Lyell Immunopharma, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. LYELL IMMUNOPHARMA, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2025, 2024 and 2023 CONTENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 95 Audited Consolidated Financial Statements: Consolidated Balance Sheets 97 Consolidated Statements of Operations and Comprehensive Loss 98 Consolidated Statements of Stockholders’ Equity 99 Consolidated Statements of Cash Flows 100 Notes to Consolidated Financial Statements 101 94 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Lyell Immunopharma, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lyell Immunopharma, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of mate rial misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 95 Table of Contents Accrued clinical expenses Description of the Matter During 2025, the Company incurred $158.7 million of research and development expenses and accrued $9.1 million for research and development expenses as of December 31, 2025, which includes clinical expenses. As described in Notes 2 and 10 to the consolidated financial statements, clinical expenses are a component of research and development expense. The Company accrues and expenses clinical trial services performed by third parties based upon actual work completed in accordance with agreements established with its service providers. The Company estimates the actual costs through discussions with internal personnel and external service providers as to the progress of the clinical services and the agreed-upon fee to be paid for such services. Auditing management’s accounting for accrued clinical expenses is especially challenging because amounts owed to external service providers are accrued based upon estimates of the progress of the clinical services with each respective contract. These estimates require the application of judgment by management that is dependent on inputs, such as the number of sites activated, the number of patients enrolled and the number of patient visits which may be compiled from multiple sources. How We Addressed the Matter in Our Audit To test the accrued clinical expenses, our audit procedures included, among other things, testing the accuracy and completeness of the underlying data used in the estimate, inspecting contracts with third-party service providers and confirming information directly with third parties. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2019. San Mateo, California March 12, 2026 96 Table of Contents Lyell Immunopharma, Inc. Consolidated Balance Sheets (in thousands, except per share amounts) As of December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 60,181 $ 105,597 Marketable securities 187,039 264,930 Prepaid expenses and other current assets 13,719 9,067 Total current assets 260,939 379,594 Restricted cash 1,585 1,690 Marketable securities, non-current — 13,014 Other investments 19,000 19,000 Property and equipment, net 34,771 48,200 Operating lease right-of-use assets 18,871 24,739 Other non-current assets 4,886 4,622 Total assets $ 340,052 $ 490,859 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 2,893 $ 5,366 Accrued liabilities and other current liabilities 46,519 40,822 Contingent consideration payable — 7,600 Total current liabilities 49,412 53,788 Operating lease liabilities, non-current 41,921 50,994 Other non-current liabilities 517 3,253 Total liabilities 91,850 108,035 Commitments and contingencies (Note 18) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 10,000 shares authorized at December 31, 2025 and 2024, respectively; no shares issued and outstanding at December 31, 2025 and 2024 — — Common stock, $ 0.0001 par value; 500,000 shares authorized at December 31, 2025 and 2024, respectively; 21,251 and 14,744 shares issued and outstanding at December 31, 2025 and 2024, respectively 1 2 1 Additional paid-in capital 1 1,867,512 1,727,638 Accumulated other comprehensive income 242 291 Accumulated deficit ( 1,619,554 ) ( 1,345,106 ) Total stockholders’ equity 248,202 382,824 Total liabilities and stockholders’ equity $ 340,052 $ 490,859 1. Amounts previously reported have been retroactively adjusted to reflect the 1-for-20 reverse stock split effected on May 30, 2025. See Note 2. The accompanying notes are an integral part of these consolidated financial statements. 97 Table of Contents Lyell Immunopharma, Inc. Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) Year Ended December 31, 2025 2024 2023 Revenue $ 36 $ 61 $ 130 Operating expenses: Research and development 158,675 171,603 182,945 General and administrative 45,135 52,041 66,983 Other operating income, net ( 2,145 ) ( 3,309 ) ( 2,790 ) Acquired in-process research and development 66,332 87,184 — Impairment of long-lived assets 1,443 51,297 — Total operating expenses 269,440 358,816 247,138 Loss from operations ( 269,404 ) ( 358,755 ) ( 247,008 ) Interest income, net 13,080 24,068 23,453 Other (expense) income, net ( 18,124 ) 4,694 1,846 Impairment of other investments — ( 13,001 ) ( 12,923 ) Total other (loss) income, net ( 5,044 ) 15,761 12,376 Net loss ( 274,448 ) ( 342,994 ) ( 234,632 ) Other comprehensive loss: Net unrealized (loss) gain on marketable securities ( 49 ) 385 7,505 Comprehensive loss $ ( 274,497 ) $ ( 342,609 ) $ ( 227,127 ) Net loss per common share, basic and diluted 1 $ ( 16.06 ) $ ( 26.23 ) $ ( 18.70 ) Weighted-average shares used to compute net loss per common share, basic and diluted 1 17,093 13,074 12,549 1. Amounts previously reported have been retroactively adjusted to reflect the 1-for-20 reverse stock split effected on May 30, 2025. See Note 2. The accompanying notes are an integral part of these consolidated financial statements. 98 Table of Contents Lyell Immunopharma, Inc. Consolidated Statements of Stockholders’ Equity (in thousands) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance as of December 31, 2022 (1) 12,479 $ 1 $ 1,608,330 $ ( 7,599 ) $ ( 767,480 ) $ 833,252 Stock-based compensation — — 47,084 — — 47,084 Issuance of common stock upon exercise of stock options 150 — 306 — — 306 Issuance of common stock under employee stock purchase plan 49 — 1,894 — — 1,894 Issuance of common stock in connection with restricted stock units, net of tax 20 — ( 457 ) — — ( 457 ) Other comprehensive income — — — 7,505 — 7,505 Net loss — — — — ( 234,632 ) ( 234,632 ) Balance as of December 31, 2023 (1) 12,698 $ 1 $ 1,657,157 $ ( 94 ) $ ( 1,002,112 ) $ 654,952 Stock-based compensation — — 33,144 — — 33,144 Issuance of common stock upon exercise of stock options 62 — 154 — — 154 Issuance of common stock under employee stock purchase plan 48 — 1,248 — — 1,248 Issuance of common stock in connection with restricted stock units, net of tax 61 — ( 76 ) — — ( 76 ) Issuance of common stock for acquisition of IPR&D 1,875 — 36,011 — — 36,011 Other comprehensive income — — — 385 — 385 Net loss — — — — ( 342,994 ) ( 342,994 ) Balance as of December 31, 2024 (1) 14,744 $ 1 $ 1,727,638 $ 291 $ ( 1,345,106 ) $ 382,824 Stock-based compensation — — 41,829 — — 41,829 Issuance of common stock upon exercise of stock options 3 — 42 — — 42 Issuance of common stock under employee stock purchase plan 52 — 365 — — 365 Issuance of common stock in connection with restricted stock units, net of tax 173 — ( 1 ) — — ( 1 ) Issuance of common stock in connect with contingent consideration milestone 625 — 5,894 — — 5,894 Issuance of common stock in connection with PIPE financing 3,754 1 57,773 — — 57,774 Issuance of common stock for acquisition of IPR&D 1,900 — 33,972 — — 33,972 Other comprehensive loss — — — ( 49 ) — ( 49 ) Net loss — — — — ( 274,448 ) ( 274,448 ) Balance as of December 31, 2025 21,251 $ 2 $ 1,867,512 $ 242 $ ( 1,619,554 ) $ 248,202 1. Amounts previously reported have been retroactively adjusted to reflect the 1-for-20 reverse stock split effected on May 30, 2025. See Note 2 The accompanying notes are an integral part of these consolidated financial statements. 99 Table of Contents Lyell Immunopharma, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2025 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 274,448 ) $ ( 342,994 ) $ ( 234,632 ) Adjustments to reconcile net loss to net cash used in operating activities: Acquired IPR&D expense 66,332 87,184 — Stock-based compensation expense 41,829 33,144 47,084 Loss on securities purchase agreement put/call 19,185 — — Depreciation and amortization expense 11,539 19,631 20,250 Net amortization and accretion on marketable securities ( 4,959 ) ( 14,681 ) ( 9,596 ) Non-cash lease income ( 3,550 ) ( 2,198 ) ( 1,873 ) Loss on property and equipment disposals, net 3,344 1,341 1,509 Change in fair value of contingent consideration payable ( 1,706 ) ( 3,804 ) — Impairment of long-lived assets 1,443 51,297 — Change in fair value of success payment liabilities 831 ( 1,165 ) ( 2,780 ) Impairment of other investments — 13,001 12,923 Loss (gain) on marketable equity security 30 ( 30 ) — Changes in operating assets and liabilities: Prepaid expenses, other current assets and other assets 2,823 1,775 3,125 Accounts payable ( 2,339 ) ( 3,234 ) 1,464 Accrued liabilities and other current liabilities ( 7,642 ) ( 1,250 ) ( 719 ) Other non-current liabilities ( 2,736 ) ( 411 ) ( 449 ) Net cash used in operating activities ( 150,024 ) ( 162,394 ) ( 163,694 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment ( 780 ) ( 464 ) ( 2,686 ) Sales of property and equipment 287 — — Purchases of marketable securities ( 278,899 ) ( 394,707 ) ( 476,880 ) Maturities of marketable securities 374,684 548,941 663,614 Acquisition of assets, net of cash acquired ( 41,195 ) ( 31,346 ) — Net cash provided by investing activities 54,097 122,424 184,048 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from securities purchase agreement equity issuance 50,000 — — Proceeds from exercise of stock options 42 154 306 Proceeds from employee stock purchase plan 365 1,248 1,894 Taxes paid related to net share settlement of equity awards ( 1 ) ( 76 ) ( 457 ) Net cash provided by financing activities 50,406 1,326 1,743 Net (decrease) increase in cash, cash equivalents and restricted cash ( 45,521 ) ( 38,644 ) 22,097 Cash, cash equivalents and restricted cash at beginning of period 107,287 145,931 123,834 Cash, cash equivalents and restricted cash at end of period $ 61,766 $ 107,287 $ 145,931 Represented by: Cash and cash equivalents $ 60,181 $ 105,597 $ 145,647 Restricted cash 1,585 1,690 284 Total $ 61,766 $ 107,287 $ 145,931 SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for amounts included in the measurement of lease liabilities $ 12,587 $ 11,467 $ 10,845 Non-cash investing and financing activities: Equity issued for Acquisition (Note 3) $ 33,972 $ 36,011 $ — Securities purchase agreement put/call issuance $ 7,774 $ — $ — Equity issued for contingent consideration - ImmPACT Bio USA Inc. acquisition $ 5,894 $ — $ — Contingent consideration payable related to the purchase of the IPR&D asset on Closing Date (Note 3 & 8) $ — $ 11,404 $ — Purchases of property and equipment included in accounts payable and accrued liabilities $ — $ 144 $ 29 The accompanying notes are an integral part of these consolidated financial statements. 100 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements 1. Organization Lyell Immunopharma, Inc. (the “Company”) was incorporated in Delaware in June 2018. The Company is a late‑stage clinical cell therapy company advancing a pipeline of proprietary next-generation autologous chimeric antigen receptor (“CAR”) T-cell product candidates for patients with hematologic malignancies and solid tumors. The Company’s lead product candidate, rondecabtagene autoleucel (“ronde-cel”, also known as LYL314), is an autologous dual‑targeting CD19/CD20 CAR T‑cell therapy in development for large B-cell lymphoma (“LBCL”). The Company has recently acquired exclusive global rights outside of mainland China, Hong Kong, Macau and Taiwan, to a novel guanylyl cyclase C (“GCC”)-targeted CAR T-cell product candidate in early clinical development for refractory metastatic colorectal cancer (“mCRC”) and other GCC-expressing cancers. The Company’s primary activities since incorporation have been to develop investigational T‑cell therapies, conduct research and development, execute clinical trials, enable and execute manufacturing activities in support of its product candidate development efforts, submit regulatory submissions, acquire technology and product candidates, enter into strategic license and collaboration arrangements, organize and staff the Company, conduct business planning, establish its intellectual property portfolio, raise capital and provide general and administrative support for these activities. 2. Basis of Presentation and Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current period presentation. Reverse Stock Split On May 30, 2025, the Company effected a 1-for-20 reverse stock split (“Reverse Split”) of its issued and outstanding shares of common stock, and the common stock began trading on a split-adjusted basis on June 2, 2025. The Reverse Split did not reduce the total number of authorized shares of common stock or the Company’s preferred stock or change the par values per share of the common stock or preferred stock. The Reverse Split affected all stockholders uniformly and did not affect any stockholder’s ownership percentage of the shares of common stock (except to the extent that the Reverse Split resulted in some of the stockholders receiving cash in lieu of fractional shares). All outstanding equity awards entitling their holders to shares of common stock were adjusted as a result of the Reverse Split, in accordance with the terms of each such security. In addition, the number of shares reserved for future issuance pursuant to the Company’s equity incentive plans was adjusted accordingly. As a result, all historical per share data, the number of shares issued and outstanding and outstanding equity awards for the periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively in this Form 10-K, where applicable, to reflect the Reverse Split. As the par value per share of the common stock was unchanged, corresponding amounts have been reclassified from common stock to additional paid-in capital. Liquidity and Management’s Plan The Company discovers and develops product candidates that involve experimental technologies. The product candidates may require several years and substantial expenditures to complete and ultimately may be unsuccessful. The Company expects to continue to incur significant operating losses for the foreseeable future and may never be profitable. As a result, the Company will need to raise additional capital through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. Management believes that it has sufficient working capital on hand to fund operations through at least the next 12 months from the date these consolidated financial statements are issued. Summary of Significant Accounting Policies Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect reported amounts and related disclosures. Specific accounts that require management estimates include, but are not limited to, stock-based compensation, valuation of 101 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) long‑lived and acquired assets, the SPA put/call (as defined below) liability, other investments and accrued expenses. See Note 13, Stockholders’ Equity , for additional information regarding the SPA put/call. Management bases its estimates on historical experience and on various other assumptions that are believed to be 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. Actual results could differ materially from those estimates. Comprehensive Loss Comprehensive loss includes net loss and certain changes in stockholders’ equity that are excluded from net loss. For the years ended December 31, 2025 , 2024 and 2023, this was comprised of net unrealized gains and losses on the Company’s marketable securities. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in investment grade fixed income securities and money market accounts. Restricted cash is cash held in a bank account and is used as collateral associated with the Company’s corporate credit card program as well as collateral for a letter of credit in favor of one of the Company’s landlords. Marketable Securities The Company generally invests its excess cash in investment grade short- to intermediate-term fixed income securities. Such investments are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses repo rted as a component of comprehensive loss. Realized gains and losses on available-for-sale securities are included in other (expense) income, net. The cost of investments sold is based on the specific-identification method. The Company classifies those investments that are not required for use in current operations and that mature in more than 12 months as non-current marketable securities in the accompanying consolidated balance sheets. Each reporting period, the Company evaluates whether declines in fair value below carrying value are due to expected credit losses, as well as the Company’s ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses, if any, are recorded as an allowance through other (expense) income, net. Valuation of Other Investments The Company accounts for its strategic equity interests in common stock and in-substance common stock in non‑publicly traded companies for which it does not have the ability to exercise significant influence in accordance with Accounting Standards Codification (“ASC”) 321, Investments – Equity Securities (“ASC 321”). Upon acquisition, these investments are measured at cost, which represents the then fair value. Under ASC 321, the Company can elect to subsequently measure the investments at initial cost, minus impairment and any changes, plus or minus, resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (“measurement alternative”). This election must be made for each investment separately. The Company has made this election for all investments in this category and will continue to measure these investments using this method until they no longer qualify to be measured in accordance with this method. Changes in the carrying value of other investments are recognized through net loss. Each reporting period, the Company performs a qualitative assessment to evaluate whether the investment is impaired. The Company’s assessment includes a review of recent operating results and trends, recent sales/acquisitions of the investee securities and other factors that raise concerns about the investee’s ability to continue as a going concern. If the investment is impaired, an impairment charge is recognized in the amount by which the carrying amount of the investment exceeds the estimated fair value of the investment, with the impairment charge recognized through net loss. See Note 7, Other Investments , for details related to investment impairments recognized during the years ended December 31, 2025, 2024 and 2023. Property and Equipment, Net Property and equipment primarily consist of laboratory equipment, computer equipment and software, furniture and fixtures and leasehold improvements. Property and equipment are stated at cost less accumulated depreciation and amortization and, if applicable, impairment charges. Deprec iation is calculated using the straight-line method based on the estimated useful lives of the related assets, which are generally three to five years . For leasehold improvements, amortization is calculated using the straight‑line method based on the shorter of the useful life or the lease term. When 102 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is recorded in other operating income, net in the period realized. Maintenance and repairs are expensed as incurred. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Valuation of Long-lived Assets Long-lived assets are reviewed each reporting period for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, which may warrant adjustments to carrying values or estimated useful lives. Recoverability is measured by comparison of the carrying amount of an asset group to the future net undiscounted cash flows that the assets are expected to generate. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset group. Any impairment loss is allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts of those assets, except that the carrying amount of an individual asset shall not be reduced below its fair value. The Company recognized impairment of long-lived assets expense of $ 1.4 million for the year ended December 31, 2025, $ 51.3 million for the year ended December 31, 2024 and zero for the year ended December 31, 2023. See Note 5, Impairment of Long-Lived Assets , for details related to long-lived asset impairments recognized during the years ended December 31, 2025 and 2024. Factors that may indicate potential impairment and trigger an impairment test include, but are not limited to, general macroeconomic conditions, conditions specific to the industry and market, business climate or operational performance of the business and sustained decline in the stock price and market capitalization compared to net book value. Calculating the fair value of a reporting unit, an asset group and an individual asset involves significant estimates and assumptions. These estimates and assumptions include, among others, projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and the determination of appropriate market comparisons. Changes in these factors and assumptions used can materially affect the amount of impairment loss recognized in the period the asset or asset group was considered impaired. Leases The Company leases certain office, laboratory and manufacturing spaces. In addition to minimum rent, the leases require payment of real estate taxes, insurance, common area maintenance charges and other executory costs. At inception of a contract, the Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. For all leases, the Company determines the classification of the lease as either operating or financing. As of December 31, 2025 and 2024, all of the Company’s leases were classified as operating leases. The Company recognizes right-of-use (“ROU”) assets and lease liabilities at the lease commencement date based on the present value of future lease payments over the lease term. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate at each lease commencement date is used to determine the present value of future lease payments. The incremental borrowing rate is the rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. To estimate the incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the Company does not currently have a rating agency-based credit rating. The ROU asset includes any lease payments made prior to the lease commencement date and is reduced by any lease incentives received or deemed payable to the Company. The lease term may include options to extend or terminate the lease when it is reasonably certain that a lease option will be exercised. Lease expense is recognized on a straight-line basis over the lease term within operating expenses on the consolidated statements of operations and comprehensive loss. The Company has elected the practical expedient to not separate lease and non-lease components for real estate leases. Additionally, the Company has elected the short-term lease recognition exemption for all short-term leases and as a result, lease liabilities and ROU assets are not included on the consolidated balance sheets for leases with an initial term of 12 months or less. The Company evaluates lease arrangements for impairment whenever events or changes in circumstances indicate that the carrying amounts of the right-of-use asset may not be fully recoverable. To the extent an impairment of the right-of-use asset is identified, the Company recognizes a lease impairment and subsequently amortizes the remaining lease asset on a straight-line basis (unless another systematic basis is more representative of the pattern in which the Company expects 103 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) to consume the future economic benefits from the asset) from the date of impairment to the earlier of the right‑of‑use asset’s useful life or the end of the lease term. Fair Value Measurements The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. The Company’s financial instruments, in addition to those presented in Note 8, Fair Value Measurements , include cash, restricted cash, other investments, accounts payable and accrued liabilities and other current liabilities. The carrying amount of cash, restricted cash, accounts payable and accrued liabilities and other current liabilities approximate fair value because of the short-term nature of these instruments. As described in Note 7, Other Investments , other investments are carried at cost, minus impairment and any changes, plus or minus, resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Research and Development Expense The Company records expense for research and development costs as incurred. Research and development expenses consist of costs incurred by the Company for the discovery and development of its technology platforms and product candidates and includes costs incurred in connection with strategic collaborations, costs to license technology, personnel-related costs, including stock-based compensation expense, facility and technology related costs, research and laboratory expenses, as well as other expenses, which include consulting fees and other costs. 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. Clinical expenses are a component of research and development expense. The Company accrues and expenses clinical trial services performed by third parties based upon actual work completed in accordance with agreements established with its service providers. The Company estimates the costs through discussions with internal personnel and external service providers as to the progress or stage of completion of services and the agreed-upon fees to be paid for such services. General and Administrative Expense General and administrative costs are expensed as incurred and include personnel-related expenses, including stock-based compensation expense for personnel in executive, legal, finance and other administrative functions, legal costs, transaction costs related to collaboration and licensing agreements, as well as fees paid for accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expenses. Legal costs include those related to corporate, dispute and patent matters. Concentrations of Credit Risk and Off-balance Sheet Risk The Company maintains its cash, cash equivalents and restricted cash with high quality, accredited financial institutions. Restricted cash is cash held in a bank account and is used as collateral associated with the Company’s corporate credit card program as well as collateral for a letter of credit in favor of one of the Company’s landlords. Cash, cash equivalents and restricted cash amounts, at times, may exceed federally insured limits. The Company also makes short-term investments in money market funds, U.S. Treasury securities, U.S. government agency securities and corporate debt securities, which can be subject to certain credit risk. However, the Company mitigates the risks by investing in high‑grade instruments, limiting exposure to any one issuer or type of investment and monitoring the ongoing creditworthiness of the financial institutions and issuers. The Company has not experienced any credit losses in such 104 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) accounts and does not believe it is exposed to significant risk on these funds. The Company has no off‑balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. Claims and Contingencies From time to time, the Company may become involved in litigation and proceedings relating to claims arising from the ordinary course of business. The Company accrues a liability if the likelihood of an adverse outcome is probable and the amount is estimable. If the likelihood of an adverse outcome is only reasonably possible (as opposed to probable), or if an estimate is not determinable, the Company provides disclosure of a material claim or contingency. Stock-based Compensation Under ASC 718, the Company measures and recognizes expense for restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), employee stock purchases related to the Employee Stock Purchase Plan, stock options, performance awards and contingent milestone payments granted to employees, directors, consultants or other third parties based on the fair value of the awards on the date of grant. Stock-based compensation expense for RSAs, RSUs, stock options and contingent milestone payments are 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, certain PSUs and contingent milestone payments, the fair value of the Company’s common stock is used to determine the resulting stock-based compensation expense. The fair value of certain 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 determined by weighting the historical volatility of the Company’s common stock with the historical volatilities 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 or a contingent milestone payment 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 and performance-based stock options 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. Income Taxes The Company determines its deferred tax assets and liabilities based on the differences between the financial reporting and tax basis of assets and liabilities. The deferred tax assets and liabilities are measured using the enacted tax 105 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) rates that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered. The Company applies judgment in the determination of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes any material interest and penalties related to unrecognized tax benefits in income tax expense. Segments Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment and one reportable segment. Acquisitions The Company evaluates 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 the Company has 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 in a business combination. If the Company determines 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. 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 in-process research and development (“IPR&D”) are recorded in acquired in‑process research and development expense if it is determined 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 for achieving certain clinical and/or regulatory milestones. For transactions accounted for as asset acquisitions, the Company records 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 (expense) income, net in the consolidated statements of operations and comprehensive loss. The assumptions utilized in the calculation of the fair values include the probability of success and the Company’s stock price. Contingent consideration involves certain assumptions requiring significant judgment and actual results may differ from estimated amounts. Recently Adopted Accounting Pronouncements Derivatives In September 2025, the FASB issued Accounting Standards Update (“ASU”) 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606) . The guidance refines the scope of Topic 815 to clarify which contracts are subject to derivative accounting. The amendments in ASU 2025-07 are effective for fiscal years and interim periods beginning after December 15, 2026, with early adoption permitted. The Company early adopted ASU 2025-07 for fiscal 2025 on a prospective basis and the adoption of this standard did not have a significant impact on the Company’s consolidated financial statements. Income Taxes In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective 106 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) for annual periods beginning after December 15, 2024 and may be applied either prospectively or retrospectively. The Company adopted ASU 2023-09 for the fiscal 2025 year prospectively with no significant updates. Recently Issued Accounting Pronouncements Income Statement Expense Disaggregation In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures , to require more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements. Interim Reporting In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements , which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-11 on its consolidated financial statements. 3. Acquisitions ICT License Acquisition On November 6, 2025, the Company entered into an Exclusive License Agreement with Innovative Cellular Therapeutics Holdings Limited and Innovative Cellular Therapeutics, Inc. (together, “ICT”) for the development and commercialization of LYL273, a novel GCC-targeted CAR T-cell product candidate for the treatment of mCRC and other GCC-expressing cancers (the “ICT License Agreement”). Pursuant to the terms of the ICT License Agreement, the Company received exclusive global rights, outside of mainland China, Hong Kong, Macau and Taiwan, to research, develop, manufacture, commercialize and otherwise exploit LYL273 (“LYL273 license”), along with clinical supply through the technology transfer period (subject to a $ 10 million cap) (“Prepaid clinical supply”), in exchange for an upfront payment of $ 40 million in cash and the issuance of 1.9 million shares of the Company’s common stock. The fair value of the common stock consideration transferred for the ICT License Agreement was calculated based on the closing stock price of the Company’s common stock on November 6, 2025, which was $ 17.88 per share, resulting in total upfront consideration of approximately $ 75.2 million. In addition, ICT is eligible to receive additional cash and equity payments of (i) a potential $ 30 million clinical milestone payment, up to $ 115 million upon the achievement of certain late-stage regulatory milestones and up to $ 675 million in commercial sales milestones; (ii) up to an additional 1.85 million shares of the Company’s common stock based on the achievement of certain clinical and regulatory milestones; and (iii) tiered royalties ranging from mid-single-digits up to 10 % on annual net sales in the United States and low to mid-single-digit royalties on annual net sales in other countries within the licensed territory. The estimated fair value of the assets acquired on November 6, 2025 are as follows (in thousands): Assets acquired: As of November 6, 2025 Prepaid clinical supply $ 8,835 LYL273 license 66,332 Total assets $ 75,167 The fair value of the Prepaid clinical supply was estimated using a market approach as the fair value a market participant would require for the materials (Level 3 of the fair value hierarchy), which resulted in a fair value that differs from the $ 10 million contractual limit. The Company utilized estimates and assumptions in determining the number of patients and the fair value of Prepaid clinical supply per patient during the technology transfer period to estimate the fair value of the Prepaid clinical supply using the market approach. A small change in the number of patients or the estimate of the fair value of Prepaid clinical supply per patient may have a material change in the total estimated fair value of the 107 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) Prepaid clinical supply. During the year ended December 31, 2025, the Company received $ 1.3 million in prepaid clinical supply, resulting in a remaining prepaid clinical supply balance of $ 7.5 million as of December 31, 2025. Prepaid clinical supply balances are recorded in prepaid expenses and other current assets in the Company’s consolidated balance sheets. The Company determined that the cash milestones and royalty payments are not subject to derivative accounting under ASC 815, Derivatives and Hedging , as their settlement is contingent upon future net sales and operational milestones related to LYL273. The Company did not record an associated liability on the acquisition date for the cash milestones or royalty payments as the milestones had not yet been achieved. The Company will recognize any future cash milestones or royalty payments in the period in which the cash milestones or royalty payments become due and payable. The Company has not made or accrued for cash milestones or royalty payments as these have not become due and payable. The Company determined that the milestone payments payable in the Company’s common stock are subject to accounting under ASC 718, Compensation - Stock Compensation. Consistent with the Company’s treatment of other performance-based equity awards, 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. If performance conditions are not met or not expected to be met, any compensation expense previously recognized associated with the awards will be reversed. As of December 31, 2025, it was determined a clinical milestone of 1.1 million shares of common stock was probable of achievement resulting in stock compensation expense of $ 19.7 million, which was recognized in research and development expense. The Company concluded that the arrangement met the definition of an asset acquisition rather than a business combination, as the transaction failed to meet the definition of a business under ASC 805, Business Combinations . The $ 66.3 million fair value of the LYL273 license IPR&D acquired was charged to acquired IPR&D expense during the year ended December 31, 2025 as it had no alternative future use as of November 6, 2025. ImmPACT Acquisition On October 31, 2024 (the “Closing Date”), the Company completed its previously announced acquisition of ImmPACT Bio USA Inc., a Delaware corporation (“ImmPACT”), pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 24, 2024, by and among the Company, ImmPACT, Inspire Merger Sub Inc., a Delaware corporation and an indirect, wholly owned subsidiary of the Company (“Merger Sub”), and an attorney-in-fact of ImmPACT securityholders (the “Representative”). Pursuant to the terms of the Merger Agreement, on the Closing Date, the Company 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, net of certain of ImmPACT’s unpaid transaction expenses) and 1.875 million shares of Company common stock. The acquisition was effected via a merger whereby Merger Sub merged with and into ImmPACT (the “Merger”), with ImmPACT surviving the merger as an indirect, wholly-owned subsidiary of the Company. Contingent consideration following the Closing Date includes (a) additional equity consideration of 625,000 shares of Company Common Stock (“contingent consideration payable”) that may be earned 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 the dual-targeting CD19/20 CAR T‑cell product in the United States. Contingent consideration payable in the Company’s consolidated balance sheet as of December 31, 2024 consisted of the additional equity consideration of 625,000 shares of Company common stock. All per-share values have been retroactively adjusted to reflect the Reverse Split effected on May 30, 2025. See Note 2, Summary of Significant Accounting Policies , for additional information regarding the Reverse Split. 108 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) The total consideration paid for the Merger consisted of the following (in thousands): Fair value of components of purchase price consideration at closing: As of Closing Date Cash (including $ 11.9 million for existing cash balances) $ 41,913 Common Stock 36,011 Representative holdback 200 Contingent consideration payable 11,404 Company’s capitalizable transaction expenses 4,215 Total consideration paid $ 93,743 The fair value of the common stock consideration transferred for the acquisition of ImmPACT was calculated based on the closing stock price of the Company’s common stock on October 31, 2024, which was $ 19.21 per share. The fair value of the contingent consideration payable was derived based on certain valuation inputs, including the closing share price of Lyell common stock on October 31, 2024 and the probability of meeting the milestone, as further discussed in Note 8, Fair Value Measurements . Pursuant to the terms of the Merger Agreement, the Company has a right to offset and cause the sellers to forfeit shares underlying the contingent consideration payable against certain indemnification claims and indemnifiable losses. As a result of this provision, the number of shares underlying the contingent consideration payable is contingently subject to adjustments and the Company has concluded that the arrangement is not indexed to the Company’s equity pursuant to guidance in Accounting Standards Codification (“ASC”) 815-40. Accordingly, the contingent consideration payable was classified as a liability and remeasured at fair value at each reporting date with changes in fair value reported in earnings until the liability was settled in accordance with the terms of the Merger Agreement. The Company determined that the contingent consideration for the royalty payments is not subject to derivative accounting under ASC 815, Derivatives and Hedging , as its settlement is contingent upon future net sales of the Company's dual-targeting CD19/20 CAR T-cell product in the United States. Therefore, the Company did not record an associated contingent consideration liability on the acquisition date for the royalty payments. The Company will recognize any future contingent consideration payments in the period in which the royalty payments become due and payable. The Company has not made or accrued for contingent payments relating to the royalty payments as these have not become due and payable. The estimated fair value of the net assets acquired at Closing Date are as follows (in thousands): Assets acquired: As of Closing Date Cash and cash equivalents $ 14,982 Prepaid expenses and other current assets 1,211 Property and equipment, net 4,446 Long-term deposits 459 Operating lease right-of-use assets 1,816 Assembled workforce intangible asset 1,315 IPR&D asset 87,184 Total assets $ 111,413 Liabilities Assumed: Accounts payable and other current liabilities $ 16,090 Operating lease liability, long-term 1,580 Total liabilities assumed 17,670 Total net assets acquired $ 93,743 The Company concluded that the arrangement met the definition of an asset acquisition rather than a business combination, as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, 109 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) IPR&D of product candidate ronde-cel. The $ 87.2 million fair value of the IPR&D acquired was charged to acquired IPR&D expense during the year ended December 31, 2024 as it had no alternative future use at the time of the Closing Date. 4. License, Collaboration and Success Payment Agreements Fred Hutch License Agreement - In 2018, the Company entered into a license agreement with Fred Hutchinson Cancer Center (“Fred Hutch”) that grants the Company a worldwide, sublicensable license under certain patent rights (exclusive) and certain technology (non-exclusive) to research, develop and commercialize products and processes for all fields of use utilizing CARs and/or T-cell receptors (“TCRs”), subject to certain exceptions. Collaboration and Success Payments - In 2018, the Company entered into a research and collaboration agreement with Fred Hutch (“Fred Hutch Collaboration Agreement”), pursuant to which it granted Fred Hutch rights to certain success payments. The potential payments for the Fred Hutch success payments are based on multiples of increased value ranging from 10 times to 50 times based on a comparison of the per share fair market value of the Company’s common stock relative to the original $ 36.58 per share issuance price of the Company’s Series A convertible preferred stock, which converted into an equal number of shares of the Company’s common stock in connection with the closing of the Company’s initial public offering (“IPO”). The aggregate success payments to Fred Hutch are not to exceed $ 200.0 million, which would only occur upon a 50 times increase in value relative to the original $ 36.58 per share issuance price of the Company’s Series A convertible preferred stock. Each threshold is associated with a success payment, ascending from $ 10.0 million at $ 365.76 per share to $ 200.0 million at $ 1,828.80 per share, payable if such threshold is reached during the measurement period. The term of the success payment agreement ends on the earlier to occur of (i) the nine-year anniversary of the date of the agreement and (ii) a change in control transaction. All per-share values, including the original Series A issuance price referenced herein, have been retroactively adjusted to reflect the Reverse Split effected on May 30, 2025. See Note 2, Summary of Significant Accounting Policies , for additional information regarding the Reverse Split. The following table summarizes the aggregate potential success payments, which are payable to Fred Hutch in cash or cash equivalents, or at the Company’s discretion, publicly-tradeable shares of the Company’s common stock: Multiple of initial equity value at issuance 10 x 20 x 30 x 40 x 50 x Per share common stock price required for payment $ 365.76 $ 731.52 $ 1,097.28 $ 1,463.04 $ 1,828.80 Aggregate success payment(s) (in millions) $ 10 $ 40 $ 90 $ 140 $ 200 The success payments will be owed if the per share fair value of the Company’s common stock on the contractually specified valuation measurement dates during the term of the success payment agreement equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by the following events: the one-year anniversary of the Company ’ s IPO and each two-year anniversary of the Company ’ s IPO thereafter, the closing of a change in control transaction and the last day of the term of the success payment agreement, unless the term has ended due to the closing of a change of control transaction. As of December 31, 2025, no success payments have been incurred as the per share fair value of the Company’s common stock was below the price required for payment. The success payment liability was $ 0.4 million and $ 0.1 million as of December 31, 2025 and 2024, respectively. With respect to the Fred Hutch Collaboration Agreement success payment obligations, the Company recognized success payment expense of $ 0.3 million fo r the year ended December 31, 2025 , and expense reversals of $ 0.5 million and $ 1.9 million fo r the years ended December 31, 2024 and 2023, respectively, which are recognized in other (expense) income, net. Stanford License Agreement - In 2019, the Company entered into a license agreement with The Board of Trustees of the Leland Stanford Junior University (“Stanford”) to license specified patent rights. Collaboration and Success Payments - In October 2020, the Company entered into a research and collaboration agreement with Stanford (“Stanford Collaboration Agreement”), pursuant to which it granted Stanford rights to certain success payments. The potential payments for the Stanford Collaboration Agreement success payments are based on multiples of increased value ranging from 10 times to 50 times based on a comparison of the per share fair market value of 110 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) the Company’s common stock relative to the original $ 36.58 per share issuance price of the Company’s Series A convertible preferred stock, which converted into an equal number of shares of the Company’s common stock in connection with the closing of the Company’s IPO. The aggregate success payments to Stanford are not to exceed $ 200.0 million, which would only occur upon a 50 times increase in value relative to the original $ 36.58 per share issuance price of the Company’s Series A convertible preferred stock. Each threshold is associated with a success payment, ascending from $ 10.0 million at $ 365.76 per share to $ 200.0 million at $ 1,828.80 per share, payable if such threshold is reached during the measurement period. The term of each success payment agreement ends on the earlier to occur of (i) the nine year anniversary of the date of the agreement and (ii) a change in control transaction. All per-share values, including the original Series A issuance price referenced herein, have been retroactively adjusted to reflect the Reverse Split effected on May 30, 2025. See Note 2, Summary of Significant Accounting Policies , for additional information regarding the Reverse Split. The following table summarizes the aggregate potential success payments, which are payable to Stanford in cash or cash equivalents, or at the Company’s discretion, publicly-tradeable shares of the Company’s common stock: Multiple of initial equity value at issuance 10 x 20 x 30 x 40 x 50 x Per share common stock price required for payment $ 365.76 $ 731.52 $ 1,097.28 $ 1,463.04 $ 1,828.80 Aggregate success payment(s) (in millions) $ 10 $ 40 $ 90 $ 140 $ 200 The success payments will be owed if the per share fair value of the Company’s common stock on the contractually specified valuation measurement dates during the term of the success payment agreement equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by the following events: the one-year anniversary of the Company ’ s IPO and each two-year anniversary of the Company ’ s IPO thereafter, the closing of a change in control transaction and the last day of the term of the success payment agreement, unless the term has ended due to the closing of a change of control transaction. As of December 31, 2025, no success payments have been incurred as the per share fair value of the Company’s common stock was below the price required for payment. The success payment liability is estimated at the fair value at inception and at each subsequent reporting period and the expense is accreted over the service period of the Stanford Collaboration Agreement as research and development expense through September 2024. As of October 2024, the Company’s associated success payment liability was fully accreted to fair value as Stanford had provided the requisite service obligation to earn the potential success payment consideration. For the year ended December 31, 2024 and future periods, the change in the Stanford success payment liability fair value is recognized in other (expense) income, net. The success payment liability was $ 0.8 million and $ 0.3 million as of December 31, 2025 and 2024, respectively. With respect to the Stanford Collaboration Agreement success payment obligations, the Company recog nized success expense payment of $ 0.5 million for the year ended December 31, 2025 , and expense reversals of $ 0.6 million and $ 0.9 million for the years ended December 31, 2024 and 2023, respectively. 5. Impairment of Long-Lived Assets As a result of the successful transition of the manufacturing of ronde-cel from the Company’s West Hills, Los Angeles manufacturing facility to the Company's LyFE Manufacturing Center TM in Bothell, Washington, and in connection with the planned closure of the West Hills facility, the associated lease has been classified as a separate asset group in 2025. The Company performed an impairment assessment in 2025 and concluded that the carrying value of the West Hills asset group was not recoverable as it exceeded the future undiscounted cash flows the asset was expected to generate from its use and eventual disposition. The Company applied a discounted cash flow method to estimate the fair value of the right‑of-use asset, which represented level 3 nonrecurring fair value measurements. Based on this analysis, the Company recognized long-lived asset impairment charges of $ 1.4 million for the year ended December 31, 2025 within impairment of long-lived assets in the consolidated statements of operations and comprehensive loss. The Company performed an impairment assessment of long-lived assets for the year ended December 31, 2024 a s a result of the sustained decline in the Company’s stock price and related market capitalization, deferral and reprioritization of certain research and development programs and associated reduction in force . The Company operates as a single reporting unit based on its business and reporting structure. The Company determined all of its long-lived assets represent one asset group for the purposes of the long-lived asset impairment assessment. The Company concluded that the carrying value of the asset group was not recoverable as it exceeded the future undiscounted cash flows the assets are expected to generate from their use and eventual disposition over the remaining useful life of the Company’s primary asset; approximately 5 years remain on the initial term of the Company’s operating lease in South San Francisco, California, 111 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) which expires in March 2031 . To allocate and recognize the impairment loss, the Company determined individual fair values of its long-lived assets. The Company applied a discounted cash flow method to estimate the fair values of its leasehold improvements and right-of-use assets. These represented level 3 nonrecurring fair value measurements. The remaining property and equipment, net was determined to not be impaired. Based on this analysis, the Company recognized long‑lived asset impairment charges of $ 12.6 million on the lease right-of-use assets and $ 38.7 million on the related leasehold improvements during the year ended December 31, 2024. No impairment was recognized on the remaining long-lived assets as their carrying values were not in excess of their fair values. 6. Cash Equivalents and Marketable Securities The fair value and amortized cost of cash equivalents and fixed income marketable securities by major security type are as follows (in thousands): December 31, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Money market funds $ 49,766 $ — $ — $ 49,766 U.S. Treasury securities 175,839 233 — 176,072 U.S. government agency securities 6,528 5 — 6,533 Corporate debt securities 4,430 4 — 4,434 Total cash equivalents and fixed income marketable securities $ 236,563 $ 242 $ — $ 236,805 Classified as: Fair Value Cash equivalents $ 49,766 Marketable securities 187,039 Marketable securities, non-current — Total cash equivalents and fixed income marketable securities $ 236,805 December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Money market funds $ 73,975 $ — $ — $ 73,975 U.S. Treasury securities 226,049 262 ( 40 ) 226,271 U.S. government agency securities 36,765 51 ( 1 ) 36,815 Corporate debt securities 21,473 20 ( 1 ) 21,492 Total cash equivalents and fixed income marketable securities $ 358,262 $ 333 $ ( 42 ) $ 358,553 Classified as: Fair Value Cash equivalents $ 80,639 Marketable securities 264,900 Marketable securities, non-current 13,014 Total cash equivalents and fixed income marketable securities $ 358,553 The fair values of money market and fixed income marketable securities held by the Company in an unrealized loss position for less than 12 months were zero and $ 31.7 million, as of December 31, 2025 and 2024, respectively. The fair values of money market and fixed income marketable securities held by the Company in an unrealized loss position for greater than 12 months were zero as of both December 31, 2025 and 2024. As of December 31, 2025 and 2024, all of the Company’s money market and fixed income marketable securities had a maturity date of two years or less, were available 112 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) for use and were classified as available-for-sale. The Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before recovery of their amortized cost basis. The Company determined that there was no material change in the credit risk of the above investments as of both December 31, 2025 and 2024. As such, an allowance for credit losses has not been recognized. Gross realized gains and losses were de minimis for the years ended December 31, 2025 and 2024 and as a result, amounts reclassified out of accumulated other compr ehensive loss for the years ended December 31, 2025 and 2024 were also de minimis . See Note 8, Fair Value Measurements , for additional information regarding cash equivalents and fixed income marketable securities. 7. Other Investments In prior years the Company made minority ownership strategic investments. As of both December 31, 2025 and 2024, the aggregate carrying amount of the Company’s strategic investments in non-publicly traded companies was $ 19.0 million . These investments are measured at initial cost, minus impairment, if any, and plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Cumulative impairments of strategic investments in equity investments without readily determinable fair values still held as of both December 31, 2025 and 2024 were $ 23.0 million, reflecting the full impairment of two of the Company’s other investments . As a part of the acquisition of each of the Company’s other investments, the Company determines whether an investment or other interest is considered a variable interest. As of both December 31, 2025 and 2024, t he Company held an interest in one entity that was concluded to be a variable interest for which the Company was not the primary beneficiary as the Company did not have the power to direct the activities that most significantly impact the economic performance of the variable interest entity. As of both December 31, 2025 and 2024 , the carrying value and maximum exposure to loss of the Company’s variable interests were zero . During the years ended December 31, 2025, 2024 and 2023, the Company performed qualitative assessments of potential indicators of impairment. For the years ended December 31, 2024 and 2023, the Company determined that indicators existed for certain of its other investments with carrying amounts of $ 13.0 million and $ 12.9 million , respectively. While no single event or factor was solely responsible for the impairments in each year, the Company considered the underlying companies’ operating cash flow requirements over the next year, liquid asset balances to fund those requirements and the underlying companies’ inability to raise funds as indicators of impairment. Due to these indicators, the Company 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, the Company recorded impairment expenses of $ 13.0 million for one investment for the year ended December 31, 2024 and $ 12.9 million for two investments for the year ended December 31, 2023. No impairment was recorded for the year ended December 31, 2025. The impairment expenses were recorded within impairment of other investments on the consolidated statements of operations and comprehensive loss and as reductions to the investment balances within other investments on the consolidated balance sheets. 8. Fair Value Measurements The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands): December 31, 2025 Level 1 Level 2 Level 3 Total Financial assets: Money market funds $ 49,766 $ — $ — $ 49,766 U.S. Treasury securities — 176,072 — 176,072 U.S. government agency securities — 6,533 — 6,533 Corporate debt securities — 4,434 — 4,434 Total financial assets $ 49,766 $ 187,039 $ — $ 236,805 Financial liabilities: SPA put/call $ — $ — $ 11,411 $ 11,411 Success payment liabilities — — 1,242 1,242 Total financial liabilities $ — $ — $ 12,653 $ 12,653 113 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) December 31, 2024 Level 1 Level 2 Level 3 Total Financial assets: Money market funds $ 73,975 $ — $ — $ 73,975 U.S. Treasury securities — 226,271 — 226,271 U.S. government agency securities — 36,815 — 36,815 Corporate debt securities — 21,492 — 21,492 Marketable equity security 30 — — 30 Total financial assets $ 74,005 $ 284,578 $ — $ 358,583 Financial liabilities: Contingent consideration payable $ — $ — $ 7,600 $ 7,600 Success payment liabilities — — 411 411 Total financial liabilities $ — $ — $ 8,011 $ 8,011 The Company measures the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities. The Company measures the fair value of marketable equity securities traded in active markets based on quoted prices of identical assets. The Level 2 marketable securities include U.S. Treasury securities, U.S. government agency securities and corporate debt securities, which are valued using third-party pricing sources. The pricing services applied industry standard valuation models. Inputs utilized include market pricing based on real-time trade data for the same or similar securities and other significant inputs derived from or corroborated by observable market data. In July 2025, the Company completed a $ 50.0 million equity financing that included issuance of mutually exclusive put and call rights related to potential future equity issuance of up to an additional $ 50.0 million financing. See Note 21, Subsequent Events , for more information about the Company’s exercise of the SPA put right. These rights were accounted for as a combined financial asset or liability and measured at fair value on a recurring basis. The SPA put/call is presented within accrued liabilities and other current liabilities on the Company’s consolidated balance sheet as of December 31, 2025. See Note 13, Stockholders’ Equity , for additional information regarding the SPA put/call liability. The SPA put/call is classified as a Level 3 financial instrument and the fair value at inception on July 24, 2025 and period-end on December 31, 2025 were estimated using the Monte Carlo simulation valuation method including the following assumptions: July 24, 2025 December 31, 2025 Time to maturity (years) 1.11 0.67 Risk-free rate 4.08 % 3.55 % Volatility 91 % 90 % The Company’s contingent consideration payable, success payment liabilities and SPA put/call are classified as Level 3 financial instruments. In July 2025, the Company issued 625,000 shares of common stock valued at $ 5.9 million upon achievement of a specific clinical milestone, thereby settling the contingent consideration payable related to the ImmPACT acquisition. Prior to settlement, the liability was valued using the Company’s common stock price and management’s assessment of the probability of achieving either (i) specified clinical milestones or (ii) certain regulatory approvals. The success payment liabilities were estimated by management using its historical experience of the correlation of success payment fair values relative to the Company’s stock price. See Note 3, Acquisitions , for additional information regarding the contingent consideration payable. The Company utilizes estimates and assumptions in determining the estimated contingent consideration payable, success payment liabilities and SPA put/call and associated changes in fair value. A small change in the value of the Company’s common stock may have a relatively large change in the estimated fair value of the contingent consideration payable, success payment liabilities and SPA put/call and associated changes in fair value. Additionally, a small change in management’s assessment of the likelihood of achieving either (i) the specified clinical milestones or (ii) certain regulatory approvals related to the estimated valuation of the contingent consideration payable may have a relatively large change in the estimated fair value. A small change in management’s assessment of the likelihood of achieving either a clinical 114 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) milestone relating to the Company’s ongoing PiNACLE pivotal trial or certain other corporate milestones relevant to the SPA put/call may have a material change in its estimated fair value. The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands): Contingent Consideration Payable Success Payment Liabilities SPA put/call (Asset) Liability Balance at December 31, 2023 $ — $ 1,576 $ — Issuance 11,404 — — Change in fair value (1) ( 3,804 ) ( 1,165 ) — Balance at December 31, 2024 7,600 411 — Issuance — — ( 7,774 ) Change in fair value (1) ( 1,706 ) 831 19,185 Settlement via equity issuance ( 5,894 ) — — Balance at December 31, 2025 $ — $ 1,242 $ 11,411 __________ (1) The change in fair value of the contingent consideration payable subsequent to Closing Date, Fred Hutch success payment liabilities and SPA put/call (asset) liability are recorded in other (expense) income, net. Changes in the fair value of Stanford success payment liabilities are recorded as either other (expense) income, net or research and development expenses, depending on the period. (See Note 4, License, Collaboration, and Success Payment Agreements .) In October 2022, the Company received non-voting PACT Series D convertible preferred stock with an estimated fair value of $ 2.9 million using the cost approach. Under this approach, the fair value of an asset is measured by the cost to reconstruct or replace such asset with another one of like utility. The fair value of PACT was estimated by using significant unobservable inputs, including an estimate of insignificant fair value associated with PACT intangible assets. Accordingly, the Company classified the fair value measurement of PACT preferred stock on October 1, 2022 as Level 3 under the fair value hierarchy. In June 2023, the Company performed a qualitative assessment of potential indicators of impairment of the PACT Series D convertible preferred stock investment, resulting in a $ 2.9 million impairment expense for the year ended December 31, 2023 . 9. Property and Equipment, Net Property and equipment, net, consisted of the following (in thousands): December 31, 2025 2024 Leasehold improvements $ 79,739 $ 79,613 Laboratory equipment 26,372 36,106 Computer equipment and software 1,672 1,805 Furniture and fixtures 814 1,114 Construction in progress 452 241 Property and equipment, at cost 109,049 118,879 Less: Accumulated depreciation and amortization ( 74,278 ) ( 70,679 ) Total property and equipment, net $ 34,771 $ 48,200 Depreciation and amortization expense was $ 10.4 million , $ 19.4 million and $ 20.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. During the year ended December 31, 2024 , the Company recorded impairment losses of $ 38.7 million for leasehold improvements. The Company did not record any impairment losses related to leasehold improvements in 2025 or 2023. See Note 5, Impairment of Long‑Lived Assets , for further information. 115 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) 10. Accrued Liabilities and Other Current Liabilities Accrued liabilities and other current liabilities consisted of the following (in thousands): December 31, 2025 2024 SPA put/call $ 11,411 $ — Accrued compensation and related benefits 11,154 19,235 Accrued research and development expenses 9,117 9,439 Current lease liabilities 9,073 7,974 Other 2,559 2,999 Deferred lease income 2,535 483 Accrued legal 670 692 Total accrued liabilities and other current liabilities $ 46,519 $ 40,822 11. Leases The Company’s lease portfolio is comprised of operating leases for laboratory, office and manufacturing facilities located in South San Francisco and Los Angeles, California, and Seattle and Bothell, Washington with contractual periods expiring between January 2028 and March 2031. In addition to minimum rent, the leases require payment of real estate taxes, insurance, common area maintenance charges and other executory costs. These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred. In 2018, the Company entered into an operating lease for approximately 34,000 square feet of office and laboratory space in Seattle, Washington, with an initial lease term expiring in December 2028. The Company has two five‑year options to extend the lease, which are not reasonably assured. In 2019, the Company entered into two operating lease agreements for a combined approximately 73,000 square feet of space to develop a cell therapy manufacturing facility located in Bothell, Washington, with initial terms expiring in May 2030. The Company has two 90 -month options to extend the leases, which are not reasonably assured. In 2019, the Company entered into an operating lease agreement for approximately 108,000 square feet of office and laboratory space located in South San Francisco, California. The initial lease term expires in January 2031 with the option to extend the term for another 10 years, which is not reasonably assured. In January 2021, the Company amended the lease term to extend the lease expiration to March 2031. On the ImmPACT acquisition Closing Date, the Company acquired an operating lease agreement for approximately 26,000 square feet of office and laboratory space located in Los Angeles, California, with an initial lease term expiring in January 2028. See Note 3, Acquisitions , for further information regarding the ImmPACT acquisition. The Company has one five-year option to extend the lease, which is not reasonably assured. 116 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) The following table summarizes the Company’s future minimum operating lease commitments, including lease incentives, as of December 31, 2025 (in thousands): Year Ending December 31: 2026 $ 12,959 2027 13,341 2028 13,005 2029 10,398 2030 9,855 Thereafter 2,333 Total undiscounted lease payments 61,891 Less: imputed interest ( 10,897 ) Total operating lease liabilities $ 50,994 Reported as of December 31, 2025: Short-term portion of lease liabilities (included in accrued liabilities and other current liabilities) $ 9,073 Operating lease liabilities, non-current 41,921 Total $ 50,994 The operating lease costs for all operating leases were $ 9.1 million, $ 9.2 million and $ 9.0 million for the years ended December 31, 2025, 2024 and 2023, respectively. The operating lease costs and total commitments for short-term leases were de minimis for the years ended December 31, 2025, 2024 and 2023. Variable lease costs for operating leases were $ 6.9 million, $ 7.1 million and $ 5.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. The weighted-average remaining lease terms for operating leases were 4.8 years and 5.7 years as of December 31, 2025 and 2024, respectively. The weighted-average discount rates for operating leases were 8.5 % as of both December 31, 2025 and 2024. The Company entered into subleases in May 2021 and September 2024, whereby the Company agreed to sublease approximately 11,000 and 12,150 square feet, respectively, currently leased by the Company in South San Francisco, California. These subleases are classified as operating leases and will expire in March 2031 and July 2026, respectively. In September 2021, the Company entered into a sublease with Sonoma Biotherapeutics, Inc. (“Sonoma”), a related party, whereby the Company agreed to sublease approximately 18,000 square feet of space in South San Francisco, California currently leased by the Company. See Note 19, Related-Party Transactions . As a part of the sublease, in September 2021, the Company received a $ 4.6 million tenant improvement contribution payment, which will be recognized over the term of the sublease. The sublease is classified as an operating lease and will expire in September 2026. The Company recognized Sonoma sublease income of $ 1.9 million for each of the years ended December 31, 2025, 2024 and 2023. The Company’s sublease income is recognized within other operating income, net in the consolidated statements of operations and comprehensive Loss. Total operating income from the subleases and income solely attributable to the subleases are shown in the table below (in thousands). Total operating income includes income attributable to the subleases, as well as additional operating fees recognized in other operating income, net such as common area maintenance charges. Year Ended December 31, 2025 2024 2023 Other operating income, net - subleases $ 5,466 $ 4,530 $ 4,152 Sublease income $ 3,601 $ 3,004 $ 2,729 During the year ended December 31, 2025 and 2024 , the Company recorded impairment losses of $ 1.4 million and $ 12.6 million for lease right‑of‑use assets, respectively. The Company did not record any impairment losses for lease right-of-use assets in 2023. See Note 5, Impairment of Long‑Lived Assets , for further information. 117 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) 12. Convertible Preferred Stock As of December 31, 2025, no shares of convertible preferred stock were outstanding. 13. Stockholders’ Equity Preferred Stock The Company is authorized to issue 10 million shares of preferred stock with a par value of $ 0.0001 per share. As of December 31, 2025 and 2024, no shares of preferred stock were outstanding. Common Stock The Company is authorized to issue 500 million shares of common stock with a par value of $ 0.0001 per share. As of December 31, 2025 and 2024, there wer e 21,251,353 shares and 14,743,777 shares of the Company’s common stock outstanding, respectively. On February 28, 2024, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) acting as the Company’s sales agent (the “Sales Agreement”), pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to $ 150.0 million from time to time in a series of one or more at‑the‑market equity offerings. The Company will pay Cowen commissions of up to 3 % of the gross proceeds of the sale, and reimbursement of certain expenses, under this agreement. Neither the Company nor Cowen is obligated to sell any shares. As of December 31, 2025 , the Company had not made any sales under the Sales Agreement. In July 2025, the Company entered into the SPA with certain institutional and other accredited investors (the “Purchasers”), pursuant to which the Company sold and issued 3,753,752 shares of common stock at a purchase price of $ 13.32 per share at an initial closing, for gross proceeds of approximately $ 50.0 million. Pursuant to the SPA, the Company had the right, but not the obligation, to require the Purchasers to purchase approximately $ 50.0 million of additional shares of common stock (and/or pre-funded warrants in lieu of common stock) at a closing (the “Milestone Closing”) upon the occurrence of a milestone event within 12 months following the initial closing (the “Put Right”). The purchase price per share of common stock in the Milestone Closing will be $ 25.61 , unless the closing price of the common stock on the date before the Milestone Closing is less than $ 10.41 , in which case it will be $ 10.41 per share. If the purchase price in the Milestone Closing will be $ 10.41 per share, the Company may rescind its Milestone Closing election before completion of the Milestone Closing. At any time before the Milestone Closing and until the later of 12 months following the initial closing and 40 days after the Purchasers receive notice from the Company of the achievement of a milestone event, each Purchaser will have the right, but not the obligation, to purchase at a closing (each, an “Investor Call Closing”) the same dollar amount of common stock (or pre-funded warrants in lieu thereof) it has committed to purchase in the Milestone Closing, at a purchase price of $ 30.73 per share. If any Purchaser exercises its right to hold its Investor Call Closing, it will not participate in any subsequent Milestone Closing. In addition, subject to specified exceptions, if the Company completes a bona fide equity financing for capital-raising purposes on terms that are more favorable to investors than the terms of the Investor Call Closing, the Company’s right to hold the Milestone Closing will terminate. The Milestone Closing and Investor Call Closing (the “SPA put/call”) were determined to be a combined financial instrument as they are mutually exclusive. The Company evaluated the SPA put/call under ASC 815 and concluded it does not meet the definition of a derivative. See Note 8, Fair Value Measurements , for additional information regarding the valuation of the SPA put/call liability. See Note 21, Subsequent Events , for more information about the Company’s exercise of the SPA put right. 14. Stock-based Compensation Equity Incentive and Employee Stock Purchase Plans In June 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”) and the 2021 Employee Stock Purchase Plan (“2021 ESPP”), both of which became effective on the date of the underwriting agreement related to the Company’s IPO. Under the 2021 Plan, the Company may grant incentive stock options, non-statutory stock options, restricted stock awards (“ RSAs”), RSUs, PSUs, stock appreciation rights, performance awards and other stock-based awards. The term of any stock option granted under the 2021 Plan cannot exceed ten years . Generally, stock options (other than performance-based stock options, discussed below) and RSU awards granted by the Company vest over four years , 118 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) but may be granted with different vesting terms. PSUs and PBOs generally have a three-year performance period, with vesting subject to the achievement of the associated performance condition. On January 1, 2025, the Company reserved an additional 737,188 shares of common stock for issuance under the 2021 Plan representing 5 % of the total common shares outstanding as of December 31, 2024 . The Company’s board of directors elected to reserve no additional shares under the 2021 ESPP for the year beginning January 1, 2025 . The 2021 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 % of their earnings, subject to plan limitations. Unless otherwise determined by the Company’s board of directors, employees are able to purchase shares at 85 % of the lower of the fair market value of the Company’s common stock on the first date of an offering or on the purchase date. Under the 2021 ESPP, 51,799 , 47,738 and 49,320 shares were issued for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025 , 2,105,974 and 200,833 shares were available for future issuance pursuant to the 2021 Plan and the 2021 ESPP, respectively. Stock-based Compensation Expense Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows (in thousands): Year Ended December 31, 2025 2024 2023 Research and development $ 28,743 $ 14,577 $ 18,207 General and administrative 13,086 18,567 28,877 Total stock-based compensation expense $ 41,829 $ 33,144 $ 47,084 Research and development stock-based compensation expense for the year ended December 31, 2025 reflects the expense associated with an ICT equity milestone deemed probable of achievement of $ 19.7 million. See Note 3, Acquisitions , for additional information regarding ICT equity milestones. At December 31, 2025, total stock-based compensation cost related to unvested awards not yet recognized was $ 26.6 million, which is expected to be recognized over a remaining weighted-average period of 2.4 years. Stock Options Repricing In November 2023, the Board of Directors of the Company approved, effective November 16, 2023, a one-time repricing of certain stock option awards that had been granted to date under the 2021 Plan and 2018 Plan. The repricing impacted stock options with exercise prices greater than $ 47.40 held by employees who remained employed as-of November 16, 2023 and were not impacted by the Company’s November 16, 2023 reduction in workforce. The original exercise prices of the repriced stock options ranged from $ 52.20 to $ 359.00 per share for 200 total grantees with 1,170,843 shares repriced. Each stock option was repriced to have a per share exercise price of $ 37.40 , which was the closing price of the Company’s common stock on November 16, 2023. To receive the new exercise price, option holders were required to be employed with the Company through November 15, 2024. Additionally, the vesting schedule for the unvested shares underlying repriced stock options held by executives at the level of senior vice president and above was extended for an additional year. There were no changes to the vesting schedules for employees below the level of senior vice president. No changes were made to the expiration dates of or number of shares underlying the repriced stock options. Incremental stock-based compensation expense resulting from the repricing was $ 8.9 million in the aggregate. Expense for vested awards was recognized through November 15, 2024 and expense for unvested awards will be recognized over the remaining service life of the option. Performance-Based Stock Options During the year ended December 31, 2025, the Company granted performance-based stock options to certain key employees. Performance-based stock options (“PBOs”) awarded to employees have a three-year performance period and vest based upon the Company’s performance against a two and three-year relative total shareholder return (“rTSR”) metric or upon the achievement of certain clinical development milestones. Certain of the clinical development milestones were probable of achievement as of December 31, 2025, representing 7,062 shares. For the portion of PBOs subject to certain clinical development milestones, 50 % vest upon the achievement of the applicable milestone and the remaining 50 % vest upon the earlier of (a) one year of service from the date of such achievement and (b) the end of the three-year performance period. The vesting of all PBOs granted is also subject to the respective employee’s continued employment. The Company 119 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) valued the portion of the PBOs subject to the rTSR metric using a Monte Carlo simulation. The number of PBOs granted subject to the rTSR metrics represents the target number of options that are eligible to be earned based on the achievement of the metrics established at the beginning of the performance period, which ends on December 31 st of the three-year performance period. For the portion of PBOs subject to the rTSR metrics, employees may ultimately earn between zero and 200 % of the target number of PBOs granted based on the degree of achievement of the applicable rTSR metric. Accordingly, additional PBOs may be issued or currently outstanding PBOs may be cancelled upon final determination of the degree of achievement of the applicable rTSR metric. PBOs have contractual terms of ten years from grant date. A summary of the Company’s PBO activity was as follows: Number of PBOs Weighted-Average Exercise Price Per Share Weighted- Average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in thousands) PBOs outstanding as of December 31, 2024 — $ — — $ — Granted (1) 138,250 $ 11.07 Exercised — $ — Canceled or forfeited ( 39,382 ) $ 11.07 PBOs outstanding as of December 31, 2025 98,868 $ 11.07 9.11 $ 1,949 PBOs exercisable as of December 31, 2025 — $ — — $ — (1) PBO grants reflect the target number of shares eligible to be earned at the time of grant. Performance-Based Restricted Stock Units During the year ended December 31, 2024, the Company granted PSU awards to certain key employees. PSUs awarded to employees have a three-year performance period and vest based upon the Company’s performance against a two and three-year rTSR metric, or upon the achievement of certain clinical development milestones. Certain of the clinical development milestones were determined to be probable of achievement as of December 31, 2025, representing 58,238 shares. For the portion of PSUs subject to certain clinical development milestones (other than the bonus clinical development milestone), 50 % vest upon the achievement of the applicable milestone, and the remaining 50 % vest upon the earlier of (a) one year of service from the date of such achievement and (b) the end of the three-year performance period. The vesting of all PSU awards granted is also subject to the respective employee’s continued employment. The Company valued the portion of PSUs subject to the rTSR metric using a Monte Carlo simulation. The number of PSUs granted subject to the rTSR metrics represents the target number of units that are eligible to be earned based on the achievement of the metrics established at the beginning of the performance period, which ends on December 31 st of the three-year performance period. For the portion of PSUs subject to the rTSR metrics, employees may ultimately earn between zero and 200 % of the target number of PSUs granted based on the degree of achievement of the applicable rTSR metric. Accordingly, additional PSUs may be issued or currently outstanding PSUs may be cancelled upon final determination of the degree of the achievement of the applicable rTSR metric. Stock-based compensation expense recognized for the PSU awards was $ 1.7 million and $ 1.9 million for the years ended December 31, 2025 and 2024, respectively and zero for the year ended December 31, 2023. 120 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) A summary of the Company’s PSU activity was as follows: Performance-Based Restricted Stock Units Outstanding Weighted-Average Value at Grant Date Per Share Unvested PSUs as of December 31, 2024 135,170 $ 37.63 PSUs granted (1) — $ — PSUs vested ( 33,623 ) $ 36.00 PSUs forfeited or canceled ( 36,029 ) $ 39.36 Unvested PSUs as of December 31, 2025 65,518 $ 37.51 (1) PSU grants reflect the target number of shares eligible to be earned at the time of grant. The fair value of PSUs vested during the year ended December 31, 2025 was $ 0.4 million and was zero during both the years ended December 31, 2024 and 2023. As of December 31, 2025 , certain of the PSU metrics have been met, resulting in 33,623 shares vesting. Restricted Stock Units A summary of the Company’s RSU activity was as follows: Restricted Stock Units Outstanding Weighted-Average Value at Grant Date Per Share Unvested RSUs as of December 31, 2024 281,190 $ 34.40 RSUs granted 287,735 $ 11.82 RSUs vested ( 139,928 ) $ 25.66 RSUs forfeited or canceled ( 122,582 ) $ 24.88 Unvested RSUs as of December 31, 2025 306,415 $ 19.77 The fair value of RSUs vested during the years ended December 31, 2025, 2024 and 2023 w as $ 1.7 million, $ 2.0 million and $ 1.4 million, respectively . Stock Options A summary of the Company’s stock option activity was as follows: Number of Stock Options Weighted-Average Exercise Price Per Share Weighted- Average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in thousands) Options outstanding as of December 31, 2024 2,239,354 $ 49.80 6.62 $ 1,479 Granted 864,491 $ 14.25 Exercised ( 3,750 ) $ 11.07 Canceled or forfeited ( 403,651 ) $ 36.96 Options outstanding as of December 31, 2025 2,696,444 $ 40.32 6.14 $ 17,090 Options exercisable as of December 31, 2025 1,660,556 $ 52.51 4.40 $ 4,704 121 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) The fair value of stock options and performance-based stock options granted to employees, directors and consultants valued using the Black-Scholes option pricing model was estimated on the date of grant using the following weighted-average assumptions: Year Ended December 31, 2025 2024 2023 Risk-free interest rate 4.05 % 4.17 % 4.13 % Expected volatility 85.7 % 75.9 % 88.0 % Expected term (in years) 6.04 5.89 6.06 Expected dividend yield 0 % 0 % 0 % The weighted-average grant date fair value of options granted for the years ended December 31, 2025, 2024 and 2023 was $ 10.31 per share, $ 26.00 per share and $ 33.80 per share, respectively. The intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 was $ 0.1 million, $ 2.9 million and $ 6.5 million, respectively. 15. Income Taxes The Company has reported pre-tax operating losses for all periods presented. The Company generated losses in the U.S. and had a minimal amount of income in Israel. The Company has not reflected any benefit for corresponding tax net operating loss carryforwards in the accompanying consolidated financial statements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. Beginning with 2025 annual reporting, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures , prospectively as described in Note 2, Summary of Significant Accounting Policies. A reconciliation of the U.S. federal statutory income tax rate to the effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 was as follows (in thousands, except percentages): Year Ended December 31, 2025 U.S. federal statutory tax $ ( 57,634 ) 21.00 % Change in valuation allowance 53,781 ( 19.60 ) Nontaxable or nondeductible items Stock-based compensation 5,830 ( 2.12 ) Fair value adjustment on PIPE 4,029 ( 1.47 ) Other nondeductible items ( 2,314 ) 0.84 R&D Tax credits ( 3,563 ) 1.30 Worldwide changes in UTB ( 115 ) 0.04 Other ( 14 ) 0.01 Effective income tax rate $ — 0.00 % A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations was as follows: Year Ended December 31, 2024 2023 U.S. federal statutory tax 21.00 % 21.00 % State tax, net of federal benefit 4.61 7.45 Change in valuation allowance ( 20.39 ) ( 29.10 ) Stock-based compensation ( 2.17 ) ( 2.25 ) Tax credits 2.23 2.96 IPR&D ( 5.34 ) — Other 0.06 ( 0.06 ) Effective income tax rate 0.00 % 0.00 % 122 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) The principal components of the Company’s net deferred tax assets were as follows (in thousands), noting certain prior year items were reclassified to conform to the current year presentation: Year Ended December 31, 2025 2024 Deferred tax assets: Net operating loss carryforward $ 242,841 $ 176,298 Tax credit carryforward 42,501 37,611 Capital loss carryforward 14,585 14,705 Accrued liabilities and allowances 3,070 3,818 Property and equipment 10,758 10,551 Intangibles capitalized for tax 30,107 5,582 Capitalized research and development 59,709 82,389 Investment basis difference 7,761 7,820 Lease liability 14,134 16,486 Stock-based compensation 7,893 10,036 Other 819 1,061 Gross deferred tax assets 434,178 366,357 Valuation allowance ( 428,947 ) ( 359,440 ) Deferred tax assets, net of valuation allowance 5,231 6,917 Deferred tax liabilities: Operating lease right-of-use assets ( 5,231 ) ( 6,917 ) Deferred tax liabilities ( 5,231 ) ( 6,917 ) Net deferred tax assets $ — $ — The changes in the Company’s valuation allowance were as follows (in thousands): Year Ended December 31, 2025 2024 Beginning balance $ 359,440 $ 248,420 Change charged to income tax expense 69,507 111,020 Ending balance $ 428,947 $ 359,440 The One Big Beautiful Bill Act (“OBBBA”) enacted on July 4, 2025, introduced notable changes to the U.S. Internal Revenue Code, including immediate expensing of domestic Section 174 costs. Section 174 costs are expenditures which represent research and development costs that are incident to the development or improvement of a product, process, formula, invention, computer software or technique. As previously required under the Tax Cuts and Jobs Act, the Company capitalized research and development expenditures in the years ended December 31, 2022 through December 31, 2024. With the enactment of OBBBA, the Company began deducting Section 174 costs in 2025. As of December 31, 2025, the Company has a deferred tax asset of $ 59.7 million related to capitalized Section 174 expenditures. As of December 31, 2025 and 2024, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $ 868.6 million and $ 599.2 million, respectively, which were available to reduce future taxable income and do not expire. The Company also had U.S. state NOL carryforwards of $ 876.5 million that begin to expire in 2038 and foreign carryforwards of $ 7.5 million that do not expire. The Company had gross U.S. federal and state tax credits of $ 48.6 million and $ 43.6 million as of December 31, 2025 and 2024, respectively, which may be used to offset future tax liabilities. The federal NOL carryforward period is indefinite, while the tax credits will begin to expire in 2039. The attributed carryforwards may become subject to annual limitations in the event of certain cumulative changes in the ownership interest of significant stockholders. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. As of both December 31, 2025 and 2024, the Company had a capital loss carryforward of $ 52.5 million, which will expire in 2028. The Company maintains a full valuation allowance on its net U.S. deferred tax assets. The assessment regarding whether a valuation allowance is required considers the evaluation of both positive and negative evidence when concluding 123 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) whether it is more likely than not that deferred tax assets are realizable. In making this assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative loss in recent years and its forecasted losses in the near-term as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, Accounting for Income Taxes (“ASC 740”), the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its U.S. net deferred tax assets will be maintained. The valuation allowance relates primarily to net U.S. deferred tax assets from net operating loss carryforwards, research and development tax credit carryforwards, research and development expenses and intangibles capitalized and amortized for tax but deducted for GAAP. The Company will continue to assess the realizability of its deferred tax assets and adjust the valuation allowance as required by ASC 740. In connection with the October 2024 acquisition of ImmPACT stock, the Company recorded U.S. deferred tax assets of $ 39.6 million, which are mainly related to capitalized research costs and tax attribute carryforwards. The deferred tax assets were considered not more likely than not to be realized and therefore were fully offset by a valuation allowance of $ 39.6 million. As of December 31, 2025 and 2024, the Company has an Israeli subsidiary with deferred tax assets of $ 1.8 million and $ 1.4 million, respectively, which are mainly related to tax attribute carryforwards. These deferred tax assets are also fully offset by a valuation allowance. The U.S. Company is not dependent on repatriation from its foreign operations to support its liquidity needs. The undistributed earnings of the Company’s foreign operations are intended to be permanently reinvested in those operations. U.S. income taxes have not been recognized on any undistributed earnings that are intended to be permanently reinvested. It is not practical at this time to estimate the additional tax that may become payable upon the eventual repatriation of these amounts, but it is not expected to be material. The Company evaluates its uncertain tax positions based on a determination of whether it is more likely than not such position will be sustained based upon its technical merits and upon examination by the relevant income tax authorities with all facts known. The Company applies judgment in its measurement of an uncertain tax position recorded in its consolidated financial statements and tax return. As of December 31, 2025 and 2024, the Company has an unrecognized tax benefit (“UTB”) of $ 3.5 million and $ 3.7 million, respectively, as a reduction to the deferred tax asset. If recognized, it would have no impact to our effective tax rate as we have a full valuation allowance. There are no penalties or accrued interest recorded in the consolidated financial statements. The following tab le summarized changes to the Company’s unrecognized tax benefits (in thousands): Year Ended December 31, 2025 2024 Beginning balance $ 3,659 $ 400 Additions based on tax position related to the current year — 1,625 Adjustments based on prior year tax positions ( 202 ) 1,634 Ending balance $ 3,457 $ 3,659 The Company files income tax returns in the U.S. federal, various state jurisdictions and Israel. The Company is generally subject to examination by the U.S. federal and local income tax authorities for all tax years in which a loss carryforward is available. The Company is currently not under examination by the Internal Revenue Service or other jurisdictions for any tax years. 16. Net Loss Per Share Basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include unvested RSUs, unvested PSUs and options to purchase common stock, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. Shares subject to options to purchase common stock, unvested RSUs and unvested PSUs were all excluded from consideration in the calculation of diluted net loss per share in all periods presented due to their anti-dilutive effects. 124 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) 17. Employee Benefit Plan In January 2019, the Company adopted a 401(k) retirement and savings plan (the “401(k) Plan”) covering all of its employees. The 401(k) Plan allows employees to make pre- and post-tax contributions up to the maximum allowable amount set by the IRS. Beginning in 2022, the Company sponsors a defined-contribution savings plan with matching 401(k) contributions based upon the amount of the employees’ contributions subject to certain limitations. The Company made matching contributions to the 401(k) Plan on behalf of participants of $ 0.8 million, $ 1.0 million and $ 1.2 million for the years ended December 31, 2025, 2024 and 2023 , respectively. 18. Commitments and Contingencies Collaboration and License Agreements The Company has entered into certain collaboration and license agreements, including those identified in Note 4, License, Collaboration and Success Payment Agreements above, with third parties that include the funding of certain development, manufacturing and commercialization efforts with the potential for future milestone and royalty payments upon the achievement of pre-established developmental, regulatory and/or commercial milestones. The Company’s obligation to fund these efforts is contingent upon continued involvement in the programs and/or the lack of any adverse events that could cause the discontinuance of the programs, including termination of such agreements. Due to the nature of these agreements, the future potential payments are inherently uncertain, and accordingly no amounts had been recorded for the potential future achievement of these targets as of December 31, 2025 and 2024. 19. Related-Party Transactions In September 2021, the Company entered into a sublease with Sonoma (“Sonoma Sublease”), with whom the Company has common stockholders with board seats, whereby the Company agreed to sublease approximately 18,000 square feet of space in South San Francisco, California currently leased by the Company. Dr. Klausner, the Chair of the Company’s board of directors, also serves as Board Chair of the board of directors of Sonoma. As a part of the Sonoma Sublease, a $ 4.6 million tenant improvement contribution payment was made by Sonoma, which is recognized over the term of the Sonoma Sublease. As of December 31, 2025 and 2024, there were accrued liabilities and other current liabilities of $ 2.5 million and $ 0.5 million, respectively, a nd as of December 31, 2025 and 2024, there were other non-current lia bilities of zero and $ 2.5 million, respectively, in connection with the Sonoma Sublease. Total operating income from Sonoma and income solely attributable to the Sonoma Sublease are shown in the table below (in thousands). Total operating income includes income attributable to the sublease, as well as additional operating fees recognized in “other operating income, net” such as common area maintenance charges. See Note 11, Leases , for more detail on the Sonoma Sublease. Year Ended December 31, 2025 2024 2023 Sonoma other operating income, net $ 2,740 $ 2,838 $ 2,592 Sonoma sublease income $ 1,861 $ 1,861 $ 1,861 In connection with the SPA, ARCH Venture XIII, L.P. participated as a Purchaser by acquiring approximately 0.9 million shares of common stock for aggregate gross proceeds to the Company of $ 12.5 million at a purchase price of $ 13.32 per share. ARCH Venture Fund XIII, L.P. filed a Form 3 in July 2025 stating it beneficially owned greater than 10 % of the Company’s outstanding common stock as of that date. See Note 13, Stockholders’ Equity , for additional information regarding the SPA. 20. Segment The Company reports segment information in accordance with the management approach, which reflects the internal reporting utilized by the Chief Operating Decision Maker (“CODM”), the Company’s President and Chief Executive Officer. Based on the information used by the CODM to allocate resources and assess the Company’s performance, the Company has determined it operates in one segment. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. Prior period segment information has been recast to reflect the manner in which financial information is currently reviewed by the CODM to allocate resources and assess performance, conforming to the current period presentation. 125 Table of Contents Lyell Immunopharma, Inc. Notes to Consolidated Financial Statements—(Continued) The CODM evaluates the performance of the Company’s sole reportable segment based on net income or loss that also is reported on the consolidated statements of operations and comprehensive loss as net income or loss. The table below details the Company’s segment net loss, significant expenses, and other segment items (in thousands). The measure of segment assets is reported on the consolidated balance sheets as total assets. Year Ended December 31, 2025 2024 2023 Revenue $ 36 $ 61 $ 130 Less: Technical operations 47,202 46,102 49,851 Clinical development 36,671 38,561 27,241 Support functions 25,737 29,870 34,096 Lease costs 16,643 16,885 14,788 Operations management 13,106 14,145 22,814 Research activities 11,038 25,284 33,309 Other segment items (1) 124,087 172,208 52,663 Net loss $ 274,448 $ 342,994 $ 234,632 1. Includes stock-based compensation, depreciation, other operating income, net, acquired in-process research and development, impairment of long-lived assets, interest income, net, other (expense) income, net, and impairment of other investments. Total expenditures for additions to the Company’s property and equipment, net were $ 0.6 million, $ 0.6 million and $ 1.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. The Company’s long-lived assets as of December 31, 2025 and 2024 are located in the United States. 21. Subsequent Events Pursuant to the SPA, the Company exercised the Put Right following achievement of the applicable milestone and, on March 6, 2026, the Company sold and issued 1,952,360 shares of common stock at a purchase price per share of $ 25.61 at the Milestone Closing, for gross proceeds of approximately $ 50.0 million. 126 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.