What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-15 compared with 2021-03-18 · 235 added, 289 removed, 266 unchanged (66% of the section changed)

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and its subsidiaries on a consolidated basis.

We are a life sciences company dedicated to improving life through the application of our pioneering, proprietary ARCUS genome editing platform.

We leverage ARCUS in the development of our product candidates, which are designed to treat human diseases and create healthy and sustainable food and agricultural solutions.

We are actively developing product candidates in three innovative areas:

allogeneic CAR T cell immunotherapy, in vivo gene correction, and food.

We are currently conducting a Phase 1/2a clinical trial of PBCAR0191 in adult patients with relapsed or refractory, or R/R, non-Hodgkin lymphoma, or NHL, or R/R B-cell precursor acute lymphoblastic leukemia, or B-ALL.

PBCAR0191 is our first gene-edited allogeneic chimeric antigen receptor, or CAR, T cell therapy candidate targeting CD19 and is being developed in collaboration with Servier pursuant to the Servier Agreement.

We have received orphan drug designation for PBCAR0191 from the U.S.

Food and Drug Administration (“FDA”), for the treatment of acute lymphoblastic leukemia, or ALL.

In August 2020, the FDA granted Fast Track Designation for PBCAR0191 for the treatment of B-ALL.

The NHL cohort will include patients with mantle cell lymphoma (“MCL”), an aggressive subtype of NHL, for which we have received orphan drug designation from the FDA.

Made from donor-derived T cells modified using our ARCUS genome editing technology, PBCAR0191 recognizes the well characterized tumor cell surface protein CD19, an important and validated target in several B-cell cancers, and is designed to avoid graft-versus-host disease, or GvHD, a significant complication associated with donor-derived, cell-based therapies.

We believe that this trial, which is designed to assess the safety and tolerability of PBCAR0191 at increasing dose levels, as well as to evaluate anti-tumor activity, is the first U.S.-based clinical trial to evaluate an allogeneic CAR T therapy for R/R NHL.

Furthermore, we believe that our proprietary, one-step engineering process for producing allogeneic CAR T cells with a potentially optimized cell phenotype, at large scale in a cost-effective manner, will enable us to overcome the fundamental clinical and manufacturing challenges that have limited the CAR T field to date.

We expect to report updated interim data for the PBCAR0191 study in mid-year 2021.

In April 2020, we commenced patient dosing in a Phase 1/2a clinical trial with our second allogeneic CAR T cell therapy product candidate, PBCAR20A.

PBCAR20A is wholly owned by us and targets the validated tumor cell surface target CD20.

It is being investigated in R/R NHL, including those with R/R chronic lymphocytic leukemia, CLL, or R/R small lymphocytic lymphoma, or SLL.

A subset of the NHL patients will have the diagnosis of MCL and we have received orphan drug designation for PBCAR20A from the FDA for the treatment of this disease.

Based on the safety profile observed to date with PBCAR0191, the FDA allowed us to commence dosing with PBCAR20A directly at 1 x 10 6 cells/kg.

The study has continued to escalate through dose level two (3 x 10 6 cells/kg), and, in February 2021, we commenced patient dosing at dose level 3 (480 x 10 6 cell fixed dose) with a max dose of 6 x 10 6 cells/kg.

We expect to report interim data for the PBCAR20A study in 2021.

In June 2020, we commenced patient dosing in a Phase 1/2a clinical trial with our third allogenic CAR T cell therapy product candidate, PBCAR269A.

The starting dose of PBCAR269A is 6 x 10 5 cells/kg.

PBCAR269A is wholly owned by us and is designed to target the validated tumor cell surface target BCMA.

It is being investigated in subjects with R/R multiple myeloma and we have received orphan drug designation and Fast Track Designation from the FDA for this indication.

In September 2020, we announced that we entered into a clinical trial collaboration with SpringWorks, a clinical-stage biopharmaceutical company focused on developing medicines for patients with severe rare diseases and cancer.

Pursuant to the collaboration, PBCAR269A will be evaluated in combination with nirogacestat, SpringWorks’ investigational GSI, in patients with R/R multiple myeloma, which is expected to commence in the first half of 2021.

In February 2021, we commenced patient dosing at the highest dose cohort, dose level 3 o f 6 x 10 6 cells/kg and we expect to report interim data on the PBCAR269A trial in 2021.

Additionally, in June 2020, Elo, our wholly-owned subsidiary, established a strategic partnership with the Dole and entered into a Research, Development, and Commercialization Agreement with Dole, with the aim to co-develop banana varieties resistant to Foc TR4, utilizing proprietary computational biology workflows and the ARCUS genome editing platform.

The disease caused by Foc TR4, commonly known as Fusarium wilt, threatens the continued cultivation of the world’s most popular variety of banana called Cavendish, which is of considerable economic significance as this variety is used to produce export bananas for key markets around the globe and Dole is one of the largest producers in the industry.

Fungicides, or other traditional means of disease control have failed as the pandemic continues to spread across vital banana growing economies.

In September 2020, we regained full clinical development and commercialization rights , and all data we generated for the in vivo chronic HBV program developed under our 2018 collaboration agreement with Gilead Sciences.

We are exploring partnership or alternative opportunities to enable the continued development of ARCUS-based HBV therapies.

In October 2020, we announced the U.S.

Patent and Trademark Office’s PTAB issued judgements in our favor in two patent interference proceedings that challenged nine U.S.

patents we owned.

The patents, which issued in 2018, relate to allogeneic CAR T cells produced by inserting a gene encoding a CAR into the TRAC locus, as well as methods of using those cells for cancer immunotherapy.

In the interference proceedings, a third party argued that it had invented the technology in 2012.

The PTAB, however, found that the third-party patent application did not satisfy the written description requirement and rejected these claims while maintaining the claims in all nine of our patents.

In November 2020, we announced a research collaboration and exclusive license agreement with Lilly to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders, with an initial focus on DMD and two other undisclosed gene targets.

Under the agreement, Lilly has the right to nominate up to three additional gene targets for genetic disorders over the first four years of the Development and License Agreement, which may be extended to six years upon Lilly’s election and payment of an extension fee.

In December 2020, we announced interim clinical results from our Phase 1/2a study of PBCAR0191 as a treatment of R/R NHL and R/R B-ALL.

As of the November 16, 2020 cutoff, 27 patients including 16 patients with aggressive NHL and 11 patients with aggressive B-ALL were enrolled and evaluated.

In this dose escalation and dose expansion study, PBCAR0191 had an acceptable safety profile with no cases of graft versus host disease, no cases of Grade ≥ 3 cytokine release syndrome, and no cases of Grade ≥ 3 neurotoxicity.

PBCAR0191 demonstrated longest durability of response to 11 months in B-ALL.

PBCAR0191 with eLD resulted in objective response rate of 83% (5/6) in NHL and B-ALL as compared to 33% (3/9) in NHL with sLD.

Additionally, in December 2020, researchers at Elo in collaboration with Alan Chambers, Ph.D., and the Tropical Research and Education Center at the University of Florida published a paper in Nature Food , reporting a chromosome-scale, phased Vanilla planifolia genome, which revealed sequence variants for genes that may impact the vanillin pathway, and therefore influence bean quality, including its productivity, flower anatomy, and disease resistance.

In January 2021, we announced that the FDA has accepted our IND application for PBCAR19B, our next-generation, stealth cell, CD19 allogenic CAR T candidate for Non-Hodgkin Lymphoma, and we expect to begin the Phase 1 study by mid-2021.

Additionally, in January 2021, we announced that we received a Notice of Allowance from the U.S.

Patent and Trademark Office for a patent application covering PBCAR19B.

The allowed composition claims of this patent application encompass genetically-modified human T cells comprising the PBCAR19B construct, which is inserted within the T cell receptor alpha constant locus.

Once issued, patents arising from this patent family will have standard expiration dates in April 2040.

In preclinical studies, PBCAR19B has shown to delay both T cell and natural killer cell mediated allogeneic rejection in vitro and may improve the persistence of allogeneic CAR T cells.

We expect to advance a program targeting the rare genetic disease PH1 as our lead wholly owned in vivo gene correction program.

PH1 affects approximately 1-3 people per million in the United States and is caused by loss of function mutations in the AGXT gene, leading to the accumulation of calcium oxalate crystals in the kidneys.

Patients suffer from painful kidney stones which may ultimately lead to renal failure.

Using ARCUS, we are developing a potential therapeutic approach to PH1 that involves knocking out a gene called HAO1 which acts upstream of AGXT.

Suppressing HAO1 has been shown in preclinical models by us to prevent the formation of calcium oxalate.

We therefore believe that a one-time administration of an ARCUS nuclease targeting HAO1 may be a viable strategy for a durable treatment of PH1 patients.

Pre-clinical research has continued to progress, and we expect to provide an update on this program in the first half of 2021.

In January 2021, we disclosed our intention to spinout our wholly owned subsidiary, Elo.

We are continuing to explore our strategic options, and the timing of any such sale, spinout or other treatment of Elo remains uncertain.

A discussion regarding our financial condition and results of operation for the year ended December 31, 2021 compared to the year ended December 31, 2020 is presented below.

A discussion regarding our financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019 is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on 10-K for the year ended December 31, 2020 filed on March 18, 2021

We are a clinical stage gene editing company dedicated to improving life by developing ex vivo allogeneic CAR T immunotherapies and in vivo therapies for genetic and infectious diseases with the application of our wholly owned proprietary ARCUS genome editing platform.

The foundation of ARCUS is a natural homing endonuclease which allows us to replicate precise gene editing as it evolved in nature.

ARCUS is designed to be precise in its specificity and versatile in its design for gene knock out as well as complex edits with gene insertion and gene repair.

ARCUS is also unique in its relatively small size which potentially allows delivery to a wider range of cells and tissues using viral and non-viral gene delivery methods.

We believe our CAR T cells are the only allogeneic CAR T cells in human clinical trials made with a single gene editing step designed to specifically avoid the potentially deleterious effects of making multiple edits to T cells.

We are simultaneously conducting a Phase 1/2a clinical trial evaluating PBCAR0191 as a potential first-in-class and a Phase 1 clinical trial evaluating PBCAR19B as, if approved, a potential best-in-class CD19-targeting CAR T cell therapies in adult patients with R/R, B-cell malignancies.

Made from donor-derived T cells modified using our ARCUS genome editing technology, PBCAR0191 recognizes the well characterized tumor cell surface protein CD19, an important and validated target in several B-cell cancers, and PBCAR0191 is designed to avoid GvHD, a significant complication associated with donor-derived, cell-based therapies.

We presented updated data from the PBCAR0191 study utilizing an enhanced lymphodepletion regimen in December 2021 at the 63rd ASH Annual Meeting.

PBCAR19B is a novel immune-evading stealth cell candidate employing a single-gene edit in an effort to knock-down β2m designed for evading T cell rejection, while also inserting a HLA-E transgene to further evade rejection from natural killer cells.

We initiated a clinical trial of PBCAR19B in patients with R/R NHL in mid-2021 and completed dosing at Dose Level one.

We plan to commence dosing at the next dose level with clinical trial material from an optimized manufacturing process once released and expect to provide a program update in mid-2022.

In January 2021, we closed the Development and License Agreement with Lilly to discover and develop in vivo gene editing product candidates incorporating our ARCUS nucleases.

Lilly has initially nominated DMD, a genetic disease affecting the muscles.

Lilly has also nominated a liver-directed target and a CNS directed target and has the right to nominate up to three additional gene targets over the first four years of the agreement.

We will be responsible for conducting certain pre-clinical research and IND-enabling activities with respect to such gene targets.

In April 2021, we entered into the Program Purchase Agreement with Servier, pursuant to which we reacquired all of our global development and commercialization rights previously granted to Servier pursuant to the Servier Agreement, and mutually terminated the Servier Agreement.

This includes our two clinical stage CD19-targeting allogeneic CAR T candidates, PBCAR0191 and PBCAR19B stealth cell, as well as four additional product targets.

In September 2021, we entered into an exclusive license agreement with Tiziana to evaluate foralumab, a fully human anti-CD3 mAb, as a lymphodepleting agent in conjunction with our allogeneic CAR T cells for the potential treatment of cancers.

This agreement reflects our ongoing pursuit of a potential best-in-class allogeneic CAR T cell therapy.

In November 2021, we announced that we will not continue development of PBCAR20A based on data observed to date in a heterogeneous R/R NHL population previously treated with anti-CD20 monoclonal antibodies, as treatment with PBCAR20A did not result in compelling response rates in a Phase 1/2a clinical study .

While this study provided important information regarding allogeneic CAR T dosing and lymphodepletion regimens, we intend to focus our clinical efforts in R/R lymphoma on CD19 targeting programs, as we believe CD19 is a more robust antigenic target in R/R heterogeneous NHL populations.

All subjects enrolled in the study and evaluated for treatment with PBCAR20A had acceptable tolerability with no GvHD, no Grade ≥ 3 cytokine release syndrome, and no Grade ≥ 3 neurotoxicity.

In December 2021, we announced that we entered into an agreement with a syndicate of investors led by ACCELR8 to separate our wholly owned Elo Life Systems subsidiary and create an independent food and agriculture business.

The transaction enables us to focus exclusively on human therapeutics.

We expect in vivo therapies for genetic and infectious diseases to be a significant focus of our operations long-term because the differentiated attributes of ARCUS are particularly advantageous for this type of application.

In vivo gene correction involves the delivery of ARCUS nucleases directly into a patient’s cells to treat disease at the level of the underlying DNA.

In vivo genome editing is more complex and challenging than ex vivo approaches like CAR T cells due to the need to safely deliver ARCUS directly to cells in the body.

We believe that in vivo applications are particularly well suited to ARCUS because they require extremely low levels of off-target editing and efficient delivery.

Looking ahead to the remainder of 2022 and beyond, we aim to further evaluate ARCUS clinically with the goal of positively impacting human health.

In mid-2022, we plan to provide updates on PBCAR0191, PBCAR19B, and PBCAR269A.

In the in vivo gene editing pipeline, we expect to submit three INDs or CTAs in the next three years, including trials to evaluate:

PBGENE-PCSK9 for the treatment of FH, PBGENE-PH1 for the treatment of PH1 and PBGENE-HBV for the treatment of chronic HBV.

In August 2021, we entered into a development and license agreement with iECURE, a mutation-agnostic in vivo gene editing company co-founded by James M.

Wilson, M.D., Ph.D.

Under the iECURE Agreement, iECURE will advance our wholly owned PBGENE-PCSK9 candidate through preclinical activities as well as a Phase 1 clinical trial in FH, with a CTA filing expected as early as the end of 2022.

iECURE will also use our PCSK9-directed ARCUS nuclease to develop gene-insertion therapies for four other pre-specified rare genetic diseases, including OTC deficiency, Citrullinemia Type 1, PKU, and another program focused on liver disease .

We received a partial equity stake in iECURE and are eligible to receive milestone and mid-single digit to low double digit royalty payments on sales of iECURE products developed with ARCUS.

Pre-clinical research continues to progress for our wholly owned in vivo gene correction program applying ARCUS to knock out the HAO1 gene as a potential one-time treatment for PH1.

In September 2021, we presented NHP data showing on average, a 98.0% reduction in HAO1 mRNA and a 97.9% reduction in the encoded protein after a single administration of an AAV vector encoding ARCUS.

We have initiated IND-enabling activities and expect to submit an IND/CTA in 2023 for PBGENE-PH1 delivered by LNP.

Our gene editing program for chronic HBV applies ARCUS to knock out persistent cccDNA and potentially reduce viral persistence.

Previously reported preclinical data has shown that ARCUS efficiently targeted and degraded HBV cccDNA in HBV-infected primary human hepatocytes and reduced expression of HBsAg by as much as 95%.

Similar levels of HBsAg reduction were observed in a newly developed mouse model of HBV infection following administration of ARCUS mRNA using LNP delivery.

We expect to submit an IND/CTA in 2024 for our HBV program.

Since our formation in 2006, we have devoted substantially all of our resources to developing ARCUS, conducting research and development activities, recruiting skilled personnel, developing manufacturing processes, establishing our intellectual property portfolio and providing general and administrative support for these operations.

We have financed our operations primarily with proceeds from upfront payments from collaboration and licensing agreements, our IPO, and private placements of convertible preferred stock and convertible debt.

On April 1, 2019, we completed our IPO of 9,085,000 shares of common stock, including the underwriters’ full exercise of their option to purchase an additional 1,185,000 additional shares of common stock, at an offering price of $16.00 per share, for net proceeds of approximately $130.5 million after deducting underwriting discounts and commissions and offering expenses payable by us.

As of December 31, 2020, we have generated approximately $492.5 million from third parties to date.

We have financed our operations primarily through proceeds from upfront and milestone payments from collaboration and licensing agreements, our IPO, private placements of our convertible preferred stock and convertible debt financings, at-the-market offerings of common stock, and borrowings on credit facilities.

Since our inception, we have incurred significant operating losses and have not generated any revenue from the sale of products.

Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates or the product candidates of our collaborators for which we may receive milestone payments or royalties.

Our net losses were $109.0 million and $92.9 million for the years ended December 31, 2020 and December 31, 2019 , respectively.

As of December 31, 2021, we had an accumulated deficit of $316.7 million.

We expect our operating expenses to increase substantially in connection with the expansion of our product development programs and capabilities.

We expect our operating expenses to increase substantially in connection with our ongoing CAR T clinical trials and the expansion of our in vivo product development programs and capabilities.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one of our product candidates or the product candidates of our collaborators for which we may receive milestone payments or royalties.

If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution.

If we obtain regulatory approval for any of our

product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution.

In addition, we expect to continue to incur additional costs associated with operating as a public company.

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We cannot assure you that we will ever generate significant revenue to achieve profitability.

Because of the numerous risks and uncertainties associated with the development of therapeutic and agricultural products, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability.

Because of the numerous risks and uncertainties associated with the development of therapeutic products, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability.

Even if we are able to generate revenue from product sales, we may not become profitable.

If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be required to raise additional capital on terms that are unfavorable to us or we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

We currently conduct our operations through two reportable segments:

Therapeutics and Food.

Our Therapeutics segment is focused on allogeneic CAR T immunotherapy and in vivo gene correction.

Our Food segment focuses on applying ARCUS to develop food and nutrition products through collaboration agreements with consumer-facing companies.

Impact of COVID-19 Pandemic

We are closely monitoring how the ongoing COVID-19 pandemic continues to affect our employees, business, preclinical studies and clinical trials.

Impact of the COVID-19 Pandemic

We are closely monitoring how the ongoing COVID-19 pandemic and variants thereof continues to affect our employees, business, preclinical studies and clinical trials.

The Company has taken steps in line with guidance from the U.S.

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We have implemented measures to mitigate exposure risks and support operations.

We initiated a health and safety program addressing mandatory use of face masks, social distancing, sanitary handwashing practices, use of personal protective equipment stations, stringent cleaning and sanitization of all facilities and measures to reduce total occupancy in facilities.

We initiated a health and safety program addressing mandatory use of face masks, mandatory vaccinations, social distancing, sanitary handwashing practices, use of personal protective equipment stations, stringent cleaning and sanitization of all facilities and measures to reduce total occupancy in facilities.

We have also implemented temperature and symptom screening procedures at each location, and we have continuously communicated to all our Precisioneers that if they are not comfortable coming to work, regardless of role, then they do not have to do so.

Per guidance from the Cybersecurity & Infrastructure Security Agency, our employees are considered essential workforce and may receive the COVID-19 vaccination as Centers for Disease Control and Prevention defined Group 3 and Group 4.

We are working closely with our clinical sites, physician partners and the patient community to monitor and manage the impact of the evolving COVID-19 pandemic.

We remain committed to our clinical programs and development plans, however, disruptions, competing resource demands and safety concerns caused by the COVID-19 pandemic have caused, and are likely to continue to cause delays in our clinical trial site activation and impact our ability to enroll patients.

We are working closely with our clinical sites, physician partners and the patient community to monitor and manage the impact of the COVID-19 pandemic and variants thereof.

We remain committed to our clinical programs and development plans, however, disruptions, competing resource demands and safety concerns caused by the COVID-19 pandemic and variants thereof have caused, and are likely to continue to cause delays in our clinical trial site activation and impact our ability to enroll patients.

We may also experience other difficulties, disruptions or delays in conducting preclinical studies or initiating, enrolling, conducting or completing our planned and ongoing clinical trials, and we may incur other unforeseen costs as a result.

We expect that the COVID-19 pandemic may continue to impact our business, including our preclinical studies and clinical trials.

At this time, there is still significant uncertainty relating to the trajectory of the COVID-19 pandemic and impact of related responses.

The impact of COVID-19 on our preclinical studies and any further impact to our clinical trials will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact of COVID-19 on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

The Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020, which provides for, among other things, the deferral of the deposit and payment of certain taxes.

Pursuant to the CARES Act, the Company elected to defer payment of the employer's share of social security taxes incurred between May 1, 2020 and December 31, 2020.

See “Risk Factors— The outbreak of the ongoing novel coronavirus disease, COVID-19 has impacted our business, or and

any other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials.

” in Part I , Item 1A.

We expect that the COVID-19 pandemic and variants thereof may continue to impact our business, including our preclinical studies and clinical trials.

At this time, there is still significant uncertainty relating to the trajectory of the COVID-19 pandemic and variants thereof and impact of related responses.

The impact of the COVID-19 pandemic and variants thereof on our preclinical studies and any further impact to our clinical trials will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact of the COVID-19 pandemic and variants thereof on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

The CARES Act was signed into law on March 27, 2020, which provides for, among other things, the deferral of the deposit and payment of certain taxes.

Pursuant to the CARES Act, we continue to elect to defer payment of the employer’s share of social security taxes since May 1, 2020.

See “ Risk Factors— The ongoing novel coronavirus disease, COVID-19 has impacted, and may continue to impact, our business, and any other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials.

of this Annual Report on Form 10-K.

Therapeutics Segment Collaborations

Collaborations

Eli Lilly and Company

In November 2020, we entered into a research collaboration and exclusive license agreement (the “Development and License Agreement”) with Lilly to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders.

Lilly has initially nominated DMD and two gene targets for other genetic disorders, and has the right to nominate up to three additional gene targets for genetic disorders over the first four years of the Development and License Agreement (the “Nomination Period”).

In November 2020, we entered into the Development and License Agreement with Lilly to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders.

Lilly has initially nominated DMD and two gene targets for other genetic disorders, and has the right to nominate up to three additional gene targets for genetic disorders over the Nomination Period.

Lilly may extend the Nomination Period for an additional two years from the date on which such initial Nomination Period ends, upon Lilly’s election and payment of an extension fee.

Under the terms of the Development and License Agreement, Lilly will receive an exclusive license to research, develop, manufacture and commercialize the resulting licensed products to diagnose, prevent and treat any and all diseases by in vivo gene editing directed against the applicable gene target.

The Development and License Agreement provides that we will be responsible for conducting certain pre-clinical research and IND-enabling activities with respect to the gene targets nominated by Lilly to be subject to the collaboration, including manufacture of initial clinical trial material for the first licensed product.

Lilly will be responsible for, and must use commercially reasonable efforts with respect to, conducting clinical development and commercialization activities for licensed products resulting from the collaboration, and may engage us for additional clinical and/or initial commercial manufacture of licensed products.

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Lilly’s obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following first commercial sale of the licensed product.

We have the right to elect to co-fund the clinical development of one licensed product, which may be selected from among the third or any subsequent licensed products to reach IND filing.

We have the right to elect to co-fund the clinical development of one licensed product, which may be selected from among the third or any subsequent licensed products to reach IND or CTA filing.

If we elect to co-fund such licensed product, we would reimburse Lilly for a portion of the clinical development expenses for such product and, in exchange, each royalty tier with respect to net sales of such licensed product would be increased by a low single digit percentage.

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Either party may terminate the Development and License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the agreement or (ii) due to a challenge to its patents brought by the other party.

In February 2016, we entered into the Servier Agreement, pursuant to which we have agreed to develop allogeneic CAR T cell therapies for five unique antigen targets.

One target was selected at the agreement’s inception.

Two additional hematological cancer targets beyond CD19 and two new solid tumor targets were selected in 2020.

With the addition of these new targets, we received development milestone payments in 2020 and may be eligible to receive additional development milestone payments in 2021.

We may also be eligible to receive option fees, as well as clinical, regulatory and sales milestone payments in addition to royalties on product sales.

Upon selection of an antigen target under the agreement, we have agreed to perform early-stage research and development on individual T cell modifications for the selected target, develop the resulting therapeutic product candidates through Phase 1 clinical trials and prepare initial clinical trial material of such product candidates for use in Phase 2 clinical trials.

In October 2020, we entered into Amendment No.

6 to the Servier Agreement, effective as of October 2, 2020 (“Amendment No.

Terms of the Servier Agreement were amended, solely as applicable to PBCAR0191.

Under Amendment No.

6, we are required to complete the ongoing Phase 1/2a clinical trial of PBCAR0191 in adult patients with R/R NHL and R/R B-ALL (the “Clinical Trial”) for a specified number of patients in the Phase 1 portion of the Clinical Trial and a number of patients to be determined by us in the

Phase 2a portion of the Clinical Trial.

We will be solely responsible for all costs and expenses we incur to complete the Clinical Trial, including the production and release of all required clinical trial material.

The results of the Clinical Trial will be used to determine whether specified development milestones have been achieved with respect to PBCAR0191, in which case, specified corresponding development milestone payments are payable by Servier to us.

The results of the Clinical Trial will also be used to determine whether Phase 2 readiness has been achieved for PBCAR0191 and Servier may determine whether, subject to payment of a commercial option exercise fee, to exercise its commercial option and proceed with development and commercialization of PBCAR0191.

Following completion of the Clinical Trial, we are not obligated to conduct any further development activities under the Servier Agreement with respect to PBCAR0191 unless we otherwise agree to conduct such further development activities.

We received an upfront payment of $105.0 million under the Servier Agreement in 2016.

We have the ability to receive total payments, including the upfront payment, option fees and milestone payments, in the aggregate across all five targets, of up to approximately $1.4 billion.

This includes up to $1.3 billion in milestone payments, consisting of up to $329.3 million in development milestone payments and up to $925.0 million in commercial milestone payments.

We are also entitled to receive tiered royalties ranging from the mid-single digit percentages to the sub-teen percentages on worldwide net sales, subject to potential customary reductions.

We also have the right to participate in the development and commercialization of any licensed products resulting from the collaboration through a 50/50 co-development and co-promotion option in the United States, subject to our payment of an option fee, which is exercisable after Servier’s commercial option exercise.

During the twelve months ended December 31, 2021 we recognized revenue under the agreement with Lilly of approximately $21.0 million.

We did not recognize any revenue under the agreement with Lilly in 2020.

Deferred revenue related to the agreement with Lilly amounted to $88.3 million as of December 31, 2021, of which $21.2 million was included in current liabilities.

No deferred revenue related to the Lilly Agreement was recorded as of December 31, 2020.

In August 2021, we entered into the iECURE Agreement, under which iECURE plans to advance our PBGENE-PCSK9 candidate through preclinical activities as well as a Phase 1 clinical trial as partial consideration for a license to our PCSK9-directed ARCUS nuclease to develop gene-insertion therapies for four other rare genetic diseases, including OTC deficiency, Citrullinemia Type 1, PKU, and another program focused on liver disease.

Pursuant to the iECURE Agreement, we retain the rights to PBGENE-PCSK9, including all products developed for indications with increased risk of severe cardiovascular events such as FH.

Simultaneously with the entry into the iECURE Agreement, we entered into an Equity Issuance Agreement with iECURE, pursuant to which iECURE granted us partial equity ownership in iECURE as partial consideration for the license to use its PCSK9-directed ARCUS nuclease.

We concluded that the iECURE Equity Issuance Agreement is to be combined with the iECURE Agreement (together, the “iECURE Agreements”) for accounting purposes.

Additionally, we are eligible to receive milestone and mid-single digit to low double digit royalty payments on sales of iECURE products developed with ARCUS.

We assessed the iECURE Agreements in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) and concluded that the promises in the iECURE Agreements represent a transaction with a customer.

Further, we concluded that the iECURE Agreements contain the following promises:

(i) the PCSK9 license and (ii) JSC Participation.

The JSC participation was determined to be an immaterial promise as the time commitment and related cost associated with performance of JSC participation is expected to be inconsequential to the total consideration in the contract.

Accordingly, we concluded that the promise of the PCSK9 license is the sole performance obligation in the iECURE Agreements.

The fair value of the iECURE equity and the estimated fair value of the costs to be incurred by iECURE to progress our PBGENE-PCSK9 candidate through preclinical activities as well as a Phase 1 clinical trial were concluded to be non-cash consideration, and as such were included in the transaction price of the iECURE Agreements.

We concluded the PCSK9 license represents functional intellectual property in accordance with ASC 606 given we will not be providing any additional services to iECURE outside of the right to use the PCSK9 license.

Therefore, the fair value of the iECURE equity and the fair value of the costs to be incurred by

iECURE to progress our PBGENE-PCSK9 candidate through a Phase 1 clinical trial was recognized at the inception of the iECURE Agreements.

The fair value of the iECURE equity at inception of the iECURE agreements was assessed to be $0.5 million and was initially recorded to the investment in equity securities line item of the consolidated balance sheets.

As further discussed in Note 12 to the consolidated financial statements, “ Fair Value Measurements ” , on issuance, we elected to account for the iECURE equity at fair value under ASC 825, Financial Instruments (“ASC 825”).

Accordingly, we adjust the carrying value of the iECURE equity to fair value each reporting period with any changes in fair value recorded to other income (expense).

The fair value of the costs to be incurred by iECURE to progress our PBGENE-PCSK9 candidate through a Phase 1 clinical trial was assessed to be $17.4 million and was recorded to the prepaid expenses and other assets line items of the consolidated balance sheets.

The PCSK9 Prepaid will be amortized to research and development expense on a pro-rata basis as iECURE incurs costs to progress our PBGENE-PCSK9 candidate through a Phase 1 clinical trial.

During the year ended December 31, 2021, we recognized revenue under the iECURE agreements of $17.9 million and $4.4 million of research and development expense related to amortization of the PCSK9 Prepaid.

As of December 31, 2021, the remaining balance of the PCSK9 Prepaid was $13.0 million, which is included in the prepaid expenses and other assets line items of the consolidated balance sheets in the amounts of $10.4 million and $2.6 million, respectively.

On April 9, 2021, we entered into the Program Purchase Agreement with Servier, pursuant to which we reacquired all of our global development and commercialization rights previously granted to Servier pursuant to the Servier Agreement, and mutually terminated the Servier Agreement.

Pursuant to the Servier Agreement, we had developed certain allogeneic CAR T candidates, including PBCAR0191 and the stealth cell PBCAR19B, each targeting CD19, as well as four additional product targets.

Pursuant to the Program Purchase Agreement, we regained full global rights to research, develop, manufacture and commercialize products resulting from such programs, with sole control over all activities.

Additionally, per the terms of the Program Purchase Agreement we do not have an obligation to continue development of the Servier Targets.

With respect to products directed to CD19, Servier has certain rights of negotiation, which may be exercised during a specified time period if we elect to initiate a process or entertain third party offers for partnering such products.

Pursuant to the terms of the Program Purchase Agreement, we made a payment of $1.25 million in cash to Servier and agreed to waive earned milestones totaling $18.75 million that would have been otherwise payable to us.

The $1.25 million cash payment to Servier is classified as research and development expense in the consolidated statement of operations for the year ended December 31, 2021.

The waiver of earned milestones resulted in a $18.75 million reduction in accounts receivable and deferred revenue.

The Program Purchase Agreement also requires us to make certain payments to Servier based on the achievement of regulatory and commercial milestones for each product, and a low- to mid-single-digit percentage royalty (subject to certain reductions) based on net sales of approved products, if any, resulting from any continued development and commercialization of the programs by us, for a period not to exceed ten years after first commercial sale of the applicable product in the United States or certain countries in Europe.

If we enter into specified product partnering transactions, the Program Purchase Agreement requires us to pay to Servier a portion of certain consideration received pursuant to such product partnering transactions in lieu of the foregoing milestones (with the exception of a one-time clinical phase development milestone) and royalties.

For additional discussion of accounting for payment obligations arising from the Program Purchase Agreement, refer to Note 7, “Commitments and Contingencies,” in the consolidated financial statements.

Upon the closing of the Program Purchase Agreement, management concluded that the combined performance obligation associated with the Servier Agreement was fully satisfied as we are no longer required to perform research and development work on the Servier targets and we regained all of our global development and commercialization rights previously granted to under the Servier Agreement.

Accordingly, all remaining deferred revenue related to the Servier agreement was recognized as revenue in the year ended December 31, 2021.

Under the Servier Agreement, we recognized $72.9 million and $18.0 million in revenue during the years ended December 31, 2021 and December 31, 2020, respectively.

The amount recorded as deferred revenue was $82.9 million and $80.9 million as of December 31, 2020 and December 31, 2019, respectively.

No deferred revenue related to the Server Agreement was recorded as of December 31, 2021, while deferred revenue as of December 31, 2020 amounted to $82.9 million.

In July 2020, Gilead notified us of its termination of the Gilead Agreement, to develop genome editing tools using ARCUS to target viral DNA associated with HBV.

Pursuant to the termination notice, the Gilead Agreement terminated on September 4, 2020.

termination, we regained full rights and all data we generated for the in vivo chronic HBV program developed under the Gilead Agreement.

During the years ended December 31, 2021 and 2020, we recognized no revenue and approximately $3.9 million of revenue under the Gilead Agreement, respectively.

The Company did not have deferred revenue related to the Gilead Agreement as of December 31, 2021 or December 31, 2020.

No development or sales-based milestone payments were received under the Gilead Agreement.

In September 2021, we entered into an exclusive license agreement to evaluate Tiziana’s foralumab, a fully human anti-CD3 mAb, as a lymphodepleting agent in conjunction with our allogeneic CAR T cells for the potential treatment of cancers.

We will investigate foralumab first in combination with an anti-CD19 CAR T and plan an IND update in 2022 to enable combination use.

SpringWorks Therapeutics

In September 2020, we entered into a Clinical Trial Collaboration Agreement with SpringWorks.

Pursuant to the agreement, PBCAR269A will be evaluated in combination with nirogacestat, SpringWorks’ investigational GSI, in patients with R/R multiple myeloma.

Pursuant to such agreement, PBCAR269A will be evaluated in combination with nirogacestat, SpringWorks’ investigational GSI, in patients with R/R multiple myeloma.

Under the terms of the agreement, we will bear all costs with the conduct of the clinical trial including providing PBCAR269A for use in the trial, and SpringWorks is responsible for providing nirogacestat at its sole cost and expense.

On July 6, 2020, Gilead Sciences (“Gilead”) notified us of its termination of the collaboration and license agreement dated September 10, 2018, subsequently amended by Amendment No.

1 dated March 10, 2020 or (the “Gilead Agreement”), to develop genome editing tools using ARCUS to target viral DNA associated with the hepatitis B virus.

Pursuant to the termination notice, the Gilead Agreement terminated on September 4, 2020.

Upon termination, we regained full rights and all data we generated for the in vivo chronic hepatitis B program developed under the Gilead Agreement.

We recognized $3.9 million and $13.3 million in revenue under the Gilead Agreement during the years ended December 31, 2020 and December 31, 2019, respectively, and $1.5 million in deferred revenue as of December 31, 2019.

We did not receive any milestone payments under the Gilead Agreement during the years ended December 31, 2020 or December 31, 2019.

The first patient was dosed in the combination arm in June 2021.

Trustees of the University of Pennsylvania

In January 2018, we entered into a research, collaboration and license agreement with the Trustees of the University of Pennsylvania (“Penn”) to collaborate on the preclinical development for gene editing products involving the delivery of an ARCUS nuclease.

On April 29, 2020, both parties agreed to coordinate a wind-down of all activities in their entirety under the agreement, effective as of June 30, 2020, however, in August 2020 and subsequently in January 2021, both parties agreed to extend certain portions of the agreement until 2022.

In January 2018, we entered into a research, collaboration and license agreement with Penn to collaborate on the preclinical development for gene editing products involving the delivery of an ARCUS nuclease.

In April 2020, both parties agreed to coordinate a wind-down of all activities in their entirety under the agreement, effective as of June 2020, however, in August 2020 and subsequently in January 2021, both parties agreed to extend certain portions of the agreement through 2022.

We will not be required to make termination payments to Penn.

Food Segment Collaborations

Dole Food Company

Through our wholly owned subsidiary, Elo, in June 2020, we entered into a Research, Development, and Commercialization Agreement with Dole with the aim to co-develop banana varieties resistant to Foc TR4, utilizing proprietary computational biology workflows and the ARCUS genome editing platform.

producers in the industry.

Fungicides, or other traditional means of disease control have failed as the pandemic continues to spread across vital banana growing economies.

Development of Foc TR4 varieties is critically important to save the banana industry, to protect the livelihoods of millions of banana growers and continue to provide consumers an affordable and nutritious fruit.

Under the terms of the collaboration, Dole will fully fund research and development efforts executed by Elo, and Elo is eligible to receive royalties on any commercialized plant product.

Cargill, Inc.

In 2014, through Elo, we and Cargill, Inc.

entered into a collaboration to produce ARCUS-optimized canola varieties with significantly lower levels of saturated fatty acids compared to the current levels in greenhouse studies.

On July 30, 2020, we and Cargill mutually agreed to terminate the collaboration, effective August 31, 2020.

Components of Our Results of Operations

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salaries, benefits and other related costs, including share-based compensation expense, for personnel engaged in research and development functions;

expenses incurred under agreements with third parties, including contract research organizations, or CROs, and other third parties that conduct preclinical research and development activities and clinical trials on our behalf;

costs of developing and scaling our manufacturing process and manufacturing drug products for use in our preclinical studies and ongoing and future clinical trials, including the costs of contract manufacturing organizations, or CMOs, and our MCAT facility that will manufacture our clinical trial material for use in our preclinical studies and ongoing and potential future clinical trials;

expenses incurred under agreements with third parties, including CROs and other third parties that conduct preclinical research and development activities and clinical trials on our behalf;

costs of developing and scaling our manufacturing process and manufacturing drug products for use in our preclinical studies and ongoing and future clinical trials, including the costs of CMOs, and our MCAT facility that will manufacture our clinical trial material for use in our preclinical studies and ongoing and potential future clinical trials;

costs of outside consultants, including their fees and related travel expenses;

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We expense research and development costs as incurred.

We track external research and development costs, including the costs of laboratory supplies and services, outsourced research and development, clinical trials, contract manufacturing, laboratory equipment and maintenance and certain other development costs, by product candidate when the program IND application is accepted by the FDA.

Internal and external costs associated with infrastructure resources, other research and development costs, facility related costs and depreciation and amortization that are not identifiable to a specific product candidate are included in the platform development and early-stage research expenses category in the table below.

The following table summarizes our research and development expenses by product candidate or development program for the periods presented :

Years ended December 31,

(in thousands)

Direct research and development expenses by product candidate:

CD19 external development costs

CD20 external development costs

BCMA external development costs

Platform development and early-stage research expenses:

Employee-related costs

Laboratory supplies and services

Outsourced research and development

CMOs and research organizations

Laboratory equipment and maintenance

Facility-related costs

Depreciation and amortization

Licensing fees

Other research and development costs

Total research and development expenses

and maintenance and certain other development costs, by product candidate when the program IND application is accepted by the FDA .

Research and development activities are central to our business model.

We expect that our research and development expenses will continue to increase substantially for the foreseeable future and will comprise a larger percentage of our total expenses as we continue our Phase 1/2a clinical trials for our CD19, CD20 and BCMA product candidates, commence our Phase 1 clinical trial of CD19B, and continue to discover and develop additional product candidates.

We cannot determine with certainty the duration and costs of ongoing and future clinical trials of our CD19, CD19B, CD20, and BCMA product candidates, or any other product candidate we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval.

We expect that our research and development expenses will continue to increase substantially for the foreseeable future and will comprise a larger percentage of our total expenses as we continue our clinical trials for our ex vivo allogeneic CAR T immunotherapies and development of our in vivo therapies for genetic and infectious diseases.

These expected increases in research and development expenses related to development of human therapeutic product candidates are expected to be partially offset by reductions in research and development expenses related to food and agricultural product candidates as we completed the Elo transaction in 2021 and will no longer be contributing capital towards the development of food and agricultural product candidates.

We cannot determine with certainty the duration and costs of ongoing and future clinical trials of our CD19, CD19B, and BCMA product candidates, or any other product candidate we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval.

We may never succeed in obtaining marketing approval for any product candidate.

The duration, costs and timing of clinical trials and development of our CD19, CD19B, CD20, and BCMA product candidates, and any other our product candidate we may develop will depend on a variety of factors, including:

the scope, rate of progress, expense and results of clinical trials of our CD19, CD19B, CD20, and BCMA product candidates, as well as of any future clinical trials of other product candidates and other research and development activities that we may conduct;

increased costs of additional clinical sites to address slowed enrollment due to the impact of COVID-19;

The duration, costs and timing of clinical trials and development of our CD19, CD19B, and BCMA product candidates, and any other our product candidate we may develop will depend on a variety of factors, including:

the scope, rate of progress, expense and results of clinical trials of our CD19, CD19B and BCMA product candidates, as well as of any future clinical trials of other product candidates and other research and development activities that we may conduct;

increased costs of additional clinical sites to address slowed enrollment due to the impact of the COVID-19 pandemic and variants thereof or any similar pandemic;

uncertainties in clinical trial design and patient enrollment rates;

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and facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs that are not specifically attributable to research activities.

We expect that our general and administrative expenses will increase in the future as we continue research activities and development of product candidates.

Change in Fair Value of Convertible Notes Payable

We elected on issuance to account for the convertible notes payable we issued in March 2019, or the 2019 Notes, at fair value until their settlement.

The change in fair value of the 2019 Notes was recognized through the statement of operations.

The 2019 Notes settled into 2,921,461 shares of common stock on the closing of our IPO on April 1, 2019.

Interest Expense

Interest expense consists of interest from the 2019 Notes at a rate of 6% per annum.

We expect that our general and administrative expenses will increase in the future to meet our growing infrastructure needs.

Change in Fair Value of Equity Investment

On issuance, we elected to account for the iECURE equity at fair value under ASC 825.

Accordingly, the Change in fair value of equity investment represents the change in fair value of the iECURE equity investment between reporting periods.

Gain on Deconsolidation of Subsidiary

The gain on deconsolidation of subsidiary was determined based on the difference between the book value of the net assets that we contributed to New Elo as part of the Elo Transaction as well as the fair value of the Promissory Note we received from New Elo and the fair value of our ownership in New Elo as of December 17, 2021.

Income from Equity Method Investments

Income from equity method investments represents our proportionate share of New Elo’s net income.

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents.

Since our inception in 2006, we have generated cumulative federal and state net operating loss and research and development (“R&D”) credit carryforwards for which we have not recorded any net tax benefit due to the uncertainty around utilizing these tax attributes within their respective carryforward periods.

As of December 31, 2020, we had federal, state, and foreign net operating loss carryforwards of $172.7 million, $116.5 million, and $0.6 million, respectively, which may be available to offset future taxable income.

Interest income consists of interest income earned on our cash and cash equivalents and Note Receivable.

Since our inception in 2006, we have generated cumulative federal and state NOL and R&D credit carryforwards for which we have not recorded any net tax benefit due to the uncertainty around utilizing these tax attributes within their respective carryforward periods.

As of December 31, 2021, we had federal, state, and foreign NOL carryforwards of $181.0 million, $122.2 million, and $0.4 million, respectively, which may be available to offset future taxable income.

A portion of the U.S.

federal net operating loss carryforwards in the amount of $19.7 million will begin to expire in 2030 while the remaining federal net operating loss carryforwards of $153.0 million carry forward indefinitely.

The state net operating loss carryforwards begin to expire in 2025.

The foreign net operating losses carryforward indefinitely.

As of December 31, 2020, we also had federal research and development tax credit carryforwards of $9.9 million, which begin to expire in 2027, and an amount less than $0.1 million, which begin to expire in 2030.

federal NOL carryforwards in the amount of $19.7 million will begin to expire in 2030 while the remaining federal NOL carryforwards of $161.2 million carry forward indefinitely.

The state NOL carryforwards begin to expire in 2025.

The foreign NOLs carryforward indefinitely.

As of December 31, 2021, we also had federal R&D tax credit carryforwards of $11.4 million, which begin to expire in 2027, and an amount less than $0.1 million, which begin to expire in 2030.

As of December 31, 2021 and December 31, 2020, we had federal Orphan Drug credits of $9.5 million and $6.0 million, respectively, which begin to expire in 2038.

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We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

On December 22, 2017, the TCJA was signed into United States law.

The TCJA includes a number of changes to existing tax law, including, among other things, a permanent reduction in the federal corporate income tax rate from a top marginal tax rate of 35% to a flat rate of 21%, effective as of January 1, 2018, as well as a limitation of the deduction for net operating losses to 80% of annual taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such net operating losses may be carried forward indefinitely).

The federal tax rate change resulted in a reduction in the gross amount of our deferred tax assets and liabilities recorded as of December 31, 2017, and a corresponding reduction in our valuation allowance.

As a result, no income tax expense or benefit was recognized as of the enactment date of the TCJA.

Results of Operations

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Other income (expense), net:

Change in fair value of convertible note payable

Gain on changes in fair value

Gain on deconsolidation of subsidiary

Income from equity method investments

Interest expense

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Revenue for the year ended December 31, 2021 was $115.5 million, compared to $24.3 million for the year ended December 31, 2020.

The increase of $2.1 million in revenue during the year ended December 31, 2020 was primarily the result of a $10.7 million increase in collaboration revenue recognized from Servier in connection with the development milestones achieved and work performed on the new targets under the Servier Agreement, a $0.8 million increase in revenue recognized from food segment partners, partially offset by a $9.5 million decrease in revenue recognized from Gilead due to the termination of the Gilead Agreement.

The increase of $91.2 million in revenue during the year ended December 31, 2021 was the result of a $54.8 million increase in revenue recognized under the Servier Agreement as the performance obligation was deemed fully satisfied upon the execution of the Program Purchase Agreement, a $21.0 million increase in revenue recognized under the Lilly Agreement as work began in 2021, a

$ 17.9 million increase in revenue recognized under the iECURE Agreement as the iECURE Agreement was executed in 2021 , and a $2.9 million increase in revenue recognized from a n agricultural partnering collaboration .

These increases in revenue were partially offset by a $3.9 million decrease in revenue recognized from Gilead due to the termination of the Gilead Agreement in 2020 and a $1.5 million decrease in milestone revenue recognized from an agriculture industry collaboration partner.

Research and Development Expenses

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BCMA external development costs

CD19B external development costs

Platform development and early-stage research expenses:

Employee-related costs

Program Purchase Agreement costs and contract liability

Amortization of PCSK9 Prepaid

Laboratory supplies and services

Sublicensing royalty payable to Duke

Outsourced research and development

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Research and development expenses for the year ended December 31, 2021 were $115.2 million, compared to $98.1 million for the year ended December 31, 2020.

The increase of $15.7 million was primarily due to a $16.2 million increase in platform development and early-stage research expenses, a $3.9 million increase in direct research and development expenses related to our CD19 program, partially offset by decreases of $2.7 and $1.8 in direct research and development expenses related to our CD20 and BCMA programs, respectively.

The increase in direct research and development expenses for our CD19 program was primarily due to increase s in CMO and research organization costs as we continue to enroll additional patients in the Phase 1/2a clinical trial.

The decrease in direct research and development expenses for our CD20 and BCMA programs was primarily due to decreases in external CMO costs as we transferred clinical trial material manufacturing activities for CD20 and BCMA in-house to MCAT .

Platform development and early-stage research expenses increased primarily due to a $10.9 million increase in employee-related expense associated with increased headcount to support our technology platform development and manufacturing capabilities, a $6.0 million increase in CMO and research organization expense, primarily related to our planned CD19B clinical trial, a $3.3 million increase in depreciation and amortization expense driven by our higher depreciable asset base during the year ended December 31, 2020, and a $0.3 million increase in facility-related expenses, partially offset by a $4.9 million decrease in outsourced research and development expense in the year ended December 31, 2020 compared to the year ended December 31, 2019.

The increase of $17.1 million was primarily due to a $17.1 million increase in platform development and early-stage research expenses, a $2.9 million increase in external development costs for our CD19B program as the CD19B Phase 1 clinical trial commenced in June 2021, and a $0.2 million increase in external development costs for our BCMA program, partially offset by decreases of $3.0 million in CD20 external development costs as development of PBCAR20A has been discontinued, and a $0.1 million decrease in CD19 external development costs.

Platform development and early-stage research expenses increased primarily due to a $11.3 million increase in expenses related to the Program Purchase Agreement in which a $10.0 million financial contract liability was accrued as it was deemed probable to occur and the $1.3 million cash payment to Servier, $4.4 million in expense related to amortization of the iECURE PCSK9 prepaid as a result of costs incurred by iECURE in the year ended December 31, 2021 to progress the Company’s PBGENE-PCSK9 candidate through a Phase 1 clinical trial , a $4.3 million increase in employee-related expense associated with increased wages and share-based compensation expense, a $3.0 million increase in laboratory-related expenses, a $1.1 million sublicensing royalty payable to Duke on the Lilly upfront payment received.

These increases in platform development and early-stage research expenses were partially offset by a $5.2 million decrease in outsourced research and development expense, and a $2.4 million decrease in CMO and research organization expense as costs associated with our CD19B program were allocated directly to the program beginning in 2021.

General and Administrative Expenses

General and administrative expenses were $39.7 million for the year ended December 31, 2021 compared to $36.1 million for the year ended December 31, 2020.

The increase of $9.1 million was primarily due to an increase of $4.0 million in employee-related expense as we increased our general and administrative headcount, $2.9 million in consulting fees, and $2.5 million in increased administrative expenses, including insurance, information technology, franchise and property taxes, and costs related to operating as a public company, partially offset by a $0.3 million decrease in bank fees and other general and administrative expenses.

Change in Fair Value of Convertible Notes Payable

We elected on issuance to account for the 2019 Notes at fair value until their settlement.

For the year ended December 31, 2019, we recognized $9.8 million of expense as changes in fair value.

The 2019 Notes were settled on the closing of the IPO in April 2019.

The increase of $3.6 million was primarily due to an increase of $3.9 million in employee-related expense associated with increased wages, share-based compensation, and recruiting costs for key management personnel, a $0.6 million increase in information technology expenses, and a $0.5 million increase in insurance expense, partially offset by a $1.5 million decrease in legal fees.

Gain on Changes in Fair Value

The gain on changes in fair value was $2.6 million for the year ended December 31, 2021.

The change in fair value is primarily attributed to an increase in the assessed fair value of our equity investment in iECURE from issuance in August 2021 to December 31, 2021.

No change in fair value was recorded in the year ended December 30, 2020 as we did not account for any assets or liabilities at fair value in the consolidated balance sheets in the year ended December 31, 2020.

Gain on Deconsolidation of Subsidiary

The Gain on Deconsolidation of Subsidiary was $6.0 million for the year ended December 31, 2021 and represents the difference between the book value of the net assets that we contributed to New Elo as part of the Elo Transaction and the sum of the fair value of the Promissory Note we received from New Elo and the fair value of our Ownership in New Elo as of December 17, 2021.

There was no gain on deconsolidation in the year ended December 31, 2020 as the Elo Transaction occurred in December 2021, and there were no such transactions that occurred in the year ended December 31, 2020.

Income from Equity Method Investments

Income from equity method investments was $0.2 million and represents our proportionate share of New Elo’s net income from December 18, 2021 through December 31, 2021.

We did not have any equity method investments in the year ended December 31, 2020.

Interest Expense

Interest expense of $0.2 million for the year ended December 31, 2019 consists of interest from the 2019 Notes at a rate of 6% per annum.

Interest expense was $0.1 million for the year ended December 31, 2021 consists of interest payments and debt discount amortization on debt outstanding during the year ended December 31, 2021.

No interest expense was incurred during the year ended December 31, 2020.

Interest Income

Interest income was $0.2 million for the year ended December 31, 2021 compared to $0.8 million for the year ended December 31, 2020.

The decrease of $3.5 million of interest income generated on our cash and cash equivalent balances was the result of lower interest rates and lower cash balances in the year ended December 31, 2020, compared to the year ended December 31, 2019.

The decrease of $0.6 million of interest income generated on our cash and cash equivalent balances was the result of lower interest rates in the year ended December 31, 2021, compared to the year ended December 31, 2020, partially offset by interest income earned on the Note Receivable that was issued in the year ended December 31, 2021.

Segment Results

The following tables summarize segment revenues and segment operating loss (see Note 13 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our segments):

The following tables summarize segment revenues and segment operating loss (see Note 14, “Segment Reporting,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our segments):

For the Years Ended December 31,

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Total segment operational cash expenditures

Segment operating loss:

Total segment operating loss

We evaluate the operating performance of each segment based on segment operating loss.

Segment operating loss is derived by deducting operational cash expenditures, net, from GAAP revenue.

Segment operating income (loss):

Total segment operating income (loss)

Prior to the Elo Transaction on December 17, 2021, we evaluated the operating performance of our Therapeutics and Food segments based on segment operating income (loss).

Segment operating income (loss) is derived by deducting operational cash expenditures, net, from GAAP revenue.

Operational cash expenditures are cash disbursements made that are specifically identifiable to the reportable segment (including specifically identifiable research and development and property, equipment and software expenditures).

The reportable segment operational cash expenditures include cash disbursements for compensation, laboratory supplies, purchases of property, equipment and software and procuring services from CROs, CMOs and research organizations.

We do not allocate general operational expenses or non-cash income statement amounts to our reportable segments.

We did not allocate general operational expenses or non-cash income statement amounts to our reportable segments.

Therapeutics Segment

Revenue for the year ended December 31, 2021 was $111.7 million, compared to $21.9 million for the year ended December 31, 2020.

The increase of $1.3 million was the result of a $10.7 increase in collaboration revenue recognized from Servier, partially offset by a $9.5 million decrease in revenue recognized from Gilead due to the termination of the Gilead Agreement.

Segment operational cash expenditures for the year ended December 31, 2020 were $71.8 million, compared to $70.1 million for the year ended December 31, 2019.

The increase of $1.7 million in operational cash expenditures was primarily due to an increase in employee costs and payments made to service providers for contract manufacturing and clinical trial research, partially offset by a decrease in capital expenditures for fixed assets and a reduction in payments to external vendors for early-stage research.

Segment operating loss increased $0.6 million from $49.4 million for the year ended December 31, 2019 to $50.0 million for the year ended December 31, 2020 primarily due to the factors discussed above.

The increase of $89.8 million was the result of a $54.8 million increase in revenue recognized under the Servier Agreement as the performance obligation was deemed fully satisfied upon the execution of the Program Purchase Agreement, a $21.0 million increase in revenue recognized under the Lilly Agreement as work began in 2021, and a $17.9 million increase in revenue recognized under the iECURE Agreement as the iECURE Agreement was executed in 2021.

These increases in revenue were partially offset by a $3.9 million decrease in revenue recognized from Gilead due to the termination of the Gilead Agreement in 2020.

Segment operational cash expenditures were $79.7 million for the year ended December 31, 2021, compared to $71.8 million for the year ended December 31, 2020.

The increase of $7.9 million in operational cash expenditures was primarily due to an increase in employee-related costs, payments under the Duke License, and the payment made to Servier in connection with the Program Purchase Agreement.

These were partially offset by a decrease in capital expenditures for fixed assets and a reduction in payments to external vendors for early-stage research.

Segment operating profit increased $82.0 million from a $50.0 million operating loss for the year ended December 31, 2020 to a $32.0 million operating profit for the year ended December 31, 2021 primarily due to the factors discussed above.

Revenue for the year ended December 31, 2021 was $3.8 million, compared to $2.4 million for the year ended December 31, 2020.

The increase of $0.8 million was primarily attributable to $0.8 million from an agreement with a new collaboration partner entered into during the year ended December 31, 2020.

Segment operational cash expenditures for the year ended December 31, 2020 were $7.6 million, compared to $7.0 million for the year ended December 31, 2019.

The increase of $0.6 million was primarily due to an increase in employee costs and rent payments, partially offset by a decrease in capital expenditures for fixed assets.

The increase of $1.4 million was the result of a $2.9 million increase in revenue recognized from an agricultural partnering collaboration partially offset by a $1.5 million decrease in milestone revenue recognized from an agriculture industry collaboration partner.

Segment operational cash expenditures were $7.6 million for the years ended December 31, 2021 and December 31, 2020.

Segment operating loss decreased $1.4 million from $5.2 million for the year ended December 31, 2020 to $3.8 million for the year ended December 31, 2021 primarily due to the factors discussed above.

As discussed above, we are assessing various options with respect to a potential separation of Elo from Precision, which could occur during 2021.

Due to the completion of the Elo Transaction in December 2021, we no longer expect to generate revenue or incur cash expenditures related to the development of food and agricultural product candidates.

Liquidity and Capital Resources

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As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.

There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all, particularly in light of the economic downturn and ongoing uncertainty related to the COVID-19 pandemic.

If we are unable to secure adequate additional funding as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates.

In addition, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements remains uncertain as of the filing date of this Annual Report on Form 10-K, as the pandemic continues to evolve globally.

See “Impact of COVID-19 Pandemic” above and “Risk Factors— The ongoing novel coronavirus disease, COVID-19 has impacted our business and any other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials” in Part I, Item 1A.

of this Annual Report on Form 10-K for a further discussion of the potential impact of the COVID-19 pandemic on our business.

In addition, the magnitude and duration of the COVID-19 pandemic and variants thereof and its impact on our liquidity and future funding requirements remains uncertain as of the filing date of this Annual Report on Form 10-K, as the pandemic continues to evolve globally.

See “Impact of the COVID-19 Pandemic” above and “ Risk Factors— The ongoing novel coronavirus disease, COVID-19 has impacted, and may continue to impact, our business, and any other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials” in Part I.

of this Annual Report on Form 10-K for a further discussion of the potential impact of the COVID-19 pandemic and its variants on our business.

We do not currently have any approved products and have never generated any revenue from product sales.

Through the date of filing this Annual Report on Form 10-K, we have financed our operations primarily with proceeds from our IPO, private placements of our convertible preferred stock, convertible debt and common stock, and upfront payments from collaboration and licensing arrangements.

As of December 31, 2020, we had raised approximately $492.5 million of proceeds from third parties through a combination of financings including our IPO, preferred stock and convertible note financings, payments under the Servier Agreement, and funding from other strategic alliances and grants.

Through the date of filing this Annual Report on Form 10-K, we have financed our operations primarily through proceeds from upfront and milestone payments from collaboration and licensing agreements, our IPO, private placements of our convertible preferred stock and convertible debt financings, at-the-market offerings of common stock, and borrowings on credit facilities.

As of December 31, 2021, we had raised approximately $659.4 million of proceeds from third parties through a combination of financings including our IPO, preferred stock and convertible note financings, at-the-market offerings of common stock as part of our shelf registration statement, upfront and milestone payments from customers, and funding from other strategic alliances and grants.

We also currently have an effective shelf registration statement on Form S-3 (No.

333-238857) filed with the SEC on June 1, 2020 (the “Form S-3”) under which we may offer from time to time in one or more offerings

any combination of common and preferred stock, debt securities, warrants and units of up to $200.0 million in the aggregate.

As of December 31, 2020, we have not sold any securities under our shelf registration statement.

333-238857) filed with the SEC on June 1, 2020 (the “Form S-3”) under which we may offer from time to time in one or more offerings any combination of common and preferred stock, debt securities, warrants and units of up to $200.0 million in the aggregate.

As of December 31, 202 1 , we had sold 2,322,676 shares of our common stock in at-the-market offerings as part of our shelf registration statement, resulting in net proceeds of $ 25.

5 million , after deducting agent commissions and issuance costs.

Our cash and cash equivalents totaled $143.7 million as of December 31, 2021, compared to $89.8 million as of December 31, 2020.

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Our losses have resulted from expenses incurred in connection with our research and development activities, including our clinical programs, preclinical development activities, and general and administrative costs associated with our operations.

The use of cash in operating activities during the years ended December 31, 2020 and December 31, 2019 resulted from our net loss adjusted for non-cash expenses and changes in working capital.

The use of cash in operating activities during the years ended December 31, 2021 and December 31, 2020 resulted from our net loss adjusted for non-cash items and changes in working capital.

Cash used in operating activities during the year ended December 31, 2021 was $10.9 million, compared to $87.4 million during the year ended December 31, 2020.

The increase in cash used in operating activities in the year ended December 31, 2020 was primarily due to an increase in employee-related costs associated with increased headcount, increased costs related to our clinical programs with our ongoing CD19 Phase 1/2a clinical trial and initiation of Phase 1/2a clinical trials for our CD20 and BCMA product candidates in 2020, an increase in legal fees and an increase in lease payments.

The decrease in cash used in operating activities in the year ended December 31, 2021 was primarily driven by the $100.0 million upfront payment received from Lilly in January 2021, partially offset by increases in employee-related costs.

Cash Used in Investing Activities

Cash used in investing activities primarily relates to leasehold additions, equipment and software.

Cash used in investing activities primarily relates to cash expenditures to acquire leasehold additions, equipment, software, and intangible assets.

Net cash used in investing activities during the year ended December 31, 2021 was $5.8 million, compared to $5 million in the year ended December 31, 2020.

The decrease in cash used in investing activities during the year ended December 31, 2020 was primarily due to the completion of the build-out of our MCAT facility in Research Triangle Park and other leased facilities in 2019.

The increase in cash used in investing activities during the year ended December 31, 2021 was primarily driven by a $0.8 million cash expenditure for the license to evaluate Tiziana’s foralumab as a lymphodepletion agent in conjunction with our allogeneic CAR T therapeutics, which was capitalized as an intangible asset.

Cash Provided by Financing Activities

Net cash provided by financing activities during the year ended December 31, 2021 was $70.5 million, compared to $1.3 million during the year ended December 31, 2020.

The higher cash provided by financing activities during the year ended December 31, 2019, compared to the year ended December 31, 2020, was due to proceeds received from our IPO, which closed in April 2019, and proceeds from the 2019 Notes, which were issued in March 2019.

Financing activities in the twelve months ended December 31, 2020 related to cash proceeds received from stock option exercise and our employee stock purchase plan.

The higher cash provided by financing activities during the year ended December 31, 2021, compared to the year ended December 31, 2020, was primarily due to the $35.0 million in proceeds received under the Stock Purchase Agreement with Lilly, $25.5 million in net proceeds received from sales of our common stock under our shelf registration statement , a $6.1 million increase in proceeds from stock option exercises and $2.5 million in net proceeds received from borrowings on our revolving credit facility.

Debt Obligations

In March 2019, we issued an aggregate principal amount of $39.6 million of 2019 Notes in a private placement transaction.

Upon settlement, the change in fair value of the 2019 Notes was $9.8 million and the accrued interest on the 2019 Notes was $0.2 million.

Pursuant to their terms, the 2019 Notes were settled in 2,921,461 shares of our common stock upon the closing of our IPO at a settlement price of $13.60 per share, which is equal to 85% of the IPO price per share.

In May 2019, we entered into the Pacific Western Loan Agreement with PWB as amended by the First Amendment to Loan and Security Amendment, effective September 18, 2019, the Second Amendment to Loan and Security Amendment, effective December 3, 2019 (the “Original Agreement”).

On June 23, 2020, the Company and PWB entered into the Third Amendment to Loan and Security Agreement (the “Amendment No.

3”) to the Original Agreement (as amended, the “Pacific Western Loan Agreement”).

The terms of Amendment No.

3 (a) decrease the aggregate principal amount of advances on a revolving line of credit (the “Revolving Line”) from $50.0 million to $30.0 million and (b) extend the maturity date of the Revolving Line to June 23, 2022, provided that, if the Company receives aggregate cash proceeds of at least $125.0 million from the issuance of the Company’s equity securities and/or

upfront cash proceeds from strategic partnerships on terms and conditions reasonably satisfactory to PWB, the maturity date shall then instead be June 23, 2023.

Under the terms of Amendment No.

3, the interest rate increased to a variable annual rate eq ual to the greater of (a) 2.75% above the Prime Rate (as defined in the Original Agreement), and (b) 6.00%.

On May 19, 2021, Elo entered into a loan and security agreement with PWB for a term loan (the “Elo Loan”) in the amount of $2.5 million.

On December 14, 2021, the Company repaid all outstanding principal and interest on the Elo Loan with proceeds from the Revolving Line.

We may request advances on the Revolving Line up to an aggregate principal of $30.0 million.

The Revolving Line matures and all outstanding principal amounts are due on June 23, 2023.

The Company must also maintain an aggregate balance of unrestricted cash at PWB (not including amounts in certain specified accounts) equal to or greater than $10.0 million.

The Pacific Western Loan Agreement matures on June 23, 2023, as a result of the events discussed in Note 14 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

As of the date of this Annual Report on Form 10-K, there have been no borrowings under our Revolving Line, and we are in compliance with the financial covenants under the Pacific Western Loan Agreement.

The interest rate on Revolving

Line borrowings is a variable annual rate equal to the greater of (a) 2.75% above the Prime Rate (as defined in the Revolving Line ), or (b) 6.00%.

As of December 31, 2021, the outstanding principal balance on the Revolving Line was $2.5 million .

Funding Requirements

Our operating expenses increased substantially in 2020 and are expected to continue to increase in the future in connection with the continuation of our current clinical trials, planned initiation of additional clinical trials and expected growth in our portfolio.

We believe that our cash and cash equivalents as of December 31, 2020, cash payments received from Lilly in January 2021 in connection with the closing of the Development and License Agreement, expected operational receipts and available credit will allow us to continue its operations into 2023.

Our operating expenses increased substantially in 2021 and are expected to continue to increase in the short term in connection with the continuation of our current clinical trials and in the long term with planned initiation of additional clinical trials, expected IND and CTA filings, potential BLA filings and expected growth in our ex vivo and in vivo portfolios.

We believe that, as of the date of this Annual Report on Form 10-K, existing cash and cash equivalents, expected operational receipts and available credit will allow us to fund our operating expense and capital expenditure requirements into mid-2023 .

We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical and agricultural products, it is difficult to estimate with certainty the amount of our working capital requirements.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, it is difficult to estimate with certainty the amount of our working capital requirements.

Our future funding requirements will depend on many factors, including:

the progress, costs and results of our clinical development for our CD19, CD19B, CD20, and BCMA programs as we progress clinical trials, including CRO costs;

the progress, costs and results of our additional research and preclinical development programs;

the progress, costs and results of our clinical development for our CD19, CD19B, and BCMA programs as we progress clinical trials, including CRO costs;

the progress, costs and results of our additional research and preclinical development programs including our in vivo pipeline and our planned IND or CTA submissions;

the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;

the costs and timing of internal process development and manufacturing scale-up activities and contract with CMOs associated with our CD19, CD19B, CD20, and BCMA programs and other programs we advance through preclinical and clinical development;

the costs and timing of internal process development and manufacturing scale-up activities and contract with CMOs associated with our CD19, CD19B, and BCMA programs and other programs we advance through preclinical and clinical development;

our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;

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Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity or debt financings, collaboration agreements, other third‑party funding, strategic alliances, licensing arrangements and marketing and/or distribution arrangements.

See “ Risk Factors – We will need substantial additional funding, and if we are unable to raise a sufficient amount of capital when needed on acceptable terms, or at all, we may be forced to delay, reduce or eliminate some or all of our research programs, product development activities and commercialization efforts.” in Part I, Item 1A.

of this Annual Report on Form 10-K for a further discussion of our ability to generate and obtain adequate amounts of funding in connection with our continuing operations.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, shareholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders.

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Lease Obligations ( 1)

Revolving Line of Credit ( 2)

Represents future minimum lease payments under our leases for office and/or lab space at the following locations:

302 East Pettigrew Street, Durham, North Carolina expiring in July 2024, 3054 Cornwallis Road, Durham, North Carolina expiring in April 2026 and 20 TW Alexander Drive, Research Triangle Park, North Carolina expiring in August 2027.

The lease obligations amounts above also represent future minimum lease payments on the MCAT Expansion Space as we are contractually obligated to make such payments on the MCAT Expansion Space notwithstanding that the lease commencement date for accounting purposes was not reached as of December 31, 2020 (see Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on these lease agreements).

We have entered into a license agreement with an undisclosed licensee for intellectual property used in our research programs.

The agreement requires us to pay annual license fees and milestones payments for achievement of specified clinical and commercial events.

We have excluded these potential milestone payments in the contractual obligations table because the timing and likelihood of these contingent payments are not currently known and would be difficult to predict or estimate.

This table does not reflect principal and interest payments payable pursuant to our Pacific Western Loan Agreement, pursuant to which we may request advances on the Revolving Line of up to an aggregate principal of $30.0 million.

As of December 31, 2020, we had no borrowings under our Revolving Line and, as of the date of this Annual Report on Form 10-K, the maturity date of the Revolving Line is June 23, 2023.

The Revolving Line bears interest at a variable annual rate equal to the greater of (a) 2.75% above the Prime Rate (as defined in the Original Agreement), and (b) 6.00%.

302 East Pettigrew Street, Durham, North Carolina expiring in July 2024, and 20 TW Alexander Drive, Research Triangle Park, North Carolina expiring in August 2027.

The lease obligations amounts above also represent future minimum lease payments on the MCAT Expansion Space as we are contractually obligated to make such payments on the MCAT Expansion Space notwithstanding that the lease commencement date for accounting purposes was not reached as of December 31, 2021 (see Note 7, “Commitments and Contingencies,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on our lease agreements).

Represents principal and estimated interest payments on our $2.5 million in outstanding Revolving Line borrowings as of December 31, 2021.

Under the Revolving Line we may request advances up to an aggregate principal of $30.0 million.

The revolving line matures on June 23, 2023 and bears interest at a variable annual rate equal to the greater of (a) 2.75% above the Prime Rate (as defined in the Original Agreement), and (b) 6.00%.

As of December 31, 2021, the stated interest rate on the Revolving line was 6.0% and the effective interest rate was 6.8%.

If the Revolving Line is terminated prior to the maturity date, we are required to pay an early termination fee equal to $0.6 million.

Upon maturity or termination of the revolving line, then we are required to pay an amount equal to 1% of the maximum principal amount of the advances outstanding at any time.

In addition, we have entered into the Duke License, under which we are obligated to make aggregate future milestone payments of up to $0.2 million upon the achievement of specified corporate milestones as well as low-single digit percent royalty payments based on future net sales of applicable products and specified royalties based on sublicensing revenue.

See “Business—License and Collaboration Agreements” for more information regarding our payment obligations under the Duke License.

We have not included future payments under the Duke License in the table above since the payment obligations under the Duke License are contingent upon future events, such as the achievement of specified milestones or generating product sales, and we are unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.

We have also not included our contractual payment obligations under the Duke License in connection with the upfront payment under the Development and License Agreement with Lilly in the table above since, as of December 31, 2020, the completion of the transactions contemplated by the Development and License Agreement had not closed.

We closed the transactions under the Development and License Agreement on January 6, 2021 following receipt of clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and as a result we will be required to make payments under the Duke License of $3.0 million in 2021, net of any outstanding credits.

See Note 14 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding the Development and License Agreement.

Upon maturity or termination of the revolving line, we are required to pay an amount equal to 1% of the maximum principal amount of the advances outstanding at any time.

We also enter into contracts in the normal course of business with CROs, CMOs, universities and other third parties for preclinical research studies, clinical trials and testing and manufacturing services.

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The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements.

We base our estimates on historical experience, known trends and events and various other factors

that we believe are reasonable under 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.

We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under 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.

We evaluate our estimates and assumptions on an ongoing basis.

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We classify payments received under these agreements as revenues within our consolidated statements of operations.

We adopted Accounting Standards Update, or ASU, No.

2014-09, Revenue from Contracts with Customers , or ASC 606, on January 1, 2019 using the modified retrospective transition method.

Under this method, results for reporting periods beginning on January 1, 2019 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC Topic 605, Revenue Recognition (“ASC 605”).

ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards.

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Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as noncurrent deferred revenue.

Amounts recognized as revenue, but not yet invoiced are generally recognized as contract assets in the Other line item in our consolidated balance sheets.

Amounts recognized as revenue, but not yet invoiced are generally recognized as contract assets in the other current assets line item in our consolidated balance sheets.

Milestone Payments – If an arrangement includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method.

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This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For collaboration arrangements within the scope of ASC 808 that contain multiple elements, we first determine which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, are within the scope of ASC 606.

For collaboration arrangements within the scope of ASC 808 that contain multiple elements, we first determine

which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, are within the scope of ASC 606.

For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606.

For those elements of the arrangement that are accounted for pursuant to ASC 606, we apply the five-step model described above.

In February 2016, we entered into the Servier Agreement for the licensing of our ARCUS proprietary genome editing platform and the research, development, and manufacturing of product for clinical trials and commercialization of products.

In September 2018, we entered into a collaboration and license agreement with Gilead, which we refer to as the Gilead Agreement, to develop genome editing tools using our ARCUS proprietary genome editing platform.

Both agreements use our genome editing technology for the treatment of certain diseases.

Consideration we received, or may receive, under these collaboration and license agreements include upfront nonrefundable payments, research funding payments and payments based upon the achievement of certain milestones and royalties on any resulting net product sales.

Under the guidance of ASC 606, certain judgments affect revenue recognition.

Our primary performance obligations under our agreements consist of research and development services.

Measuring the amount of time it takes for us to complete these services includes estimating our total effort to satisfy our performance obligations at the outset of the agreement and then comparing that amount to the actual effort expended for a given accounting period.

In certain instances, significant judgment is required to estimate the timing of satisfying these obligations and timing may change due to efforts beyond our control, such as changes in the customer’s direction of a particular research program or changes to the contractual terms of an agreement.

Accordingly, our estimates may change in the future.

Such changes to estimates will result in a change in prospective revenue recognition amounts.

Revenue related to performance obligations satisfied over time could be materially impacted as a result of changes in the estimated research effort to satisfy performance obligations or changes in the transaction price related to variable consideration.

For example, in in the year ended December 31, 2021, we recorded cumulative catch up adjustments on that increased revenue recognition by $61.2 million as a result of changes in the transaction price related to variable consideration for development milestones as well as changes in total estimated effort required to satisfy performance obligations.

If we were to increase total estimated effort required to satisfy the performance obligations related to the agreement with Lilly by 10%, it would result in a cumulative catch up adjustments that decrease revenue recognition by $1.9 million.

Alternatively, if we were to decrease total estimated effort required to satisfy the performance obligations related to the agreement with Lilly by 10%, it would result in a cumulative catch up adjustments that increase revenue recognition by $2.3 million.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses.

As part of the process of preparing our consolidated financial statements, we are required to make certain estimates and judgements in our accrued research and development expenses.

This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs.

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We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time.

Actual costs incurred could differ materially from estimates.

Examples of estimated accrued research and development expenses include fees paid to the following:

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CMOs and other vendors in connection with product manufacturing and development and distribution of preclinical supplies.

We base our expenses related to preclinical studies on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct and manage preclinical studies and clinical trials and CMOs that manufacture product for our

research and development activities on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

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Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 1 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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 under SEC rules.

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 1, “Description of Business and Summary of Significant Accounting Policies,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Emerging Growth Company Status

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We will remain an “emerging growth company” until the earliest of (1) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more, (2) December 31, 2024, (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, which means the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30th, we have been a public company for at least 12 months and have filed one Annual Report on Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business.

These risks primarily include interest rate sensitivities.

Our interest-earning assets consist of cash and cash equivalents, which are denominated in U.S.

We had cash and cash equivalents of $89.8 million, or 60% of our total assets, at December 31, 2020 and $180.9 million, or 77% of our total assets, at December 31, 2019.

Interest income earned on these assets was $0.8 million and $4.3 million for the years ended December 31, 2020 and December 31, 2019, respectively.

Our interest income is sensitive to changes in the general level of interest rates, primarily U.S.

interest rates, however, we do not anticipate fluctuations in interest rates to have a significant impact on our financial statements.

We are also exposed to foreign exchange rate risk with respect to our global subsidiaries from foreign currency transactions.

We do not anticipate foreign exchange rate risk to have a material impact on our financial statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis