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Item 7. Management’s Discussion and Analysis

2025-03-11 compared with 2024-02-28 · 158 added, 116 removed, 190 unchanged (59% of the section changed)

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Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

We are a clinical-stage cell therapy company advancing a pipeline of product candidates for patients with solid tumors utilizing our proprietary ex vivo genetic and epigenetic T‑cell reprogramming technologies.

Our investigational therapies use the patient’s own cells as the starting point to generate highly tumor-reactive, longer-lasting functional T cells with enhanced ability to defeat solid tumors.

Our innovative reprogramming technologies address what we believe are the primary barriers that limit consistent and long-lasting responses to T‑cell therapy in solid tumors:

T‑cell exhaustion and lack of durable stemness.

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.

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.

We are a clinical-stage cell therapy company expecting to enter pivotal trials in 2025 and advancing a pipeline of proprietary next-generation autologous CAR T-cell product candidates for patients with hematologic malignancies and solid tumors.

We are pioneering novel approaches designed to generate T cells that drive long-lasting clinical responses.

The patient’s own living cells are the starting point for our investigational CAR T-cell therapies, and we enhance them with our innovative CAR constructs, technology and manufacturing protocols.

In hematologic malignancies, we are focused on advancing to pivotal trials a product candidate designed to deliver improved outcomes over first-generation CD19 CAR T-cell therapies for patients with aggressive large B-cell lymphoma.

Our lead program, IMPT-314, is a dual-targeting CD19/CD20 CAR T-cell product candidate designed to increase complete response rates and prolong the duration of response as compared to the approved CD19‑targeted CAR T-cell therapies.

IMPT-314 is designed with a true ‘OR’ logic gate to target B cells that express either CD19 or CD20 with full potency and is manufactured with a process that enriches for CD62L+ cells to generate cell products with more naïve and central memory CAR T cells with enhanced stemlike features and antitumor activity.

To realize the potential of cell therapy for solid tumors, Lyell is also developing next-generation CAR T-cell product candidates enhanced with our anti-exhaustion and additional arming technologies and manufactured with our proprietary protocols.

These approaches are designed to endow CAR T cells with attributes needed to drive durable tumor cytotoxicity and achieve consistent and long-lasting clinical responses, including the ability to resist exhaustion, maintain qualities of durable stemness and function in the hostile tumor microenvironment.

For additional information regarding our business, see “Business” in Part I, Item 1 of this Annual Report on Form 10-K.

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Pipeline Programs

We are advancing four wholly-owned product candidates.

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.

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.

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.

We are advancing a pipeline of next-generation CAR T-cell product candidates.

Our lead program, IMPT-314, is in Phase 1/2 clinical development for relapsed or refractory aggressive large B-cell lymphoma and our preclinical programs target solid tumor indications.

Each of our programs target cancers with large unmet need with substantial patient populations (see Table 1).

A next-generation dual-targeting CD19/CD20 CAR T-cell product candidate designed to increase complete response rates and prolong the duration of response as compared to the approved CD19‑targeted CAR T-cell therapies for the treatment of large B-cell lymphoma.

• A Phase 1/2 clinical trial is ongoing and currently enrolling patients in the 3 rd line+ and 2 nd line settings who have not previously received CAR T-cell therapy.

IMPT-314 has received Fast Track Designation from the U.S.

Food and Drug Administration for the treatment of relapsed/refractory aggressive large B-cell lymphoma in the 3 rd line+ setting.

• Initial data from the Phase 1/2 trial was presented at the ASH 2024 Annual Meeting on December 9, 2024.

Data from 23 patients with R/R, CAR T-naive large B-cell lymphoma who received IMPT-314 were reported.

The efficacy evaluable population consisted of 17 patients.

The overall response rate was 94% (16/17 patients), with 71% (12/17 patients) achieving a complete response by three months.

The median follow up was 6.3 months (range 1.2 – 12.5 months) and 71% of patients were experiencing a response at last follow-up.

In the safety evaluable population of 23 patients, no Grade 3+ CRS was reported.

Grade 3 ICANS was reported in 13% (3/23) of patients with a median time to complete ICANS resolution of 5 days, and rapid improvement to Grade 2 or lower with standard therapy.

• More mature data from the ongoing Phase 1/2 trial in the 3 rd line+ setting and initial data from patients in the 2 nd line setting are expected to be presented in mid-2025.

• We expect to initiate a pivotal trial in mid-2025 in patients with relapsed/refractory large B-cell lymphoma in the 3 rd line+ setting who have not yet received CAR T-cell therapy.

• We expect to initiate a pivotal trial by early 2026 in patients with relapsed/refractory large B-cell lymphoma in the 2 nd line setting who have not yet received CAR T-cell therapy.

Preclinical Pipeline, Technologies and Manufacturing Protocols

• The first IND for a fully-armed CAR T-cell product candidate with an undisclosed target for solid tumors is expected in 2026.

Lyell is advancing next-generation fully-armed CAR T-cell product candidates, meaning they are armed with multiple technologies, each designed to address different barriers to effective cell therapies, including T-cell exhaustion, lack of durable stemness, as well as immune suppression within the hostile tumor microenvironment.

• During the past year, we presented nonclinical and clinical data from our suite of anti-exhaustion and manufacturing technologies demonstrating their potential to improve T-cell function in solid tumors.

• We presented data at the Society for Immunotherapy of Cancer (SITC) 2024 from a validated nonclinical xenograft model of non-small cell lung cancer, demonstrating that combining c-Jun overexpression and NR4A3 knockout achieves tumor control and prolonged survival even at very low doses (100,000 CAR T cells/dose) compared to c‑Jun overexpression alone (1,000,000 CAR T cells/dose).

The study presented potential molecular mechanisms underlying the functional reduction of T-cell exhaustion and enhancement of memory‑related characteristics of CAR T cells enhanced with c-Jun overexpression and NR4A3 knockout after antigen encounter in vitro and in vivo.

• We presented translational clinical data at SITC 2024 from an in-human Phase 1 trial of CAR T-cells enhanced with c‑Jun overexpression and manufactured with Epi-R, showing reduced T-cell exhaustion and enhanced stemness of CAR T cells, resulting in CAR T-cell tumor infiltration with histological evidence of T-cell mediated tumor lysis in patients with ROR1 positive triple-negative breast cancer and non-small cell lung cancer.

ROR1 CAR T cells enhanced with c-Jun overexpression demonstrated lower exhaustion and maintenance of stem- and memory-like phenotypes in the peripheral blood post-infusion, suggesting c-Jun overexpression can delay CAR T-cell exhaustion in patients.

• We delivered an oral presentation at SITC 2024 demonstrating successful incorporation of an anti-TGF-β scFv domain into a novel bispecific CAR designed to mediate TGF-β blockade and overcome the suppressive solid tumor microenvironment.

In nonclinical models, these bispecific CAR T-cells demonstrated long term maintenance of effector function with resistance towards both exhaustion and the conversion of regulatory T cells in repeated antigen stimulation challenges, as well as effective tumor infiltration and anti-tumor function in vivo.

• We presented data at SITC 2024 suggesting Stim-R is a viable replacement for feeder cells in TIL manufacturing and has the potential to overcome limitations that may arise in feeder cell‑mediated TIL expansion.

Stim-R™ is our customizable and degradable biomimetic emulating physiologic, cell‑like presentation of signal molecules.

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.

• To accelerate the pivotal trials of IMPT-314 and focus resources on next-generation solid tumor CAR T-cell programs in preclinical development, we have streamlined expenses and focused our development on IMPT-314 and preclinical solid tumor CAR T-cell programs.

Our net cash use in 2025 is expected to be between $175 million and $185 million.

Additional Pipeline and Business Updates

Acquisition of ImmPACT

Pursuant to the Agreement and Plan of Merger (the Merger Agreement) by and among us, ImmPACT, Inspire Merger Sub Inc., a Delaware corporation and our indirect, wholly-owned subsidiary, and WT Representative LLC, a Delaware limited liability company, solely in its capacity as the representative, agent and attorney-in-fact of ImmPACT securityholders, dated October 24, 2024, we acquired all of the outstanding equity interests of ImmPACT in exchange for an upfront payment of $30.0 million in cash (in addition to approximately $11.9 million for ImmPACT’s existing cash balance) and the issuance of 37.5 million shares of our common stock at closing.

Contingent consideration following the closing includes (a) additional equity consideration of 12.5 million shares of our common stock upon the achievement of the earlier to occur of (i) the demonstration of certain clinical milestones or (ii) the receipt of certain regulatory approvals and (b) a low single‑digit royalty on future net sales of IMPT-314 in the United States.

Contingent consideration payable in our Consolidated Balance Sheet as of December 31, 2024 consists of the additional equity consideration of 12.5 million shares of our common stock.

As a result of the acquisition of ImmPACT, we assumed its rights and obligations under its license agreement with the Regents of the University of California, acting through The Technology Development Group of UCLA, dated February 18, 2021 (the UCLA License Agreement).

Pursuant to the UCLA License Agreement, we are obligated to pay a nominal, tiered annual license maintenance fee each year of the term of the UCLA License Agreement until we make the first commercial sale of a licensed product and, upon the achievement of specified development, regulatory and commercial milestones, we are obligated to pay UCLA one-time milestone payments of up to an aggregate amount in the mid-single digit millions for each commercialized licensed product.

In addition, we are obligated to pay UCLA a tiered royalty on worldwide annual net sales of any commercialized licensed products in the low- to mid-single digits percentage, subject to specified and capped reductions and a tiered minimum annual royalty payment of between a low-five figure and a low-six figure amount.

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, 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.

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, armed conflicts and turmoil in the Middle East, tensions in U.S.-China relations, inflationary pressures, fluctuations in the interest rate environment, disruption between the U.S.

and its trading partners due to tariffs or other policies, instability in the banking industry, supply constraints and overall market volatility.

Economic uncertainty may persist into the remainder of 2025, and the market dynamics discussed above and similar adverse 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

For a detailed description of our license, collaboration and success payment agreements, see the section titled “ Business—License, Collaboration and Success Payment Agreements ” in Part I, Item 1 of this Annual Report on Form 10‑K and Notes 2 and 3 to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

License and Collaboration Agreements

For a detailed description of our license and collaboration agreements, see the section titled “ Business—License and Collaboration Agreements ” in Part I, Item 1 of this Annual Report on Form 10 ‑K and Notes 2 and 4 to o ur audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Components of Results of Operations

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

Research and development costs also include expenses related to the November 2023 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).

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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.

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

As of September 30, 2024, Stanford had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration.

For the last three months of the year ended December 31, 2024 and future periods, the change in the Stanford success payment liability fair value was recognized in other income, net, as the requisite service obligation had been met.

See Note 4, License, Collaboration and Success Payment Agreements , in the accompanying notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10‑K for additional information.

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.

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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 approvals of our product candidates, identifying new product candidates and incurring costs to acquire and license technology platforms.

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.

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

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.

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Other operating income, net consists primarily of service and occupancy fees received associated with subleases as well as losses on t he retirement of property and equipment.

Acquired In-Process Research and Development

Acquired in-process research and development (IPR&D) consists primarily of the expense of the acquired IPR&D asset recognized as part of the acquisition of ImmPACT in October 2024, which was determined to have no alternative future use.

See Note 3, Acquisition , 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.

Impairment of Long-Lived Assets

Impairment of long-lived assets consists primarily of the expense associated with our 2024 annual impairment assessment, with the impairment loss measured as the amount by which the carrying value of our asset group exceeded its fair value.

The impairment loss was allocated on a pro rata basis to our lease right-of-use assets and associated leasehold improvements.

See Note 5, Impairment of Long-Lived Assets , 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.

Interest Income, Net

Interest income, net consists primarily of interest earned on our cash, cash equivalents and marketable securities balances.

Other Income (Expense), Net

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.

Other Income, Net

Other income, net for the year ended December 31, 2024 consists primarily of the change in fair value associated with our contingent consideration payable related to the ImmPACT acquisition and changes in the fair value of our success payment liabilities.

Other income, net for the year ended December 31, 2023 consists primarily of changes in the fair value of our success payment liabilities to Fred Hutch.

Other income, net for the year ended December 31, 2022 consists primarily of a gain to record the PACT Series D convertible preferred shares and changes in the fair value of an equity warrant investment for the year ended December 31, 2022.

Impairment of Other Investments

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(3,309) (2,790) (4,754) (519) 1,964

Acquired in-process research and development

87,184 — — 87,184 —

Impairment of long-lived assets

51,297 — — 51,297 —

Total operating expenses

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24,068 23,453 7,053 615 16,400

Other income (expense), net

Other income, net

4,694 1,846 1,887 2,848 (41)

Impairment of other investments (13,001) (12,923) (5,000) (78) (7,923)

Total other income (loss), net 12,376 3,940 (35,443) 8,436 39,383

Total other income, net

15,761 12,376 3,940 3,385 8,436

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.

$ (342,994) $ (234,632) $ (183,118) $ (108,362) $ (51,514)

Research and Development Expenses

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$ 67,693 $ 81,717 $ 70,483 $ (14,024) $ 11,234

Facilities and technology

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

Research activities, collaborations and outside services

53,654 50,470 41,682 3,184 8,788

Facilities, technology and depreciation

50,564 51,688 52,153 (1,124) (465)

Success payments

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Research and developm ent expenses were $171.6 million and $182.9 million for the years ended December 31, 2024 and 2023, respectively.

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.

The decrease of $11.3 million was primarily due to a decrease of $14.0 million i n personnel‑related expenses and a decrease of $1.1 million in facilities, technology and depreciation expenses mainly due to the decrease in headcount associated with the Company’s November 2023 reduction in workforce and lower software implementation costs.

These decreases were offset by an increase o f $3.2 million in research activities, collaborations and outside services primarily driven by clinical trial activity and a change of $0.6 million in success payment expense primarily driven by the change in our stock price.

General and Administrative Expenses

General and administrative expenses were $52.0 million and $67.0 million for the years ended December 31, 2024 and 2023, 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.

The decrease of $14.9 million was primarily due to a $13.0 million reduction in personnel costs, including a $10.3 million decrease in stock-based compensation expense, primarily related to significant awards being fully expensed in previous periods and a decrease of $2.7 million in personnel-related expenses mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce.

Other Operating Income, Net

Other operating income, net was $3.3 million and $2.8 million for the years ended December 31, 2024 and 2023, respectively.

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.

The increase of $0.5 million was due to an increase in sublease income due to the addition of a new sublessee at the Company’s headquarters in South San Francisco, California in September 2024.

Acquired In-Process Research and Development

Acquired IPR&D was $87.2 million and zero for the years ended December 31, 2024 and 2023, respectively.

Acquired IPR&D consists primarily of the expense of the acquired IPR&D asset recognized as part of the acquisition of ImmPACT Bio USA Inc.

in October 2024 as the asset was determined to have no alternative future use.

See Note 3, Acquisition , 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.

Impairment of Long-Lived Assets

Impairment of long-lived assets was $51.3 million and zero for the years ended December 31, 2024 and 2023, respectively.

Impairment of long-lived assets expense of $51.3 million consists of $12.6 million of impairment expense of our lease right-of-use assets and $38.7 million of impairment expense for the associated leasehold improvements.

Interest Income, Net

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The increase of $0.6 million was primarily driven by higher interest rates in 2024.

Other Income (Expense), Net

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

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.

Other Income, Net

Other income, net was $4.7 million and $1.8 million for the years ended December 31, 2024 and 2023, respectively.

Other income, net of $4.7 million for the year ended December 31, 2024 was primarily driven by a $3.8 million gain resulting from the change in the fair value of our contingent consideration payable related to the ImmPACT acquisition and changes in the fair value of our success payment liabilities.

Impairment of Other Investments

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, 2024, the $13.0 million impairment consisted of the full impairment of one of our other investments.

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

See Note 7, 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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Since our inception, we have incurred significant operating losses.

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 have not yet commercialized any product candidates and we may never generate revenue from sales of any product candidates.

We had an accumulated deficit of $1.3 billion as of December 31, 2024.

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Future Funding Requirements

We expect to incur additional losses in the foreseeable future as we conduct and expand our research and development efforts, including conducting nonclinical studies and clinical trials, developing new product candidates, establishing internal manufacturing capabilities and funding our operations generally.

Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure needs into 2027.

We expect to incur additional losses in the foreseeable future as we conduct and expand our research and development efforts, including conducting nonclinical studies and clinical trials, integration of ImmPACT into our business, developing new product candidates, establishing internal manufacturing capabilities and funding our operations generally.

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.

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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;

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

• 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;

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

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• the extent to which we acquire or invest in businesses, products and technology platforms;

• integration of businesses, products and technology platforms, such as ImmPACT, into our business.

Until such time as we complete nonclinical and clinical development and receive regulatory approval of our product candidates and can generate significant revenue from product sales, if ever, we expect to finance our operations from the sale of additional equity or debt financings, or other capital which come in the form of strategic collaborations, licensing, or other arrangements.

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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 actual or perceived changes in interest rates and economic inflation, and otherwise.

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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We continually evaluate our liquidity and capital resources to ensure that we can adequately and efficiently finance our operations.

As of December 31, 2023 , our material cash requirements consisted primarily of paying salaries and benefits, administering clinical trials, conducting research, improving our manufacturing capabilities, providing the technology and facilities necessary to support our operations, funding operating lease obligations and other payments related to our collaborative agreements.

See Note 3, License, Collaboration and Success Payment Agreements , and Note 9, Leases , 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.

As of December 31, 2024 , our material cash requirements consisted primarily of paying salaries and benefits, administering clinical trials, conducting research, improving our manufacturing capabilities, providing the technology and facilities necessary to support our operations, funding operating lease obligations and other payments related to our collaboration and license agreements and the Merger Agreement.

See Note 4, License, Collaboration and Success Payment Agreements , Note 11, Leases , and Note 3, Acquisition , 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.

The following table summarizes our cash flows for the periods indicated (in thousands):

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1,326 1,743 10,635

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

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

$ (38,644) $ 22,097 $ (170,460)

Operating Activities

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.

During the year ended December 31, 2024, net cash used in operating activities was $162.4 million, primarily reflecting our net loss of $343.0 million, partially offset by non-cash items primarily related to acquired IPR&D expense of $87.2 million, impairment of long-lived assets expense of $51.3 million , stock-based compensation expense o f $33.1 million , depreciation and amortization expense of $19.6 million and impairment of other investments of $13.0 million.

Non-cash net amortization and accretion on marketable securitie s of $14.7 million also contributed to net cash used in operating activities.

During the ye ar 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 mainly related to stock-based compensation expense of $47.1 million , depreciation and amortization expense of $20.3 million and impairment of other investments of $12.9 million.

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

Non-cash net amortization and accretion on marketable securities of $9.6 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, 2024, cas h provided by investing activities was $122.4 million, consisting of net maturities and purchases of marketable securities of $154.2 million, partially offset by the $31.3 million acquisition of ImmPACT net of cash acquired.

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

Financing Activities

During the year ended December 31, 2024, cash provided by financing activities was $1.3 million, consisting of $1.2 million in proceeds from our employee stock purchase plan and $0.2 million in proceeds from the exercise of stock options, partially offset by $0.1 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.

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.

Critical Accounting Policies and Significant Judgments and Estimates

Our audited consolidated financial statements are prepared in accordance with U.S.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the audited consolidated financial statements, as well as the reported revenue and expenses incurred during the reporting periods.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of our audited consolidated financial statements, as well as the reported revenue and expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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While our significant accounting policies are described in more detail in the notes to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

We evaluate acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

If the screen is met, the transaction is accounted for as an asset acquisition.

If the screen is not met, further determination is required as to whether or not we have acquired inputs and processes that have the ability to create outputs which would meet the requirements of a business in which case the transaction is accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date, and that the fair value of acquired intangibles be recorded on the balance sheet.

Any excess of the purchase price over the assigned fair values of the net assets acquired is recorded as goodwill.

If we determine an acquisition does not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an asset acquisition.

For asset acquisitions, a cost accumulation model is used to determine the cost of an asset acquisition, with cost allocated to acquired assets on a relative fair value basis.

Direct transaction costs are recognized as part of the cost of an asset acquisition.

The cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis.

Goodwill is not recognized in an asset acquisition.

In an asset acquisition, upfront payments allocated to IPR&D are recorded in research and development expense if we determine that there is no alternative future use, and subsequent milestone payments are recorded in research and development expense when achieved for technology that has not yet met product feasibility.

Contingent Consideration

Contingent consideration relates to the potential payments to the pre-acquisition stockholders of ImmPACT for meeting certain clinical and/or regulatory milestones.

For transactions accounted for as asset acquisitions, we record contingent consideration at fair value at the date of the acquisition when deemed probable.

Liabilities for contingent consideration are remeasured each reporting period and subsequent changes in fair value are recognized within other income, net in our Consolidated Statements of Operations and Comprehensive Loss.

The assumptions utilized in the calculation of the fair values include the probability of success and our stock price.

Contingent consideration involves certain assumptions requiring significant judgment and actual results may differ from estimated amounts.

Revenue Recognition

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For a further description of our revenue recognition, see Note 2, Basis of Presentation and Significant Accounting Policies, in the accompanying notes to our audited consolidated financial statements included in Part II, Item 8, of this Annual Report on Form 10-K.

Success Payments

We are required to make success payments to Fred Hutch and Stanford based on increases in the per share market value of our common stock, payable in cash or cash equivalents or, at our discretion, publicly tradeable shares of our common stock.

The success payments are accounted for under Accounting Standards Codification (ASC) 718, Compensation – Stock Compensation , and are initially recorded at fair value with a corresponding charge to research and development expense.

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 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.

Stock-based Compensation

Stock-based compensation cost is recognized for restricted stock awards (RSAs), restricted stock units (RSUs), employee stock purchases related to the Employee Stock Purchase Plan and stock options.

Stock-based compensation cost is measured at the grant date based on the fair value of the award.

The fair value of stock-based awards is recognized as an expense on a straight-line basis over the requisite service period, with forfeitures recognized as they occur.

We use the Black-Scholes model to determine the fair value of our options.

The Black-Scholes option pricing model requires the use of assumptions, including stock price volatility, the expected life of stock options, risk-free interest rate and the fair value of the underlying common stock on the date of grant.

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

Under ASC 718, the Company measures and recognizes expense for restricted stock awards (RSAs), restricted stock units (RSUs), performance-based restricted stock units (PSUs), employee stock purchases related to the Employee Stock Purchase Plan and stock options granted to employees, directors and consultants based on the fair value of the awards on the date of grant.

Stock-based compensation expense for RSAs, RSUs and stock options is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award.

The Company accounts for forfeitures as they occur.

For RSAs, RSUs and certain PSUs, the fair value of the Company’s common stock is used to determine the resulting stock-based compensation expense.

The fair value of stock options is estimated on the date of grant using a Black-Scholes option pricing model which requires management to apply judgment and make estimates, using inputs including:

• Fair Value of Common Stock—The fair value of common stock is based on the closing price as reported on The Nasdaq Global Select Market on the date of grant.

• Expected Term—The expected term represents the period that a stock-based award is expected to be outstanding.

The Company generally uses the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the option.

The Company generally uses the simplified method as provided for under the applicable guidance for entities with a limited history of relevant stock option exercise activity.

• Expected Volatility—The expected volatility of stock options is based on the historical volatility of the stock of similar entities within the Company’s industry over a period commensurate with the Company’s expected term assumption.

• Risk-Free Interest Rate—The risk-free interest rate is based on the interest rate payable on U.S.

Treasury securities in effect at the time of grant for a period that is commensurate with the Company’s expected term assumption.

• Expected Dividend—The Company has not historically paid, and does not expect for the foreseeable future to pay, a dividend.

Therefore, the Company used an expected dividend yield of zero.

For awards with performance conditions that vest upon a performance condition being met, compensation expense is recognized for the number of shares expected to be earned after assessing the probability that a certain performance condition will be met and the targeted payout level associated with the performance condition expected to be achieved.

At each reporting date, the Company is required to evaluate whether achievement of a performance condition is probable.

Cumulative adjustments are recorded each quarter to reflect the estimated outcome of the performance-related conditions until the date results are determined and settled.

If performance conditions are not met or not expected to be met, any compensation expense previously recognized associated with the awards will be reversed.

The fair values of the Company’s PSUs that have market-based metrics are estimated using Monte Carlo simulations.

The Company applies an accelerated attribution method to recognize stock-based compensation expense over the applicable service period for these awards.

The number of shares expected to be earned is considered in the grant date valuation;

therefore, the expense is not subsequently adjusted to reflect the actual shares ultimately earned.

Valuation of Other Investments

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Recording upward and downward adjustments to the carrying value of our equity investments as a result of observable price changes requires quantitative assessments of the fair value of our investments using various valuation methodologies and involves the use of estimates.

We determine at the inception of each arrangement whether an investment or other interest is considered a variable interest entity (VIE).

If the investment or other interest is determined to be a VIE, we evaluate whether we are considered the primary beneficiary.

The primary beneficiary of a VIE is the party that meets both of the following criteria:

(i) has the power to direct the activities that most significantly impact the VIE’s economic performance;

and (ii) has the obligation to absorb losses or the right to receive benefits from the VIE.

For any investments in VIEs in which we are considered the primary beneficiary, the assets, liabilities and results of operations of the VIE would be included in our consolidated financial statements.

As of December 31, 2023 and 2022, there were no VIEs for which we were the primary beneficiary.

Non-marketable equity investments are also subject to periodic impairment reviews.

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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.

As a result, we recorded impairment expense of $13.0 million for one investment the year ended December 31, 2024 , $12.9 million for two investments for the year ended December 31, 2023 and $5.0 million for one investment for the year ended December 31, 2022.

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

Valuation of Long-Lived Assets

Long-lived assets, including property and equipment and lease right-of-use assets, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.

Recoverability of these assets is measured by a comparison of the carrying amounts of the future undiscounted cash flows the assets are expected to generate from their use and eventual disposition over the remaining useful life of the primary asset of the asset group.

The primary asset is the principal long-lived tangible asset being depreciated or intangible asset being amortized that is the most significant component asset from which the asset group derives its cash-flow-generating capacity.

If such review indicates the carrying amount of the long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value.

We have recorded impairment of long-lived assets of $51.3 million during the year ended December 31, 2024.

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