What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-02-28 · 108 added, 118 removed, 198 unchanged (53% of the section changed)

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Our technologies are designed to generate T cells with the ability to persist and self‑renew while driving durable tumor cytotoxicity, even in the setting of an immunosuppressive tumor microenvironment.

The goal is for our technologies to provide patients with T cells that are potent and long-lasting enough to achieve durable antitumor responses.

Furthermore, our technologies can be applied in a target agnostic manner to multiple T‑cell modalities, including chimeric antigen receptor (CAR), tumor-infiltrating lymphocytes (TIL) and T‑cell receptor (TCR) therapies.

We apply our technologies with the aim to develop T‑cell therapies with improved durable clinical outcomes.

Our growing pipeline of promising cell product candidates targets solid tumor indications with large unmet needs that are collectively responsible for approximately 180,000 deaths in the US annually.

We apply our technologies with the aim of developing T‑cell therapies with improved and durable antitumor responses for patients with solid tumors.

Our technologies can be applied in a target agnostic manner to multiple T‑cell modalities, including chimeric antigen receptor (CAR), tumor-infiltrating lymphocytes (TIL) and T‑cell receptor (TCR) therapies.

Our growing pipeline of promising cell product candidates targets solid tumor indications with large unmet needs that are collectively responsible for approximately 180,000 deaths in the United States annually.

Each of our programs provide opportunities to expand into additional indications beyond the patient populations we are initially targeting.

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Pipeline Programs and Operational Updates

Pipeline Programs

We are advancing four wholly-owned product candidates.

two product candidates, LYL797 and LYL845, are in Phase 1 clinical development and two additional product candidates, LYL119 and a TIL product candidate incorporating novel genetic and epigenetic reprogramming technologies, are in preclinical development.

LYL797 – A ROR1 CAR T-cell product candidate genetically reprogrammed using c-Jun and epigenetically reprogrammed using our proprietary Epi-R manufacturing protocol, designed for differentiated potency and durability

Two product candidates, LYL797 and LYL845 are in Phase 1 clinical development.

Two additional product candidates, LYL119 and a second-generation tumor infiltrating lymphocyte (TIL) product candidate, are in preclinical development and our T-cell rejuvenation technology is in research.

LYL797 – A ROR1-targeted Chimeric Antigen Receptor (CAR) T-cell product candidate genetically reprogrammed to overexpress c-Jun and epigenetically reprogrammed using Lyell’s proprietary Epi-R TM manufacturing protocol, designed for differentiated potency and durability

• Enrollment in the Phase 1 clinical trial of LYL797 is ongoing.

Initial clinical data from the Phase 1 trial of LYL797 are expected in the first half of 2024.

• Presented nonclinical data at the American Association of Cancer Research 2022 Annual Meeting characterizing LYL797 and demonstrating that our c-Jun overexpression and Epi-R reprogramming technologies can overcome barriers of T-cell exhaustion and lack of durable stemness in engineered T cells using a set of in vitro and in vivo models, including an aggressive syngeneic mouse tumor model and a xenograft lung cancer model.

• Presented nonclinical data demonstrating LYL797 showed improved expansion and anti-tumor activity and prolonged survival compared to conventional ROR1 CAR T cells in an established human ROR1-positive H1975 mouse xenograft model at the American Society of Gene and Cell Therapy Annual Meeting.

LYL119 – An innovative ROR1 CAR T-cell product designed for enhanced cytotoxicity

• LYL119 incorporates four of our stackable reprogramming technologies, including two novel technologies – a genetic knockout of NR4A3 and Stim-R.

These technologies, which are complementary to c-Jun and Epi-R, are designed to further improve the anti-tumor potency and durability of T-cells.

• An IND for LYL119 is expected to be submitted in the first half of 2024.

• Presented nonclinical data demonstrating that the combination of two genetic reprogramming technologies, NR4A3 gene knockout and c-Jun overexpression, enhances the functional activity of ROR1 CAR T cells as shown by higher levels of cytokine production, increased CAR T-cell persistence and reduced surface expression of inhibitory receptors after repetitive antigen stimulation, as well as significant improvement in tumor control in vivo at The Society for Immunotherapy of Cancer 2022 Annual Meeting (SITC 2022).

• Presented nonclinical data at SITC 2022 demonstrating that our proprietary Stim-R epigenetic reprogramming technology, which enables precise control and optimized delivery of activation molecules during T-cell production, generates potent CAR T-cell product candidates with increased cell proliferation and persistence, as well as improved tumor control in vivo .

LYL845 – A novel epigenetically reprogrammed TIL product candidate designed for differentiated potency and durability

• Announced clearance of the IND for LYL845 in October 2022;

The study includes patients with relapsed or refractory triple-negative breast cancer (TNBC) or non-small cell lung cancer (NSCLC).

• Initial clinical and translational data from at least 20 patients in the Phase 1 trial of LYL797 are expected in the first half of 2024.

• Initiated a CAR T-cell manufacturing proof-of-concept collaboration with Cellares as part of an overall manufacturing strategy to build scale and reduce cost.

Under the collaboration, the companies have agreed on a proof-of-concept technology transfer process for the manufacture of Lyell’s LYL797 CAR T-cell therapy, using Cellares’ Cell Shuttle™.

• Announced initial results from Lyell’s ROR1 screening program indicating that expression of ROR1 in TNBC and NSCLC, 53% (N=77) and 33% (N=18), respectively, is consistent with what has been reported in the literature.

The screening program is designed to support Lyell’s current and future clinical trials.

• Presented a LYL797 Trial in Progress poster at the 38th Annual Meeting of the Society for Immunotherapy of Cancer (SITC).

LYL845 – A novel epigenetically reprogrammed TIL product candidate using Lyell’s proprietary Epi-R TM manufacturing protocol, designed for differentiated potency and durability

• Enrollment in the Phase 1 clinical trial for LYL845 is ongoing.

Initial clinical data from the Phase 1 trial of LYL845 are expected in 2024.

• Presented nonclinical data at SITC 2022 demonstrating the ability of Lyell’s Epi-R technology to successfully expand TIL in both hot and cold tumors and to retain qualities linked with anti-tumor functionality and improved outcomes in previous TIL clinical trials.

These qualities present in our Epi-R TIL include a greater proportion of CD8+ T cells, enrichment for T cells with stem-like profiles, better metabolic fitness and preserved polyclonality compared to control TIL preparations.

• Presented bioinformatic analyses, including comprehensive analyses of transcriptomic profiles, polyclonality and prediction of tumor-reactive T cell clones in our LYL845 product candidate, at SITC 2022.

These analyses demonstrated that LYL845 expanded at clinical scale using Epi-R technology remained highly polyclonal and preserved approximately 94% of the predicted tumor reactive clones.

Further, the preserved predicted tumor reactive clones in LYL845 have increased stemness and reduced exhaustion‑associated genes compared to TIL products derived from the standard process.

Corporate and Operational Updates

• In December, Lynn Seely, M.D., a member of the company’s board since May 2021 and former President and CEO of Myovant Sciences, was named President and CEO.

Seely has extensive biopharmaceutical leadership experience with a track record of success building companies and developing new medicines in oncology and women’s health.

• In September, Rahsaan W.

Thompson was named Chief Legal Officer.

Thompson is a biopharmaceutical industry veteran with more than 20 years of experience with development stage and commercial companies.

• In January, Gary Lee, Ph.D.

was named Chief Scientific Officer.

Lee is a veteran biotech leader with more than a decade of experience heading translational cell and gene therapy programs.

The study includes patients with relapsed and/or refractory metastatic or locally advanced melanoma, NSCLC and colorectal cancer.

• Initial clinical and translational data from the Phase 1 trial of LYL845 are expected in the second half of 2024.

• Received FDA Orphan Drug designation (ODD) for LYL845 for the treatment of stage IIB-IV melanoma.

• Presented nonclinical data at SITC highlighting the Epi-R P2 manufacturing process, which is designed to shorten TIL manufacturing time to less than three weeks without impacting cell number and phenotype.

Epi-R P2 is expected to be incorporated into the Phase 1 trial of LYL845 in 2024.

• Presented a LYL845 Trial in Progress poster at SITC.

LYL119 – A ROR1-targeted CAR T-cell product candidate incorporating Lyell’s four stackable and complementary reprogramming technologies for enhanced cytotoxicity

• LYL119 is a ROR1-targeted CAR T-cell product enhanced with Lyell’s four novel genetic and epigenetic reprogramming technologies:

c-Jun overexpression, NR4A3 knockout, Epi-R manufacturing protocol and Stim‑R TM T-cell activation technology.

• An IND application for LYL119 is expected to be submitted in the first half of 2024.

• Presented posters highlighting preclinical development of LYL119 at the American Society for Gene and Cell Therapy and at SITC.

In preclinical studies, LYL119 demonstrated superior cytotoxicity and sustained cytokine production upon repeated antigen stimulation compared to various controls lacking one or more of the reprogramming technologies and showed robust in vivo antitumor efficacy and prolonged survival in a mouse xenograft tumor model at very low cell doses.

Rejuvenation – Novel partial reprogramming technology designed to maintain T-cell identity while reducing cells’ epigenetic age

• Presented nonclinical data at the International Society for Stem Cell Research (ISSCR) 2023 Annual Meeting demonstrating that Lyell’s T‑cell Rejuvenation technology generates cells with improved expansion capacity and increased expression of biomarkers associated with T-cell stemness, that also exhibit improved antitumor properties compared with non-rejuvenated T-cell controls in sequential cell-killing assays.

• Presented nonclinical data at SITC demonstrating that TIL generated with Lyell’s Rejuvenation technology retain a broad TCR repertoire and demonstrate improved T-cell function and antitumor properties.

Corporate Updates

• Appointed Matt Lang, J.D., Chief Business Officer.

Lang, who also serves as Lyell’s Chief Legal Officer and Corporate Secretary, is an experienced company builder who has successfully led growth in complex organizations.

Macroeconomic Environment

Our business and operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges such as the effects of the ongoing geopolitical conflicts in Ukraine, tensions in U.S.-China relations, the COVID-19 pandemic, uncertainty in the markets and inflationary trends.

Fiscal year 2022 was marked by significant market uncertainty, increasing inflationary pressures, supply constraints and ongoing effects from the COVID-19 pandemic.

These market dynamics may continue into 2023 and these and similar adverse market conditions may negatively impact our business.

In particular, as the global COVID-19 pandemic and its effects continue to evolve, the extent of the impact of the COVID-19 pandemic on our business, operations and development timelines and plans remains uncertain and will continue to depend on certain developments, including the duration and spread of the outbreak, other next-level effects and the impact on our CROs, contract manufacturing organizations, clinical sites and other third parties with whom we do business, as well as the impact on regulatory authorities and our key scientific and management personnel.

There can be no assurance that we will be able to avoid materially adverse impacts from the effects of the COVID-19 pandemic.

The effects of the COVID-19 pandemic may continue to negatively impact healthcare and hospital resources, including both front-line and administrative staff, which may delay enrollment in our current and planned clinical trials.

Some patients may not be able to comply with clinical trial protocols due to potential quarantines, lack of healthcare support or potential interruptions of healthcare services, and we may be unable to obtain blood samples for testing.

For example, limitations or modifications in surgery scheduling for oncology patients at collaborating institutions has limited and may continue to limit supply of patient tumor samples that we use in our research.

Our business and operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges such as the effects of the ongoing geopolitical conflicts in Ukraine, escalating armed conflicts and turmoil in the Middle East, tensions in U.S.-China relations, inflationary pressures, interest rate environment, instability in the banking industry and overall market volatility.

The first half of 2023 was marked by significant market uncertainty, inflationary pressures, banking upheaval and supply constraints.

Although these negative impacts improved throughout the fiscal year, economic uncertainty persists and could continue in 2024, and these market dynamics and similar adverse market conditions may negatively impact our business.

For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Reduction in Workforce

In the fourth quarter of 2023, we implemented a reduction in our workforce of approximately 25% to reduce operating costs and improve operating efficiency.

The restructuring prioritized investment in our clinical stage programs and core research platforms and streamlined operations.

In connection with this reduction in workforce, we incurred approximately $5.5 million in expenses for one-time severance payments and other employee-related costs for the year ended December 31, 2023.

License, Collaboration and Success Payment Agreements

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We have no products approved for sale and have never generated any revenue from product sales.

We have generated revenue primarily from the recognition of the upfront payment under the GSK Agreement, entered into in 2019 and amended in June 2020 and December 2021 with GSK.

We have generated revenue primarily from the recognition of the upfront payment under the Collaboration and License Agreement, entered into in 2019 and amended in June 2020 and December 2021 (GSK Agreement) with GlaxoSmithKline Intellectual Property (No.

5) Limited and Glaxo Group Limited (together, GSK).

GSK terminated the GSK Agreement effective December 2022 and we do not expect further revenue from the collaboration.

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Upfront payments and milestones paid to third parties in connection with technology platforms that have not reached technological feasibility and do not have an alternative future use are expensed as incurred.

Research and development expenses also include non-cash expenses related to the change in the esti mated fair value of the liabilities associated with our success payments granted to Fred Hutch and Stanford .

Research and development costs also include expenses related to the reduction in workforce, which was substantially completed in 2023.

Research and development expenses also include non-cash expenses related to the change in the estimated fair value of the success payment obligations over their respective requisite service terms granted to Fred Hutchinson Cancer Center (Fred Hutch) and The Board of Trustees of the Leland Stanford Junior University (Stanford).

See the subsection titled “Critical Accounting Policies and Estimates— Success Payments ” below.

Research and development expenses related to our success payment liabilities are unpredictable and may vary significantly from quarter-to-quarter and year-to-year due to changes in our assumptions used in the calculation.

As of December 31, 2022, Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration.

For the year ended December 31, 2023 and future periods, the change in the Fred Hutch success payment liability fair value is recognized in other income (expense), net, as the requisite service obligation had been met.

Research and development expenses related to our success payment liabilities are unpredictable and may vary significantly from year‑to‑year due to changes in our assumptions used in the calculation.

We deploy our employee and infrastructure resources across multiple research and development programs for identifying and developing product candidates and establishing manufacturing capabilities.

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Research and development activities account for a significant portion of our operating expenses.

We anticipate that our research and development expenses will increase over the foreseeable future as we expand our research and development efforts including completing nonclinical studies, commencing planned clinical trials, conducting and completing current and planned clinical trials, seeking regulatory approval of our product candidates, identifying new product candidates and incurring costs to acquire and license technology platforms.

A change in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product

Because we are early in our research and development efforts and beginning clinical development of our product candidates, and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the nonclinical development, clinical development and commercialization of product candidates or whether, or when, we may achieve profitability.

We anticipate that our research and development expenses will increase over the foreseeable future as we expand our research and

development efforts including completing nonclinical studies, commencing planned clinical trials, conducting and completing current and planned clinical trials, seeking regulatory approvals of our product candidates, identifying new product candidates and incurring costs to acquire and license technology platforms.

A change in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates.

Because we are early in our research and clinical development efforts of our product candidates, and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the nonclinical development, clinical development and commercialization of product candidates or whether, or when, we may achieve profitability.

Our research and development expenses may vary significantly based on factors such as:

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Legal costs include those related to corporate, dispute and patent matters.

We anticipate that our general and administrative expenses will increase over the foreseeable future to support our continued research and development activities, operations generally, future business development opportunities, consulting fees, as well as due to the increased costs of operating as a public company such as costs related to accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs and investor and public relations costs.

General and administrative costs also include expenses related to the reduction in workforce, which was substantially completed in 2023.

We anticipate that our general and administrative expenses will increase over the foreseeable future to support our continued research and development activities, operations generally, future business development opportunities, consulting fees, as well as the costs of operating as a public company such as costs related to accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission (SEC) requirements, director and officer insurance costs and investor and public relations costs.

Other Operating Income, Net

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Other Income (Expense), Net

Other income (expense), net consists primarily of a gain to record the PACT Series D convertible preferred shares, in addition to changes in the fair value of an equity warrant investment held.

Other income (expense), net consists primarily of the change in fair value associated with our success payment liabilities to Fred Hutch for the year ended December 31, 2023 and primarily of a gain to record the PACT Series D convertible preferred shares for the year ended December 31, 2022 and changes in the fair value of an equity warrant investment held for the years ended December 31, 2022 and 2021.

Impairment of Other Investments

Impairment of other investments consists of a reduction in the value of certain other investments.

Deemed Dividends Upon Repurchase of Convertible Preferred Stock

Deemed dividends upon repurchase of convertible preferred stock consists of the amount by which the cash paid for the repurchase of convertible preferred stock exceeded the carrying value of such convertible preferred stock.

Upon the closing of our IPO, all our convertible preferred stock was converted into our common stock.

Impairment of other investments consists of reductions in the value of certain other investments.

Results of Operations

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$ (234,632) $ (183,118) $ (250,219) $ (51,514) $ 67,101

Deemed dividends upon repurchase of convertible preferred stock

— — (3,582) — 3,582

Net loss attributed to common stockholders

$ (183,118) $ (250,219) $ (208,054) $ 67,101 $ (42,165)

Reven ue was $84.7 million and $10.7 million for the years ended December 31, 2022 and 2021, respectively, primarily related to the recognized portion of the upfront license fee pursuant to the GSK Agreement.

The increase of $74.0 million was primarily related to $83.6 million in revenue adjustments driven by the mutual agreement with GSK to conclude certain research activities in June 2022 and GSK’s subsequent termination of the GSK Agreement, effective December 2022, both of which resulted in changes to the measure of proportional cumulative performance.

The revenue increase was offset by a decrease of $9.6 million due primarily to fewer research and development activities under the GSK Agreement for the year ended December 31, 2022 .

See Note 3, License, Collaboration and Success Payment Agreements in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8, of this Annual Report on Form 10-K for additional information about the termination of the GSK Agreement.

Reven ue was $0.1 million a nd $84.7 million for the years ended December 31, 2023 and 2022, respectively.

The GSK Agreement was terminated in December 2022 and, therefore, no further research and development pursuant to the GSK Agreement was performed in 2023, which drove the decrease in revenue of $84.6 million for the year ended December 31, 2023.

The revenue for the year ended December 31, 2022 was primarily due to $83.6 million in revenue adjustments driven by the mutual agreement with GSK to conclude certain research activities in June 2022 and GSK’s subsequent termination of the GSK Agreement, both of which resulted in changes to the measure of proportional cumulative performance.

See Note 3, License, Collaboration and Success Payment Agreements – GSK , in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information about the termination of the GSK Agreement.

Research and Development Expenses

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51,688 52,153 39,092 (465) 13,061

Collaborations, research activities and outside services

Research activities, collaborations and outside services

50,470 41,682 35,389 8,788 6,293

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Research and developm ent expenses were $182.9 million and $159.2 million for the years ended December 31, 2023 and 2022, respectively.

The increase of $20.5 million was primarily due to an increase of $13.1 million i n facilities and technology costs, primarily related to increased infrastructure to support our expansion in research and development, manufacturing capabilities and associated headcount g rowth;

an increase of $10.0 million i n personnel-related expenses, that wa s primarily related to an increase in headcount to expand our research, development and manufacturing capabilities;

an increase of $6.3 million in collaboration, research activities and outside services primarily driven by an increase of $5.1 million in research and laboratory costs principally due to clinical trials;

and an increase of $3.3 million in professional services offset by a reduction of $2.2 million in collaboration and license fees;

partially offset by a decrease of $8.8 million in success payment expenses associated with our Fred Hutch and Stanfo rd success payment liabilities, primarily driven by the decrease in the per share fair value of our common stock.

The increase of $23.8 million was primarily due to an increase o f $17.5 million in research and laboratory costs principally due to clinical trials as part of the $8.8 million increase in research activities, collaborations and outside services, partially offset by a reduction of $5.2 million in collaboration and license fees primarily related to the completion of certain sponsored research agreements and a reduction of $3.6 million in professional services;

an increase of $11.2 million i n personnel‑related expenses to support our growth, including $4.6 million for one-time severance payments and other employee-related costs in connection with the reduction in workforce that occurred during the fourth quarter of 2023;

a change of $4.2 million in success payments associated with the decrease in fair value of our Fred Hutch and Stanford success payment liabilities, including a $3.9 million change due to recognizing the Fred Hutch success payment liability fair value change in other income (expense), net for the year ended December 31, 2023;

partially offset by a decrease of $0.5 million in facilities and technology costs, primarily related to lower software implementation costs.

General and Administrative Expenses

General and administrative expenses w ere $117.3 million and $89.1 million for the years ended December 31, 2022 and 2021, respectively.

The increase of $28.3 million was primarily due to an increase of $18.3 million in stock-based compensation expense, primarily related to award modifications and new awards granted.

A dditionally, outside services increased by $5.1 million due primarily to higher legal expenses and corporate expenses increased $3.9 million primarily due to costs associated with operating as a public company.

General and administrative expenses were $67.0 million and $117.3 million for the years ended December 31, 2023 and 2022, respectively.

The decrease of $50.3 million was primarily due to a decrease of $36.3 million in stock-based compensation expense, primarily related to significant awards being fully expensed, a decrease of $9.7 million in outside services primarily due to a decrease in legal and consulting expenses and a decrease of $2.8 million in other administrative expenses.

Included in general and administrative expenses for the year ended December 31, 2023 is $0.9 million for one‑time severance payments and other employee-related costs in connection with the reduction in workforce that occurred during the fourth quarter of 2023.

Other Operating Income, Net

Other operating income, net was $2.8 million and $4.8 million for the years ended December 31, 2023 and 2022, respectively.

The increase of $2.4 million wa s due primarily to sublease income and operating fees related to our subleases.

The decrease of $2.0 million was due primarily to increased losses on property and equipment disposals offsetting sublease income and operating fees related to our subleases.

Interest Income, Net

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Other income (expense), net was $1.8 million and $1.9 million for the years ended December 31, 2023 and 2022, respectively.

The increase of $2.0 million consisted primarily of a gain of $2.9 million to record the estimated fair value of PACT Series D convertible preferred shares acquired, offset by a decrease of $1.1 million in the fair value of an equity warrant investment held.

Other income (expense), net of $1.8 million consisted primarily of a gain associated with the change in fair value associated with our Fred Hutch success payment liabilities.

For fiscal 2023, changes in the Fred Hutch success payment liability were recognized in other income (expense) net as Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration as of December 2022.

Other income (expense), net of $1.9 million for the year ended December 31, 2022 consisted primarily of a gain of $2.9 million for the year ended December 31, 2022 to record the estimated fair value of PACT Pharma Inc.

(PACT) Series D convertible preferred shares acquired, offset by a decrease of $1.1 million in the fair value of an equity warrant investment held for the year ended December 31, 2022.

Impairment of Other Investments

For the year ended December 31, 2022, the $5.0 million impairment of other investments consisted of the full impairment of one of our other investments.

For the year ended December 31, 2021, the $36.4 million impairment of other investments consisted of the full impairment of our investment in PACT Series C-1 convertible preferred stock.

For the year ended December 31, 2023, the $12.9 million impairment consisted of the full impairment of two of our other investments.

For the year ended December 31, 2022, the $5.0 million impairment consisted of the full impairment of one of our other investments.

See Note 5, Other Investments , in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8, of this Annual Report on Form 10-K for additional information.

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We have not yet commercialized any product candidates and we do not expect to generate revenue from sales of any product candidates for a number of years, if ever.

We had an accumulated deficit of $767.5 million as of December 31, 2022.

From June 29, 2018 (inception) through December 31, 2022, we raised an aggregate of $1,405.7 million in gross proceeds from the sales of our convertible preferred stock and the IPO.

On August 4, 2022, we entered into an Equity Distribution Agreement (the Equity Distribution Agreement) with Goldman Sachs & Co.

LLC (Goldman Sachs) and BofA Securities, Inc.

(BofA, and together with Goldman Sachs, the Agents) with respect to an at-the-market offering program.

In accordance with the terms of the Equity Distribution Agreement, we may offer and sell from time to time through the Agents shares of our common stock having an aggregate offering amount of up to $200.0 million (the Placement Shares).

Sales of the Placement Shares, if any, will be made at prevailing market prices on Nasdaq at the time of sale, or as otherwise agreed with the Agents, by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415 of the Securities Act.

We will pay commissions to the Agents of up to 3.0% of the gross proceeds of the sale of the Placement Shares sold under the Equity Distribution Agreement and reimburse the Agents for certain expenses.

Neither us nor the Agents are obligated to sell any shares and to date, we have not made any sales under the Equity Distribution Agreement.

We had an accumulated deficit of $1.0 billion as of December 31, 2023.

From June 29, 2018 (inception) through December 31, 2023, we raised an aggregate of $1.4 billion in gross proceeds from the sales of our convertible preferred stock and the IPO.

On February 28, 2024, we entered into a sales agreement (the Sales Agreement) with Cowen and Company, LLC as the Company’s sales agent (Agent) with respect to an at-the-market offering program.

In accordance with the terms of the Sales Agreement, we may offer and sell from time to time through the Agent shares of our common stock having an aggregate offering amount of up to $150.0 million (the Placement Shares).

Sales of the Placement Shares, if any, will be made at prevailing market prices on Nasdaq at the time of sale, or as otherwise agreed with the Agent, by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415 of the Securities Act.

We will pay commissions to the Agent of up to 3% of the gross proceeds of the sale of the Placement Shares sold under the Sales Agreement and reimburse the Agent for certain expenses.

Neither us nor the Agent is obligated to sell any shares and, to date, we have not made any sales under the Sales Agreement.

Future Funding Requirements

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However, we anticipate that we will need to raise additional capital in the future to fund our operations, including further development of our product candidates and the commercialization of any approved product candidates.

In addition, we regularly consider fund-raising opportunities and may decide, from time to time, to raise additional capital, including pursuant to the Equity Distribution Agreement, based on various factors, including market conditions and our plans of operation.

In addition, we regularly consider fund-raising opportunities and may decide, from time to time, to raise additional capital, including pursuant to the Sales Agreement, based on various factors, including market conditions and our plans of operation.

We are subject to the risks typically related to the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

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

• the scope, timing, progress, costs and results of discovery, nonclinical development and clinical trials for our current and future product candidates;

• the scope, timing, progress, costs and results of discovery, nonclinical development and clinical trials for our current and future product candidates and any additional nonclinical studies;

• the number of clinical trials required for regulatory approval of our current and future product candidates;

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• the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

• our ability to maintain existing, and establish new, collaborations, licenses, product acquisitions or other strategic transactions and the fulfillment of our financial obligations under any such agreements, including the timing and amount of any success payment, future contingent payments, milestone, royalty or other payments due under any such agreement;

timing and amount of any success payment, future contingent payments, milestone, royalty or other payments due under any such agreement;

• the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

• expenses to attract, hire and retain skilled personnel;

• the costs of operating as a public company;

• addressing any potential interruptions or delays resulting from factors related to the COVID-19 pandemic;

• the costs and estimated financial impact of our reduction in workforce in the fourth quarter of 2023;

• the costs of operating as a public company, including legal, accounting and other related expenses as well as costs relating to maintaining or expanding our operational, financial and management systems;

• addressing or responding to any potential disputes or litigation;

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In the event that additional capital is required, we may not be able to raise it on terms acceptable to us, or at all.

If we raise additional funds through the issuance of equity or convertible debt securities, including pursuant to the Equity Distribution Agreement, it may result in dilution to our existing stockholders.

If we raise additional funds through the issuance of equity or convertible debt securities, including pursuant to the Sales Agreement, it may result in dilution to our existing stockholders.

Debt financing or preferred equity financing, if available, may result in increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock.

If we incur indebtedness, we could become subject to covenants that would restrict our operations.

If we incur indebtedness, we could become subject to covenants that may restrict our operations.

If we raise funds through strategic collaboration, licensing, or other arrangements, we may relinquish significant rights or grant licenses on terms that are not favorable to us.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the COVID-19 pandemic, actual or perceived changes in interest rates and economic inflation, and otherwise.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from actual or perceived changes in interest rates and economic inflation, and otherwise.

If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be adversely affected.

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1,743 10,635 401,244

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

$ 22,097 $ (170,460) $ 153,422

Operating Activities

During the year ended December 31, 2022, net cash used in operating activities wa s $169.6 million, primarily reflecting our net loss of $183.1 million, a decrease of $82.0 million in net operating assets and liabilities primarily driven by a $84.7 million decrease in deferred revenue due to non-cash revenue recognized and a $2.0 million decrease in prepaid expenses, other current assets and other assets, offset by a $4.9 million increase in operating lease liabilities due primarily to tenant improvement allowances received.

These decreases were partially offset by $95.6 million of non-cash expenses primarily related to stock-based compensation of $81.9 million, depreciation and amortization of $18.0 million and impairment of other investments of $5.0 million.

Additionally, we recognized decreases for the $5.1 million change in the fair value of success payment liabilities and $2.9 million for the non-cash adjustment of the gain on other investments.

During the ye ar ended December 31, 2021, net cash used in operating activities was $126.2 million , consisting primarily of our net loss of $250.2 million , partially offset by certain non-cash items such as stock-based compensation expense of $62.2 million , impairment of other investments of $36.4 million, depreciation and amortization expense of $13.6 million and the change in fair value of success payment liabilities of $3.7 million .

Additionally, net operating assets

and liabilities increased $4.0 million , which included an increase in operating lease liabilities due to tenant improvement allowances received of $13.3 million offset by the recognition of $10.5 million of revenue previously recorded as deferred revenue.

During the year ended December 31, 2023, net cash used in operating activities was $163.7 million, primarily reflecting our net loss of $234.6 million, partially offset by non-cash items primarily related to stock-based compensation expense o f $47.1 million , depreciation and amortization expense of $20.3 million and impairment of other investments of $12.9 million.

Non-cash net amortization and accretion on marketable securitie s of $9.6 million also contributed to net cash used in operating activities.

During the ye ar ended December 31, 2022, net cash used in operating activities was $169.6 million , primarily reflecting our net loss of $183.1 million , partially offset by non-cash items mainly related to stock-based compensation expense of $81.9 million , depreciation and amortization expense of $18.0 million and impairment of other investments of $5.0 million.

Non-cash deferred revenue of $84.7 million also contributed to net cash used in operating activities.

Investing Activ ities

During the year ended December 31, 2023, cas h provided by investing activities was $184.0 million, consisting of net maturities, sales and purchases of marketable securities of $186.7 million, partially offset by purchases of property and equipment of $2.7 million.

During the year ended December 31, 2022, cash used in investing activities was $11.5 million , consisting of purchases of property and equipment of $24.3 million offset by net maturities, sales and purchases of marketable securities of $12.7 million .

During the year ended December 31, 2021, cash used in investing activities was $121.6 million , consisting of net purchases of marketable securities of $56.1 million and capital expenditures of $65.5 million .

Financing Activities

During the year ended December 31, 2022, cash provided by financing activities was $10.6 million, consisting of $9.6 million in proceeds from the exercise of stock options and $1.5 million in proceeds from the employee stock purchase plan, partially offset by $0.5 million in taxes paid related to the net share settlement of equity awards.

During the year ended December 31, 2021, cash provided by financing activities was $401.2 million, consisting of $391.8 million in net proceeds from the sale of our common stock in our IPO and $9.4 million in proceeds from the exercise of stock options.

During the year ended December 31, 2023, cash provided by financing activities was $1.7 million, consisting of $1.9 million in proceeds from our employee stock purchase plan and $0.3 million in proceeds from the exercise of stock options, partially offset by $0.5 million in taxes paid related to the net share settlement of equity awards.

During the year ended December 31, 2022, cash provided by financing activities was $10.6 million, consisting of $9.6 million in proceeds from the exercise of stock options and $1.5 million in proceeds from our employee stock purchase plan, partially offset by $0.5 million in taxes paid related to the net share settlement of equity awards.

Critical Accounting Policies and Significant Judgments and Estimates

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Revenue Recognition

We recognize revenue from research services generally as services are provided while revenue from non‑refundable upfront fees are recognized over time by measuring progress towards satisfaction of the relevant performance obligation using the input method (i.e., cumulative actual costs incurred relative to total estimated costs).

, cumulative actual costs incurred relative to total estimated costs).

The estimation of measure of progress is complex, involves significant judgment and is affected by our estimates of the total costs required to complete the performance obligations including the total internal personnel costs and external costs to be incurred.

5 unchanged sentences

The liabilities are marked to market at each balance sheet date with all changes in value recognized in research and development expense in the Consolidated Statements of Operations and Comprehensive Loss.

Once their service periods are complete , the success payments will be accounted for under ASC 815, Derivatives and Hedging , and fair value changes will be recorded in other income (expense), net.

Once their service periods are complete , the success payment fair value changes are recorded in other income (expense), net.

We will continue to adjust the liabilities for changes in fair value until the earlier of the achievement or expiration of the success payment obligation.

To determine the estimated fair value of the success payments, we use a Monte Carlo simulation model, which models the value of the liability based on several key variables that require judgment, including the expected fair value and volatility of our common stock, estimated term and number of valuation measurement dates.

To determine the estimated fair value of the success payments, we use a Monte Carlo simulation

model, which models the value of the liability based on several key variables that require judgment, including the expected fair value and volatility of our common stock, estimated term and number of valuation measurement dates.

Stock-based Compensation

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Our restricted stock awards and restricted stock units are valued based on the fair market value of the award on the grant date.

Prior to the closing of our IPO, the fair value of the common stock underlying our stock-based awards was estimated on each grant date by our board of directors using significant judgment to estimate the fair value of our common stock, including considering our stage of development;

progress of our research and development efforts;

the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock;

equity market conditions affecting comparable public companies;

and the lack of marketability of our common stock.

Valuation of Other Investments

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When our assessment indicates that an impairment exists, we write down the investment to its fair value.

We performed a qualitative assessment of potential indicators of impairment for 2022 and determined that indicators existed for one of our other investments with a carrying amount of $5.0 million.

While there was no single event or factor, we considered the underlying company’s operating cash flow requirements over the next year and liquid asset balances to fund those requirements and the uncertainty regarding the underlying company’s ability to raise funds as indicators of impairment.

Due to these indicators, we assessed the valuation of the investment and determined the fair value to be negligible and the impairment to be other-than-temporary in nature.

As a result, we recorded a $5.0 million impairment expense for the investment for the year ended December 31, 2022, which was recorded within impairment of other investments on the Consolidated Statement of Operations and Comprehensive Loss and as a reduction of the other investments on the Consolidated Balance Sheet.

In connection with the preparation of our financial statements for 2021, we performed a qualitative assessment of potential indicators of impairment and determined that indicators existed for our $36.4 million investment in PACT Series C-1 convertible preferred stock.

While there was no single event or factor, we considered PACT’s operating cash flow requirements over the next year and liquid asset balances to fund those requirements and their inability to raise funds as indicators of impairment.

Due to these indicators, we assessed the valuation of our investment in PACT as of

December 31, 2021 and determined the fair value to be negligible and the impairment to be other-than-temporary in nature.

As a result, we recorded a $36.4 million impairment of our PACT investment in the fourth quarter of 2021.

The impairment charge was recorded within impairment of other investments on the Consolidated Statement of Operations and Comprehensive Loss and as a reduction of the other investments on the Consolidated Balance Sheet.

We perform quarterly qualitative assessments of potential indicators of impairment and determined that indicators existed for certain of our other investments during the years ended December 31, 2023, 2022 and 2021 .

While there was no single event or factor in each instance, we considered the underlying companies’ operating cash flow requirements over the next year, liquid asset balances to fund those requirements and the uncertainty regarding the underlying companies’ ability to raise funds as indicators of impairment.

Due to these indicators, we assessed the valuation of these investments and determined the fair values to be negligible and the impairments to be other-than-temporary in nature.

As a result, we recorded impairment expense of $12.9 million for our PACT Series D convertible preferred stock and another investment for the year ended December 31, 2023 , $5.0 million for one investment for the year ended December 31, 2022 and $36.4 million for our PACT Series C-1 convertible preferred stock investment for the year ended December 31, 2021.

The impairment expenses were recorded within impairment of other investments on the Consolidated Statements of Operations and Comprehensive Loss and as a reduction of the other investments on the Consolidated Balance Sheets.

Recently Adopted and Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis