Lyell Immunopharma, Inc. 10-K

Item 1. Business Overview We are a T-cell reprogramming company dedicated to the mastery of T cells to cure patients with solid tumors. We believe the key to effective cell therapy is the deep and profound understanding of the identity, fate and function of cells to create living medicines. We take a systematic, interrogative, cell biology-driven approach to overcome what we view as the two major barriers to successful Adoptive Cell Therapy (ACT) – (1) T-cell exhaustion and (2) lack of durable stemness – through the application of our proprietary ex vivo genetic and epigenetic reprogramming technologies, Gen-R™ and Epi-R™. Our technologies are designed to be applied in a target and modality agnostic manner to chimeric antigen receptor (CAR), tumor-infiltrating lymphocytes (TIL) and T-cell receptor (TCR) therapies to fundamentally improve the properties of T cells needed to eradicate solid tumors. We believe our autologous T-cell therapies will generate improved, durable clinical outcomes that are potentially curative for patients with solid tumors. We are building a multi-modality product pipeline across several solid tumor indications with high unmet needs. We are advancing a product pipeline of promising living cell product candidates across multiple ACT modalities that incorporate our Gen-R and Epi-R technology platforms. Each of our programs provide opportunities to expand into additional indications beyond the patient populations we are initially targeting. Our lead product candidates are summarized in the table below: Our Strategy Our goal is to utilize our proprietary technology platforms to develop curative ACT for patients with solid tumors. Key components of our business strategy to achieve this goal include: • Leverage our proprietary, cell reprogramming technology platforms to fundamentally improve T-cell efficacy and eradicate solid tumors. — We seek to develop T-cell therapies that eradicate solid tumors by addressing the major barriers to ACT efficacy, including overcoming exhaustion of T cells and creating T cells with properties of durable stemness. Our pipeline of therapeutic candidates includes four programs designed to outlast and eradicate solid tumors utilizing our two lead proprietary T-cell reprogramming technologies: Gen-R and Epi-R. • Rapidly advance our deep multi-modality pipeline of product candidates. — Our technology platforms are designed to be applied in a target and modality agnostic manner to CAR, TIL and TCR cell therapies. We believe our autologous T-cell therapies will generate improved, durable clinical outcomes that are potentially curative for 4 Table of Contents patients with solid tumors. Two INDs for our product candidates have been cleared by the U.S. Food and Drug Administration (FDA), and we anticipate filing two additional INDs by the end of 2022/early 2023. • Continually innovate to develop and advance disruptive, next generation platform technologies for cell-based therapy. — We are committed to continuing to discover, develop and advance disruptive technologies that have the potential to revolutionize ACT and its promise to cure patients with solid tumors. For example, we believe our T-cell rejuvenation platform technology may represent the next frontier of epigenetic reprogramming for cell‑based therapy. • Maintain proprietary state of the art manufacturing infrastructure and capabilities to control all aspects of cell product preparations. — We have and will continue to invest in manufacturing to mitigate the risks the field has seen, including challenges in managing production, supply chain, patient specimen chain of custody and quality control. Controlling manufacturing also enables us to protect proprietary aspects of Gen-R and Epi-R, and rapidly incorporate new innovations. LyFE™, our multi-product manufacturing facility, which can produce plasmid, lentivirus and cells, has been commissioned and qualified in compliance with U.S. Food and Drug Administration’s Current Good Manufacturing Practices (cGMP). • Implement digital technologies and cloud solutions to accelerate and enhance our science and operations. — High-performance cloud computing, scalable cloud storage, robotic and artificial intelligence, coupled with our collaboration with Amazon Web Services (AWS), enable real time monitoring of our manufacturing process and ability to incorporate deep insights into our research, manufacturing and clinical development efforts. This approach is being leveraged to inform our next generation cell therapies. • Aggressively generate, secure and defend intellectual property on our differentiated technology platforms and product candidates. — We have developed and secured intellectual property, including know-how, through our internal research efforts, licensing agreements and collaborations. We rigorously analyze, file and protect our intellectual property. Our Technology Platforms ACT has demonstrated profound results in some patients suffering from hematologic tumors, but solid tumors are more complex and have evolved multiple mechanisms to evade and ultimately overcome the immune system. This has limited the use of ACTs in non-hematologic settings. We believe T-cell exhaustion and lack of durable stemness are the two primary barriers limiting the efficacy of ACT in solid tumors. We have developed two proprietary reprogramming technology platforms to address these two major barriers. Gen-R is designed to overcome loss of T-cell function attributable to an exhausted state, and Epi-R is designed to create T-cell populations with properties of durable stemness. T cells with properties of durable stemness are able to proliferate, persist and self-renew, as well as generate differentiated effector cell progenies to provide durable anti-tumor functionality. Gen-R for Overcoming T-Cell Exhaustion. Gen-R is our proprietary ex vivo genetic reprogramming technology to overcome T-cell exhaustion, which results from transcriptional and epigenetic changes that occur as T cells differentiate into a dysfunctional state. Our scientific co-founders discovered T-cell exhaustion occurs more frequently in solid tumors than in hematologic cancers where CAR T cells have demonstrated efficacy. The discovery of Gen-R came from the realization that chronic antigen stimulation, or when the T cell is always “on,” combined with an immunosuppressive solid tumor microenvironment (TME), likely promotes the development of T-cell exhaustion. Our scientific co-founder Dr. Crystal Mackall identified a strategy to prevent T cells from becoming exhausted utilizing ex vivo genetic reprogramming to overcome the problem of T-cell exhaustion. Dr. Mackall developed a GD2-targeted CAR T cell that is always turned on and quickly exhausts. This model system drove the CAR T cells to have the hallmark phenotypic, functional, transcriptomic and epigenetic abnormalities described in cancer and chronic viral infections where T cells become exhausted. Compared to normal CD19-targeted CAR T cells that are not always “on,” the GD2 CAR T cells demonstrated elevated expression of cell surface exhaustion-associated markers such as PD-1, TIM-3, LAG3 and CD39, and these T cells had decreased function as measured by secretion of IL-2 compared with T cells expressing the CD19 CAR. All T cell differentiation states, including exhaustion, are characterized by distinct chromatin structure (open versus closed). Generally, open chromatin structures allow for transcription factor binding while closed structures inhibit transcription factor binding. To determine if the GD2 model could enable the understanding of the biology of exhaustion, the GD2 and CD19 CAR T cells were examined for their chromatin structure to evaluate which transcription factor binding sites were accessible in the functional versus the exhausted states. The exhausted GD2 CAR T cells had a genome-wide restructuring of chromatin accessibility compared to the CD19 CAR T cells, and the greatest change was the increased 5 Table of Contents availability of binding sites to the AP-1/ bZIP family and IRF4 transcription factors. These transcription factors include JUNB, JUND, BATF, BATF3, FOSL1, FOSL2 and IRF4. It is notable that c-JUN, a protein which, when dysregulated, has been shown to play a crucial role in T-cell exhaustion, can bind directly to inhibitory bZIP members, potentially limiting its availability for binding to FOS, which is the necessary AP-1 complex for T-cell effector function. Dr. Mackall evaluated the levels of each of these transcription factors to see whether there were differences between CD19 and GD2 CAR T cells. What was seen was an increase in the level of several of these proteins including JUNB, BATF3 and IRF4 in GD2 CAR T cells compared to CD19 CAR T cells. Furthermore, in the GD2 CAR T cells c-JUN was shown to be complexed with inhibitory factors such as JUNB, IRF4, BATF and BATF3. We believe these data are suggestive of reduced availability of c-JUN to bind to FOS (its activating partner) which is required for T-cell activation. Dr. Mackall then hypothesized that overexpression of c-JUN in the GD2 CAR T cell, would enable the reconstitution of activating c-JUN/FOS heterodimers and shift the balance to activating versus suppressive protein complexes, and prevent the T cells from becoming exhausted. Indeed, overexpression of c-JUN in the GD2 CAR T cells led to tumor eradication in vivo in preclinical models as compared to the mice treated with GD2 CAR T cells that did not overexpress c-JUN. Our scientific co-founder Dr. Stanley Riddell further tested the hypothesis in a rigorous solid tumor model of non-small cell lung cancer (NSCLC) (Figure 1). He utilized a mouse model that recapitulates the oncogenic driver mutations and immunosuppressive TME of human NSCLC. It has been difficult if not impossible to treat the tumors in these mice with chemotherapy or immunotherapy and this “model” is highly representative of human NSCLC. This model was further designed so that the tumors express ROR1 and, perhaps not surprisingly proved to be resistant to therapy with ROR1 CAR T cells, just as was observed in treating human NSCLC with ROR1 CAR T cells. In contrast, tumor-bearing mice treated with ROR1 CAR T cells that overexpressed c-JUN (Gen-R ROR1 CAR T cells) demonstrated greater infiltration by the T cells into the tumor, enhanced function of those T cells and tumor regression in 50% of the mice, further confirming the results obtained by Dr. Mackall in HER2 and other cancer models. These results are in contrast to the 100% tumor progression observed in mice treated with ROR1 CAR without overexpression of c-JUN. Once again, this model illustrated that when T cells enter solid tumors, they exhaust and become ineffective unless the T cells resist exhaustion with Gen-R. Figure 1: ROR1 CAR T cell overexpressing c-JUN (Gen-R ROR1 CAR T cells) demonstrated efficacy in mice with NSCLC Epi-R - Reprogramming Cells to Create Durable Stemness. Epi-R is our proprietary ex vivo epigenetic reprogramming technology to create a novel population of T cells with durable stemness. T cells with properties of durable stemness are able to proliferate, persist and self-renew, as well as generate differentiated effector cell progenies to provide durable anti-tumor functionality. Emerging research has made clear that effective cellular immunotherapy requires T-cell populations with stem‑like characteristics that are capable of both self-renewal and generation of differentiated effector cell progenies to produce clinical responses. The presence of T-cell populations with these attributes correlates with responses to cancer immunotherapy, including TIL ACT and immune checkpoint blockade (ICB) therapy. We believe durable stemness is required for meaningful long-term efficacy against solid tumors. Durable stemness relates to the ability of T cells to maintain their stemness until the tumor is eradicated, that is, they have the ability to proliferate, persist and self-renew, as well as generate differentiated effector cell progenies to provide durable anti‑tumor 6 Table of Contents functionality, despite continued persistent signals from the tumor. We believe that as these cells proliferate, they generate progeny cells that can both differentiate into polyfunctional effector cells, and/or re-populate the population of less differentiated T cell states, thereby maintaining stemness. Epi-R is designed to intentionally and reproducibly generate populations of T cells that have this property of durable stemness. Furthermore, relating specifically to TIL, application of Epi-R has generated T cell preparations that exhibit increased polyclonality, i.e., the retention of a broad repertoire of relevant TCR clonotypes. We believe our scientists have been able to intentionally and reproducibly produce T cell populations with durable stemness using Epi-R. The resulting Epi-R T cell populations have in vitro and preclinical in vivo properties that suggest that they are significantly more potent than those generated by standard approaches to manufacturing T cells for ACT. Standard approaches likely generate ill-defined mixes of cells in various states of differentiation, most of which lack the properties to be effective against solid tumors. To be curative, we believe T cells with durable stemness properties are needed. Our work has built upon the groundbreaking science conducted at the National Cancer Institute (NCI) by the laboratory of Dr. Nick Restifo and then actuated at Lyell by him and his colleagues. We believe that we can reliably produce a population of T cells that have the requisite properties to be effective against tumor cells, that can be characterized by genomic, proteomic and transcriptomic features, and that may ultimately be responsible for clinical effectiveness in ACT. These T cells have enhanced proliferative capacities, as well as the ability to engraft, persist and destroy tumor masses. Our ultimate goal is to characterize, identify, optimize and consistently produce these cells through our proprietary Epi-R technology, which comprises a protocol involving proprietary media, and well-defined cell activation and expansion protocols and customized cytokine combinations. We expect to develop other versions of the protocol in the future to further advance this technology. Epi-R triggers metabolic pathways that cause T cells to have properties of durable stemness. The origins of Epi-R came from Dr. Restifo’s work at the NCI, where he demonstrated that T cells grown in media with high concentrations of potassium were more stem-like and functional. These were the first clues that it might be possible to reprogram cells to be more stem-like and functional. Cells grown with high potassium in the media were 40-100x more potent in vivo against established tumors compared with controls and demonstrated significantly enhanced abilities to infiltrate tumors, with tumor-infiltrating T cells exhibiting enhanced resistance to exhaustion as measured by markers such as TIM3. This work demonstrated that the high potassium resulted in changes in the epigenome of the T cells and that this epigenetic reprogramming was likely responsible for the persistence of functional changes in the T-cell population, even after return to standard media or infusion in vivo . Lyell has further advanced and optimized these epigenetic reprogramming strategies to produce the Epi-R T-cell populations with the properties we seek, measured both phenotypically and functionally. We have expanded beyond the work at the NCI on hyperkalemia to execute multivariate, high dimensional experiments that improve upon what was previously published to create Epi-R protocols. Most importantly, in addition to elevated potassium, we have extensively reformulated the media, and optimized cytokines, growth factors, activation methods and other components related to cell culture, activation and expansion. These modifications were required to optimize phenotypic and in vitro and in vivo functions of the resulting T-cell populations. In addition, we have advanced these research scale efforts and developed clinical scale production capabilities for Epi-R. Our Epi-R technology allows us to generate T-cell therapy products that retain increased characteristics of stemness that have been clinically linked with effective antitumor immunotherapies. These qualities preserve stemness while also enhancing the functional ability of our cells to recognize and destroy tumor cells, what we term durable stemness. Epi-R fine-tunes the chromatin structure of the T cells, which results in a new transcriptional profiles of T cells to yield a novel cell population that is distinct from those produced by standard expansion processes, with increased expression of a distinct population of cells expressing key genes linked with T cell engraftment, expansion, in vivo persistence and function. Trajectory analyses of Epi-R T-cell populations demonstrate that both stem-like and effector populations are maintained in the face of persistent activation, proliferation and multiple cycles of tumor killing, supporting a durable ability to self-renew. As predicted, clinical scale production of Epi-R cells show that they maintain all of these properties, thus addressing one of the challenges in ACT product production – how to maintain functionality of T cells during expansion. Our Epi-R T cell populations have increased durable functionality against tumors in vitro and in vivo , with increased ability to eradicate established tumors in realistic animal models of human cancer. Applying Epi-R to TIL expansion, we have been able to generate TIL products that exhibit increased polyclonality and retention of key TCR clonotypes in cells grown to clinically meaningful numbers. Our Epi-R TIL are able to effectively recognize and respond to autologous tumor cell lines by secreting key inflammatory cytokines and displaying increased ability to kill cancer on a per-cell basis. In utilizing 7 Table of Contents Epi‑R to create T cells with the qualities associated with clinical antitumor effectiveness, we believe that we have generated an opportunity to eradicate solid cancers. The Next Frontier: Epigenetic Rejuvenation of T Cells We believe that Epi-R – the epigenetic reprogramming of T cells to create Epi-R cell populations with durable stemness – holds great potential. New science is emerging that provides insight into additional opportunities to capture the potential of T cells enhanced with the required properties to cure cancer. There are two key cellular parameters as cells develop and differentiate over the life of an organism: cellular identity and age. The decline in function with aging is stereotypical in many cells; it has been well characterized in T cells. Aging of adult stem cells is thought to play a central role in determining the effect of aging on organismal function. Each T cell clonotype can be renewed from a stem cell-like state, but self-renewal, proliferation, function, persistence and antitumor activity are thought to be impacted by aging. We and others have documented the impact of aging on T cell function, which begins to decline after puberty, and at an increasingly accelerated rate after age 65. Morbidity and mortality from cancer also increases with age. We are therefore working to advance a third platform technology that focuses on rejuvenation of antitumor T cells. The most transformative examples of cell reprogramming have been demonstrated by Shinya Yamanaka, who proved through his Nobel Prize-winning work the ability to reprogram and dedifferentiate somatic cells into induced pluripotent stem cells utilizing four transcription factors (OCT3/4, SOX2, KLF4 and c-MYC; or OSKM), termed the Yamanaka factors. These factors regulate the developmental signaling network necessary for embryonic cell pluripotency. These iPSCs are remarkable in two ways: they are fully de-differentiated and they are rejuvenated to age zero, the age of cells immediately post-fertilization. Recently, numerous labs have made a leap in cellular reprogramming, called partial reprogramming. By carefully controlling cell exposure to OSKM, scientists have been able to retain the functionality of cells while avoiding the impacts of aging. Rejuvenation can be measured by the reacquisition of youthful properties like enhanced stem cell proliferation and by newly discovered molecular clocks, which measure the intrinsic cellular epigenetic changes associated with aging. These intrinsic ‘clocks’ can be measured by DNA methylation patterns. We have early data for the first time with T cells illustrating the ability to “turn back” the epigenetic clock in a process called cell rejuvenation, without changing the cell’s identity as would occur in de-differentiation. This cell rejuvenation process utilizes transient expression of OSKM, and/or other reprogramming factors. Our data illustrates that when we express the reprogramming factors in a T-cell population for a prolonged amount of time, T cells lose their identity and start to acquire markers associated with mesenchymal and embryonic stem cells. During this process, cells acquire the expression of stage-specific embryonic antigen-4 (SSEA-4) and begin to attach to the cell culture substrate. We are developing a method to revert the initial changes caused by reprogramming to maintain T-cell identity while reducing the epigenetic age of the cells. This technology is currently in the research stage. Targeting Cancer Cells: ACT Modalities and Their Limited Efficacy Against Solid Tumors to Date Most of the activity in ACT for cancer has focused on ways to provide the requisite specificity of the T cells to cancer: identifying appropriate tumor-specific targets, evaluating their frequency on cancers versus healthy tissues and evaluating the best ways to traffic immune cells to them and attack the cancer. There are three main modalities to achieve target specificity in ACT today: CARs, TCRs and TILs, and, unfortunately, with very few exceptions, they have not meaningfully improved clinical outcomes in patients suffering from solid tumor cancers. • CARs : Chimeric antigen receptors are artificial cell surface receptors that are genetically engineered into T cells and comprise a chimeric protein that contains an extracellular binding domain specific to a surface molecule on tumor cells linked to an intracellular activation domain that turns the T cells “on” to kill target tumor cells when the antibody portion binds to the tumor cell target. CAR-based ACT has shown efficacy in some cancers, including durable complete remissions. The greatest clinical benefit has been demonstrated in B cell malignancies where the adoptive transfer of autologous T cells engineered with a CAR targeting CD19 has been shown to induce complete remission in 40 – 90% of patients resulting in the approval of five CD19 CAR T cell therapies. However, CAR T cells have thus far demonstrated limited efficacy in solid tumors. Furthermore, the identification of targets with sufficient differential expression between tumor and normal tissues has limited the broader development of CAR T-cell therapies in solid tumors. 8 Table of Contents • TILs : Tumor infiltrating lymphocytes are T cells that have entered and reside within the tumor. They are polyclonal in nature, i.e., they are able to recognize multiple tumor neoantigens. A TIL-based ACT approach isolates and expands TILs from tumor masses and reinfuses the expanded cells into the patient. The polyclonality of TILs is a major advantage to address the heterogeneity and antigen loss challenges of solid tumors. The risk of normal tissue toxicity is mitigated because the targets for these T cells are directed against neoantigens that arise from the accumulation of mutations in genes unique to the cancer. While a handful of clinical trials, primarily academic, have demonstrated TILs may generate durable responses in certain tumor types such as melanoma, they have shown limited efficacy in patients with other prevalent solid tumor cancers. Regardless, most patients treated with TIL therapy do not respond to treatment, and most patients who do respond eventually relapse. • TCRs : T cell receptors are directed against fragments of intracellular proteins that are presented by the human leukocyte antigen (HLA) complex on the surface of target cells. T cells can be engineered with a cloned TCR that mono-specifically directs the T cell to recognize a neoantigen that arises from the tumor’s mutated proteins or to recognize an aberrant or overexpressed self-protein. TCRs specific for neoantigens have the advantage of being tumor specific, meaning that normal tissues do not express these neoantigens thereby reducing the risk of normal tissue toxicity. TCR-based ACT has been utilized clinically to treat a limited number of cancers. Although there has been some clinical success in treating cancer patients with TCR-engineered T cell products, most patients infused with these cells do not experience durable, complete responses to therapy. Our Programs We are advancing a product pipeline of promising living cell product candidates across multiple ACT modalities that incorporate our Gen-R and Epi-R technology platforms. Each of our programs provide opportunities to expand into additional indications beyond the patient populations we are initially targeting. Our lead product candidates are summarized in the table below: LYL797: Our ROR1 Targeted CAR T-Cell Product Candidate for the Treatment of Multiple Solid Tumor Indications We are applying our Gen-R and Epi-R technology platforms to our lead CAR T-cell product candidate, LYL797, which is expected to be an IV administered CAR T-cell product targeting receptor tyrosine kinase-like orphan receptor 1 (ROR1). LYL797 contains a CAR with a 4-1BB/CD3z co-stimulatory domain, an optimized spacer and a single-chain variable fragment (scFy) derived from an R12 rabbit monoclonal antibody that recognizes and binds with high specificity to human ROR1. LYL797 also incorporates Gen-R and a proprietary optimized version of human EGFR (EGFR opt ) used 9 Table of Contents for tracking of the CAR T cells in the peripheral blood. LYL797 is manufactured utilizing our proprietary Epi-R technology. We are initially developing LYL797 for the treatment of ROR1 + triple-negative breast cancer (TNBC) and NSCLC. ROR1 expression is associated with poor prognosis. Significant subsets of patients with common cancers express ROR1, including TNBC (~60%) and NSCLC (~40%), two of the highest ROR1 expressing indications. If successful, we anticipate expanding into other ROR1 + cancers with a lower incidence of ROR1 expression, including potentially HR + breast cancer, ovarian and other solid tumors. In December 2021 we announced FDA clearance of our Investigational New Drug (IND) application for LYL797. With the opening of a clinical trial site in March 2022, we have initiated our Phase 1 clinical trial designed to evaluate the safety and anti-tumor activity of LYL797 in patients with ROR1+ TNBC or NSCLC. We plan to share initial data from the trial when we have a meaningful number of patients and an indication of clinical effect, which we expect to occur in 2023. Rationale for ROR1 We have selected ROR1 as our initial target because it is highly expressed in certain solid tumor types and clinical data has been generated using ROR1 CAR T cells that demonstrate exhaustion and thus serve as a good vehicle to test our Gen-R technology. Data from multiple third-party clinical trials of ROR1 targeted therapies in hematologic and solid tumor cancers suggest that targeting ROR1 was well tolerated at active dose levels with no on-target, off-tumor toxicity observed despite ROR1 expression in a number of normal tissues. Target Indications Patients with solid tumors, including TNBC, NSCLC, ovarian cancer or HR+ breast cancer, often face a poor prognosis and low rates of long-term survival. Although patients may benefit initially from radiation therapy, chemotherapy, surgery and more advanced alternatives such as ICB, immunotherapies or targeted therapies, most patients eventually relapse. After becoming resistant to initial lines of therapy, patients are limited to palliative care, experimental therapies in clinical trials or chemotherapy regimens that are often highly toxic and largely ineffective. Patients are further challenged by high rates of late-stage diagnosis, when tumors have metastasized. Despite recent advances in therapeutic development, for most patients diagnosed with solid tumors, a significant unmet medical need exists and long-term survival rates remain low. ROR1 has been reported to be expressed in many other solid tumors beyond breast, lung and ovarian, including prostate, stomach, endometrial and pancreatic, providing multiple opportunities for indication expansion. Many of these indications are unaddressed or under-addressed with currently approved therapeutics; further, patients with ROR1 expression tend to experience poorer outcomes on these treatments and poorer prognosis. These indications represent a significant unmet need and a substantial opportunity. Preclinical Data We have conducted a number of preclinical in vitro and in vivo experiments of LYL797 against ROR1 + solid tumors. These studies have demonstrated that LYL797, which incorporates Gen-R and Epi-R, maintains stem-like phenotypes and can resist exhaustion while inhibiting tumor growth in models of tumor cells expressing ROR1. Gen-R and Epi-R, in combination with ROR1-targeted CAR T cells, have been evaluated preclinically in in vitro and in vivo models. In the studies depicted below, we exposed ROR1 + Gen-R CAR T cells (ROR-1 + Gen-R) and other ROR1 CAR T cells without Gen-R (the Control) to chronic stimulation by repeated exposure to ROR1 + NSCLC tumor cells, with fresh tumor cells introduced every two days. After seven days of chronic stimulation, we assessed cytolytic ability and cytokine release from the T cells. In all donors, the ROR1 + Gen-R T cells demonstrated improved maintenance of cytotoxicity against ROR1 + tumor cells while producing increased levels of cytotoxic cytokines, such as IFNɣ. This suggests persistence of activity and thus lack of exhaustion in ROR1 + Gen-R versus the Control T cells (Figure 2). Figure 2: In vitro experiment demonstrated superior ability of ROR1 + Gen-R T cells to resist T cell exhaustion. In this experiment we repeatedly stimulated T cells from three different donors with ROR1 + lung cancer cells (cell lines A549 and H1975). After four rounds of stimulation over seven days, we tracked tumor killing kinetics by measuring reduction of tumor cells over time. Shown here are results comparing ROR1 + Gen-R T cells (Gen-R, in green), to the Control T cells (the Control, in red), and to T cells without a ROR1 CAR (Mock, in black). In both the left and middle columns (against two lung tumor cancer cell lines—A549 and H1795), the green line is below the red and black lines, indicating that more 10 Table of Contents tumor killing occurred with ROR1 + Gen-R T cells. In addition, as shown in the right panel, at 24 hours after the fourth round of stimulation, the ROR1 + Gen-R T cells produced more of the killing-associated cytokines IFN ɣ and IL-2. In in vivo experiments the ROR1 + Gen-R T cells achieved superior tumor growth inhibition relative to the Control in murine models of ROR1 + lung cancer. Importantly, as shown in the figure below, the Control T cells were administered at a sub-therapeutic dose and did not result in complete tumor eradication, while the ROR1 + Gen-R T cells, when administered intravenously at the same dose, demonstrated near complete inhibition of tumor growth. Figure 3: In vivo study demonstrated inhibition of tumor using ROR1 + Gen-R T cells. In this study, tumor cells from a human ROR1 + lung cancer cell line were implanted into NSG mice. When tumors reached 100mm3, the mice were intravenously injected with ROR1 + Gen-R T cells (Gen-R, in green), the Control T cells (the Control, in red) or T cells without a ROR1 CAR (Mock, in black). The left panel shows results from tracking tumor growth. The black and red lines, Mock and the Control, go up over time, while the green line at the bottom, ROR1 + Gen-R, is nearly flat. At the end of the study (60 days post T cell injection) all of the mice treated with ROR1 + Gen-R T cells were alive and had no meaningful change in body weight. Additional in vitro experiments demonstrate synergistic improvement of CAR T cells by implementing Epi-R in addition to Gen-R (LYL797). When repeatedly exposed to ROR1 + NSCLC tumor cells, with fresh tumor cells introduced every three days, LYL797 showed increases in cytotoxicity, proliferation and secretion of cytokines compared to ROR1 + Gen-R, across all donors. Figure 4: In vitro , application of Epi-R technology resulted in better functional activity of ROR1 + Gen-R T cells. LYL797 T cells (LYL797, in green) and ROR1 + Gen-R T cells (the Control, in red) were repeatedly stimulated every three days with tumor cells from a ROR1 + lung cancer cell line (A549). During the final stimulation, we measured the percent 11 Table of Contents enhancement in tumor cell clearance (cytotoxicity) or the fold increase in proliferation and 24 hour cytokine production of LYL797 T cells compared to ROR1 + Gen-R T cells. Data from four donors is shown. LYL797 T cells showed increases in cytotoxicity, proliferation and secretion of cytokines compared to ROR1 + Gen-R T cells. Our Phase 1 Trial Our Phase 1 clinical trial is designed to evaluate the safety and anti-tumor activity of LYL797 in patients with ROR1+ TNBC or NSCLC. The trial is designed as an open label, dose escalation and expansion trial in patients with relapsed/refractory TNBC or NSCLC who have failed at least two lines of therapy. Once a dose is identified during dose escalation in TNBC, 15 patients with TNBC and 15 patients with NSCLC are expected to be enrolled at the recommended dose. The primary endpoint is safety and tolerability of LYL797. Secondary endpoints include clinical activity based on the evaluation of antitumor activity as evaluated by Response Evaluation Criteria in Solid Tumors (RECIST) criteria and characterization of the pharmacokinetic profile of LYL797. Exploratory biomarkers of T cell function – exhaustion and stemness – will also be assessed. Patients will be monitored for cytokine release syndrome (CRS) and immune effector cell-associated neurotoxicity syndrome (ICANS), as well as tissue specific toxicities in ROR1-expressing organs. As a safety measure, we have included our EGFRopt safety switch in our construct. Thus, cetuximab may be used as a safety intervention, if indicated. 12 Table of Contents Figure 5: LYL797 Phase 1 trial design LYL845: Our TIL Product Candidate Targeting Multiple Solid Tumor Indications We are applying our Epi-R technology to develop our product candidate, LYL845, which is expected to be an IV administered autologous TIL therapy in multiple solid tumors. TILs have previously shown clinical benefit in patients with melanoma and other solid tumors with high mutation burdens. Published data from third-party TIL trials show that treating metastatic melanoma patients with TILs results in a 50% or greater response rate, with up to half of those responses complete and durable. TIL therapy has also been shown to result in responses in patients with advanced cervical, lung, breast and gastrointestinal cancers, although response rates in these tumor histologies are much lower than that observed in the melanoma setting. TILs target a variety of tumor antigens, but it is thought that the clinical efficacy of TILs is largely driven by specific recognition of mutated tumor neoantigens. Further, broad TIL efficacy has been limited by poor enrichment of tumor-reactive T cells, poor quality and growth potential of expanded T cells, and failure to maintain polyclonality of TILs during production. We have designed LYL845 to incorporate our Epi-R technology that has shown promising improvements in enhancing T cell potency, antitumor activity and increased polyclonality of TILs. We expect to submit an IND to the FDA in the second half of 2022 for LYL845. Target Indications We are initially targeting melanoma, and also plan to include patients with other solid tumors, potentially including NSCLC, colon, head and neck, cervical, breast and pancreatic, which all have a high unmet need based on the current treatment landscapes. Although patients may benefit initially from radiation therapy, chemotherapy, surgery and more advanced alternatives such as checkpoint therapies, immunotherapies or targeted therapies, most patients with these types of cancers eventually relapse. After becoming resistant to initial lines of therapy, patients are limited to palliative care, experimental therapies in clinical trials or chemotherapy regimens that are often highly toxic and largely ineffective. Overall, despite recent advances in therapeutic development, for most patients diagnosed with solid tumors, a significant unmet medical need exists and long-term survival rates remain low. Our Preclinical Data We have conducted a number of preclinical in vitro and in vivo studies supporting the development of LYL845 that suggest TILs enhanced with Epi-R maintain properties of durable stemness, including superior expansion and tumor eradication in both animal studies and autologous experiments, as well as polyclonality. 13 Table of Contents Our Epi-R T cell populations have demonstrated superior expansion in in vivo mouse models. We measured the number of T cells in the mice at various time points and observed as many as 50-fold more T cells in mice injected with Epi-R T cells, as compared to mice injected with T cells expanded in Standard Preparation. We also observed, after 40 days, tumor eradication in 8 out of 9 mice treated with Epi-R T cells versus eradication in only 4 out of 10 mice treated with Standard Preparation. Standard Preparation, as used throughout this document refers to a typical cell preparation that includes TransAct beads, OpTmizer media and IL-2, IL-7 and IL-15 cytokines. Figure 6: Epi-R T cells had improved expansion in vivo as shown in the left panel and had greatly improved antitumor function in mouse models of cancer, as shown on the right. Epi-R T cells eliminated tumors in 8 out of 9 treated mice (note overlapping blue lines in Epi-R tumor killing along the x-axis), compared to 4 out of 10 mice treated with Standard Preparation T cells. In in vitro studies we evaluated Epi-R expanded TIL recognition of autologous melanoma cancer cells. Utilizing a patient melanoma tumor excision, we both extracted and expanded TIL from that specimen in either Standard Preparation or Epi-R, and created a cancer cell line in order to evaluate whether the expanded TIL from that tumor recognize and react to that patient’s own cancer cells. We were able to demonstrate that Epi-R TIL do exhibit enhanced activation, the response is mediated by activated killer CD8 + cells, and they have significantly enhanced tumor cell killing capacity when compared to Standard Preparation. The higher secretion of IL-2, the critical T cell growth factor, is notable. Figure 7: Epi-R TIL had enhanced recognition and activity against autologous melanoma tumor cell line. Asterisks denote significant p-values between groups. The red bars in the graph on the left show that Epi-R T cells from TIL secreted increased levels of IFN ɣ and IL-2 cytokines as compared to Standard Preparation after co-culture with autologous melanoma tumor cells, indicating greater activation and cytotoxicity potential. As a control, when TIL alone were measured without the presence of autologous tumor cells, they did not activate and did not secrete the cytokines. In the bar chart on the right, we demonstrate that production of IFN ɣ secretion dropped significantly when target cells were coated with an antibody to HLA Class I, indicating that the tumor cell recognition was mediated by CD8 + T cells. 14 Table of Contents These cells were also shown to be more effective at tumor cell killing. In the graph below on the left, we show that Epi-R TIL killed autologous tumor cells at a rate of approximately 50% whereas those TIL grown in Standard Preparation killed at a rate of approximately 20%. We also observed, in an experiment to titrate different levels of Epi-R TIL against tumor cells, that a 4:1 effector T cell to tumor cell ratio resulted in complete tumor eradication. Figure 8: Epi-R TIL had improved ability to kill autologous tumor cells. Standard and Epi-R TIL were co-cultured with autologous melanoma tumor cells and their ability to kill tumor was measured after 24 hours (left panel). Altering the ratio of TIL:tumor cells (E/T ratio) can impact TIL ability to kill tumor. Epi-R TIL exhibited increased tumor killing at all E/T ratios, and at a 4:1 ratio Epi-R TIL successfully killed all tumor cells. Epi-R has also demonstrated the ability to preserve the polyclonality of TIL preparations, one of the key advantages of this ACT modality. Quantitatively, polyclonality can be measured by the Simpson Clonality index. The Simpson Clonality Index is a quantitative tool that reflects diversity within a dataset; a low number represents high diversity, while a high number represents low diversity. An index value of 1 would represent a monoclonal population. The Simpson Clonality Index of TIL in the tumor is very low, demonstrating high clonal diversity of the original TILs. In Standard Preparation, the majority of clones giving rise to the desired clonal diversity are lost upon stimulation and expansion as shown by the high Simpson Clonality Index. In contrast, most of the original tumor clonal diversity is maintained in TIL expanded with Epi-R, as shown with a low index score. It is known that T cells migrating through tissues experience arrested migration upon recognition of their target tumor antigen, resulting in their activation and expansion, which is followed by their exhaustion. We quantified the TCRs 15 Table of Contents from TILs and ranked them by the frequency of the clonotypes found. We compared the frequencies of individual TCRs after expansion in Standard Preparation or Epi-R conditions. On the right in the graph below, we show that Epi-R preserved dominant TIL clonotypes found amplified in the tumor; 57% of the TCR Vß sequences corresponded to the top 50 TCRs represented in the original TIL. By sharp contrast, only 2% of the TCR clonotypes expanded in Standard Preparation were represented in the top 50 TCRs found in TIL. Figure 9: Epi-R TIL exhibited increased T cell polyclonality in multiple tumor types as measured by the Simpson Clonality Index (a measure of polyclonality, with high Simpson values indicating low polyclonality). Epi-R TIL exhibited a low Simpson Clonality Index that reflects increased diversity of T-cell TCR repertoire. Figure 10: Epi-R TIL also exhibited retention of original dominant T cell clones. TCR sequencing was performed on Standard Preparation and Epi-R TIL. The relative abundance of TCRs that were observed in starting tumor T cell population was compared with Standard Preparation and Epi-R expanded TILs. Epi-R TILs retained greater proportions of starting TCR repertoire after expansion. Of the top 50 dominant tumor TCRs, 57% are represented in the Epi-R expanded product vs 2% in the Standard Preparation. Our Planned IND Submission and Phase 1 Trial We plan to submit an IND for LYL845 to the FDA in the second half of 2022. We are planning our Phase 1 clinical trial as a dose escalation and expansion study of LYL845 in multiple solid tumor indications. The primary endpoint of our Phase 1 trial is expected to be the safety and tolerability of LYL854. We are initially targeting melanoma, and also plan to include patients with other solid tumors, potentially including NSCLC, colon, head and neck, cervical, breast and pancreatic. 16 Table of Contents We plan to monitor patients for CRS and auto-immunity. We plan to monitor clinical efficacy based on antitumor activity as evaluated by RECIST criteria and characterization of the pharmacokinetic profile of LYL845. Figure 11: LYL845 Phase 1 Trial NY-ESO-1 TCR: Our Lead Program with GSK Our collaborator, GSK, is developing an NY-ESO-1 TCR T cell product candidate, NY-ESO-1 c259 , currently in pivotal development. Our collaboration explores the potential enhancement of that product candidate though the application of our Gen-R and Epi-R platform technologies, with a goal to improve the depth and durability of clinical responses. While we are currently evaluating Gen-R and Epi-R in separate preclinical and clinical programs, together these programs could represent a single future product opportunity for GSK utilizing one or both of our platform technologies. We are responsible for preclinical activities for both programs and GSK is responsible for executing the clinical trials and commercialization, if approved, of a future product. We anticipate that initial clinical trials will be conducted in synovial sarcoma (SS) and myxoid/round cell liposarcoma (MRCLS). Positive results from the initial patient cohorts could support additional combinations and expansions into additional NY-ESO-1+ tumor types, including those with lower levels of target antigen, such as NSCLC. In January 2022, we announced FDA clearance of our IND for LYL132 (NY-ESO-1 + Epi-R). The planned Phase 1 trial is designed to assess LYL132 in patients with NY-ESO-1+ advanced SS or myxoid/round cell liposarcoma (MRCLS). Lyell holds the product IND and will manufacture LYL132 in its LyFE™ Manufacturing Center and GSK will conduct the Phase 1 trial. GSK has communicated to us that due to updated manufacturing timing, the IND submission to the FDA for NY‑ESO-1 + Gen-R is likely to be in late 2022/early 2023. Rationale for NY-ESO-1 NY-ESO-1 is a known cancer testis antigen target that has been previously validated in clinical trials. It is expressed in a wide range of solid tumors, including at high levels in some indications; however, it has low or no expression in healthy adult tissues. It is expressed in approximately 80% of SS, neuroblastomas and MRCLS, more than 40% of melanomas and ovarian cancers, and between 20% to 40% of multiple other cancers including bladder, esophageal, hepatocellular, head and neck, ovarian, prostate, myeloma, breast and NSCLC. Patients who could benefit from treatment with NY-ESO-1-targeted therapies are further limited because the NY-ESO-1-antigen is HLA A2-restricted and the therapeutic T cells recognize only certain protein sequences. Target Indications We are initially targeting SS, MRCLS and NSCLC, which all have a high unmet need based on the current treatment landscapes. SS and MRCLS, in particular, have limited treatment alternatives, and are largely treated with a combination of surgery and chemotherapy, but with significant rates of metastases and low 5-year survival rates in metastatic cases. While NSCLC has more treatment alternatives, it still has low five-year survival rates and due to its prevalence causes upwards of 130,000 deaths in the United States per year. In addition to the unmet need in these cancers, NY-ESO-1 expression is high in all three, 80+% in MRCLRS and SS as well as up to 25% in NSCLC, further supporting our development plans. 17 Table of Contents Preclinical Data We have separately tested both platform technologies with GSK’s NY-ESO-1 TCR. We are currently conducting preclinical studies for NY-ESO-1 TCR with Gen-R (NY-ESO-1 + Gen-R) and NY-ESO-1 TCR with Epi-R (NY-ESO-1 + Epi-R), compared to GSK’s baseline NY-ESO-1 TCR (the Control). Preclinical in vitro and in vivo experiments of NY-ESO-1 + Epi-R (LYL132) have demonstrated that LYL132 has T cells with qualities consistent with T-cell stemness, including enhanced metabolic fitness and proliferation. We believe these qualities could be associated with improved clinical responses that could further improve first generation approaches. We have conducted a series of in vitro and in vivo experiments that show NY-ESO-1 + Gen-R T cells resisted exhaustion and had increased production of cytokines associated with tumor killing, improved sensitivity to lower levels of NY-ESO-1 surface expression and improved tumor cell killing compared to the Control, both initially and after persistent exposure to NY-ESO-1 + tumor cells. We believe these findings could translate into improved outcomes in the clinical setting. We exposed NY-ESO-1 + Gen-R T cells to NY-ESO-1 + solid tumor cell lines and measured IFNɣ and IL-2, cytokines associated with tumor killing. We observed a more than two-fold increase in secretion of those cytokines with NY-ESO-1 + Gen-R compared to the Control in two of three donors. We also exposed T cells to increasing concentrations of NY-ESO-1 on solid tumor cells and showed that NY-ESO-1 + Gen-R were significantly more sensitive than the Control to low levels of NY-ESO-1 (Figure 12). Figure 12: In vitro experiments showed that NY-ESO-1 + Gen-R had increased antitumor cytokines (left panel) and increased antigen sensitivity (right panel) compared to the Control. In the experiment on the left, T cells were exposed to NY-ESO-1 + tumor cells and IFNɣ and IL-2 production were measured. The figure shows that NY- ESO- 1 + Gen-R (TCR + Gen-R, green curves) produced higher and increasing amounts of those cytokines compared to the Control (red curves). In the experiment on the right, T cells were exposed to increasing concentrations of NY-ESO-1 peptide presented by T2 cells, where EC50 and EC90 are measures of maximal antigen concentration needed for response. The right panel shows that NY-ESO-1 + Gen-R (green dots) were more sensitive to low levels of NY-ESO-1 compared to the Control (red dots). Mock T cells, without NY-ESO-1 TCR or Gen-R, are shown in the black curves. Results for EC50 were significant, with p values between groups shown. Additionally, NY-ESO-1 + Gen-R T cells demonstrated a stronger, faster and sustained durability to kill solid tumor cells versus the Control (Figure 13). This result was observed across five donors and two NY-ESO-1+ solid tumor cell lines. Figure 13: NY-ESO-1 + Gen-R T cells (TCR + Gen-R, green curves) demonstrated superior ability to kill NY-ESO-1 + solid tumor cells compared to the Control. The figure shows T cell killing efficiency against two different NY-ESO-1 + cell lines, measured by tracking kinetics of tumor cell clearance over time. The green curves illustrate the clearance of tumor cells by the NY-ESO-1 + Gen-R; the red curves illustrate the same for the Control. Mock T cells, without NY-ESO-1 TCR or Gen-R, are shown in the black curves. In the right panel, the red curve goes upward over time as the TCR T cells without Gen-R lost their antitumor activity, while the green curve goes downward, showing that NY-ESO-1 + Gen-R T cells maintained their antitumor activity. Experiment performed with five donors; representative donor shown. 18 Table of Contents To test for T cell exhaustion, we exposed NY-ESO-1 + Gen-R to NY-ESO-1 + solid tumor cells repetitively. After persistent antigen exposure, NY-ESO-1 + Gen-R continued to kill NY-ESO-1 + tumor cells and secrete cytokines associated with tumor killing, while the Control T cells lost this ability (Figure 14). In addition, a significantly lower proportion of NY-ESO-1 + Gen-R expressed markers of exhaustion. These results suggest that NY-ESO-1 + Gen-R T cells resisted exhaustion after persistent antigen exposure compared to the Control. Figure 14: NY-ESO-1 + Gen-R T cells (TCR + Gen-R, green line) showed enhanced long-term tumor killing activity. In a serial re-stimulation assay, where the T cells were exposed to fresh NY-ESO-1 + tumor cells four times, NY-ESO-1 + Gen-R T cells maintained the ability to kill NY-ESO-1 + tumor cells and to secrete cytokines over time, whereas the Control cells (red line) exhibited signs of exhaustion, as illustrated by loss of killing activity and cytokine secretion. The green curves in the left panel and the green dots in the right panel show that the NY-ESO-1 + Gen-R T cells were able to kill NY-ESO-1 + tumor cells and secrete high amounts of cytokines before (Day 0) and after (Day 14) four rounds of NY-ESO-1 antigen exposure, whereas the Control T cells showed signs of exhaustion, as illustrated by loss of ability to kill and secrete cytokines (red curves and red dots). Mock T cells, without NY-ESO-1 TCR or Gen-R, are shown in the black curves. Significant p values between groups are shown. Our Manufacturing Capabilities We believe it is critically important to own, control and continuously monitor all aspects of the cell therapy manufacturing process in order to mitigate risks the field has seen, including challenges in managing production, supply chain, patient specimen chain of custody and quality control. We made a strategic decision to invest in building our own manufacturing facility to control our supply chain, maximize efficiencies in cell product production time, cost and quality, and have the ability to rapidly incorporate disruptive advancements and new innovations. Controlling manufacturing also enables us to protect proprietary aspects of our Gen-R and Epi-R technology platforms. We view our manufacturing team and capabilities as a significant competitive advantage. Our LyFE manufacturing center is approximately 73,000 square feet and comprises laboratories, offices and manufacturing suites. LyFE has a flexible and modular design allowing us to produce plasmid, viral vector and T cell product to control and de-risk the sequence and timing of production of the major components of our supply chain related to our product candidates. At full staffing and capacity, we expect to be able to manufacture approximately 500 infusions per year depending on product candidate mix. At this time, we believe this capacity is sufficient to support our pipeline programs through pivotal trials and, if approved, early commercialization. Since becoming operational in April 2021, the LyFE manufacturing center has completed successful engineering runs at scale in support of our current and planned clinical trials. 19 Table of Contents In December 2021, we announced that LyFE is commissioned and qualified in compliance with the FDA’s cGMP requirements. LyFE is designed to produce cell products at scale for our current and planned clinical trials across our CAR, TIL and TCR programs. Competition The pharmaceutical industry is highly competitive and dynamic, owing to rapidly advancing technologies. We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, government agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing treatments and new treatments that may become available in the future. In addition, during development, our product candidates may compete against other experimental treatments, whether cell therapy or other modalities, for patients with certain histologies or patients with tumors expressing certain antigen targets of interest. We are aware of a number of companies using ex vivo cell therapy approaches to treat solid tumors. Some of these companies may have substantially greater financial and other resources than we have, such as larger research and development staff and well-established marketing and sales forces, or may operate in jurisdictions where lower standards of evidence are required to bring products to market. There are a number of companies developing CAR T cells, TCR T cells or TIL-based immune-oncology therapies for the treatment of solid tumors including Achilles Therapeutics plc, Adaptimmune Therapeutics Plc., Bristol Myers Squibb Co., Gilead Sciences Inc., Instil Bio Inc., Intima Bioscience Inc., Iovance Biotherapeutics Inc., the Janssen Pharmaceutical Companies of Johnson & Johnson, Nanjing Legend Biotech, Nurix Therapeutics Inc., Oncternal Therapeutics Inc., Precigen Inc. and TILT Biotherapeutics Ltd. Among companies developing cell therapies for solid tumors, we believe we are substantially differentiated by our technology platforms, knowledge, experience, scientific personnel and robust intellectual property portfolio. We believe the key competitive factors affecting the success of any of our product candidates will include efficacy, safety, accessibility, price and cost of manufacturing. Collaboration, License and Success Payment Agreements Fred Hutch License Agreement and Success Payment Agreement In December 2018, we entered into a license agreement with Fred Hutchinson Cancer Research Center (Fred Hutch) that grants us an exclusive, worldwide, sublicensable license under certain patent rights, and a non-exclusive, worldwide, sublicensable license under certain technology, to research, develop, manufacture, improve and commercialize products and processes covered by such patent rights or incorporating such technology for all fields of use utilizing CARs and/or TCRs. This agreement was amended in June 2019, September 2019, January 2020, and August 2020. We paid Fred Hutch an upfront payment of $150,000. In connection with the license agreement, we entered into a letter agreement with Fred Hutch pursuant to which we issued to Fred Hutch 1,075,000 shares of our common stock. We also entered into a letter agreement with Fred Hutch in December 2018 under which we agreed to make success payments to Fred Hutch, payable in cash or publicly traded equity at our discretion. These success payments are based on increases in the per share fair market value of our Series A convertible preferred stock or any security into which such stock has been converted or for which it has been exchanged during the success payment period, which is a period of time that begins on the date of our letter agreement with Fred Hutch and ends on the earlier of: (a) the ninth anniversary of that date and (b) the earlier of (i) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company and (ii) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity). Upon the closing of our initial public offering, all shares of Series A convertible preferred stock then outstanding converted into an equivalent number of shares of our common stock. Success payments will be owed (if applicable) after measurement of the value of our common stock in connection with the following valuation dates during the success payment period: (1) the date of the first anniversary of our initial public offering; (2) the second anniversary of such date; (3) each two year anniversary thereafter (i.e., the four year anniversary, six year anniversary, etc. of such date); (4) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company; (5) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); and (6) the last day of the nine year period. Any success payment will generally be made within 45 days after the applicable valuation date, except that in the case of a merger or sale of all of our company’s assets, the success payment will be made on the earlier of the 90th day following the transaction or the first date that transaction proceeds are paid to any of our stockholders. In the case of (1), (2) and (3), the value of our common stock will be determined by the average trading price of a share of our common stock over the consecutive 90-day period preceding the 20 Table of Contents date the success payment is made; the value will otherwise be determined either, in the case of a merger or stock sale, by the consideration paid in the transaction for each share of our stock or the stock of the acquiring entity (or their parent or affiliate). The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending from $18.29 per share to $91.44 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares or other similar events. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to $200.0 million at $91.44 per share, payable if such threshold is reached. Any previous success payments made to Fred Hutch are credited against the success payment owed as of any valuation date, so that Fred Hutch does not receive multiple success payments in connection with the same threshold. The success payments paid to Fred Hutch will not exceed, in aggregate, $200.0 million, which would be owed only when the value of the common stock reaches $91.44 per share. Stanford License Agreement and Success Payment Agreement In January 2019, we entered into a license agreement with The Board of Trustees of the Leland Stanford Junior University (Stanford) that grants us an exclusive, worldwide, sublicensable license under certain patent rights, and a non-exclusive, worldwide, sublicensable license under certain other patent rights and technology, to make, have made, use, offer to sell, sell, import or otherwise offer to dispose of products and processes covered by such patent rights or incorporating such technology for all fields of use utilizing CARs and/or TCRs. The patents and patent applications covered by this agreement are directed to compositions and methods of treating related to preventing, reversing, inhibiting, reducing or modulating T cell exhaustion and compositions and methods related to engineered cell surface receptors including CARs. We also have the right to add certain Stanford patent applications covering certain inventions that are improvements to the existing patents and patent applications, as well as a right of first negotiation for other patent applications covering inventions made in the principal investigator’s lab that relate to and are necessary or useful for utilizing CARs and/or TCRs. We are obligated to use commercially reasonable efforts to develop, manufacture and sell licensed products and to develop markets for licensed products. We paid Stanford an upfront payment of $400,000. We are required to pay Stanford an annual maintenance fee in the mid tens of thousands on the second anniversary of entering into this agreement, and each anniversary thereafter until the date of the first commercial sale of a licensed product. We are obligated to pay Stanford up to a maximum of $3.7 million per target upon achievement of certain specified clinical and regulatory milestones. We are also obligated to pay Stanford $2.5 million collectively for all licensed products upon our achievement of a certain commercial milestone. In addition, the license agreement provides that we are required to pay Stanford low single-digit tiered royalties based on annual net sales of the licensed products by us and by our sublicensees. If we seek to challenge the validity of any of the licensed patents, during the pendency of such action our royalty rate will increase, and if the outcome of such challenge finds that patent is both valid and infringed our royalty rate will increase further. We are also required to pay Stanford (a) royalties in the mid-teens percentage of the payments that we receive from sublicensees of the rights solely licensed to us by Stanford, or (b) if sublicensed with other intellectual property, on a tiered basis in the low six figures up to $300,000. The license agreement will expire, on a licensed product-by-licensed product and country-by-country basis, on the expiration of the last to expire valid claim of the licensed patents rights covering such licensed product in such country. We may terminate the agreement at will in its entirety or with respect to any licensed patent. Stanford has the right to terminate the agreement in the event of our uncured breach. In connection with the license agreement, we entered into a letter agreement in January 2019 with Stanford pursuant to which we issued to Stanford 910,000 shares of our common stock. We also entered into a letter agreement with Stanford in October 2020, under which we agreed to make success payments to Stanford, payable in cash or publicly traded equity at our discretion. These success payments are based on increases in the per share fair market value of our Series A convertible preferred stock or any security into which such stock has been converted or for which it has been exchanged during the success payment period, which is a period of time that begins on the date of our letter agreement with Stanford and ends on the earlier of: (a) the ninth anniversary of that date and (b) the earlier of (i) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company and (ii) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity). Upon the closing of our initial public offering, all shares of Series A convertible preferred stock then outstanding converted into an equivalent number of shares of our common stock. Success payments will be owed (if applicable) after measurement of the value of our common stock in connection with the following valuation dates during the success payment period: (1) the date of the 21 Table of Contents first anniversary of our initial public offering; (2) the second anniversary of such date; (3) each two year anniversary thereafter (i.e., the four year anniversary, six year anniversary, etc. of such date); (4) the date on which we sell, lease, transfer or exclusively license all or substantially all of our assets to another company; (5) the date on which we merge or consolidate with or into another entity (other than a merger in which our pre-merger stockholders own a majority of the shares of the surviving entity); and (6) the last day of the nine year period. Any success payment will generally be made within 45 days after the applicable valuation date, except that in the case of a merger or sale of all of our company’s assets, the success payment will be made on the earlier of the 90th day following the transaction or the first date that transaction proceeds are paid to any of our stockholders. In the case of (1), (2) and (3), the value of our common stock will be determined by the average trading price of a share of our common stock over the consecutive 90-day period preceding the date the success payment is made; the value will otherwise be determined either, in the case of a merger or stock sale, by the consideration paid in the transaction for each share of our stock or the stock of the acquiring entity (or their parent or affiliate). The amount of a success payment is determined based on whether the value of our common stock meets or exceeds certain specified threshold values ascending from $18.29 per share to $91.44 per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares or other similar events. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to $200.0 million at $91.44 per share, payable if such threshold is reached. Any previous success payments made to Stanford are credited against the success payment owed as of any valuation date, so that Stanford does not receive multiple success payments in connection with the same threshold. The success payments paid to Stanford will not exceed, in aggregate, $200.0 million, which would be owed only when the value of the common stock reaches $91.44 per share. GSK Collaboration and License Agreement In May 2019, we entered into a collaboration and license agreement with GSK that became effective on July 7, 2019 and was amended in June 2020 and December 2021. Under the GSK Agreement, we agreed to work collaboratively with GSK to research and develop certain T cell therapies incorporating our technology platforms or other cell therapy innovations as applied to CARs or TCRs under distinct collaboration programs. The GSK Agreement could include T cell therapies for up to a total of nine CAR or TCR targets, and GSK may select these CAR or TCR targets for collaboration during a specified period, subject to certain restrictions. Under the GSK Agreement, we granted GSK an option, for each Lyell cell therapy innovation that was the subject of a collaboration program under the GSK Agreement, to obtain an exclusive, worldwide license to develop and commercialize that Lyell cell therapy innovations as part of a TCR or CAR cell therapy for the specific target, for human diagnostic and therapeutic uses, except that we retain rights for the China territory for T cell therapies directed to targets that were within GSK’s pipeline and met certain criteria prior to inclusion in the GSK Agreement. We also retain rights to the Lyell cell therapy innovations for other products and targets. For potential T cell therapies that are the subject of collaboration programs under the GSK Agreement, we are responsible for certain research and development activities, at our cost, up to GSK’s option point. The GSK option point is prior to IND filing for therapies to targets that were within GSK’s pipeline and met certain criteria prior to inclusion in the GSK Agreement and, for other targets, the GSK option point is after results of a specific clinical trial. At the GSK option point, together with GSK we must engage in an option process for a specified period of time, at the end of which GSK may exercise its option. Generally, each party is responsible for its own cost and expense to conduct each collaboration program. Upon any such option exercise, GSK will be responsible for further development, at GSK’s cost. In April 2021, GSK exercised its option to the NY-ESO-1 TCR with Gen-R program. As a result of such option exercise, we will transition to GSK responsibility for future research and development of this program at its cost and expense. For a specified time period, we are prohibited from working with third parties to develop or commercialize CAR or TCR T cell therapies, except (a) in China for non-GSK programs, (b) with entities such as research institutions, contractors and clinical sites that are not granted commercial rights, (c) for companies with supporting tools and (d) in programs for which the therapy targets one of the targets excluded from the GSK Agreement. Currently five targets are excluded, and we may exclude three additional targets during a specified period. In addition, there is a target-based exclusivity for so long as GSK is paying royalties on a product to that target. We received an upfront payment of $45.0 million from GSK under the GSK Agreement. In addition to the upfront payment, we are eligible to receive up to two one-time payments, totaling up to approximately $200.0 million in aggregate for technology validation of Lyell’s cell therapy innovations. For each cell therapy target for which there has been a joint collaboration program, Lyell also could receive up to approximately $400.0 million in aggregate in development and sales 22 Table of Contents milestones if the target is already within GSK’s pipeline and meets certain criteria, up to approximately $900.0 million in aggregate in development and sales milestones for all other targets and tiered royalties on a per-product basis ranging from low to high single digits for targets that are already within GSK’s pipeline and meet certain criteria, or from high single digits to low teens for all other targets. Milestones are paid once per target, even if there is more than one Lyell innovation applied to a T cell therapy directed to that target. The GSK Agreement will expire on a product-by-product and country-by-country basis upon the latest of (a) the expiration of the last valid claim of the last to expire licensed patent covering such product in such country, (b) the expiration of all regulatory exclusivity for such product in such country or (c) a specified period after the first commercial sale of such product in such country. GSK may terminate the GSK Agreement in its entirety or on a collaboration program-by-collaboration program basis for convenience or in its entirety upon a change of control of Lyell by a GSK competitor. Each party may terminate the GSK Agreement in its entirety or with respect to a collaboration program in the event of an uncured material breach by the other party or in its entirety for the other party’s insolvency. We may terminate the GSK Agreement in the event of a patent challenge by GSK or specified third parties. In December 2021, we entered into a Second Amendment to Collaboration and License Agreement (Collaboration Amendment) with GSK. The Collaboration Amendment amends the terms of the GSK Agreement. Pursuant to the Collaboration Amendment, among other things, we will manufacture the NY-ESO-1 + Epi-R TCR cell therapy product candidate for an initial planned Phase 1 clinical trial (Epi-R Trial) at our manufacturing facility in Bothell, Washington. GSK will conduct the Epi-R Trial under its First Time in Humans Master Protocol for NY-ESO-1 (FTIH Protocol) pursuant to a clinical plan agreed to by us and GSK. We are responsible for submitting the IND for this product candidate with the FDA, and GSK is responsible for filing its updated FTIH Protocol and for regulatory interactions with FDA related to that protocol. Each party bears its own costs associated with its responsibilities under the GSK Agreement. The Collaboration Amendment further specifies that we are eligible (i) to receive milestone payments for any use of an Anti-Exhaustion Component in connection with a collaboration target, whether or not there was a specific research program and (ii) for one set of milestone and royalty payments with respect to a collaboration target, even if the approved product uses more than one Anti-Exhaustion Component. The Collaboration Amendment also modifies the scope of license grants in the GSK Agreement to conform to the modified responsibilities under the Collaboration Amendment and specifies that Lyell owns improvements to the Epi-R and Gen-R technologies. National Cancer Institute (NCI) License Agreement In December 2020, we entered into a license agreement with NCI that grants us a worldwide license to certain patent rights, and intellectual property rights related to certain know-how, to develop, make and commercialize licensed products and practice licensed processes for the treatment of human cancers, which license is (A) exclusive with respect to certain licensed patents for use in the field of (1) companion diagnostics for our T cell therapy products, (2) adoptive T cell therapy products generated from autologously derived, induced pluripotent stem cells or (3) adoptive T cell therapy products isolated from autologously-derived and allogeneic-derived peripheral blood; (B) non-exclusive with respect to all licensed patents for use in the field of (4) autologous and allogeneic, adoptive T cell therapy products; and (C) non-exclusive with respect to the licensed know-how for use in the fields of (1) through (4). The licensed patents and licensed know-how covered are directed, in part, to thymic emigrant cells, hematopoietic progenitor cells, thymic organoid from human pluripotent stem cells, T cells, T memory stem cells and their use for the treatment of cancer in humans. We may grant sublicenses under our license with NCI’s written approval and, if the rights we are sublicensing are non-exclusive, they must be sublicensed in combination with certain other intellectual property. On or before the seventh anniversary of the agreement, it is the intention of NCI and us to enter into an amendment to the agreement, which amendment is intended to narrow our exclusive license for certain licensed patents to a defined list of cancer indications that meet certain criteria. Such amendment would also extend the term of our exclusive license to such licensed patents so that it would continue beyond such seventh anniversary until the expiration of the last to expire of such licensed patents. We are obligated to use commercially reasonable efforts to develop, manufacture and sell licensed products and to adhere to an agreed-upon clinical development plan and performance milestones. We paid NCI an upfront payment of $100,000. We have paid a prorated annual maintenance payment to NCI in the mid four figures and we also agreed to pay NCI future annual maintenance payments in the high five figures, which payments may be credited against earned royalties. We may be obligated to pay NCI up to a maximum of $3.1 million upon achievement of certain specified clinical and regulatory milestones. We may also be obligated to pay NCI a maximum of $12.0 million collectively for all licensed products upon our achievement of certain commercial milestones. In addition, the license agreement provides that we are required to pay NCI low single-digit royalties on annual net sales of the licensed products. 23 Table of Contents The license agreement will expire on the expiration of the last to expire valid claim of the licensed patents. We may terminate the agreement at will, in its entirety, or on a patent-by-patent and country-by-country basis. NCI has the right to terminate the agreement in the event of our uncured breach or to terminate or modify the agreement, at NCI’s option, for our failure to meet certain diligence obligations, in the event of certain false statements or omissions by us, for our violation of certain laws, for our material breach of a covenant in this agreement, if we fail to maintain reasonable availability of licensed products or licensed processes, if we cannot meet certain health and safety needs or if we cannot reasonably justify a failure to comply with certain production requirements. Intellectual Property We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to our business, including seeking, maintaining and defending patent rights, whether developed internally or licensed from our collaborators or other third parties. Our policy is to seek to protect our proprietary position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation of our business. We also rely on trade secrets and know-how relating to our proprietary technology and product candidates, continuing innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of cell and gene therapy. We additionally plan to rely on data exclusivity, market exclusivity and patent term extensions when available, and if appropriate, may seek and rely on regulatory protection afforded through orphan drug designations. Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions and improvements; to preserve the confidentiality of our trade secrets; to maintain our licenses to use intellectual property owned by third parties; to defend and enforce our proprietary rights, including our patents; and to operate without infringing on the valid and enforceable patents and other proprietary rights of third parties. We have in-licensed and procured, and filed for numerous patent applications, which include claims directed to compositions, methods of use, processes, dosing and formulations, and possess substantial know-how and trade secrets relating to the development and commercialization of our cell engineering technology platforms and related product candidates, including related manufacturing processes and protocols. Our intellectual property strategy is designed to provide multi-layered protection covering our core technologies, such as Epi-R, Gen-R and cell rejuvenation, as well as various aspects of our product candidates. For all patent applications, we determine claiming strategy on a case-by-case basis. We may file patent applications containing claims for protection of all useful applications of our proprietary technology platforms and any products, as well as new applications and/or uses we discover for existing technology platforms and products. We continuously reassess the number and type of patent applications, as well as the pending and issued patent claims, to ensure that maximum coverage and value are obtained for our processes and compositions. Further, claims may be modified during patent prosecution to meet our intellectual property and business needs. Notwithstanding these efforts, we cannot be sure that any patents will be granted with respect to any patent application we have licensed or filed or may license or file in the future, and we cannot be sure that any patents we have licensed or patents that may be licensed or granted to us in the future will not be challenged, invalidated or circumvented or that such patents will be commercially useful in protecting our technologies. As of March 1, 2022, our in-licensed and owned patent portfolio consists of over 30 issued patents and 135 pending patent applications that we have licensed and over 40 pending patent applications that we own. Our portfolio covers various aspects of our core technologies including Epi-R, Gen-R and cell rejuvenation as well as our product candidates. The patents and patent applications in our portfolio are held primarily in the United States, Europe, Canada, Japan and Australia. For information related to our in-licensed intellectual property, see the subsection titled under “—Collaboration, License and Success Payment Agreements.” Individual patents extend for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued for applications filed in the United States are effective for 20 years from the earliest nonprovisional filing date. In the United States, a patent’s term may be lengthened by patent term adjustment (PTA), which compensates a patentee for administrative delays by the USPTO in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier filed patent . In addition, in certain instances, the patent term of a U.S. patent that covers an FDA-approved drug may also be eligible for extension to recapture a portion of the term effectively lost as a result of clinical trials and the FDA regulatory review period, such extension is referred to as patent term extension (PTE). The restoration period cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. However there is no guarantee that the applicable authorities, 24 Table of Contents including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions. The duration of patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest nonprovisional filing date. The actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent. As of March 1, 2022, our registered trademark portfolio currently contains approximately 135 registered trademarks and pending trademark applications, consisting of approximately 10 pending trademark applications in the United States, approximately 105 foreign pending trademark applications in Argentina, Australia, Brazil, Canada, China, Colombia, Costa Rica, European Union, Hong Kong, India, Israel, Japan, Mexico, New Zealand, Oman, South Korea, Russia, Singapore, South Africa, Switzerland, UAE and Venezuela; and approximately 20 trademark registrations in the following countries through national filings: Australia, Brazil, China, European Union, Hong Kong, India, Israel, Japan, Mexico, New Zealand, Republic of Korea, Switzerland and the United Kingdom. We may also rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our technology and product candidates, in part, by entering into confidentiality agreements with those who have access to our confidential information, including our employees, contractors, consultants, collaborators and advisors. We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems. Although we have confidence in these individuals, organizations and systems, agreements or security measures may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or may be independently discovered by competitors. To the extent that our employees, contractors, consultants, collaborators and advisors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. For this and more comprehensive risks related to our proprietary technology, inventions, improvements and product candidates, see the subsection titled “Risk Factors —Risks Relating to Our Intellectual Property.” Sales and Marketing Given our stage of development, we have not yet established a commercial organization or distribution capabilities. We intend to either build a commercial infrastructure to support sales of any approved products or outsource this function to third parties. We intend to continue evaluating opportunities to work with partners that enhance our capabilities with respect to the development and commercialization of LYL797 or LYL845. In addition, we intend to commercialize our product candidates, if approved, in key markets either alone or with partners to maximize the worldwide commercial potential of our programs. Government Regulation The FDA and other regulatory authorities at federal, state and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of biologics such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct trials or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. U.S. Biologics Regulation In the United States, biological products are subject to regulation under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal, state, local and foreign statutes and regulations. The process required by the FDA before biologics may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s Good Laboratory Practice requirements (GLP); • submission to the FDA of an IND, which must become effective before clinical trials may begin; 25 Table of Contents • approval by an Institutional Review Board (IRB) or ethics committee at each clinical site before the trial is commenced; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as GCP, regulations and any additional requirements for the protection of human research subjects and their health information to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose; • preparation of and submission to the FDA of a Biologics License Application (BLA), after completion of all pivotal clinical trials; • satisfactory completion of an FDA Advisory Committee review, if applicable; • a determination by the FDA within 60 days of its receipt of a BLA to file the application for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency and, if applicable, to assess compliance with the FDA’s cGTPs requirements for the use of human cellular and tissue products, and of selected clinical investigation sites to assess compliance with GCPs; • potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the BLA; and • FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States. Before testing any biological product candidate in humans, the product candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs. Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical trials. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology and pharmacodynamic characteristics of the product; chemistry, manufacturing and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial. In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involving recombinant or synthetic nucleic acid molecules are subject to oversight of IBCs as set forth in the NIH Guidelines for Research Involving Recombinant DNA Molecules (the NIH Guidelines). Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an Institutional Biosafety Committee (IBC), a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include 26 Table of Contents oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries. For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These trials are designed to test the safety, dosage tolerance, absorption, metabolism and excretion of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. • Phase 2—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. • Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval. In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product in the intended therapeutic indication, particularly for long-term safety follow-up. These so-called Phase 4 trials may also be made a condition to approval of the BLA. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. BLA Submission and Review by the FDA Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including trials initiated by independent investigators. The submission of a BLA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies. Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the FDA accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. Once a BLA has been accepted for filing, the FDA’s goal is to review standard applications within 10 months after the filing date, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the review process may also be extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may also convene an advisory committee to provide clinical insight on application review questions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. For a product candidate that is also a human cellular or tissue product, the FDA also will not approve the application if the 27 Table of Contents manufacturer is not in compliance with cGTPs. These are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues and cellular and tissue-based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter (CRL). An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A CRL will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product. If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a REMS, to ensure the benefits of the product outweigh its risks, or otherwise limit the scope of any approval. A REMS is a safety strategy implemented to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post-marketing trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies. Expedited Development and Review Programs The FDA offers a number of expedited development and review programs for qualifying product candidates. For example, the fast track program is intended to expedite or facilitate the process for reviewing new products that are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Specifically, new biological products are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new biologic may request that the FDA designate the biologic as a fast track product at any time during the clinical development of the product. The sponsor of a fast track product has opportunities for more frequent interactions with the applicable FDA review team during product development and, once a BLA is submitted, the product candidate may be eligible for priority review. A fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA. A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review. A product candidate can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers. 28 Table of Contents Any marketing application for a drug or biologic submitted to the FDA for approval, including a product candidate with a fast track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product candidate is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new biological product designated for priority review in an effort to facilitate the review. For original BLAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (as compared to 10 months under standard review). Additionally, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical trials to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required post-marketing studies or if such studies fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. In 2017, the FDA established a new regenerative medicine advanced therapy (RMAT) designation, which is intended to facilitate an efficient development program for, and expedite review of, any drug or biologic that meets the following criteria: (i) the drug or biologic qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (ii) the drug or biologic is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition; and (iii) preliminary clinical evidence indicates that the drug or biologic has the potential to address unmet medical needs for such a disease or condition. RMAT designation provides all the benefits of breakthrough therapy designation, including more frequent meetings with the FDA to discuss the development plan for the product candidate and eligibility for rolling review and priority review. Product candidates granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of clinical trial sites, including through expansion of trials to additional sites. RMAT-designated products that receive accelerated approval may, as appropriate, fulfill their post-approval requirements through submission of clinical evidence, clinical trials, patient registries or other sources of real-world evidence (such as electronic health records); through the collection of larger confirmatory data sets; or via post-approval monitoring of all patients treated with such therapy prior to approval of such therapy. Fast track designation, breakthrough therapy designation, priority review, accelerated approval and RMAT designation do not change the standards for approval but may expedite the development or approval process. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Orphan Drug Designation and Exclusivity Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for a particular drug or biologic for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities 29 Table of Contents of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease. A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if a second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Post-Approval Requirements Biologics are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products. Biologic manufacturers and other entities involved in the manufacture and distribution of approved biological products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain GMP compliance. Changes to the manufacturing process or facility are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or untitled letters; • clinical holds on clinical trials; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; • consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs; • mandated modification of promotional materials and labeling and the issuance of corrective information; • the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or • injunctions or the imposition of civil or criminal penalties. The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product 30 Table of Contents seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits or civil or criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe, in their independent medical judgment, that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products. Biosimilars and Reference Product Exclusivity The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA), includes a subtitle called the Biologics Price Competition and Innovation Act (BPCIA), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical trial or trials. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law. A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study. The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation and impact of the BPCIA is subject to significant uncertainty. Government Regulation Outside of the United States In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In the European Union, for example, a clinical trial application (CTA) must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and the IRB, respectively. Once the CTA is approved in accordance with the applicable requirements, clinical trial development may proceed. The 31 Table of Contents requirements and process governing the conduct of clinical trials, are to a significant extent harmonized at the European Union-level but could vary from country to country. In all cases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. The way clinical trials are conducted in the European Union will undergo a major change when the Clinical Trial Regulation (Regulation (EU) 536/2014) comes into application, probably in 2022. The Regulation harmonizes the assessment and supervision processes for clinical trials throughout the European Union via a Clinical Trials Information System, which will contain a centralized European Union portal and database. To obtain regulatory approval of an investigational biological product under European Union regulatory systems, we must submit a marketing authorization application. The application used to file the BLA in the United States is similar to that required in the European Union, with the exception of, among other things, country-specific document requirements. Innovative products that target an unmet medical need may be eligible for a number of expedited development and review programs in the European Union, such as the PRIME scheme, which provides incentives similar to the breakthrough therapy designation in the United States. Such products are generally eligible for accelerated assessment and may also benefit from different types of fast track approvals, such as a conditional marketing authorization or a marketing authorization under exceptional circumstances granted on the basis of less comprehensive clinical data than normally required (respectively in the likelihood that the sponsor will provide such data within an agreed timeframe or when comprehensive data cannot be obtained even after authorization). The European Union also provides opportunities for market exclusivity. For example, in the European Union, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic or biosimilar application. During the additional two-year period of market exclusivity, a generic or biosimilar marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar product can be marketed until the expiration of the market exclusivity. However, there is no guarantee that a product will be considered by the European Union’s regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity. Products receiving orphan designation in the European Union can receive ten years of market exclusivity, during which time no similar medicinal product for the same indication may be placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the European Union for pediatric trials. No extension to any supplementary protection certificate can be granted on the basis of pediatric trials for orphan indications. The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the European Union, or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan drug designation must be submitted before the application for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designation has been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if: • The second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; • The applicant consents to a second orphan medicinal product application; or • The applicant cannot supply enough orphan medicinal product. 32 Table of Contents The medicinal products we are developing, which are based on genes, cells or tissues, may be considered advanced therapy medicinal products (ATMPs) in the European Union if they meet the scientific criteria for defining an ATMP. The principles of the aforementioned medicines legislation apply to ATMPs. All ATMPs must obtain a marketing authorization from the EMA and are regulated through the centralized authorization procedure. Regulation (EC) No 1394/2007 (the ATMP Regulation) provides specific incentives to accelerate the development of such products, including fee reductions for scientific advice, an ATMP classification procedure (for all developers) and a certification procedure for quality and preclinical data (for SMEs only). If tissues and cells are being used as starting materials in a medicinal product we may also need to comply with the requirements of Directive 2004/23/EC (the European Tissues and Cells Directive) covering standards for donation, procurement and testing, processing, preservation, storage and distribution of human tissues and cells, as well as its technical implementing directives; and Directive 2015/566, as regards the procedures for verifying the equivalent standards of quality and safety of imported tissues and cells. In the European Union, early access mechanisms for innovative medicines (such as compassionate use programs and named patient supplies), pricing and reimbursement and promotion and advertising are subject to national regulations and oversight by national competent authorities and therefore significantly vary from country to country. Sanctions for non-compliance with the aforementioned requirements, which may include administrative and criminal penalties, are generally determined and enforced at national level. However, under the European Union financial penalties regime, the EMA can investigate and report on alleged breaches of the European Union pharmaceutical rules by holders of a marketing authorization for centrally authorized medicinal products and the European Commission could adopt decisions imposing significant financial penalties on infringing marketing authorization holders. The United Kingdom left the European Union on January 31, 2020 (Brexit). Following the Transition Period which ended on December 31, 2020, Brexit could materially impact the regulatory regime with respect to the development, manufacture, importation, approval and commercialization of our product candidates in the United Kingdom in the coming years. For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Other Healthcare Laws Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business and may constrain the financial arrangements and relationships through which we research, sell, market and distribute any products for which we obtain marketing approval. Such laws include, without limitation, federal and state anti-kickback, fraud and abuse, false claims, data privacy and security, price reporting and physician and other health care provider transparency laws and regulations. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and imprisonment. The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify 33 Table of Contents for an exception or safe harbor but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Additionally, the intent standard under the Anti-Kickback Statute and the criminal healthcare fraud statutes under the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) was amended by the ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (FCA) (discussed below). The FCA prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. Pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product and for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus non-covered, uses. HIPAA also created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Additionally, the federal Physician Payments Sunshine Act within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) annually report information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals and certain ownership and investment interests held by these healthcare providers and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information regarding its payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives during the previous year. We may also be subject to data privacy and security regulations by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and its implementing regulations, impose requirements on covered entities, including certain healthcare providers, health plans, healthcare clearinghouses and their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. In order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of pharmaceutical products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in 34 Table of Contents the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, track and report gifts, compensation and other remuneration made to physicians and other healthcare providers, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws. If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations Coverage and Reimbursement Sales of any product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that a product is safe, effective and medically necessary; appropriate for the specific patient; cost-effective; supported by peer-reviewed medical journals; included in clinical practice guidelines; and neither cosmetic, experimental, nor investigational. A third-party payor could also require that certain lines of therapy be completed or failed prior to reimbursing our therapy. The principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and Human Services (HHS). CMS decides whether and to what extent products will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Third-party payors determine which products and procedures they will cover and establish reimbursement levels. Even if a third-party payor covers a particular product or procedure, the resulting reimbursement payment rates may not be adequate. These third-party payors are increasingly reducing coverage and reimbursement for medical products, drugs and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product and also have a material adverse effect on sales. Healthcare Reform In the United States, in March 2010, the ACA was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affected the pharmaceutical industry. The ACA contained a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement adjustments and changes to fraud and abuse laws. For example, the ACA: • increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1% of the average manufacturer price; • required collection of rebates for drugs paid by Medicaid managed care organizations; • required manufacturers to participate in a coverage gap discount program, under which they must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; • imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs” to specified federal government programs; • expanded the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and 35 Table of Contents • created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research. There have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example, the Tax Act was enacted, which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit ruled that that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the Supreme Court ruling, other such litigation and the healthcare reform measures of the Biden administration will impact the ACA and our business. Other legislative changes have also been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013. However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2021. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. There has been heightened governmental scrutiny recently over the manner in which pharmaceutical companies set prices for their marketed products, which has resulted in several Congressional inquiries and proposed federal legislation, as well as state efforts, designed to, among other things, bring more transparency to product pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. The likelihood of success of these and other measures initiated by the former Trump administration is uncertain, particularly in light of the Biden administration. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We anticipate that these new laws will result in additional downward pressure on coverage and the price that we receive for any approved product, and could seriously harm our business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products (if approved). In addition, it is possible that there will be further legislation or regulation that could harm our business, financial condition and results of operations. For example, it is possible that additional governmental action is taken in response to address the COVID-19 pandemic. Other Privacy and Security Laws We may become subject to privacy laws in the jurisdictions in which we are established or in which we sell or market our products or run clinical trials. For example, in Europe we may be subject to Regulation (EU) 2016/679, the General Data Protection Regulation (GDPR) in relation to our collection, control, processing and other use of personal data (i.e., data relating to an identifiable living individual). The GDPR is directly applicable in each European Union Member State, however, it provides that European Union Member States may introduce further conditions, including limitations that could limit our ability to collect, use and share personal data (including health and medical information), or could cause our compliance costs to increase, ultimately having an adverse impact on our business. 36 Table of Contents The GDPR imposes onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and implement policies as part of its mandated privacy governance framework. It also requires data controllers to be transparent and disclose to data subjects (in a concise, intelligible and easily accessible form) how their personal information is to be used, imposes limitations on retention of personal data; defines pseudonymized (i.e., key-coded) data; introduces mandatory data breach notification requirements; and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. We are subject to the supervision of local data protection authorities in those European Union jurisdictions where we are established or otherwise subject to the GDPR. Fines for certain breaches of the GDPR are significant: up to the greater of €20 million or 4% of total global annual turnover. Further, following the withdrawal of the United Kingdom from the European Union on January 31, 2020, pursuant to the transitional arrangements agreed between the United Kingdom and the European Union, we will have to comply with the GDPR and separately the GDPR as implemented in the United Kingdom, each regime having the ability to fine up to the greater of €20 million/ £17 million or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, including how data transfers between European Union member states and the United Kingdom will be treated. These changes may lead to additional compliance costs and could increase our overall risk. In addition to the foregoing, a breach of the GDPR or other applicable privacy and data protection laws and regulations could result in regulatory investigations, reputational damage, orders to cease/change our use of data, enforcement notices, or potential civil claims including class action type litigation. In addition, the GDPR includes restrictions on cross-border data transfers. Certain aspects of cross-border data transfers under the GDPR are uncertain as the result of legal proceedings in the European Union, including a recent decision by the Court of Justice for the European Union that invalidated the EU-U.S. Privacy Shield and, to some extent, called into question the efficacy and legality of using standard contract clauses. This may increase the complexity of transferring personal data across borders. The GDPR will increase our responsibility and liability in relation to personal data that we process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries. We are also subject to European Union rules with respect to cross-border transfers of personal data out of the European Union and European Economic Area (EEA). Recent legal developments in the European Union have created complexity and uncertainty regarding transfers of personal data from the EEA to the United States. On July 16, 2020, the Court of Justice of the European Union (CJEU) invalidated the EU-US Privacy Shield Framework (Privacy Shield) under which personal data could be transferred from the EEA to US entities who had self-certified under the Privacy Shield scheme. While the CJEU upheld the adequacy, subject to certain conditions, of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism), future regulatory guidance could result in changes to the use of standard contractual clauses. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results. Further, the vote in the United Kingdom in favor of exiting the European Union, referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom. Specifically, while the Data Protection Act of 2018, which “implements” and complements the GDPR achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, aspects of data protection in the United Kingdom, such as the transfer of data from the EEA to the United Kingdom, remain uncertain. During the period of “transition” (i.e., until December 31, 2020), European Union law will continue to apply in the United Kingdom, including the GDPR, after which the GDPR will be converted into United Kingdom law. Beginning in 2021, the United Kingdom will be a “third country” under the GDPR. In addition, California recently enacted the California Consumer Privacy Act (CCPA), which creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling certain personal data of consumers or households. The CCPA requires covered companies to provide new disclosure to consumers about such companies’ data collection, use and sharing practices, provide such consumers new ways to opt-out of certain sales or transfers of personal information, and provide consumers with additional causes of action. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. The CCPA became effective on January 1, 2020, and (i) allows enforcement by the California Attorney General, with fines set at $2,500 per violation (i.e., per person) or $7,500 per intentional violation and (ii) authorizes private lawsuits to recover statutory damages for certain data breaches. In addition, laws in all 50 U.S. states require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data 37 Table of Contents breach. State laws are changing rapidly and there is discussion in the U.S. Congress of a new comprehensive federal data privacy law to which we would become subject if it is enacted. The CCPA may impact our business activities and exemplifies the vulnerability of our business to the evolving regulatory environment related to personal data and protected health information. Further, the California Privacy Rights Act (the CPRA) recently passed in California. The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. The U.S. Foreign Corrupt Practices Act The U.S. Foreign Corrupt Practices Act of 1977 (FCPA), prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Employees and Human Capital Management Our Mission We are a T-cell reprogramming company dedicated to the mastery of T cells to cure patients with solid tumor cancers. We strive to create an environment where everyone can do the best work of their lives, be themselves and thrive personally and professionally. Our culture is grounded by innovative science and demands excellence. Patients are waiting for new, innovative and effective therapies, and it is this need that drives our sense of urgency to achieve our important mission. Our Values We believe success comes when we and our employees align our core values with our mission to translate our ground-breaking science into medicines with the potential to transform patients’ lives. Our core values are: • Science : We focus and execute on the critical efforts that matter most. • Courage : We are bold and willing to think and act differently. • Respect : We seek to understand and communicate directly, transparently and honestly. • Collaboration : We work across teams to solve our most challenging problems to continually improve and learn. Our Employees We view our employees as a valuable assets in serving our mission. We compete in the highly competitive biotechnology industry, and attracting, retaining and developing a diverse group of talented employees is crucial to our strategy and our ability to compete effectively. We need to grow the size of our organization in order to support our current research, product development and manufacturing efforts and our future plans for commercializing our product candidates, if approved. This growth is critical to our success. There currently is a shortage of skilled individuals with substantial experience discovering, developing and manufacturing cell therapy medicines, which is likely to continue. We also operate in areas such as data capture and analytics, machine learning and artificial intelligence. As a result, competition for talent is intense and the turnover rate can be high. We face substantial competition among numerous biopharmaceutical companies and academic institutions as well as technology companies for individuals with these skills. As of December 31, 2021, we had 219 employees, 149 of whom were engaged in research and development activities, technical operations and process sciences. Our employees are highly skilled, and many hold advanced degrees. Many of our employees have experience with the development of cell therapies. Substantially all of our employees are located in California and Washington. None of our employees are subject to a collective bargaining agreement nor represented by labor unions. We consider our relationship with our employees to be good. 38 Table of Contents Developing our employees is important, and we focus on providing training and opportunities for development and advancement. Learning and development, training and career advancement are an integral part of retaining our employees. We hold talent discussions regularly, which include promotion cycles across functions and role levels. We are in the process of creating and implementing a comprehensive talent management framework inclusive of role leveling, competencies, training by role level and competencies, development and career planning. Since inception, our employee turnover has remained consistently below average for the U.S. life sciences industry generally, as well as for life sciences companies located in Northern California. Given our expanding operations and need to further grow our headcount to support our business, we continually assess employee turnover, recruitment initiatives, compensation and benefits programs, safety in performing critical laboratory work, diversity and other matters relevant to human capital management, and we review results with our Board of Directors on a periodic basis. Our Compensation & Benefits Given the highly competitive nature of our industry and the importance of recruitment and retention to our success, we strive to provide our employees with what we believe is a competitive and comprehensive total rewards package of compensation, benefits and services. This package includes at or competitive market pay, healthcare benefits for employees and family members, a flexible spending account, paid time off benefits, family leave, flexible work schedules, flexible work locations, 401(k) matching and an employee assistance program. In addition, we offer employees the benefit of equity ownership in the company through stock option grants. Our employees are also eligible to participate in an employee stock purchase plan, which offers the opportunity to purchase our common stock at a discount of at least 15%. Our Commitment to Diversity, Belonging, Inclusion & Equity We strongly believe in a diverse workplace where all employees can thrive in an inclusive environment free from discrimination, harassment, bias and prejudice. We aim to treat all individuals with respect and dignity and to provide all employees with equal opportunity and fair treatment. By embracing diversity and inclusion, we seek to create an organization committed to working together to develop innovative solutions consistent with our values and in support of accomplishing our mission. Not only is a diverse, equitable and inclusive mindset and culture critical to an engaged and committed workplace, but it is also imperative to understanding and meeting the needs of the patients we seek to help with our medicines. In 2020, with the support of our Chief Executive Officer and executive leadership team, we convened a Diversity, Belonging, Inclusion and Equity (DBIE) working group comprised of a diverse group of employees tasked with designing and implementing specific initiatives to promote greater diversity, belonging, inclusion and equity at Lyell. We also engaged an experienced DBIE consultant to advise us on the design and planning of new DBIE initiatives based on expertise and external benchmarking. The DBIE working group formalized a DBIE statement, a framework, a tactical plan and advanced a commitment to the importance of DBIE. In 2022, we expect to implement a DBIE speaker series, relevant DBIE training for managers and to expand our recruiting activities to include the use of Textio, a platform that aims to reduce gender bias in role descriptions and postings, and to utilize new recruiting platforms to further diversify candidate pools. Although we are proud of our progress to date, we have and will continue to conduct relevant training and provide guidance with respect to best practices of similarly situated companies. As of December 31, 2021, our employees were self-reportedly approximately 52.1% percent women and 39% of our employees were self-reportedly ethnically or racially diverse with 25% Asian, 5% Black or African American, 6% Hispanic or Latino and 3% of other minority groups or two or more races. We believe in equitable pay practices and our compensation practices and philosophies are reviewed regularly. We establish components and ranges of compensation based on market and benchmark data. Within this context, we strive to pay all employees equitably within a reasonable range, taking into consideration factors such as role, market data, internal equity, job location, relevant experience, and individual and company performance. We review and analyze our compensation decisions for individual employees and our workforce as a whole on at least an annual basis. In 2021, we conducted a pay equity analysis that we believe demonstrated that our compensation practices and structure are equitable. If we identify employees with unjustified pay gaps that do not align with our pay philosophy, we review and take appropriate action to ensure fidelity between our stated philosophy and actions. Our Efforts to Address the COVID-19 Pandemic Employee safety and well-being is of paramount importance to us in any year and was of particular focus since 2020 in light of the evolving COVID-19 pandemic. In response to the pandemic, we have supported our employees and government efforts to curb the COVID-19 pandemic through safety and communication efforts and investments, which include: 39 Table of Contents • Creating a COVID-19 working group responsible for establishing COVID-19 safety protocols and regularly communicating updates to all employees; • A work from home policy in which work that can be done from home is encouraged and allowed to be done from home; • Decreasing density and increasing physical distancing in our facilities for employees working onsite using scheduling adjustments and flexibility; • Robust cleaning protocols across all locations; • Strict mask requirements for employees, contractors and other onsite vendors; • Requirement that all employees and substantially all other third parties that come onsite be fully vaccinated; • Rigorous procedures to address actual and suspected COVID-19 cases and potential exposure; and • Limitation of all domestic and international non-essential travel for all employees. Additionally, from time to time we have instituted additional programs during the COVID-19 pandemic to support our employees, including wellness days and subsidies to all employees for home office expenses and upgrades. One of our top priorities during the ongoing COVID-19 pandemic remains protecting the health and well-being of our employees, customers, partners and communities. We have closely monitored the COVID-19 pandemic and have strived to follow recommended containment and mitigation measures, including the guidance from the Centers for Disease Control and Prevention ( CDC), Occupational Safety and Health Administration (OSHA), the states of California and Washington (including their state OSHA programs) and applicable counties. For most of the pandemic, essential laboratory, manufacturing and support employees worked in our facilities to continue and progress experiments and manufacturing related activities. We will continue to actively monitor the situation related to the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.