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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-01 · 53 added, 166 removed, 180 unchanged (55% of the section changed)

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Factors that could cause or contribute to these differences include those under “Risk Factors” included in Part I, Item 1A and under “Special Note Regarding Forward-Looking Statements” or in other parts of this Annual Report on Form 10-K.

All share amounts presented in this Item 7 give effect to the 1-for-15 reverse stock split of our outstanding shares of common stock that occurred on January 31, 2024.

We have operated as a clinical-stage oncology-focused cell therapy company developing adoptive TCR-T cell therapy, designed to treat multiple solid tumor types in large cancer patient populations with unmet clinical needs.

We were working to leverage our cancer hotspot mutation TCR library and our proprietary, non-viral Sleeping Beauty gene transfer platform to design and manufacture patient-specific cell therapies that target neoantigens arising from shared tumor-specific mutations in key oncogenic genes, including KRAS , TP53 and EGFR .

In collaboration with the MD Anderson Cancer Center, or MD Anderson, we were enrolling and treating patients for a Phase 1/2 clinical trial which was evaluating 12 TCRs reactive to mutated KRAS , TP53 and EGFR from our TCR library for the investigational treatment of non-small cell lung, colorectal, endometrial, pancreatic, ovarian and bile duct cancers, which we refer to as our TCR-T Library Phase 1/2 Trial.

We have not generated any product revenue and have incurred significant net losses in each year since our inception.

For the year ended December 31, 2023, we had a net loss of $35.1 million, and as of December 31, 2023, we have incurred approximately $915.8 million of accumulated deficit since our inception in 2003.

We expect to continue to incur significant operating expenditures and net losses for the foreseeable future.

All share amounts presented in this Item 7 give effect to the 1-for-15 reverse stock split and the 1-for-10 second reverse stock split of our outstanding shares of common stock that occurred on January 31, 2024 and July 17, 2024, respectively.

On October 10, 2024, we announced our continued progress and evaluation of our internally developed small molecule oral obesity program.

The aim of this program is to develop a drug for obesity with a differentiated profile relative to currently marketed and in development oral and injectable products.

We have also operated as a clinical-stage oncology-focused cell therapy company developing adoptive TCR-T cell therapy, designed to treat multiple solid tumor types in large cancer patient populations with unmet clinical needs.

On August 14, 2023, we announced a strategic reprioritization of our business and wind down of our TCR-T Library Phase 1/2 Trial.

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We continue to explore strategic alternatives, including, but not limited to, an acquisition, merger, reverse merger, sale of assets, strategic partnerships, capital raises or other transactions.

We have engaged Cantor Fitzgerald & Co., or Cantor, to act as strategic advisor for this process.

In addition, on August 14, 2023, we announced that we had provided the requisite notice to the National Cancer Institute, or the NCI, to terminate the Cooperative Research and Development Agreement, dated January 9, 2017, by and among us, the NCI and Intrexon Corporation, or Intrexon, as amended (such agreement referred to herein as the CRADA), pursuant to its terms, effective October 13, 2023.

In addition, on October 27, 2023, we provided notice of termination of the Patent License with the NCI, effective December 26, 2023.

We engaged Cantor Fitzgerald & Co., or Cantor, to act as strategic advisor for this process.

We have not generated any product revenue and have incurred significant net losses in each year since our inception.

For the year ended December 31, 2024, we had a net loss of $4.6 million, and as of December 31, 2024, we have incurred approximately $920.4 million of accumulated deficit since our inception in 2003.

We expect to continue to incur significant operating expenditures and net losses for the foreseeable future.

2024 Developments

Obesity Program

On October 10, 2024, we announced our continued progress and evaluation of our internally developed small molecule oral obesity program.

The aim of this program is to develop an oral drug for obesity and other metabolic disorders with a differentiated profile relative to currently marketed and in development oral and injectable products.

We believe our small molecule product candidates are distinct in that they do not rely on hormonal manipulation, which is common with many obesity treatments.

We aim to develop an oral obesity compound that addresses many of the shortcomings of injectable GLP-1 receptor agonists including preserving lean muscle mass.

We engaged a contract development and manufacturing organization or CMDO to manufacture active pharmaceutical ingredients for our small molecule product candidates and initiated in vitro testing of our candidates in the fourth quarter 2024.

The ongoing in vitro study aims to evaluate the impact of ALN1001 and its derivatives on lipid deposition and gene expression.

This study evaluates if genes related to thermogenic activity, lipid metabolism, and energy regulation are activated or deactivated by treatment, to determine if these compounds positively affect fat and energy metabolism.

The results of this study, which are expected early second quarter of 2025, will provide critical insights into the development strategy for ALN1001 and its derivatives for obesity, metabolic disorders, and inflammation.

Drug development candidates most effective in increasing metabolic activity and reducing fat accumulation may be advanced to evaluation of the compounds in rodent models of obesity.

As is standard in the industry, if the aforementioned in vitro study is successful, we plan to conduct a proof-of-concept diet-induced obesity or DIO mouse study to validate our mechanism of action by the third quarter of 2025 before proceeding to Investigational New Drug or IND Application enabling studies.

Our ability to execute on this plan is dependent on study results and our ability to raise additional capital or partner these assets with other companies or research institutions.

TCR-T Library Phase 1/2 Trial

Eight patients were treated and evaluated in our TCR-T Library Phase 1/2 Trial.

Eight patients were treated and evaluated in our TCR-T Library Phase 1/2 Trial from 2022-2023.

Patients with pancreatic (3), colorectal (4) and non-small cell lung cancer (1) were treated, with certain pancreatic and colorectal patients also having lung metastases.

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The total overall response rate was 13% and disease control rate was 87% in evaluable patients with advanced, metastatic, refractory solid tumors (see Figure A).

Disease control was measured by objective responses and stable disease.

Increased secretion of interferon-gamma relative to baseline was detected in all patients' serum post-cell transfer suggesting recognition of the tumor by the infused TCR-T cells.

Persistence of TCR-T cells in peripheral blood was detected in all evaluable patients at their last follow-up, including up to six months in one patient.

Infiltration of TCR-T cells into the tumor was also detected in three samples where a fresh biopsy was collected suggesting homing to the tumor microenvironment.

All patients have progressed or withdrawn from the trial and long-term follow-up is ongoing for a subset of patients with no further intervention per the treatment protocol.

This trial established proof-of-concept that Sleeping Beauty TCR-T cells can result in objective clinical responses and recognize established tumors in vivo .

Despite the encouraging TCR-T Library Phase 1/2 Trial data, based on the substantial cost to continue development and the current financing environment, we announced in August 2023 that we would not pursue any further development of our clinical programs.

Despite the encouraging TCR-T Library Phase 1/2 Trial data, based on the substantial

cost to continue development and the current financing environment, we announced in August 2023 that we would not pursue any further development of our clinical programs.

hunTR® Platform

We have discovered multiple proprietary TCRs targeting driver mutations through our hunTR TCR discovery platform.

In addition to TCRs that recognize KRAS and TP53 mutations similar to those licensed from the NCI, we identified additional TCRs that bind to other driver

mutations and TCRs that are restricted to additional HLAs.

In addition to TCRs that recognize KRAS and TP53 mutations similar to those licensed from the NCI, we identified additional TCRs that bind to other driver mutations and TCRs that are restricted to additional HLAs.

We believe that the hunTR library has the potential to allow for the treatment of a large patient population.

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We continue to explore strategic alternatives, which may include but are not limited to, an acquisition, merger, reverse merger, sale of assets, strategic partnerships, capital raises or other transactions.

In connection with the strategic reprioritization, we reduced our workforce by approximately 95% to date in order to streamline the organization and to maximize our cash runway.

Nasdaq Delisting Determination

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As such, the listing matter was closed.

Pursuant to Nasdaq Listing Rule 5815(d)(4)(B), we will be subject to a mandatory panel monitor for the one-year period through February 16, 2025.

Pursuant to Nasdaq Listing Rule 5815(d)(4)(B), we were subject to a mandatory panel monitor for the one-year period which was completed on February 16, 2025.We are no longer subject to monitoring by the panel.

Financial Overview

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Other Income (Expense)

Other income (expense) consists primarily of interest expense associated with our amended Loan and Security Agreement (as defined below), interest income on our cash balances and sublease income.

Other income (expense) consists primarily of interest expense associated with our amended Loan and Security Agreement, interest income on our cash balances and sublease income.

Results of Operations for the Fiscal Years ended December 31, 2024 and 2023

Year Ended December 31,

Collaboration revenue

($ in thousands)

Operating expenses:

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Other income (expense), net

Collaboration Revenue

Collaboration revenue during the years ended December 31, 2023 and 2022 were as follows:

Revenue during the years ended December 31, 2024 and 2023 were as follows:

Year Ended December 31,

($ in thousands)

Collaboration revenue

Collaboration revenue during the year ended December 31, 2023 was $5 thousand compared to $2.9 million during the year ended December 31, 2022.

The decrease was primarily due to $2.9 million milestone revenue earned under the Solasia License and Collaboration Agreement for the first commercial sale of darinaparsin, which did not recur in the year ended December 31, 2023.

Revenue during the year ended December 31, 2024 was $10 thousand compared to $5 thousand during the year ended December 31, 2023.

Research and Development Expenses

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Research and development expenses

Research and development expenses for the year ended December 31, 2023 decreased by $8.7 million when compared to the year ended December 31, 2022 primarily due to lower program expenses of $1.1 million as a result of the wind down of our clinical activities, a $3.0 million decrease in employee-related expenses due to our reduced headcount, an accrual adjustment related to our de-prioritized clinical programs of $1.0 million, a $0.9 million decrease in facilities costs following the termination of our leases, a one-time $2.5 million milestone payment to MD Anderson in 2022 under the terms of our patent and technology license agreement that did not recur in 2023 and a $0.2 million decrease in consulting costs due to the reduced scope of activities.

Our clinical stage projects included our TCR-T Library Phase 1/2 Trial evaluating TCRs from our library for the investigational treatment of non-small cell lung, colorectal, endometrial, pancreatic, ovarian and bile duct cancers, which we are currently in the process of winding down.

Research and development expenses for the year ended December 31, 2024 decreased by $15.9 million when compared to the year ended December 31, 2023 primarily due to lower program expenses of $8.5 million as a result of the wind down of our clinical activities, a $4.5 million decrease in employee-related expenses due to our reduced headcount, an accrual adjustment related to our de-prioritized clinical programs of $0.2 million, a $2.5 million decrease in facilities costs following the termination of our leases.

General and Administrative Expenses

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General and administrative expenses

General and administrative expenses for the year ended December 31, 2023 decreased by $0.9 million as compared to the year ended December 31, 2022, primarily due to a $1.1 million decrease in employee-related expenses as a result of our reduced headcount and a $0.4

million decrease in insurance fees, partially offset by a $0.6 million increase in consulting and professional services expenses related to higher legal costs.

General and administrative expenses for the year ended December 31, 2024 decreased by $7.7 million as compared to the year ended December 31, 2023, primarily due to a $7.5 million decrease in consulting and employee-related expenses as a result of our reduced headcount and a $0.2 million decrease in facility cost due to the reduction in depreciation expenses and rent as a direct result of the lease termination in the prior period.

Gain on lease modification and termination

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Gain on lease modification and termination

Gain on lease modification and termination during the year ended December 31, 2023 was $0.3 million as compared to $0.1 million during the year ended December 31, 2022.

Gain on lease modification and termination during the year ended December 31, 2023 was $0.3.

As a result of real estate lease terminations during 2023, the associated lease liabilities and right-of-use assets were remeasured based on the revised lease payments, resulting in a gain of $0.3 million.

As a result of a real estate lease modification during 2022, the associated lease liability and right-of-use asset were remeasured based on the revised lease payments, resulting in a gain of $0.1 million.

Restructuring costs

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Other income, net

Total other expense, net for the year ended December 31, 2023 decreased by $1.8 million as compared to the year ended December 31, 2022 due to lower interest expense associated with our amended Loan and Security Agreement, as defined below, of $1.2 million and increased interest income of $0.5 million recognized during the year ended December 31, 2023 as a result of higher interest rates earned on our cash balances.

Total other income (expense), net for the year ended December 31, 2024 increased by $1.00 million as compared to the year ended December 31, 2023 primarily due to no interest expense associated with our former amended Loan and Security Agreement.

Liquidity and Capital Resources

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To date, we have financed our operations primarily through public offerings of our common stock, private placements of our convertible equity securities, term debt and collaborations.

Through December 31, 2023, we have received an aggregate of $729.2 million from issuances of equity.

On August 14, 2023, we announced a strategic reprioritization of our business and wind down of our TCR-T Library Phase 1/2 Trial.

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We continue to explore strategic alternatives, including, but not limited to, an acquisition, merger, reverse merger, sale of assets, strategic partnerships, capital raises or other transactions.

We have engaged Cantor to act as strategic advisor for this process.

We engaged Cantor to act as strategic advisor for this process.

We follow the guidance of Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements - Going Concern , in order to determine whether there is substantial doubt about our ability to continue as a going concern for one year after the date our financial statements are issued.

Given our current development plans and cash management efforts, we anticipate that our cash resources will be sufficient to fund operations into the third quarter of 2024.

Given our current development plans and cash management efforts, we anticipate that our cash resources will be sufficient to fund operations into the second quarter of 2025.

Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing, as to which no assurances can be given.

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This forecast of cash resources and planned operations is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors.

2022 Public Offering

On November 29, 2022, we entered into an underwriting agreement, or the Underwriting Agreement, with Cantor Fitzgerald & Co., or the Underwriter, as the sole underwriter, relating to the issuance and sale in an underwritten offering, or the Offering, of 1,615,247 shares of our common stock, or the Firm Shares, to the Underwriter at a price of $9.2865 per share.

Our net proceeds from the Offering were $14.7 million (before accounting for the partial exercise of the Underwriter's option as described below) after deducting underwriting discounts and commissions and offering expenses payable by us.

Under the terms of the Underwriting Agreement, we granted the Underwriter an option, exercisable for 30 days, to purchase up to an additional 242,287 shares of common stock, or, together with the Firm Shares, the Shares, at the same price per share as the Firm Shares.

On January 5, 2023, the Underwriter partially exercised its option to purchase 14,420 shares of common stock.

2022 Equity Distribution Agreement

On August 12, 2022, we entered into an Equity Distribution Agreement, or the Equity Distribution Agreement, with Piper Sandler & Co., or Piper Sandler, pursuant to which we can offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50 million through Piper Sandler as our sales agent in an “at the market offering.” Piper Sandler will receive a commission of 3.0% of the gross proceeds of any common stock sold under the Equity Distribution Agreement.

During the years ended December 31, 2023 and 2022, there were no sales of our common stock under the Equity Distribution Agreement.

2021 Loan and Security Agreement

On August 6, 2021, we entered into a Loan and Security Agreement, or the Loan and Security Agreement, with Silicon Valley Bank, or SVB.

The Loan and Security Agreement provided for an initial term loan of $25.0 million funded at the closing, or the Term A Tranche, with an additional tranche of $25.0 million available if certain funding and clinical milestones were met by August 31, 2022.

The SVB Facility and related obligations under the Loan and Security Agreement were secured by substantially all of our properties, rights and assets, except for our intellectual property (which was subject to a negative pledge under the Loan and Security Agreement).

In addition, the Loan and Security Agreement contained customary representations, warranties, events of default and covenants.

Effective December 28, 2021, we entered into the First Amendment to the Loan and Security Agreement.

Under the terms of the First Amendment, the additional tranche, which remained unfunded, was eliminated, leaving only the Term A Tranche, which is referred to as the SVB Facility.

The SVB Facility bore interest at a floating rate per annum on the outstanding loans, payable monthly, at the greater of (a) 7.75% and (b) the current published U.S.

prime rate, plus a margin of 4.5%.

Commencing on September 1, 2022, aggregate outstanding borrowings became repayable in twelve consecutive, equal monthly installments of principal plus accrued interest.

All outstanding obligations under the amended Loan and Security Agreement were due and payable on August 1, 2023.

We also owed SVB $1.4 million as a final payment, or the Final Payment.

Effective March 30, 2023, we entered into a Third Amendment to the Loan and Security Agreement, or the Third Amendment.

Under the terms of the Third Amendment, we were no longer required to maintain all of our operating accounts, depository accounts and excess cash with SVB, and were instead only required to maintain a single operating or depository account at SVB.

The Third Amendment also modified the cash collateralization requirement, such that we were required to cash collateralize the entire sum of the outstanding principal amount of the SVB Facility plus an amount equal to the Final Payment, which amount was to be reduced commensurate with each regularly scheduled monthly payment of principal and interest on the SVB Facility.

On May 1, 2023, we paid SVB all amounts outstanding under the amended Loan and Security Agreement, comprised of the entire outstanding principal amount under the SVB Facility, all accrued and unpaid interest and the Final Payment.

The payment was subject to a prepayment premium of 2.00%.

In connection with our entry into the Loan and Security Agreement in August 2021, we issued to SVB warrants to purchase (i) up to 28,856 shares of our common stock, in the aggregate, and (ii) up to an additional 28,856 shares of Common Stock, in the aggregate, in the event we achieved certain clinical milestones, in each case at an exercise price per share of $33.30.

In connection with our entry into the First Amendment in December 2021, we amended and restated the warrants issued to SVB.

As amended and restated, the warrants are for up to 43,307 shares of our common stock, in the aggregate, with an exercise price of $17.40 per share, or the SVB Warrants.

The SVB Warrants expire on August 6, 2031.

The following table summarizes our net increase (decrease) in cash and cash equivalents for the years ended December 31, 2024 and 2023:

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($ in thousands)

Net cash provided by (used in):

Net cash flows in:

Operating activities

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Net cash used in operating activities for the year ended December 31, 2024 was $5.0 million, as compared to $30.1 million for the year ended December 31, 2023.

The net cash used in operating activities for the year ended December 31, 2023 was primarily a result of our net loss of $35.1 million, adjusted for $11.3 million of non-cash items such as depreciation, property and equipment and right-of-use assets impairment, stock-based compensation and a decrease in the carrying amount of right-of-use assets, an increase in prepaid expenses of $1.4 million and decreases in accounts payable of $0.8 million, accrued expenses of $4.0 million and lease liabilities of $0.6 million, offset by a decrease in non-current assets of $0.5 million.

The net cash used in operating activities for the year ended December 31, 2022 was primarily a result of our net loss of $37.7 million, adjusted for $7.6 million of non-cash items such as depreciation, stock-based compensation and a decrease in the carrying amount of right-of-use assets, a decrease in accounts receivable of $1.1 million and a decrease in prepaid expenses and other assets of $1.0 million, partially offset by a decrease in accrued expenses of $0.7 million and a decrease in lease liabilities of $0.5 million.

Net cash provided by investing activities was $1.3 million for the year ended December 31, 2023 as compared to net cash used in investing activities of $0.2 million for the year ended December 31, 2022.

The increase in net cash provided by investing activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to proceeds from the disposal of property and equipment of $1.5 million, partially offset by purchases of property and equipment of $0.2 million.

Net cash used in financing activities was $18.1 million for the year ended December 31, 2023 compared to $6.4 million of net cash provided by financing activities for the year ended December 31, 2022.

The increase in net cash used in financing activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the repayment of long-term debt of $18.1 million and debt extinguishment costs of $0.1 million, partially offset by proceeds from the issuance of common stock of $0.1 million.

The $6.4 million provided by financing activities during the year ended December 31, 2022 related primarily to $14.7 million in net proceeds from the issuance of common stock (before accounting for the partial exercise of the Underwriter's option), offset by $8.3 million of repayments of long-term debt.

The net cash used in operating activities for the year ended December 31, 2024 was primarily a result of our net loss of $4.6 million, adjusted for $4.7 million of non-cash items such as depreciation, property and equipment and right-of-use assets impairment, stock-based compensation and a $2.8 million decrease in accrued expenses, a decrease in accounts payable of $0.6 million, a decrease of $1.4 million in prepaid expenses and $0.5 million decrease in other current assets and accounts receivables of $7 thousand.

Net cash provided by investing activities was $0 million for the year ended December 31, 2024 as compared to net cash provided in investing activities of $1.3 million for the year ended December 31, 2023.

The decrease is related to no investing activities during the current period as compared to the prior period.

Net cash used in financing activities was $0 million for the year ended December 31, 2024 compared to $18.1 million of net cash used by financing activities for the year ended December 31, 2023.

The decrease was primarily related to the repayment of long-term debt in 2023 that did not recur in 2024.

Operating Capital and Capital Expenditure Requirements

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As of December 31, 2024, we had approximately $1.1 million of cash and cash equivalents.

In light of our announced strategic reprioritization and concurrent exploration of strategic alternatives, including our decision to halt work on our TCR-T Library Phase 1/2 Trial, our development programs and reducing our workforce, we anticipate our cash resources will be sufficient to fund our operations into the third quarter of 2024.

Our streamlined and cost efficiency efforts, in light of our 2023 announced strategic reprioritization , we anticipate our cash resources will be sufficient to fund our operations into the second quarter of 2025.

In order to continue our operations beyond our forecasted runway, including, if necessary, to continue to explore strategic alternatives, we will need to raise additional capital, and we have no committed sources of additional capital at this time.

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If adequate additional funds are not available when required, we may be unable to persist as a going concern for sufficient time to identify or execute on any strategic alternatives.

Working capital as of December 31, 2023 was $6.3 million, consisting of $8.3 million in current assets and $2.0 million in current liabilities.

Working capital as of December 31, 2022 was $15.7 million, consisting of $39.9 million in current assets and $24.2 million in current liabilities.

Operating Leases

On March 12, 2019, we entered into a lease agreement for office space in Houston, Texas at MD Anderson through April 2021.

On October 15, 2019, we entered into another lease agreement for additional office and laboratory space in Houston through February 2027.

On April 7, 2020, we entered into amendments to our existing lease to lease additional office and laboratory space in Houston through February 2027.

On December 15, 2020, we entered into another lease in Houston with MD Anderson which provided us additional office and laboratory space through April 2028.

In April 2022, we modified our real estate lease agreement executed on December 15, 2020 with MD Anderson.

The modification reduced our leased space from 18,111 square feet to 3,228 square feet.

As a result, the associated lease liability and right-of-use asset were remeasured to $0.4 million based on revised lease payments.

In April 2023, we executed an agreement to terminate the lease for our remaining office space in Boston, Massachusetts.

Under the terms of the lease termination, we were required to pay a $0.2 million termination fee.

Additionally, we have been released from a sub-sublease of certain of our office space in Boston signed in June 2022 as it has been assigned to the Boston office space's landlord in conjunction with the agreement to terminate the lease for the remaining office space.

In August 2023, in accordance with the lease agreement executed on December 15, 2020, we provided notification to the landlord to terminate office space of 3,228 square feet in Houston, Texas.

As a result, the associated lease liability and right-of-use asset were remeasured to $19 thousand, reflecting the revised lease payments and term end date of November 2023.

On November 1, 2023, we and MD Anderson, as landlord, agreed to mutually terminate the leases dated October 15, 2019 and April 7, 2020, which represent office space totaling 14,037 square feet, effective November 15, 2023.

As a result, we agreed to make a final payment of $0.1 million to the landlord.

As of December 31, 2023, we had terminated all operating leases and therefore have no remaining lease commitments, other than a short-term lease.

As of December 31, 2024, we have no lease commitments, other than a short-term lease.

Royalty and License Fees

On May 28, 2019, we entered into the Patent License with the NCI.

The terms of the Patent License required us to pay the NCI minimum annual royalties in the amount of $0.3 million, which would be reduced to $0.1 million once the aggregate minimum annual royalties paid by us equaled $1.5 million.

For the year ended December 31, 2023, we recognized $0.3 million in royalty payments under the Patent License, and we recognized $0.3 million in royalty payments for the year ended December 31, 2022.

As of December 31, 2023, we paid a total of $0.8 million in minimum annual royalty payments under the Patent License.

Pursuant to the Patent License, we were also required to make performance-based payments contingent upon the successful completion of clinical and regulatory benchmarks relating to the licensed products.

Of such payments, the aggregate potential benchmark payments were $4.3 million, of which aggregate payments of $3.0 million were due only after marketing approval in the United States or in Europe, Japan, Australia, China or India.

The first benchmark payment of $0.1 million was due upon the initiation of our TCR-T Library Phase 1/2 Trial.

In addition, we were required to pay the NCI one-time benchmark payments following aggregate net sales of licensed products at certain aggregate net sales ranging from $250.0 million to $1.0 billion.

The aggregate potential amount of these benchmark payments was $12.0 million.

No payments were made during the year ended December 31, 2023, compared to payments of $0.1 million during the year ended December 31, 2022.

On October 27, 2023, we provided notice of termination of the Patent License with the NCI, effective December 26, 2023.

On October 5, 2018, we entered into the License Agreement with PGEN.

Under the License Agreement, we are obligated to pay PGEN an annual licensing fee of $0.1 million expected to be paid through the term of the agreement and we have also agreed to reimburse certain historical costs of PGEN up to $1.0 million.

Pursuant to the terms of the License Agreement, we were responsible for contingent milestone payments totaling up to an additional $52.5 million for each exclusively licensed program upon the initiation of later stage clinical trials and upon the approval of exclusively licensed products in various jurisdictions.

In addition, we were also required to pay Precigen tiered royalties ranging from low-single digits to high-single digits on the net sales derived from the sale of any approved IL-12 products and CAR products as well as royalties ranging from low-single digits to mid-single digits on the net sales derived from the sales of any approved TCR products, up to a maximum royalty amount of $100.0 million in the aggregate.

We were also required to pay Precigen 20% of any sublicensing income received by us relating to the licensed products.

We were also responsible for all development costs associated with each of the licensed products.

Precigen was required to pay us royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of Precigen's CAR products, up to a maximum royalty amount of $100.0 million.

Pursuant to the A&R License Agreement, all royalty and milestone obligations between us and Precigen have been removed, and annual license payments due to Precigen have been reduced from $100 thousand to $75 thousand.

For the years ended December 31, 2023 and 2022, we made licensing fee payments in accordance with the terms of the agreement.

We have discovered multiple proprietary TCRs targeting driver mutations through its hunTR TCR discovery platform, including many of the same KRAS and TP53 mutations as were licensed from the NCI.

On May 28, 2019, the Company entered into a Patent License with the NCI for exclusive worldwide rights to develop and commercialize certain engineered T-cell therapies targeting mutated KRAS, TP53, and EGFR neoantigens, as well as related manufacturing technologies.

The agreement included minimum annual royalties, milestone payments upon achieving clinical, regulatory, and sales benchmarks, and royalties on product sales.

The Company terminated the agreement effective December 26, 2023, after developing proprietary alternatives internally.

The Company incurred no expenses under this agreement in 2024, compared to $0.3 million in 2023.

In June 2022, Solasia Pharma K.

K., or Solasia, announced that darinaparsin had been approved from relapsed or refractory Peripheral T-Cell Lymphoma by the Ministry of Health, Labor and Welfare in Japan.

During the year ended December 31, 2023, we recorded collaboration revenue of $5 thousand for royalties on sales under the License and Collaboration Agreement, dated March 7, 2011, as amended on July 31, 2014 between Solasia and us, compared to $2.9 million in milestone revenue related to Solasia's achievement of certain sales-based milestones in Japan for the year ended December 31, 2022.

During the year ended December 31, 2024, the Company did not earn collaboration revenue and earned $10 thousand in royalty revenues on net sales under the Solasia License and Collaboration Agreement.

During the year ended December 31, 2023, the Company did not earn collaboration revenue and earned $5 thousand in royalty revenues on net sales under the Solasia License and Collaboration Agreement.

Critical Accounting Policies and Significant Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles or GAAP.

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

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• Income taxes.

Research and Development Costs / Clinical Trial Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses.

This process involves reviewing open contracts and purchase orders, communicating with our personnel and third-party vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs.

The majority of our service providers invoice us in arrears for services performed, on a predetermined schedule or when contractual milestones are met;

however, a few require advanced payments.

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

Examples of estimated accrued research and development expenses include fees paid to:

• CROs in connection with performing research services on our behalf and clinical trials;

• investigative sites or other providers in connection with clinical trials;

• vendors in connection with preclinical and clinical development activities;

• vendors related to product manufacturing, development, and distribution of preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage clinical trials on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense.

Payments under some of these contracts depend on factors such as the completion of clinical trial milestones.

In accruing service fees, we estimate the time period over

which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in changes to our previous estimates, which we considered reasonably reliable at the time.

During the year ended December 31, 2023, we recorded an accrual adjustment related to our de-prioritized clinical programs of $1.0 million.

Revenue Recognition from Collaboration Agreements

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If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.

up-front fees.

Contracts that include an option to acquire additional goods and/or services are evaluated to determine if such option provides a material right to the customer that it would not have received without entering into the contract.

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If not, the option is considered a marketing offer which would be accounted for as a separate contract upon the customer’s election.

The terms of our arrangements with customers typically include the payment of one or more of the following:

(i) non-refundable, up-front payment, (ii) development, regulatory and commercial milestone payments, (iii) future options and (iv) royalties on net sales of licensed products.

Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products.

We measure the transaction price based on the amount of consideration to which we expect to be entitled in exchange for transferring the promised goods and/or services to the customer.

We utilize the most likely amount method to estimate the amount of variable consideration, to predict the amount of consideration to which we will be entitled.

Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

At the inception of each arrangement that includes development and regulatory milestone payments, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method.

Milestone payments that are not within the control of us or the licensee, such as those dependent upon receipt of regulatory approval, are not considered to be probable of achievement until the triggering event occurs.

At the end of each reporting period, we reevaluate the probability of achievement of each milestone and any related constraint, and if necessary, adjust our estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, we recognize revenue upon the later of:

(i) when the related sales occur or (ii) when the performance obligation to which some or all of the payment has been allocated has been satisfied (or partially satisfied).

Consideration that would be received for optional goods and/or services is excluded from the transaction price at contract inception.

We allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis.

However, certain components of variable consideration are allocated specifically to one or more particular performance obligations in a contract to the extent both of the following criteria are met:

(i) the terms of the payment relate specifically to the efforts to satisfy the performance obligation or transfer the distinct good or service and (ii) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective of the standard whereby the amount allocated depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services.

We develop assumptions that require the use of judgment to determine the standalone selling price for each performance obligation identified in each contract.

The key assumptions utilized in determining the standalone selling price for each performance obligation may include forecasted revenue, development timelines, estimated research and development costs, discount rates, likelihood of exercise and probabilities of technical and regulatory success.

Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer.

For performance obligations that are satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress which depicts the performance in transferring control of the associated goods and/or services to the customer.

We use input methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.

Accounting for Stock-Based Compensation

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Such changes may lead to a significant change in the expense we recognize in connection with share-based payments.

Our assumptions are estimated as follows:

• the fair market value of our common stock is considered the quoted market price on Nasdaq;

• the expected volatility is based on the historical stock volatility of our common stock over a sufficient period of time equal to the expected term of the option;

• the expected term represents the period that our stock options are expected to be outstanding;

• the risk-free interest rate is based on the yields of U.S.

Treasury securities with maturities commensurate with the expected term of the award;

• we have not paid dividends on our common stock nor do we expect to pay dividends in the foreseeable future.

In preparing our financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis