Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Atara Biotherapeutics is a pioneer in T-cell immunotherapy, leveraging its novel allogeneic EBV T-cell platform to develop transformative therapies for patients with serious diseases, including solid tumors, hematologic cancers and autoimmune disease. With our lead program in Phase 3 clinical development, we are the most advanced allogeneic T-cell immunotherapy company and intend to rapidly deliver off-the-shelf treatments to patients with high unmet medical need. Our platform leverages the unique biology of EBV T cells and has the capability to treat a wide range of EBV-driven diseases or other serious diseases through incorporation of engineered CARs or TCRs. Atara is applying this one platform to create a robust pipeline. Our strategic priorities are:
•
Tab-cel ® : Atara’s most advanced T-cell immunotherapy, tab-cel ® (tabelecleucel), currently in Phase 3 development for patients with EBV+ PTLD who have failed rituximab or rituximab plus chemotherapy, as well as other EBV-driven diseases;
•
ATA188 : T-cell immunotherapy targeting EBV antigens believed to be important for the potential treatment of multiple sclerosis;
•
CAR T Programs :
o
ATA2271 : Autologous CAR T immunotherapy targeting solid tumors expressing the tumor antigen mesothelin, which is partnered with Bayer;
o
ATA3271 : Allogeneic CAR T therapy targeting mesothelin, which is partnered with Bayer; and
o
ATA3219 : Allogeneic CAR T targeting CD19 and being developed as a potential best-in-class product, based on a next generation 1XX co-stimulatory domain and the innate advantages of EBV T cells as the foundation for an allogeneic CAR T platform.
Our T-cell immunotherapy platform includes the capability to progress both allogeneic and autologous programs and is potentially applicable to a broad array of targets and diseases. Our off-the-shelf, allogeneic T-cell platform allows for rapid delivery of a T-cell immunotherapy product manufactured in advance of patient need and stored in inventory, with each manufactured lot of cells providing therapy for numerous potential patients. This differs from autologous treatments, in which each patient’s own cells must be extracted, genetically modified outside the body and then delivered back to the patient, requiring a complex logistics network. For our allogeneic programs, we select the appropriate set of cells for use based on a patient’s unique immune profile.
In December 2020, we entered into the Bayer License Agreement, pursuant to which we granted to Bayer an exclusive, field-limited license under the applicable patents and know-how owned or controlled by us and our affiliates covering or related to ATA2271 and ATA3271. Under the terms of the Bayer License Agreement, we will be responsible at our cost for all mutually agreed preclinical and clinical activities for ATA2271 through the first in human Phase 1 clinical study in collaboration with MSK, following which Bayer will be responsible for the further development of ATA2271 at its cost. Bayer will be responsible for the development of ATA3271, except for certain mutually agreed preclinical, translational, manufacturing and supply chain activities to be performed by us relating to ATA3271, in each case at Bayer’s cost. Bayer will also be solely responsible for commercializing the Licensed Products at its cost.
We have also entered into research collaborations with leading academic institutions such as MSK, QIMR Berghofer and Moffitt pursuant to which we acquired rights to novel and proprietary technologies and programs.
Our manufacturing facility in Thousand Oaks, California has the flexibility to manufacture multiple T-cell and CAR T immunotherapies while integrating research and process science functions to enable increased collaboration for rapid product development. We are currently in the process of completing our facility’s commercial production qualification activities for tab-cel ® while building inventory according to our commercial product supply strategy.
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In addition to our manufacturing facility, we also work with Cognate pursuant to the Manufacturing Agreement that we entered into in December 2019 . P ursuant to the Manufacturing Agreement, Cognate provides manufacturing services for certain of our product candidates. The initial term of the Manufacturing Agreement runs until December 31, 2021 and is renewable with Cognate’s approval for an additional one - year period.
We have a limited operating history. Since our inception in 2012, we have devoted substantially all of our resources to identify, acquire and develop our product candidates, including conducting preclinical and clinical studies, acquiring or manufacturing materials for clinical studies, constructing our manufacturing facility and providing general and administrative support for these operations.
Our net losses were $306.6 million, $291.0 million and $230.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, we had an accumulated deficit of $1.1 billion. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative expenses associated with our operations. As of December 31, 2020 , our cash, cash equivalents and short-term investments totaled $500.7 million, which we intend to use to fund our operations.
Financial Overview
Revenues
We have never generated revenues from the sale of products and have incurred losses since inception. We do not expect to receive any revenue from product sales unless and until we obtain regulatory approval for and commercialize one of our current or future product candidates. Further, we have not generated any revenue to date from the Bayer License Agreement.
We expect that any revenue we generate from our Bayer License Agreement and any future collaboration and research and license partners will fluctuate from year to year as a result of the timing and number of milestones and other payments.
Research and Development Expenses
The largest component of our total operating expenses since inception has been our investment in research and development activities, including the preclinical and clinical development of our product candidates. Research and development expenses consist primarily of compensation and benefits for research and development employees, including stock-based compensation; expenses incurred under agreements with contract research organizations and investigative sites that conduct preclinical and clinical studies; the costs of acquiring and manufacturing clinical study materials and other supplies; payments under licensing and research and development agreements; other outside services and consulting costs; and facilities, information technology and overhead expenses. Research and development costs are expensed as incurred.
We plan to continue investment in the development of our product candidates. Our current planned research and development activities include the following:
•
continuing to initiate sites and enroll patients in our Phase 3 clinical study of tab-cel ® for the treatment of patients with EBV+ PTLD after HCT and SOT who have failed rituximab;
•
process development, testing and manufacturing of drug supply to support clinical studies and IND-enabling studies;
•
continuing development of ATA188 in progressive MS;
•
continuing to develop product candidates based on our next-generation CAR T programs;
•
continuing to develop our product candidates in additional indications, including tab-cel ® for EBV+ cancers;
•
continuing to develop other preclinical product candidates; and
•
leveraging our relationships and experience to in-license or acquire additional product candidates or technologies.
In addition, we believe it is important to invest in the development of new product candidates to continue to build the value of our product candidate pipeline and our business. We plan to continue to advance our most promising early product candidates into preclinical development with the objective to advance these early-stage programs to human clinical studies over the next several years .
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Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs, and timing of clinical studies and development of our product candidates will depend on a variety of factors, including :
•
the availability of qualified drug supply for use in our ongoing Phase 3 or other clinical studies;
•
the scope, rate of progress, and expenses of our ongoing clinical studies, potential additional clinical studies and other research and development activities;
•
the potential review or reanalysis of our clinical study results;
•
future clinical study results;
•
uncertainties in clinical study enrollment rates or discontinuation rates of patients, including any potential impact of the COVID-19 pandemic;
•
potential additional safety monitoring or other studies requested by regulatory agencies;
•
changing medical practice patterns related to the indications we are investigating;
•
significant and changing government regulation;
•
disruptions caused by man-made or natural disasters or public health pandemics or epidemics, including, for example, the COVID-19 pandemic; and
•
the timing and receipt of any regulatory approvals, as well as potential post-market requirements.
The process of conducting the necessary clinical research to obtain approval from the FDA and other regulators is costly and time consuming and the successful development of our product candidates is highly uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in the section of this report titled “1A. Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and benefits for legal, human resources, finance, commercial and other general and administrative employees, including stock-based compensation; professional services costs, including legal, patent, human resources, audit and accounting services; other outside services and consulting costs, including those related to pre-commercial activities; and information technology and facilities costs.
Interest and Other Income, net
Interest and other income, net consists primarily of interest earned on our cash, cash equivalents and short-term investments.
Income Taxes
Our provision for (benefit from) income taxes consists primarily of income taxes in U.S. state and foreign jurisdictions. Our effective tax rate was 0% for the years ended December 31, 2020, 2019, and 2018.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Our significant judgments and estimates are detailed below, and our significant accounting policies are more fully described in Note 2 of the accompanying consolidated financial statements .
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R evenue Recognition
Revenue from research activities under our research, development, and license agreements is recognized when our customer obtains control of the promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. Revenue generated from our research, development, and license agreements is not subject to repayment and typically includes upfront fees, development, regulatory and commercial milestone payments and royalties on the licensee’s future product sales.
Our research, development, and license agreements may include the transfer of intellectual property rights in the form of licenses, promises to provide research and development services and promises to participate on certain development committees with the collaboration party. We assess whether the promises in these agreements are considered distinct performance obligations that should be accounted for separately. Judgment is required to determine whether licenses to our intellectual property are distinct from the research and development services or participation on development committees.
The transaction price in each agreement is allocated to the identified performance obligations based on the standalone selling price (SSP) of each distinct performance obligation. Due to the early stage of our licensed technology, the license of such technology is typically combined with the research and development services and committee participation as one combined performance obligation.
Revenue associated with nonrefundable upfront license fees where the license fees and research and development activities cannot be accounted for as separate performance obligations is deferred and recognized as revenue over the expected period of performance using a cost-based input method. We utilize judgment to assess the pattern of delivery of the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in the assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
At the inception of each agreement that includes development, regulatory or commercial milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price by using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. The transaction price is allocated to each performance obligation in the agreement based on relative SSP. We typically determine SSPs using an adjusted market assessment approach model. Milestone payments that are not within our or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of each such milestone and any related constraint, and if necessary, adjust our estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
Certain judgments affect the application of our revenue recognition policy. For example, we record short-term and long-term deferred revenue based on our best estimate of when such revenue will be recognized. Short-term deferred revenue consists of amounts that are expected to be recognized as revenue in the next 12 months, and long-term deferred revenue consists of amounts that we do not expect will be recognized in the next 12 months. This estimate is based on the our current operating plan and, if our operating plan should change in the future, we may recognize a different amount of deferred revenue over the next 12-month period
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate and accrue expenses, the largest of which is related to research and development expenses, including those related to clinical studies and drug manufacturing. This process involves reviewing contracts and purchase orders, identifying and evaluating the services that have been performed on our behalf, and estimating the associated cost incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs.
Costs for preclinical studies, clinical studies and manufacturing activities are recognized based on an evaluation of our vendors’ progress towards completion of specific tasks, using data such as patient enrollment, clinical site activations or information provided to us by our vendors regarding their actual costs incurred. Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services were performed. We determine accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or state of completion of studies, or the services completed. Our estimates of accrued expenses as of each balance sheet date are based on the facts and circumstances known at the time. Costs that are paid in advance of performance are deferred as a prepaid expense and amortized over the service period as the services are provided.
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For the years ended December 31, 2020 and 2019 , there were no material changes from our estimates of accrued research and development expenses. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates of accrued research and development expenses. However, if actual results are not consistent with our estimates, we may be exposed to changes in accrued research and development expenses that could be material or the accrued research and development expenses reported in our financial statements may not be representative of the actual economic cost of accrued research and development.
Stock-based Compensation
We have stock-based compensation programs, which include restricted stock units (RSUs); stock options and an employee stock purchase plan. See Note 2 – “Summary of Significant Accounting Policies” and Note 10 – “Stockholders' Equity” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report for a complete discussion of our stock-based compensation programs. We account for stock-based compensation expense, including the expense for grants of RSUs and stock options that may be settled in shares of our common stock, based on the fair values of the equity instruments issued. The fair value is determined on the measurement date, which is generally the date of grant. The fair value of our RSUs is the fair value of the underlying stock at the measurement date. The fair value for our stock option awards is determined at the grant date using the Black-Scholes valuation model.
Assumptions for the Black-Scholes valuation model used for employee stock awards include:
•
Expected term – We derived the expected term for employee stock awards using the “simplified” method (the expected term is determined as the average of the time-to-vesting and the contractual life of the options), as we have limited historical information to develop expectations about future exercise patterns and post vesting employment termination behavior. Expected term for non-employee awards is based on the remaining contractual term of an option on each measurement date.
•
Expected volatility – Expected volatility is estimated using comparable public companies’ volatility for similar terms.
•
Expected dividend rate – We have not historically declared or paid dividends to our stockholders and have no plans to pay dividends; therefore, we have assumed an expected dividend yield of 0%.
•
Risk-free interest rate – The risk-free interest rate is based on the yields of U.S. Treasury securities with expected terms similar to that of the associated award.
•
The fair value of our common stock is based on observable market prices.
For awards with performance-based vesting criteria, we assess the probability of the achievement of the performance conditions at the end of each reporting period and begin to recognize the share-based compensation costs when it becomes probable that the performance conditions will be met. For awards that are subject to both service and performance conditions, no expense is recognized until it is probable that performance conditions will be met. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in stock-based compensation expense that could be material or the stock-based compensation expense reported in our financial statements may not be representative of the actual economic cost of the stock-based compensation.
Accounting for Income Taxes
See Note 11 – “Income Taxes” in the Notes to Consolidated Financial Statements, included in Item 8. Financial Statements and Supplementary Data of this report for a complete discussion of the components of Atara's income tax expense, as well as the temporary differences that exist as of December 31, 2020.
Our consolidated effective income tax rate is influenced by tax planning opportunities available to us in the various jurisdictions in which we conduct business. Significant judgment is required in evaluating our tax positions, including those that may be uncertain. Atara is also required to exercise judgment with respect to the realization of our net deferred tax assets. Management evaluates all positive and negative evidence and exercises judgment regarding past and future events to determine if it is more likely than not that all or some portion of the deferred tax assets may not be realized. If appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may not be realized.
We do not believe that there is a reasonable likelihood that there will be a material change in our liability for uncertain income tax positions or our effective income tax rate. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses that could be material. Atara recorded a valuation allowance of approximately $287.3 million as of December 31, 2020 related primarily to net operating losses, capitalized expenses and stock-based compensation.
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Results of Operations
Comparison of the Years Ended December 31, 2020, 2019 and 2018
Research and development expenses
Research and development expenses consisted of the following costs, by program, in the periods presented:
Year ended December 31,
Increase (Decrease)
2020
2019
2018
2020 compared to 2019
2019 compared to 2018
(in thousands)
Tab-cel ® expenses
$
61,196
$
49,179
$
50,822
$
12,017
$
(1,643
)
ATA188, CAR T and other program expenses
25,124
34,869
30,155
(9,745
)
4,714
Employee and overhead expenses
158,330
132,049
86,480
26,281
45,569
Total research and development expenses
$
244,650
$
216,097
$
167,457
$
28,553
$
48,640
Tab-cel ® expenses were $61.2 million in 2020 as compared to $49.2 million in 2019 and $50.8 million in 2018. Tab-cel ® expenses increased in 2020 due to clinical trials and process performance qualification activities at our manufacturing facility, as well as increased activity to support our tab-cel ® BLA filing . T he slight decrease in 2019 as compared to 2018 was primarily due to higher clinical trial and manufacturing costs in 2018 related to the ramp up of the MATCH and ALLELE Phase 3 clinical studies for patients with EBV+ PTLD.
ATA188, CAR T and other program expenses were $25.1 million in 2020 as compared to $34.9 million in 2019 and $30.2 million in 2018. The decrease in 2020 was primarily due to lower clinical study, manufacturing and other outside services costs for programs that are no longer in active development. The increase in 2019 was primarily related to research and manufacturing process development costs related to our CAR T programs; increased clinical study, manufacturing and other outside service costs related to the Phase 1 clinical study of ATA188 for patients with PMS; and other programs .
Employee and overhead expenses were $158.3 million in 2020 as compared to $132.0 million in 2019 and $86.5 million in 2018. The increases were primarily due to higher compensation-related costs from increased headcount and higher facility-related costs in support of our continuing expansion of research and development activities. Payroll and related costs increased by $21.2 million in 2020 as compared to 2019 and by $29.6 million in 2019 as compared to 2018. Facility-related costs increased by $5.1 million in 2020 as compared to 2019 and by $10.4 million in 2019 as compared to 2018. Outside service costs remained consistent in 2020 as compared to 2019 and increased by $5.6 million in 2019 as compared to 2018.
Total research and development expenses for 2020 were not significantly impacted as a result of the COVID-19 pandemic.
General and administrative expenses
General and administrative expenses for the periods indicated were as follows:
Year ended December 31,
(Decrease) Increase
2020
2019
2018
2020 compared to 2019
2019 compared to 2018
(in thousands)
General and administrative expenses
$
64,402
$
79,584
$
69,654
$
(15,182
)
$
9,930
General and administrative expenses were $64.4 million in 2020 as compared to $79.6 million in 2019 and $69.7 million in 2018. The decrease of $15.2 million in 2020 was primarily due to decreases of $10.1 million in outside services costs and $5.1 million in non-cash stock-based compensation expenses. The increase of $9.9 million in 2019 was primarily due to increases in compensation-related costs driven by increased headcount. Total general and administrative expenses for 2020 were not significantly impacted as a result of the COVID-19 pandemic.
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Quarterly Results of Operations Data (unaudited)
The following table sets forth our unaudited consolidated statement of operations data for each of the quarterly periods in the years ended December 31, 2020 and 2019. The unaudited quarterly statement of operations data set forth below have been prepared on a basis consistent with our audited annual consolidated financial statements in this Annual Report on Form 10-K and include, in our opinion, all normal recurring adjustments necessary for a fair statement of the financial information contained in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following quarterly financial data should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
Three months ended
March 31
June 30
September 30
December 31
2020
(In thousands, except per share amounts)
Operating expenses:
Research and development
$
57,659
$
61,560
$
59,877
$
65,554
General and administrative
17,038
16,392
14,829
16,143
Total operating expenses
74,697
77,952
74,706
81,697
Loss from operations
(74,697
)
(77,952
)
(74,706
)
(81,697
)
Interest and other income, net
1,188
497
364
398
Loss before provision for income taxes
(73,509
)
(77,455
)
(74,342
)
(81,299
)
Provision for income taxes
—
1
6
8
Net loss
(73,509
)
(77,456
)
(74,348
)
(81,307
)
Other comprehensive (loss) gain:
Unrealized (loss) gain on available-for-sale securities
(16
)
606
(283
)
(231
)
Comprehensive loss
$
(73,525
)
$
(76,850
)
$
(74,631
)
$
(81,538
)
Basic and diluted net loss per common share
$
(1.20
)
$
(1.14
)
$
(0.92
)
$
(0.95
)
Three months ended
March 31
June 30
September 30
December 31
2019
(In thousands, except per share amounts)
Operating expenses:
Research and development
$
48,668
$
52,251
$
53,538
$
61,640
General and administrative
19,223
23,284
19,018
18,059
Total operating expenses
67,891
75,535
72,556
79,699
Loss from operations
(67,891
)
(75,535
)
(72,556
)
(79,699
)
Interest and other income, net
1,634
1,207
661
1,215
Loss before provision for income taxes
(66,257
)
(74,328
)
(71,895
)
(78,484
)
Provision for income taxes
—
—
—
12
Net loss
(66,257
)
(74,328
)
(71,895
)
(78,496
)
Other comprehensive gain (loss):
Unrealized gain (loss) on available-for-sale securities
378
135
60
(13
)
Comprehensive loss
$
(65,879
)
$
(74,193
)
$
(71,835
)
$
(78,509
)
Basic and diluted net loss per common share
$
(1.44
)
$
(1.60
)
$
(1.31
)
$
(1.36
)
Liquidity and Capital Resources
Sources of Liquidity
Since our inception in 2012, we have funded our operations primarily through the issuance of common and preferred stock, issuance of pre-funded warrants to purchase common stock and upfront fees from the Bayer License Agreement.
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In December 20 20, we completed an underwritten public offering of 5 , 102 , 041 shares of common stock at a public offering price of $ 24 . 50 per share and pre-funded warrants to purchase 2, 040 , 816 shares of common stock at a public offering price of $ 24 . 49 99 per warrant. We received net proceeds of approximately $ 164 . 3 million after deducting underwriting discounts and commissions and estimated offering expenses payable by us .
In the second quarter of 2020, we completed an underwritten public offering of 14,958,039 shares, inclusive of the exercise of the full option granted to the underwriters, of common stock at a public offering price of $11.32 per share and pre-funded warrants to purchase 2,866,961 shares of common stock at a public offering price of $11.3199 per warrant. We received net proceeds of approximately $189.3 million after deducting underwriting discounts and commissions and offering expenses payable by us.
In July 2019, we completed an underwritten public offering of 6,871,727 shares of common stock at a public offering price of $15.28 per share and pre-funded warrants to purchase 2,945,026 shares of common stock at a public offering price of $15.2799 per warrant. We received aggregate net proceeds of approximately $140.7 million after deducting underwriting discounts and commissions and offering expenses payable by us.
In February 2019, we entered into a sales agreement (the 2019 ATM Facility) with Cowen and Company, LLC (Cowen), which provided for the sale, in our sole discretion, of shares of our common stock having an aggregate offering price of up to $100.0 million through Cowen, as our sales agent. The issuance and sale of these shares by us pursuant to the 2019 ATM Facility were deemed “at the market” offerings defined in Rule 415 under the Securities Act of 1933, as amended (the Securities Act), and were registered under the Securities Act. We paid a commission of up to 3.0% of gross sales proceeds of the common stock sold under the 2019 ATM Facility.
In February 2020, we entered into a new sales agreement (the 2020 ATM Facility) with Cowen, which provides for the sale, in our sole discretion, of shares of our common stock having an aggregate offering price of up to $100.0 million through Cowen, as our sales agent. The 2020 ATM Facility is separate from and does not replace the 2019 ATM Facility in any way. The issuance and sale of these shares by us pursuant to the 2020 ATM Facility are deemed “at the market” offerings and are registered under the Securities Act. We pay a commission of up to 3.0% of gross sales proceeds of any common stock sold under the 2020 ATM Facility.
During the year ended December 31, 2020, we sold an aggregate of 4,785,514 shares of common stock under the ATM facilities, at an average price of $14.60 per share for net proceeds of $68.0 million, after deducting commissions and other offering expenses payable by us. On January 3, 2020, we received net proceeds of approximately $1.2 million from sales of shares of our common stock under the 2019 ATM Facility that occurred during December 2019.
As of December 31, 2020, we have fully utilized the 2019 ATM Facility and $79.7 million of common stock remained available to be sold under the 2020 ATM Facility, subject to certain conditions as specified in the agreement.
We have incurred losses and negative cash flows from operations in each year since inception. We do not expect to receive any revenues from the sale of products unless and until we obtain regulatory approval for and commercialize any of our product candidates. As such, we anticipate that we will continue to incur losses in the foreseeable future. Additionally, as a result of the COVID-19 pandemic, we have experienced, and may experience in the future, disruptions that could severely impact our business, preclinical studies and clinical trials. We expect that our operating expenses will continue to increase. As a result, we will need additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We may borrow funds on terms that may include restrictive covenants, including covenants that restrict the operation of our business, liens on assets, high effective interest rates and repayment provisions that reduce cash resources and limit future access to capital markets. In addition, we expect to continue to opportunistically seek access to additional funds through additional public or private equity offerings or debt financings including by utilizing the 2020 ATM Facility, through potential collaborations, partnering or other strategic arrangements, or a combination of the foregoing. However, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. As a consequence, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. We may face similar difficulties in obtaining funding through debt financing or other arrangements. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration or partnering arrangements, we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certain geographies, grant licenses or other rights on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders.
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Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our cash, cash equivalents and short-term investments are held in bank and custodial accounts and consist of money market funds, U.S. Treasury, government agency and corporate debt obligations, commercial paper and asset-backed securities.
Our cash, cash equivalents and short-term investments balances as of the dates indicated were as follows:
December 31,
December 31,
2020
2019
(in thousands)
Cash and cash equivalents
$
200,404
$
74,317
Short-term investments
300,255
184,792
Total cash, cash equivalents and short-term investments
$
500,659
$
259,109
Cash Flows
The following table details the primary sources and uses of cash for each of the periods set forth below:
Year Ended December 31,
2020
2019
2018
(in thousands)
Net cash (used in) provided by:
Operating activities
$
(180,759
)
$
(235,626
)
$
(179,772
)
Investing activities
(120,728
)
60,459
(196,289
)
Financing activities
427,574
188,786
357,536
Net increase (decrease) in cash, cash equivalents and restricted cash
$
126,087
$
13,619
$
(18,525
)
Operating activities
Net cash used in operating activities was $180.8 million in 2020 as compared to $235.6 million in 2019. The decrease of $54.9 million was primarily due to $52.9 million received as a result of the Bayer License Agreement, a $14.9 million increase in other net operating liabilities and a $2.2 million increase in the amortization of investment premiums, partially offset by a $15.6 million increase in net loss.
Net cash used in operating activities was $235.6 million in 2019 as compared to $179.8 million in 2018. The increase of $55.8 million was primarily due to a $60.3 million increase in net loss and a $19.2 million increase in net operating assets, partially offset by a $17.9 million increase in stock-based compensation, a $3.3 million increase in depreciation and amortization expense, and a $1.0 million increase in loss on disposals of property and equipment.
Investing activities
Net cash used in investing activities in 2020 consisted primarily of $425.9 million used to purchase available-for-sale securities and $4.5 million in purchases of property and equipment, partially offset by $309.7 million received from maturities and sales of available-for-sale securities.
Net cash provided by investing activities in 2019 consisted primarily of $336.3 million received from maturities and sales of available-for-sale securities, partially offset by $270.2 million used to purchase available-for-sale securities and $5.7 million in purchases property and equipment.
Net cash used in investing activities in 2018 consisted primarily of $466.5 million used to purchase available-for-sale securities and $35.9 million used to purchase property and equipment, partially offset by $306.1 million received from maturities and sales of available-for-sale securities.
Financing activities
Net cash provided by financing activities in 2020 consisted primarily of $353.8 million of aggregate net proceeds received from the two underwritten public offerings of common stock and pre-funded warrants, $69.2 million of net proceeds from ATM facilities
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and $ 6. 7 million of net proceeds from employee stock award transactions, partially offset by $ 1.5 million of taxes paid related to the net share settlement of RSUs.
Net cash provided by financing activities in 2019 consisted primarily of $140.9 million of net proceeds received from an underwritten public offering of common stock and pre-funded warrants, $47.7 million of net proceeds from ATM facilities and $7.4 million of net proceeds from employee stock award transactions, partially offset by $6.7 million of taxes paid related to the net share settlement of RSUs.
Net cash provided by financing activities in 2018 consisted of $293.3 million of aggregate net proceeds from the underwritten public offerings in January and March 2018, $47.6 million of net proceeds from ATM facilities and $24.7 million of net proceeds from employee stock award transactions, partially offset by $7.5 million of taxes paid related to the net share settlement of restricted stock and $0.5 million of principal payments on capital lease obligations.
Operating Capital Requirements and Plan of Operations
To date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize one of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the accumulated losses to increase as we continue the development of and seek regulatory approvals for our product candidates and begin to commercialize any approved products. We are subject to all of the risks inherent in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need to raise substantial additional funding in connection with our continuing and expected expansion of our operations.
We expect that our existing cash, cash equivalents and short-term investments as of December 31, 2020, together with projected revenue from U.S. tab-cel ® sales, if approved, will be sufficient to fund our operations into 2023, including expenses related to the BLA filing and potential commercial launch of tab-cel ® in the U.S. In order to complete the process of obtaining regulatory approval for any of our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding. In addition, we expect to continue to opportunistically seek access to additional funds through additional public or private equity offerings or debt financings, through potential collaborations, partnering or other strategic arrangements, or a combination of the foregoing.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to :
•
the timing, costs and results of our ongoing and planned clinical and preclinical studies for our product candidates, including any potential impact of the COVID-19 pandemic;
•
our success in establishing and scaling commercial manufacturing capabilities;
•
the number and characteristics of product candidates that we pursue;
•
the outcome, timing and costs of seeking regulatory approvals;
•
subject to receipt of regulatory approval, costs associated with the commercialization of our product candidates and the amount of revenues received from commercial sales of our product candidates;
•
the timing of proceeds from the Bayer License Agreement, as well as the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish;
•
the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or patent applications or other intellectual property rights;
•
the extent to which we in-license or acquire other products and technologies; and
•
the timing of capital expenditures, including the qualification of our manufacturing facility.
Until we are able to generate a sufficient amount of product revenue and generate positive net cash flows from operations, which we may never do, meeting our long-term capital requirements is in large part reliant on access to public and private equity and debt capital markets, augmented by cash generated from operations and interest income earned on the investment of our cash balances. We expect to continue to seek access to the equity and debt capital markets to support our development efforts and operations. To the
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extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration or partnering arrangements, we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certain geographies, grant licenses or other rights on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders.
As a result of economic conditions, general global economic uncertainty, political change and other factors, including the ongoing COVID-19 pandemic, we do not know whether additional capital will be available when needed, or that, if available, we will be able to obtain additional capital on reasonable terms. If we are unable to raise additional capital due to the volatile global financial markets, general economic uncertainty or other factors, we will be forced to delay, limit, reduce or terminate preclinical studies, clinical studies or other development activities for one or more of our product candidates.
Contractual Obligations and Commitments
We lease our corporate headquarters in South San Francisco, California under a non-cancellable lease agreement for approximately 13,670 square feet of office space. In October 2020, we entered into an amendment of this lease to extend the lease term by one year and an option to extend the lease for an additional five years. The amended lease expires in May 2022.
In February 2017, we entered into a lease agreement for approximately 90,580 square feet of office, lab and cellular therapy manufacturing space in Thousand Oaks, California. The initial 15-year term of this lease commenced in February 2018, and the contractual obligations during the initial term are $16.4 million in aggregate. We have the option to extend this lease for two additional periods of ten and nine years, respectively, after the initial term. In connection with this lease, we were required to issue a letter of credit in the amount of $1.2 million to the landlord, which is recorded as long-term restricted cash in our consolidated balance sheet.
In November 2018, we entered into a lease agreement for approximately 51,160 square feet of office space in Thousand Oaks, California. The initial term of this lease expires in February 2026. The contractual obligations during the initial term are $8.5 million in aggregate. We have the option to extend the lease for an additional period of five years after the initial term.
In May 2019, we entered into a new lease agreement for approximately 8,800 square feet of office and lab space in Aurora, Colorado. The term of this lease expires in April 2024. The contractual obligations during the lease term are $1.1 million in aggregate.
The following table summarizes our contractual obligations as of December 31, 2020:
Payments Due by Period
Less than
More than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(in thousands)
Operating lease obligations
$
23,188
$
3,177
$
5,531
$
5,180
$
9,300
Finance lease obligations
441
282
159
—
—
Purchase obligations (1)
12,720
12,720
—
—
—
Total contractual obligations
$
36,349
$
16,179
$
5,690
$
5,180
$
9,300
(1)
We enter into contracts in the normal course of business with clinical research organizations for clinical studies, with contract manufacturing organizations for clinical supplies, and with other vendors for preclinical studies and supplies and other services and products for operating purposes. These contracts generally provide for termination on notice, with the exception of one of our contract manufacturing agreements which we may terminate for convenience upon six months’ written notice. Payments in the table above represent our estimate of contractual minimum purchase obligations. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. Payments in the table above do not include any termination penalties or fees.
The above amounts exclude potential milestone and royalty payments related to our license and collaboration agreements, as the achievement of these milestones is currently not fixed and determinable.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
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