Immunocore Holdings plc 10-Q

Item 1. Financial Statements Immunocore Holdings plc Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share data) September 30, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 537,767 $ 442,626 Marketable securities 363,515 — Accounts receivable, net 63,659 52,093 Prepaid expenses and other current assets 36,446 29,600 Inventory, net 4,518 4,501 Total current assets 1,005,905 528,820 Property and equipment, net 9,160 9,215 Operating lease right of use assets, net 39,672 33,520 Deferred tax assets, net 12,663 10,973 Other non-current assets 17,238 14,473 Total assets $ 1,084,638 $ 597,001 Liabilities and shareholders’ equity Current liabilities Accounts payable $ 19,721 $ 17,798 Accrued expenses and other current liabilities 197,224 119,835 Operating lease liabilities, current 1,097 1,388 Interest-bearing loans and borrowings, current 48,207 — Total current liabilities 266,249 139,021 Accrued expenses, non-current 3,006 978 Deferred revenue, non-current 5,797 5,515 Operating lease liabilities, non-current 41,271 34,633 Interest-bearing loans and borrowings, non-current 390,488 48,011 Total liabilities $ 706,811 $ 228,158 Shareholders’ equity Ordinary shares (voting and non-voting), £ 0.002 par value, most recent authority to allot up to a maximum nominal value of £ 97,454 and £ 109,355 shares as of September 30, 2024 and December 31, 2023, respectively, and 50,025,620 and 49,725,649 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively. 135 134 Deferred shares, £ 0.0001 par value, 5,793,501 shares authorized, issued and outstanding as of September 30, 2024 and December 31, 2023. 1 1 Additional paid-in capital 1,180,854 1,149,643 Accumulated deficit ( 771,990 ) ( 744,674 ) Accumulated other comprehensive loss ( 31,173 ) ( 36,261 ) Total shareholders' equity 377,827 368,843 Total liabilities and shareholders' equity $ 1,084,638 $ 597,001 The accompanying notes form an integral part of these condensed consolidated financial statements. 2 Table of Contents Immunocore Holdings plc Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (In thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenue: Product revenue, net $ 80,248 $ 62,629 $ 225,937 $ 171,142 Collaboration revenue — 2,221 213 8,124 Total revenue 80,248 64,850 226,150 179,266 Cost and operating expenses: Cost of product revenue ( 448 ) ( 276 ) ( 2,401 ) ( 837 ) Research and development expense ( 52,770 ) ( 43,249 ) ( 161,301 ) ( 117,980 ) Selling, general and administrative expense ( 35,532 ) ( 35,469 ) ( 113,457 ) ( 103,046 ) Loss from operations ( 8,502 ) ( 14,144 ) ( 51,009 ) ( 42,597 ) Other income (expense): Interest income 5,960 5,142 20,445 12,546 Interest expense ( 4,290 ) ( 1,321 ) ( 11,806 ) ( 3,845 ) Foreign currency gain (loss) 3,963 11,246 1,049 ( 647 ) Other income (expense), net 8,962 ( 192 ) 13,205 ( 706 ) Net income (loss) before income taxes 6,093 731 ( 28,116 ) ( 35,249 ) Income tax benefit (expense) 2,643 175 800 ( 308 ) Net income (loss) $ 8,736 $ 906 $ ( 27,316 ) $ ( 35,557 ) Other comprehensive income (loss): Exchange differences on translation of foreign operations 3,247 ( 14,951 ) 5,088 ( 746 ) Total comprehensive income (loss) 11,983 ( 14,045 ) ( 22,228 ) ( 36,303 ) Basic net income (loss) per share $ 0.17 $ 0.02 $ ( 0.55 ) $ ( 0.73 ) Basic weighted-average number of shares outstanding 50,021,939 49,134,037 49,971,267 48,671,732 Diluted net income (loss) per share $ 0.17 $ 0.02 $ ( 0.55 ) $ ( 0.73 ) Diluted weighted-average number of shares outstanding 52,808,434 54,158,967 49,971,267 48,671,732 The accompanying notes form an integral part of these condensed consolidated financial statements. 3 Table of Contents Immunocore Holdings plc Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) (In thousands, except share data) Ordinary Shares Deferred Shares Additional Paid-in Capital Accumulated deficit Accumulated other comprehensive income (loss) Total Shareholders' Equity Shares Amount Shares Amount As of December 31, 2023 49,725,649 $ 134 5,793,501 $ 1 $ 1,149,643 $ ( 744,674 ) $ ( 36,261 ) $ 368,843 Net loss — — — — — ( 24,436 ) — ( 24,436 ) Other comprehensive income — — — — — — 897 897 Exercise of share options 280,436 1 — — 5,212 — — 5,213 Share-based compensation expense — — — — 9,017 — — 9,017 As of March 31, 2024 50,006,085 $ 135 5,793,501 $ 1 $ 1,163,872 $ ( 769,110 ) $ ( 35,364 ) $ 359,534 Net loss — — — — — ( 11,616 ) — ( 11,616 ) Other comprehensive income — — — — — — 944 944 Exercise of share options 11,521 — — — 297 — — 297 Share-based compensation expense — — — — 9,978 — — 9,978 As of June 30, 2024 50,017,606 $ 135 5,793,501 $ 1 $ 1,174,147 $ ( 780,726 ) $ ( 34,420 ) $ 359,137 Net income — — — — — 8,736 — 8,736 Other comprehensive income — — — — — — 3,247 3,247 Exercise of share options 8,014 — — — 198 — — 198 Share-based compensation expense — — — — 6,509 — — 6,509 As of September 30, 2024 50,025,620 $ 135 5,793,501 $ 1 $ 1,180,854 $ ( 771,990 ) $ ( 31,173 ) $ 377,827 The accompanying notes form an integral part of these condensed consolidated financial statements. 4 Table of Contents Immunocore Holdings plc Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) (In thousands, except share data) Ordinary Shares Deferred Shares Additional Paid-in Capital Accumulated deficit Accumulated other comprehensive (loss) income Total Shareholders' Equity Shares Amount Shares Amount As of December 31, 2022 48,088,346 $ 129 5,793,501 $ 1 $ 1,082,833 $ ( 689,387 ) $ ( 54,673 ) $ 338,903 Net loss — — — — — ( 19,449 ) — ( 19,449 ) Other comprehensive income — — — — — — 7,434 7,434 Exercise of share options 291,063 1 — — 6,157 — — 6,158 Share-based compensation expense — — — — 8,258 — — 8,258 As of March 31, 2023 48,379,409 $ 130 5,793,501 $ 1 $ 1,097,248 $ ( 708,836 ) $ ( 47,239 ) $ 341,304 Net loss — — — — — ( 17,014 ) — ( 17,014 ) Other comprehensive income — — — — — — 6,771 6,771 Exercise of share options 561,940 2 — — 11,556 — — 11,558 Share-based compensation expense — — — — 8,821 — — 8,821 As of June 30, 2023 48,941,349 $ 132 5,793,501 $ 1 $ 1,117,625 $ ( 725,850 ) $ ( 40,468 ) $ 351,440 Net income — — — — — 906 — 906 Other comprehensive loss — — — — — — ( 14,951 ) ( 14,951 ) Exercise of share options 1,349,910 1 — — 10,375 — — 10,376 Share-based compensation expense — — — — 8,199 — — 8,199 As of September 30, 2023 50,291,259 $ 133 5,793,501 $ 1 $ 1,136,199 $ ( 724,944 ) $ ( 55,419 ) $ 355,970 The accompanying notes form an integral part of these condensed consolidated financial statements. 5 Table of Contents Immunocore Holdings plc Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities Net loss $ ( 27,316 ) $ ( 35,557 ) Adjustments for: Share-based compensation expense 25,523 25,278 Depreciation 3,038 3,058 Unrealized foreign exchange gains, net ( 3,982 ) ( 9 ) Unrealized gains on marketable securities ( 13,515 ) — Non-cash lease expense 1,352 1,210 Other 1,535 197 Changes in assets and liabilities: Increase in accounts receivable ( 11,053 ) ( 7,647 ) (Increase) decrease in prepayments and other current assets ( 5,910 ) 18,050 Increase (decrease) in accounts payable 1,388 ( 1,130 ) Increase in accrued expenses 72,728 23,109 Decrease in deferred revenue ( 1 ) ( 6,010 ) (Decrease) increase in operating lease liabilities ( 1,208 ) 645 Increase in other operating assets ( 4,515 ) ( 2,676 ) Increase in other operating liabilities 1,948 2,155 Net cash provided by operating activities 40,012 20,673 Cash flows from investing activities Purchase of marketable securities ( 350,000 ) — Purchase of property and equipment ( 1,589 ) ( 4,608 ) Net cash used in investing activities ( 351,589 ) ( 4,608 ) Cash flows from financing activities Proceeds from issue of convertible senior notes 402,500 — Payments for debt issuance costs ( 13,358 ) — Proceeds from exercise of share options 6,250 28,092 Net cash provided by financing activities 395,392 28,092 Increase in net cash and cash equivalents 83,815 44,157 Net foreign exchange difference on cash held 11,326 ( 2,491 ) Cash and cash equivalents at beginning of period 442,626 402,472 Cash and cash equivalents at end of period $ 537,767 $ 444,138 Supplemental disclosure of cash flow and non-cash information Cash received for interest, net $ 7,285 $ 5,703 Cash paid for income taxes, net $ ( 352 ) $ ( 220 ) Purchases of property and equipment in accounts payable $ 840 $ 65 The accompanying notes form an integral part of these condensed consolidated financial statements. 6 Table of Contents Immunocore Holdings plc Notes to the Condensed Consolidated Financial Statements (Unaudited) 1. Description of business Immunocore Holdings plc (collectively with its subsidiaries, the “Company”) is a public limited company incorporated in England and Wales and has the following wholly owned subsidiaries: Immunocore Limited, Immunocore LLC, Immunocore Commercial LLC, Immunocore Ireland Limited, Immunocore GmbH, and Immunocore Nominees Limited with operations based primarily in the United Kingdom and United States. The Company is pioneering and delivering transformative immunomodulating medicines to radically improve outcomes for patients with cancer, infectious diseases, and autoimmune diseases. Leveraging its proprietary, flexible, off-the-shelf ImmTAX (Immune mobilizing monoclonal TCRs Against X disease) platform, the Company’s pipeline includes nine active clinical and preclinical programs in oncology, infectious diseases, and autoimmune diseases. In January and April 2022, the Company received approval from the U.S. Food and Drug Administration ("FDA") and European Commission, ("EC"), respectively, for its lead product, KIMMTRAK, for the treatment of unresectable or metastatic uveal melanoma and has subsequently received approvals in further territories, and the Company continues to launch and seek approvals in additional territories. KIMMTRAK is now approved in 38 countries and the Company has commercially launched the product in the United States, Germany and France, among other territories. 2. Summary of significant accounting policies Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP"), for interim financial reporting and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information required for the full annual financial statements and should be read in conjunction with the annual consolidated financial statements of the Company for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC"), on February 28, 2024 ("Annual Report"). The accompanying condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods reported. In the opinion of management, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist only of normal and recurring adjustments. Certain information and footnote disclosures have been condensed or omitted as permitted under U.S. GAAP. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. Use of estimates The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions. These judgments, estimates and assumptions affect the reported assets and liabilities as well as income and expenses in the financial period. The estimates and associated assumptions are based on information available when the condensed consolidated financial statements are prepared, historical experience and various other factors which are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the Company’s control. Actual results could differ from those estimates. Estimates are primarily made in relation to revenue recognition, estimation of operating lease incremental borrowing rates, share-based compensation expense, clinical accruals, and deferred tax asset valuation allowances. Significant accounting policies With the exception of the below polices, the significant accounting policies used in the preparation of these condensed consolidated financial statements as of and for the three and nine months ended September 30, 2024 are consistent with those described in No te 2. "Summary of Significant Accounting Policies" in the Company’s Annual Report. 7 Table of Contents Collaboration and supply agreements In February 2024, the Company entered into a clinical trial collaboration and supply agreement with Bristol Myers Squibb ("BMS"), to investigate the Company’s ImmTAC bispecific TCR candidate targeting PRAME HLA-A02, brenetafusp (IMC-F106C), in combination with BMS’s nivolumab, in first-line advanced cutaneous melanoma (the "BMS Agreement"). Under the terms of the BMS Agreement, the Company is sponsoring and funding the registrational Phase 3 clinical trial of brenetafusp in combination with nivolumab in first-line advanced cutaneous melanoma (PRISM-MEL-301), and BMS is providing nivolumab. Both parties will own the study data produced in the clinical trial, other than study data related solely to nivolumab, which will belong solely to BMS, or study data related solely to brenetafusp, which will belong solely to the Company. Given the terms of the BMS Agreement, the Company concluded that it is not within the scope of ASC 808 or ASC 606. Any relevant costs arising from the clinical trial are expensed as incurred and recorded in research and development expenses. The Company announced the randomization of the first patient in the PRISM-MEL 301 trial in June 2024. There has been no impact to the condensed consolidated financial statements as of September 30, 2024 relating to the Company’s collaboration with BMS. Convertible senior notes The Company issued 2.5 % Convertible Senior Notes due in 2030 in February 2024 (the "Notes"), and evaluated to determine whether they contain features that qualify as embedded derivatives in accordance with ASC 815. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract and the features of the derivatives. In accounting for the issuance of the Notes, the Company treats the instrument wholly as a liability, in accordance with ASC 470, as the conversion features do not require bifurcation as a derivative in accordance with ASC 815 and the Notes were not issued at a substantial premium. Costs directly associated with the borrowing have been capitalized and are netted against the corresponding debt liabilities in the Company’s Condensed Consolidated Balance Sheets at issuance and amortized over the contractual term of the convertible debt instrument using the effective interest rate method. See Note 5. “Current and non-current interest-bearing loans and borrowings” for additional information. Foreign currencies The reporting currency of the Company is the U.S. dollar. Effective January 1, 2024, the Company’s ultimate parent adopted the U.S. dollar as its functional currency. Prior to January 1, 2024, the functional currency of the Company’s ultimate parent was the British pound sterling. The functional currency of the Company’s ultimate parent and each subsidiary is based on the currency of the economic environment in which they operate. The change in functional currency of the Company’s ultimate parent is due to a change in the economic facts and circumstances of the entity due to the increased exposure to the U.S. dollar primarily as a result of the increased cash flows related to financing and investing activities that are now expected to occur going forward in this entity. The effect of the change in functional currency for the Company’s ultimate parent was applied prospectively in the Condensed Consolidated Financial Statements effective January 1, 2024. Upon consolidation, assets and liabilities of each subsidiary with a functional currency that differs to the Company’s ultimate parent are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates for each reporting period. Translation adjustments are reflected as other comprehensive income (loss). Marketable securities Marketable securities consist of investment funds which are measured and reported at fair value determined using quoted market prices. The investment funds are primarily invested in U.S. investment-grade debt securities, including asset-backed and mortgage-backed securities. Marketable securities are available to the Company for use in current operations and are classified as current assets. Gains and losses from marketable securities are recognized in Other income (expense), net. Fair value measurements Where financial and non-financial assets and liabilities are measured at fair value, the Company uses appropriate valuation techniques for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. 8 Table of Contents As of September 30, 2024 and December 31, 2023, the Company held $ 410.2 million and $ 331.0 million, respectively, of money market funds required to be measured at fair value on a recurring basis within cash and cash equivalents. In addition, as of September 30, 2024 and December 31, 2023, the Company held $ 363.5 million and $ 0 of marketable securities, respectively, including unrealized gains of $ 13.5 million and $ 0 , respectively. The fair value of these cash equivalents and marketable securities is based on quoted prices from active markets (Level 1 inputs). Other financial instruments, although not recorded at fair value on a recurring basis, include cash, accounts receivable, accounts payable and debt obligations. The fair value of borrowings under the Notes and Pharmakon Loan Agreement (disclosed in Note 5. “Current and non-current interest-bearing loans and borrowings”) were based on Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk, and the contractual terms of debt instruments. After initial recognition, borrowings are measured at amortized cost using the effective interest method. Recently issued and recently adopted accounting pronouncements In March 2024, the SEC issued Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors . The final rule requires registrants to provide climate-related disclosures in their annual reports and registration statements, beginning with annual reports for the year ending December 31, 2025, for calendar-year-end large accelerated filers. In April 2024, the SEC issued an order staying the final rule pending the completion of legal challenges to the final rule. The Company is currently assessing the impact of this final rule and the order to stay the rule on its disclosures. 3. Revenue During the three and nine months ended September 30, 2024, the Company recognized $ 80.2 million and $ 225.9 million, respectively, (2023: $ 62.6 million and $ 171.1 million, respectively) of net product revenue relating to the sale of KIMMTRAK primarily in the United States and Europe after estimated deductions for rebates, chargebacks and returns, which are recognized in Accrued expenses and other current liabilities as set out in the Company’s accounting policies included in the Annual Report. Product revenue, net from the sale of KIMMTRAK is presented by country / region based on the location of the end customer below (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 United States $ 57,268 $ 43,441 $ 162,900 $ 120,722 Europe 21,098 18,937 55,454 49,293 International 1,882 251 7,583 1,127 Total product revenue, net $ 80,248 $ 62,629 $ 225,937 $ 171,142 Product revenue, net for the three and nine months ended September 30, 2024 included $ 2.8 million and $ 10.1 million respectively (2023: $ 0.6 million and $ 2.6 million, respectively), of partnered revenue under the Company's agreement with Medison Pharma Ltd ("Medison"), and such revenue is split between its European and international markets. Accounts receivable from contracts with customers Accounts receivable as of September 30, 2024 and December 31, 2023 was $ 63.7 million and $ 52.1 million, respectively. An allowance for lifetime expected credit losses on accounts receivable is measured using historical credit loss experience, conditions at the end of each reporting period, and reasonable and supportable forecasts that affect collectability. Expected credit losses as of September 30, 2024 and December 31, 2023 were immaterial. 9 Table of Contents Accruals for rebates, chargebacks and returns Current and non-current accruals for rebates, chargebacks and returns as of September 30, 2024 were as follows (in thousands): Rebates Chargebacks Returns Total As of December 31, 2023 $ 63,957 $ 2,031 $ 738 $ 66,726 Provisions related to sales in the period 69,463 22,844 898 93,205 Adjustments related to sales in prior periods 12,642 — — 12,642 Credits and payments made ( 14,557 ) ( 23,172 ) ( 1,271 ) ( 39,000 ) As of September 30, 2024 $ 131,505 $ 1,703 $ 365 $ 133,573 Included in the above are non-current accruals for rebates, chargebacks and returns of $ 2.3 million and $ 0 as of September 30, 2024 and December 31, 2023, respectively, which are not expected to be paid in the twelve months from the balance sheet date. For accruals for rebates, chargebacks and returns reported as of December 31, 2023 where the uncertainty remains unresolved, additional information in the three and nine months ended September 30, 2024 resulted in a change in estimate of $ 1.4 million and $ 12.6 million, respectively, net increase to the Company’s total accrued revenue deductions as of September 30, 2024. Deferred revenue Non-current deferred revenue as of September 30, 2024 and December 31, 2023 relates to $ 5.0 million received from Medison in the year ended December 31, 2023. The Company expects to recognize revenue for this combined performance obligation of supplying KIMMTRAK and granting Medison the exclusive right to distribute KIMMTRAK in South America with the sale of products following potential regulatory approvals in South America. The Company estimates that product revenue recognition of this non-current deferred revenue will commence after September 30, 2025. 4. Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): September 30, 2024 December 31, 2023 Rebates, chargebacks and returns $ 131,243 $ 66,726 Clinical accruals 40,448 22,459 Employee related expenses 12,322 11,598 Commercial services 3,449 6,900 Contract manufacturing 3,436 4,356 Other taxation and social security 962 1,807 Other accruals 5,364 5,989 $ 197,224 $ 119,835 See Note 3. “Revenue” for a breakdown of rebates, chargebacks and returns. Clinical accruals primarily represent unbilled work undertaken by contract research organizations ("CROs") as part of the advancement of the Company's clinical programs. 10 Table of Contents 5. Current and non-current interest-bearing loans and borrowings Current and non-current interest-bearing loans and borrowings consisted of the following as of September 30, 2024 (in thousands): Fair Value Principal Amount Unamortized Debt Issuance Costs Net Carrying Amount Amount Level Convertible senior notes $ 402,500 $ ( 12,012 ) $ 390,488 $ 347,438 Level 2 Pharmakon loan 50,000 ( 1,793 ) 48,207 55,293 Level 2 Current and non-current interest-bearing loans and borrowings consisted of the following as of December 31, 2023 (in thousands): Fair Value Principal Amount Unamortized Debt Issuance Costs Net Carrying Amount Amount Level Convertible senior notes $ — $ — $ — $ — Not applicable Pharmakon loan 50,000 ( 1,989 ) 48,011 46,100 Level 2 Interest expense consisted of the following (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Convertible senior notes Coupon interest $ 2,890 $ — $ 6,997 $ — Amortization of debt issuance costs 511 — 1,343 — Pharmakon loan 889 1,321 3,466 3,845 Total interest expense $ 4,290 $ 1,321 $ 11,806 $ 3,845 On February 2, 2024, the Company completed a private offering (the "Offering") of $ 402.5 million aggregate principal amount of Notes, including the exercise in full of the initial purchasers’ option to purchase up to an additional $ 52.5 million principal amount of Notes. The Notes were issued pursuant to an indenture, dated February 2, 2024 (the "Indenture") between the Company and U.S. Bank Trust Company, National Association, as trustee. The Company’s net proceeds from the Offering of the Notes were $ 389.1 million, after deducting issuance costs of $ 13.4 million. The Notes are senior, unsecured obligations of the Company and will mature on February 1, 2030, unless earlier converted, redeemed or repurchased. The Notes will accrue interest payable semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2024, at a rate of 2.50 % per year. L ender fees and issuance costs incurred with the Notes were $ 13.4 million and are being amortized as interest expense on an effective interest rate method over the expected life of the Notes, through February 2030, at an effective interest rate of 3.06 %. Holders may convert all or any portion of their Notes at their option at any time prior to the close of business on the business day immediately preceding the maturity date. The Notes have an initial conversion rate of 10.5601 American Depositary Shares ("ADSs") per $ 1,000 principal amount of the Notes, which will be subject to anti-dilution adjustments in certain circumstances. This represented an initial conversion price of $ 94.70 per ADS. The number of shares that would be issuable assuming conversion of all of the Notes is 5,950,600 (assuming the maximum increase to the conversion rate in connection with a “make-whole fundamental change” (as defined in the Indenture)). Upon conversion, the Notes may be settled in shares of the Company’s ordinary shares, cash or a combination of cash and shares of the Company’s ordinary shares, at the Company’s election. Upon the occurrence of a make-whole fundamental change (as defined in the Indenture), the Company may, in certain circumstances, be required to increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change. 11 Table of Contents The Company may not redeem the Notes prior to February 5, 2027, except in the event of certain tax law changes as described below and in the Indenture. The Company may redeem for cash all or any portion of the Notes (subject to the partial redemption limitation described in the Indenture), at its option, on or after February 5, 2027 if the last reported sale price of the ADSs has been at least 130 % of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of optional redemption, at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the optional redemption date. If, as a result of certain changes in the law of any relevant tax jurisdiction, the Company would be required to pay additional amounts (as defined in the Indenture) on the Notes, the Company may redeem the Notes in whole, but not in part, at a tax redemption price of 100 % of the aggregate principal amount thereof, plus accrued and unpaid interest to, but excluding, the tax redemption date and all additional amounts, if any, which otherwise would be payable to the date of tax redemption. Upon the Company giving notice of a tax redemption, a holder may elect not to have its Notes redeemed, in which case the holder would not be entitled to receive any additional amounts with respect to its Notes after the tax redemption date. If the Company undergoes a fundamental change, holders may require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. On November 8, 2022, the Company entered into the Pharmakon loan agreement (the "Pharmakon Loan Agreement"), providing for term loans to the Company in an aggregate principal amount of up to $ 100 million to be funded in two tranches. The first tranche of $ 50 million bears interest at a fixed rate of 9.75 %, which is payable quarterly in arrears, with payments commencing in 2023. The Company was required to pay a further fee of $ 1.25 million by June 2024, regardless of whether it elected to draw down on the second $ 50 million tranche under the Pharmakon Loan Agreement. The Company elected not to exercise the option to draw down the second tranche and made the payment of $ 1.25 million in the three months ended June 30, 2024. The Company intends to use a portion of its cash and cash equivalents to repay in full the loan outstanding under the Pharmakon Loan Agreement during the three months ending December 31, 2024. While the principal amount outstanding under the Pharmakon Loan Agreement is not yet due for repayment, we have classified the outstanding loan amount within current liabilities in the Condensed Consolidated Balance Sheet as of September 30, 2024, to reflect our intention to repay the loan. The Company has pledged its total assets of $ 1,084.6 million, presented in the Condensed Consolidated Balance Sheet as of September 30, 2024, as collateral for the $ 50 million loan drawn down under the Pharmakon Loan Agreement. In the event the Company is unable to repay the loan, the pledged assets may instead be used to repay the outstanding amount of loan and interest. The Company’s borrowings under the Pharmakon Loan Agreement, contain customary representations and warranties and customary affirmative and negative covenants, including limitations on the Company’s ability to dispose of assets, enter into merger, consolidation or acquisition transactions, and incur additional debt. The Company monitors these covenants and is in compliance as of the date of this Quarterly Report. As of September 30, 2024, the contractual future principal payments due were as follows (in thousands): 2024 $ - 2025 - 2026 6,250 2027 25,000 2028 18,750 2029 and thereafter 402,500 Total principal payments $ 452,500 Less: debt issuance costs ( 13,805 ) Total interest-bearing loans and borrowings $ 438,695 12 Table of Contents 6. Share-based compensation Under the Company’s Equity Incentive Plan ("EIP"), the Company may grant market value options, share appreciation rights or restricted shares, restricted share units, performance share units and other share-based awards to the Company’s employees. The Company’s board members and consultants are eligible to receive awards under the Company’s non-employee sub-plan to the EIP. Awards may be granted at such times as the Company may determine, but will generally be granted annually following the end of the financial year. Awards vest at such times and as specified in the award agreement, typically being over a four-year period although the Company retains the discretion to provide for other vesting schedules. If the participant violates the non-competition, non-solicitation, confidentiality or other similar restrictive covenant provisions of any employment contract, the right of the participant to receive these shares on vesting shall terminate immediately. The Company maintains discretion over the type and terms of equity awards granted. All awards lapse on the tenth anniversary from the date of grant, and they are not subject to performance conditions or entitled to dividends. The Company has reserved 5,589,797 authorized shares for future issuance under the EIP. The following table shows the total share-based compensation expense recorded in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Research and development $ 1,819 $ 1,717 $ 5,971 $ 5,254 Selling, general and administrative $ 4,740 $ 6,482 $ 19,552 $ 20,024 Share option activity The number and weighted average exercise prices of share options were as follows: Number of Share Options (#) Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding as of December 31, 2023 8,967,882 $ 27.06 7.1 years $ 369,976 Awards granted 1,033,541 67.00 Awards exercised ( 299,971 ) 19.06 Awards forfeited / cancelled ( 50,734 ) ( 47.39 ) Outstanding as of September 30, 2024 9,650,718 $ 31.48 6.7 years $ — Exercisable as of September 30, 2024 7,033,644 $ 24.68 6.2 years $ 34,693 As of September 30, 2024, total unrecognized compensation expense related to share options granted but not vested was $ 29.1 million, which the Company expects to recognize over a remaining weighted-average period of 1.7 years. Awards granted in the three and nine months ended September 30, 2024 and 2023 have been valued using the Black-Scholes option pricing model. The assumptions used in the models for share options granted during the three and nine months ended September 30, 2024 and 2023, were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Share price at grant date $ 33.89 $ 59.45 $ 33.89 - $ 70.50 $ 48.38 - $ 64.53 Exercise price $ 33.89 $ 59.45 $ 33.89 - $ 70.50 $ 48.38 - $ 64.53 Expected volatility 55.42 % 70.46 % 55.24 % - 66.17 % 70.46 % - 72.05 % Expected life 5.5 years 5 years 5 years - 5.5 years 5 years Risk free rate 4.44 % 4.19 % 3.93 % - 4.56 % 3.52 % - 4.19 % Fair value $ 18.53 $ 36.48 $ 18.53 - $ 40.47 $ 29.51 - $ 39.92 13 Table of Contents 7. Basic and diluted net income (loss) per share Basic and diluted net income (loss) per share is calculated as follows (in thousands, except share and per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income (loss) $ 8,736 $ 906 $ ( 27,316 ) $ ( 35,557 ) Basic weighted-average number of shares outstanding 50,021,939 49,134,037 49,971,267 48,671,732 Adjustment for stock options with dilutive effect 2,786,495 5,024,930 — — Diluted weighted-average number of shares outstanding 52,808,434 54,158,967 49,971,267 48,671,732 Basic net income (loss) per share $ 0.17 $ 0.02 $ ( 0.55 ) $ ( 0.73 ) Diluted net income (loss) per share $ 0.17 $ 0.02 $ ( 0.55 ) $ ( 0.73 ) A total of 9,650,718 shares issuable upon the exercise of outstanding share options as of September 30, 2024 (September 30, 2023: 9,251,830 ), have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect for the nine months ended September 30, 2024 and 2023. For the three months ended September 30, 2024 and 2023, there were 2,222,171 and 902,650 , respectively, shares issuable upon the exercise of options granted under the Company’s option plans excluded from the calculation for diluted earnings per share, because they are considered to be anti-dilutive. For the three and nine months ended September 30, 2024, shares issuable upon the potential conversion of all of the Notes (as defined in Note 5. “Current and non-current interest-bearing loans and borrowings”) were excluded from the calculation of diluted income (loss) per share because they were anti-dilutive. Diluted earnings per share for the Notes is calculated under the if-converted method in accordance with ASC 260, Earnings Per Share. 8. Income taxes Income tax benefit (expense) is recognized at an amount determined by multiplying the net income (loss) before income taxes for the interim reporting period by the Company’s estimated annual effective tax rate, adjusted for the tax effect of certain items recognized in full in the interim period. As such, the effective tax rate in the condensed consolidated financial statements may differ from the Company’s estimate of the effective tax rate for the Company’s consolidated financial statements for the year ending December 31, 2024. The Company’s consolidated estimated effective tax rate for the nine months ended September 30, 2024 w as 2.8 %. During the nine months ended September 30, 2024, the Company recorded a tax benefit of $ 0.8 million, comp ared to a tax charge for the nine months ended September 30, 2023 of $ 0.3 million. The Company continues to benefit from the U.K. large company, Research & Development Expenditure Credit ("RDEC") regime which can generate a cash rebate of up t o 15 % of qualifying research and development expenditures incurred after April 1, 2023. Tax credits receivable under the RDEC regime are recorded "above the line" as a reduction from research and development expenses. For the three and nine months ended September 30, 2024 , the Company excluded the United Kingdom from the calculation of the annual estimated tax rate as the Company anticipates an ordinary loss in this jurisdiction for which no tax benefit can be recognized. A net deferred tax asset o f $ 12.7 m illion has been recognized as of September 30, 2024 ( December 31, 2023 : $ 11.0 million) primarily representing research and development credits and share-based compensation for one of the Company’s U.S. subsidiaries, Immunocore LLC, following an annual assessment, or periodically as required, of all available and applicable information, including its forecasts of costs and future profitability and the resulting ability to reverse the recognized deferred tax assets over a short period of time. 14 Table of Contents 9. Commitments and contingencies Lease commitments The maturities of operating lease liabilities as of September 30, 2024 were as follows (in thousands): 2024 $ 679 2025 4,382 2026 4,644 2027 4,543 2028 4,823 2029 and thereafter 50,102 Total lease payments 69,173 Less imputed interest ( 26,805 ) Present value of operating lease liabilities $ 42,368 Manufacturing commitments The Company enters into a number of manufacturing commitments for the future purchase of materials and contract manufacturing services. While the majority of such contracts can be cancelled on reasonable notice, due to the significant ongoing expenditure associated with the Company’s programs, including brenetafusp, the Company estimates it has noncancellable commitments in relation to the development and supply of product candidates totaling $ 26.0 million, the majority of which are estimated to be paid within the next twelve months. Legal proceedings The Company is not currently a party to any material legal proceedings. 15 Table of Contents