 30, 2024.

No such interest expense was recorded for the three months ended September 30, 2023.

Other Income and Expense, Net

Other income was $0.1 million and other expense was $2.5 million for the three months ended June 30, 2024 and 2023, respectively.

The decrease in other expenses of $2.6 million was primarily due to a decrease in the share of net losses in our equity method investments and gain from the Organizational Restructuring of Overland Therapeutics.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following sets forth our results of operations for the six months ended June 30, 2024 and 2023 (dollars in thousands):

Six Months Ended June 30,

Other expense, net was $1.1 million and $5.5 million for the three months ended September 30, 2024 and 2023, respectively.

The decrease in other expense of $4.4 million was primarily due to a decrease in the share of net losses in our equity method investments and impairment charge of $3.0 million for our equity method investments during the three months ended September 30, 2023.

Comparison of the Nine Months Ended September 30, 2024 and 2023

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The following sets forth our results of operations for the nine months ended September 30, 2024 and 2023 (dollars in thousands):

Nine Months Ended

September 30, Change

2024 2023 $ %

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Interest and other income, net 17,126 12,042 5,084 42 %

Interest expense (100) — (100) 100 %

Other income and expense, net

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Collaboration revenue - related party

Collaboration revenue recognized for the six months ended June 30, 2024 and 2023 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement with Allogene Overland PRC.

Collaboration revenue recognized for the nine months ended September 30, 2024 and 2023 was mainly due to participation in the joint steering committee performance obligation related to the License Agreement with Allogene Overland PRC.

Research and Development Expenses

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

Six Months Ended June 30,

Nine Months Ended September 30,

2024 2023 Change

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Total research and development expenses 147,327 188,253 (40,926)

Our research and development expenses included $47.5 million of internal expenses and $55.1 million of external expenses for the six months ended June 30, 2024.

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

Research and development expenses were $102.6 million and $142.3 million for the six months ended June 30, 2024 and 2023, respectively.

The decrease of $39.7 million was driven primarily by a decrease in personnel related costs of $21.9 million, including $8.3 million related to a decrease in stock-based compensation expense, a decrease in external costs relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs of $14.4 million and a decrease in facilities, depreciation, and other expense of $3.4 million.

Our research and development expenses included $70.1 million of internal expenses and $77.3 million of external expenses for the nine months ended September 30, 2024.

Our research and development expenses included $94.4 million of internal expenses and $93.8 million of external expenses for the nine months ended September 30, 2023.

Research and development expenses were $147.3 million and $188.3 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease of $40.9 million was driven primarily by a decrease in personnel related costs of $28.3 million, including $10.2 million related to a decrease in stock-based compensation expense, external costs of $8.4 million relating to the advancement of our product candidates due to the timing of development activities and manufacturing runs, and facilities, depreciation, and other expense of $4.2 million.

General and Administrative Expenses

General and administrative expenses were $33.4 million and $37.4 million for the six months ended June 30, 2024 and 2023, respectively.

General and administrative expenses were $49.7 million and $54.4 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease of $4.8 million was primarily due to a decrease in personnel related costs of $3.9 million, including $1.7 million related to a decrease in stock-based compensation expense.

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Impairment of long-lived asset

In June 2024, we made a decision to sublease one of our leased buildings in South San Francisco.

We vacated and ceased occupancy of this building in June 2024 and currently we are actively marketing the leased building for sublease.

We recorded long-lived asset impairment charge based on the performed impairment analysis.

In June 2024, we recorded long-lived asset impairment charge of $5.0 million.

In September 2024, we identified additional impairments as the carrying value of this to-be-sublet property asset group was not recoverable due to current market conditions.

We revised the valuation of this asset group based on new market data.

In September 30, 2024, we recorded an additional long-lived asset impairment charge of $1.2 million.

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

In September 2024, we identified additional impairments as the carrying value of to-be-sublet property asset group was not recoverable due to current market conditions.

We revised the valuations of this asset group based on a non-binding letter of intent with a potential subtenant for a portion of the building included in this asset group and based on new market data.

In September, we recorded long-lived asset impairment charge of $9.5 million.

During the nine months ended September 30, 2024, we recognized total impairment charge of $15.7 million.

No such expense was recorded for the nine months ended September 30, 2023.

Interest and Other Income, Net

Interest and other income, net was $10.4 million and $5.8 million for the six months ended June 30, 2024 and 2023, respectively.

The increase of $4.6 million was due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Interest and other income, net was $17.1 million and $12.0 million for the nine months ended September 30, 2024 and 2023, respectively.

The increase of $5.1 million was primarily due to higher yields and a corresponding increase in the interest earned on our cash, cash equivalents and investments.

Interest Expense

Interest expense was related to the CIRM award proceeds received for the nine months ended September 30, 2024.

No such interest expense was recorded for the nine months ended September 30, 2023.

Other Income and Expense, Net

Other expenses, net were $0.8 million and $5.4 million for the six months ended June 30, 2024 and 2023, respectively.

The decrease in other expenses of $4.6 million was primarily due to a decrease in the share of net losses in our equity method investments and gain from the Organizational Restructuring of Overland Therapeutics.

Other expense, net was $2.0 million and $10.9 million for the nine months ended September 30, 2024 and 2023, respectively.

The decrease in other expense of $8.9 million was primarily due to a decrease in the share of net losses in our equity method investments and impairment charge of $3.0 million for our equity method investments during the nine months ended September 30, 2023.

Liquidity and Capital Resources

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

As of June 30, 2024, we had $444.6 million in cash and cash equivalents and investments.

As of September 30, 2024, we had $403.4 million in cash and cash equivalents and investments.

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

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

During the three and six months ended June 30, 2024, we sold an aggregate of 250,000 shares of our common stock in ATM offerings resulting in net proceeds of $1.0 million.

During the nine months ended September 30, 2024, we sold an aggregate of 250,000 shares of our common stock in ATM offerings resulting in net proceeds of $1.0 million.

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

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

On May 13, 2024, we 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 our Board of Directors and our executive officers or their respective affiliates (Purchasers), pursuant to which we sold and issued to the Underwriter and the Purchasers an aggregate of 37,931,035 shares of our common stock resulting in net proceeds of $105.2 million in a registered offering transaction that closed on May 16, 2024.

In May 2024, we completed an underwritten offering pursuant to which we issued and sold 37,931,035 shares of our common stock.

We received net proceeds of $105.2 million, after deducting underwriting discounts and commissions and offering expenses payable by us.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

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Operating Activities

During the six months ended June 30, 2024, cash used in operating activities of $119.5 million was attributable to a net loss of $131.4 million and a decrease of $21.2 million in our net operating assets and liabilities, partially offset by non-cash charges of $33.1 million.

The non-cash charges consisted primarily of stock-based compensation expense of $25.5 million, impairment of long-lived assets of 5.0 million, depreciation of $7.2 million, and our share of equity investments’ net losses for the period of $0.6 million, partially offset by net amortization and accretion on investment securities of $5.0 million.

The change in operating assets and liabilities was primarily due to a $21.4 million deposit placed in escrow related to the Servier Amendment, a $6.7 million decrease in accrued and other current liabilities, and a $2.0 million increase in prepaid expenses and other current assets, partially offset by a $6.7 million increase in accounts payable and a $2.1 million decrease in other long-term assets.

During the six months ended June 30, 2023, cash used in operating activities of $128.5 million was attributable to a net loss of $179.2 million, partially offset by non-cash charges of $47.6 million and an increase of $3.1 million in our net operating assets and liabilities.

The non-cash charges consisted primarily of stock-based compensation expense of $35.4 million, depreciation of $7.2 million, our share of equity investments' net losses for the period of $5.4 million, and non-cash rent expense of $0.4 million, partially offset by net amortization and accretion on investment securities of $0.6 million.

The change in operating assets and liabilities was primarily due to a $5.6 million increase in accrued and other current liabilities and a $1.4 million decrease in prepaid expenses and other current assets, partially offset by a $3.2 million decrease in accounts payable and a $0.6 million decrease in other long-term liabilities.

During the nine months ended September 30, 2024, cash used in operating activities of $163.6 million was attributable to a net loss of $197.7 million and a decrease of $30.1 million in our net operating assets and liabilities, partially offset by non-cash charges of $64.1 million.

The non-cash charges consisted primarily of stock-based compensation expense of $38.9 million, impairment of long-lived assets of 15.7 million, depreciation of $10.4 million, non-cash rent expense of $4.1 million, and our share of equity investments’ net losses for the period of $1.7 million, partially offset by net amortization and accretion on investment securities of $6.7 million.

The change in operating assets and liabilities was primarily due to deposit placed in escrow related to the Servier Amendment of $22.3 million, decrease in operating lease liabilities of $4.5 million, decrease in accrued and other current liabilities of $4.1 million, increase in prepaid expenses and other current assets of $2.3 million, and decrease in accounts payable of $0.5 million, partially offset by decrease in other long-term assets of $3.6 million.

During the nine months ended September 30, 2023, cash used in operating activities of $184.0 million was attributable to a net loss of $241.5 million and a decrease of $16.2 million in our net operating assets and liabilities, partially offset by non-cash charges of $73.7 million.

The non-cash charges consisted primarily of stock-based compensation expense of $50.7 million, depreciation of $10.7 million, our share of equity investments' net losses for the period of $7.9 million, non-cash rent expense of $4.9 million, and impairment of equity method investment of $3.0 million, partially offset by net amortization and accretion on investment securities of $3.5 million.

The change in operating assets and liabilities was primarily due to decrease in accounts payable of $7.2 million, decrease in accrued and other current liabilities of $7.1 million, decrease in operating lease liabilities of $4.4 million, decrease in other long-term liabilities of $0.6 million, and increase in other long-term asset of $0.4 million, partially offset by decrease in prepaid expenses and other current assets of $3.6 million.

Investing Activities

During the six months ended June 30, 2024, net cash provided by investing activities of $96.7 million was related to cash provided by investment maturities of $220.5 million, partially offset by cash used in the purchase of investments of $123.7 million.

During the six months ended June 30, 2023, net cash provided by investing activities of $130.1 million was related to cash provided by investment maturities of $296.3 million and cash provided by investment sales of $5.6 million, partially offset by cash used in purchases of investments of $170.5 million and cash used in the purchase of property and equipment of $1.3 million.

During the nine months ended September 30, 2024, net cash provided by investing activities of $20.8 million was related to cash provided by investment maturities of $330.3 million and cash provided by investment sales of $5.4 million, partially offset by cash used in the purchase of investments of $314.5 million.

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

Financing Activities

During the six months ended June 30, 2024, cash provided by financing activities of $110.3 million was related to $105.3 million in net proceeds from the issuance of common stock through our May 2024 registered offering, $1.0 million of net proceeds from the issuance of common stock through ATM transactions, $2.3 million of cash provided from the CIRM award, $0.9 million of cash provided by the sale of common stock through our employee stock purchase plan, and $0.8 million of cash provided by the issuance of common stock upon exercise of stock options.

During the six months ended June 30, 2023, cash provided by financing activities of $91.3 million was related to $87.9 million in net proceeds from the issuance of common stock through ATM transactions, $1.7 million of cash provided by the sale of common stock through our employee stock purchase plan, and $1.6 million of cash provided by the issuance of common stock upon exercise of stock options.

During the nine months ended September 30, 2024, cash provided by financing activities of $110.9 million was related to $105.3 million in net proceeds from the issuance of common stock through our May 2024 registered offering, $2.3 million of cash provided from the CIRM award, $1.5 million of cash provided by the sale of common stock through our employee stock purchase plan, $1.0 million of net proceeds from the issuance of common stock through ATM transactions, and $0.8 million of cash provided by the issuance of common stock upon exercise of stock options.

During the nine months ended September 30, 2023 , cash provided by financing activities of $95.5 million was related to $91.1 million in net proceeds from the issuance of common stock through ATM transactions, $2.5 million of cash provided by the sale of common stock through our employee stock purchase plan, and $1.9 million of cash provided by the issuance of common stock upon exercise of stock options.

Material Cash Commitments and Requirements

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Our primary use of cash is for operating expenses, which consist primarily of clinical manufacturing and research and development expenditures related to our lead product candidates, other research efforts, and to a lesser extent, general and administrative expenditures.

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Doing so will likely harm our ability to execute our business plans.

Our commitments primarily consist of obligations under our agreements with Pfizer, Cellectis, Servier and Notch.

Our commitments primarily consist of obligations under our agreements with Pfizer, Cellectis, Servier, Notch and Foresight.

Under these agreements we are required to make milestone payments upon successful completion of certain regulatory and sales milestones on a target-by-target and country-by-country basis.

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

As of June 30, 2024, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

As of September 30, 2024, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

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

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

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

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

These agreements generally provide for termination or cancellation, other than for costs already incurred.

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

As of September 30, 2024, the Company had non-cancellable purchase commitments of $2.3 million.

On October 6, 2020, we announced we entered into a strategic five-year collaboration agreement with MD Anderson for the preclinical and clinical investigation of allogeneic CAR T cell product candidates.

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

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

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

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

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

On January 3, 2024, we entered into the Foresight Agreement with Foresight Diagnostics.

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

In July 2020, we 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 our manufacturing facility in Newark, California.

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We are 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 us will

result in a termination payment due of approximately $4.3 million.

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

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

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Critical Accounting Policies and Estimates

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Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

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

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Item 2. Management’s Discussion and Analysis