Alaunos Therapeutics, Inc. 10-K

Item 1. Business BUSINESS OVERVIEW We are a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing next generation immuno-oncology platforms that leverage cell- and gene-based therapies to treat patients with cancer. We are developing platform technologies that utilize the immune system by employing innovative cell engineering and novel, controlled gene expression technologies designed to deliver safe and effective, cell and gene therapies for the treatment of multiple cancer types. Our major platform and priority is referred to as Sleeping Beauty and is based on the non-viral genetic engineering of immune cells using a transposon/transposase system that is intended to stably engineer T cells outside of the body for subsequent infusion. Our second platform is referred to as Controlled IL-12 and is designed to stimulate expression of interleukin 12, or IL-12, a master regulator of the immune system, in a controlled manner to focus the patient’s immune system to more effectively attack cancer cells. Using our Sleeping Beauty platform, we are developing T cell receptor, or TCR, T cell therapies to target neoantigens in solid tumors using two approaches, which we refer to as our “Library TCR-T Approach” and “our Personalized TCR-T Approach.” The Library TCR-T Approach uses third-party (allogeneic) TCRs that have been prepared before the recipient has been identified to genetically modify patient-derived T cells to redirect specificity to public, or shared neoantigens. The Personalized TCR-T Approach uses patient-derived (autologous) TCRs that are prepared from the recipient to genetically modify patient-derived T cells to redirect specificity to private neoantigens. It is anticipated that more than one TCR-T product with more than one specificity will be administered in the Personalized TCR-T Approach. In February 2021, the U.S. Food and Drug Administration, or the FDA, cleared our company-sponsored investigational new drug, or IND, application submitted for a Phase 1/2 clinical trial evaluating TCRs from our library for the investigational treatment of lung, cholangiocarcinoma, pancreatic, colorectal and gynecological cancers. Initially, six curated TCRs reactive to mutated KRAS and TP53 will be included in the clinical trial: however, we expect to expand the number of TCRs to be evaluated in our clinical trial. This clinical trial is being conducted in collaboration with The University of Texas MD Anderson Cancer Center, or MD Anderson, which will be the first site for the clinical trial. Under our Cooperative Research and Development Agreement, the National Cancer Institute, or NCI, is conducting a Phase 2 Personalized TCR-T clinical trial to evaluate autologous peripheral blood lymphocytes genetically modified with the Sleeping Beauty system to express private neoantigen-specific TCRs. The trial is designed to enroll patients with a broad range of solid tumors. The FDA has cleared the IND application submitted by the NCI for this clinical trial. However, enrollment in this clinical trial has been temporarily suspended due to issues internal to NCI and unrelated to our technology. The progress and timeline for this trial, including the timeline for dosing patients, are under the control of the NCI. We are developing chimeric antigen receptor, or CAR, T cell, or CAR + T, therapies targeting CD19 on malignant B cells using our Sleeping Beauty platform. We are advancing our so-called rapid personalized manufacture, or RPM, technology, in Greater China with Eden BioCell, Ltd., or Eden BioCell, our joint venture with TriArm Therapeutics, Ltd. RPM enables small numbers of T cells to be infused as soon as the day after gene transfer which is made possible by the genetic modification of resting T cells to express CAR and membrane bound IL-15, or mbIL15. Eden BioCell is leading the clinical development and commercialization of Sleeping Beauty -generated CD19-specific RPM CAR + T therapies using patient-derived (autologous) T cells in order to treat patients with relapsed or refractory CD19 + leukemias and lymphomas. In the fourth quarter of 2020, an IND was cleared by the Taiwan FDA for a Phase 1 clinical trial designed to evaluate safety and efficacy in this patient group. In our Phase 1 clinical trial being conducted in the United States, we plan to infuse donor-derived T cells after allogeneic bone marrow transplantation, or BMT, for recipients who have relapsed with CD19 + leukemias and lymphomas with our CD19-specific CAR + T therapies manufactured using our technology. 7 Table of Contents Our Controlled IL-12 platform is based on an engineered replication-incompetent adenovirus, referred to as Ad-RTS-hIL-12, plus veledimex as a gene delivery system to conditionally produce IL-12, a potent, naturally occurring anti-cancer protein, to treat patients with solid tumors. Our Controlled IL-12 platform allows us to deliver IL-12 in a tunable dose as the cytokine is under transcriptional control of the RheoSwitch Therapeutic System ® (RTS ® ). We have completed enrollment to all our Phase 1 and 2 clinical trials of patients with recurrent glioblastoma multiforme, or rGBM. These trials examine the effect of Controlled IL-12 as a monotherapy and in combination with blockade of the immune checkpoint protein PD-1. Dosing is ongoing in a Phase 2 clinical trial evaluating Ad-RTS-hIL-12 plus veledimex in combination with PD-1 antibody Libtayo ® (cemiplimab-rwlc) for the treatment of recurrent or progressive glioblastoma multiforme in adults. Data from our monotherapy and combination studies have been presented at major scientific conferences. OUR STRATEGY Our goal is to be an innovative immuno-oncology company that delivers safe and effective therapies that provide clinically transformative benefit for patients and long-term value for shareholders. Key elements of our strategy include: • Building an end-to-end TCR solution targeting solid tumors. We intend to build and strengthen our position in the field of T cell targeting solid tumors by investing significantly to optimize and expand our process development and manufacturing capabilities, creating an end-to-end, scalable solution. We intend to build this end-to-end solution to develop treatments using (i) TCR + T cells expressing third party (allogeneic) TCRs from a library, which we refer to as our Library TCR-T Approach and (ii) TCR + T cells expressing recipient-derived (autologous) TCRs, which we refer to as our Personalized TCR-T Approach. We plan to expand our library of allogeneic TCRs from internal research and third parties that target mutated KRAS, TP53 and EGFR pan-cancer neoantigens as a key part of our commitment to advance clinical development for the treatment of patients whose solid tumors have driver mutations. • Advancing our third generation CD19 CAR + T program. We believe our CD19 CAR + T therapies may help address the manufacturing and economic challenges of other CAR + T programs. Our CAR + T program targeting CD19 on malignant B cells was initially developed in collaboration with MD Anderson in the United States and will be increasingly led by Eden BioCell in Greater China. • Executing on the clinical trials of our Controlled IL-12 platform as both a monotherapy and in combination with immune checkpoint inhibitors. In our clinical trials, we have observed that Controlled IL-12 increases T cell activity in the tumor microenvironment in patients with rGBM and we will continue exploring partnership opportunities to continue developing Controlled IL-12 in GBM and other tumor types. • Delivering shareholder value through strategic business development and disciplined prioritization of our capital resources. As our programs advance to trials with potentially higher investment required, we will prioritize across our programs to ensure our capital resources are deployed in the optimal manner. In addition, where appropriate, we will seek and execute value-delivering partnerships with other companies. Partnerships are also a potentially important source of technology and innovation. We will seek scientifically focused collaborations that can further enhance our in-house capabilities and technologies. SLEEPING BEAUTY PLATFORM TECHNOLOGY We are pursuing non-viral genetic engineering technologies to develop two distinct therapies: addressing solid tumors via novel neoantigen-specific TCR + T therapies and addressing hematological cancers via CD19-specific CAR + T therapies. The platform we have licensed from MD Anderson uses the Sleeping Beauty non-viral genetic modification system to generate and characterize both TCR and CAR designs in T cells. 8 Table of Contents Limitations of Existing Approaches to Manufacturing T Cell Therapies In recent years, companies have begun developing and commercializing therapies that include T cells engineered specifically for each patient, utilizing a viral vector. Manufacturing such products is typically undertaken at a centralized facility. The production time varies and typically takes many weeks with additional time needed for quality control. Manufacturing based on viral technology to express TCR or CAR has many challenges: • Scalability . The requirement to be able to timely express a multitude of TCRs, whether to neoantigens unique to patients or neoantigens shared between patients, will be a challenge when the choice of gene transfer for TCR is based on virus. • Time to manufacture . The need to propagate (numerically expand) T cells requires the product be in culture in compliance with current good manufacturing practice (cGMP) during which the intended recipient may be unable to receive the genetically modified T cells. • Expense of production . The need to generate virus and the production time with the associated logistical complications increase the cost of manufacturing the genetically modified T cells. • Required lymphodepletion . The infusion of T cells that have been propagated ex vivo , or outside the body, tends to make them dependent on cytokines to survive and thrive after infusion. This requirement has resulted in the use of chemotherapy and other approaches of immunosuppression to “free up” pro-survival cytokines, such as naturally occurring (endogenous) IL-15, in the recipient prior to the administration of T cells. Lymphodepletion facilitates the sustained persistence of genetically modified T cells in the patient, but it exposes the patient to medical complications, raises expense, and limits the ability of the technology to be scaled as the administration of chemotherapy requires specialized centers. • Toxicity . Infusing large numbers of T cells recognizing a single antigen, such as CD19, commonly places the recipient at risk from the synchronous activation of these T cells resulting in cytokine release syndrome and other associated toxicities, which can be severe and life threatening. We believe these disadvantages will slow the development of clinically-effective and commercially-viable TCR therapies and continue to limit the long-term commercial potential of currently available CAR-T therapies. Sleeping Beauty Solution The Sleeping Beauty system is a gene transfer method that utilizes a transposase enzyme to “cut and paste” donor transposon DNA from introduced plasmid into chromosomes using a process called transposition. The system can be used to stably deliver genes to a variety of cell types including human T cells. Sleeping Beauty transposons appear to integrate in a random distribution at thymine-adenine, or TA, dinucleotide sites, making them less likely to cause off-target effects when compared to other transposons and viral gene delivery methods. We use the Sleeping Beauty system to express TCRs that target patients’ neoantigens as well as CARs that enable a T cell to recognize specific proteins or antigens that are present on the surface of other cells. Our RPM technology is used in our third generation CAR + T therapy, which uses the Sleeping Beauty system to co-express our proprietary mbIL15 and a kill switch along with the CAR, and we may elect to incorporate our mbIL15 technology in our TCR therapies in the future. Interleukin 15 (IL-15) may have a variety of beneficial effects as it is considered a pro-survival cytokine that promotes survival of T cells. Our pre-clinical data suggest that incorporating mbIL15 into TCR and CAR + T therapies enhances in vivo persistence of the TCR and CAR + T cells. We believe our Sleeping Beauty platform has several advantages compared with the viral gene transfer technologies used by other TCR and CAR-T companies: • Reduced costs. By using DNA plasmid and avoiding the time-consuming and laborious manufacture of virus, our Sleeping Beauty technology may reduce the manufacturing expense and challenges associated with viral gene transfer systems in creating T cells engineered to express TCR and CAR. 9 Table of Contents • Shortened manufacturing. We expect the T cell manufacturing process with Sleeping Beauty to significantly reduce virus-based manufacturing times. In the clinical setting, the time to administration of Sleeping Beauty -modified CAR + T cells expressing mbIL15 and a kill switch has been shortened to two days or less from gene transfer, including time to release the product for infusion. This reduction in time is primarily achieved through the elimination of in vitro T cell activation and propagation which avoids the need to culture T cells, which can take between approximately two and four weeks. • Customizable therapies. Our Sleeping Beauty platform may allow us to manufacture more customizable therapies. This enables a library of TCRs to be assembled and used that recognize diverse mutations within shared neoantigens and address a multitude of human leukocyte antigen, or HLA types. This enables personalized TCR-T therapies against unique, and potentially multiple, private neoantigens. • Potential improved safety profile. We expect that including mbIL15 will enable the T cells in our TCR + T or CAR + T therapies to engraft from low starting (infusion) numbers. We believe this reduced T cell dose may reduce the side effects caused by cytokine release syndrome, which is often experienced by patients receiving larger infusions of TCR + T or CAR + T cells. • Potential to avoid lymphodepletion. The addition of our proprietary mbIL15 may enable the administration of TCR- or CAR-expressing “younger” T cells with an ability to be long-lived after infusion. The ability of TCR or CAR + T cells to signal via mbIL15 increases TCR or CAR persistence and has the potential to eliminate lymphodepletion as the T cells rely on their own source of this pro-survival cytokine rather than scavenging endogenous soluble IL-15 from the recipient. SLEEPING BEAUTY TCR PROGRAM Background Each T cell has a unique alpha/beta TCR and an ability to rapidly increase in numbers when the TCR interrogates a target and detects a threat. A TCR can recognize cancer cells as a threat as the receptor docks with a specialized set of molecules on the cancer cell surface called the HLA system, which is also referred to as the major histocompatibility complex, or MHC. The HLA system reveals the health of a cell based on the loading of peptides (processed protein), which then await examination by unique TCRs on populations of T cells. Two types of HLA molecules, Class I and Class II, are interrogated by TCRs on T cells. Class I molecules activate CD8 + T cells which have evolved an ability to be efficient killers. Class II molecules activate CD4 + T cells which help coordinate an efficient immune response. In each person, there are both many different TCR structures and many different HLA structures. TCRs within each person are adapted to work with their own HLA structures or alleles. For a T cell to recognize and destroy a tumor cell, the TCR must recognize the foreign antigen in the context of HLA and then be activated to deepen the engagement to kill the cell. This is different from CARs, which directly recognize antigens, such as CD19, such as on the surface of malignant B cells, without the need for presentation by HLA. Genes in cancer cells can lead to the production of proteins, which are then processed by the cell into protein fragments known as peptides. When these peptides are presented to T cells by HLA, by either tumor cells or antigen presenting cells, and they result in T cell activation, they are known as antigens. When these immunogenic peptides are derived from proteins which are in turn expressed from genes that are mutated only in tumor cells (for example, within the cancer genome and not encoded in the germline), they are known as neoantigens. Tumor cells presenting neoantigens via HLA are targets for T cells. T cells can recognize and kill neoantigen-presenting cancer cells and effect a positive feedback loop to heighten the immune response. In general, the immune system avoids targeting the body’s own healthy cells principally through processes known as immune tolerance by which T cells do not respond to HLA containing peptides from normal proteins and therefore avoid targeting healthy cells for destruction. The recognition by the TCR of peptide presented by the HLA system is a vital immune mechanism that allows the body both to respond against foreign threats, including cancer, as well as to avoid targeting the body’s own healthy cells. 10 Table of Contents Tumors utilize a variety of strategies to evade and suppress the host immune system. This renders T cells residing within the tumor, referred to as tumor-infiltrating lymphocytes, or TIL, ineffective and, despite expressing tumor-specific TCRs, unable to recycle their effector functions to eliminate tumor. To overcome immune suppression, “young” T cells are likely needed, such as those found in the peripheral blood. However, these circulating T cells do not typically express tumor-specific TCRs in adequate numbers. We seek to address this problem by genetically modifying peripheral blood-derived T cells to express TCRs with specificity to tumor-derived antigens, especially neoantigens, and propagating them to sufficient numbers prior to administration. Neoantigens are encoded by tumor-specific mutated genes that are often unique to each patient. Targeting these neoantigens requires TCRs that are generated on a patient-by-patient basis. During cancer initiation and progression, tumor cells acquire mutations in naturally occurring genes that are responsible for transformation, known as driver mutations. Some of these driver mutations occur in “hotspots” and are a class of mutations shared between tumor types and between individuals. Since driver mutations can be anticipated, it is possible to prepare TCRs in a library in advance of a patient’s need. Our Approach to Targeting Neoantigens Using our Sleeping Beauty non-viral platform, we are developing TCR + T therapies to target solid tumors. Our TCR program designs and manufactures T cells that are intended to target tumor-specific neoantigens, thereby delivering personalized therapy that can attack an individual patient’s cancer. To be successful, genetically modified T cells targeting one or more neoantigens will likely need to address the fact that (1) among a population of patients, not all tumors express the targeted neoantigen, referred to as inter-tumor heterogeneity, and (2) within a single patient, not all tumor cells express the targeted antigen, referred to as intra-tumor heterogeneity. Inter-tumor heterogeneity limits the number of recipients that are eligible to receive a treatment and intra-tumor heterogeneity creates the risk of antigen-escape variants, increasing the likelihood of cancer relapse. As a result, we believe companies developing T cell therapies targeting neoantigens must address both inter- and intra-tumor heterogeneity. The Sleeping Beauty system uses DNA plasmids to reprogram T cells to express introduced TCRs on a patient-by-patient basis, which helps address inter-tumor heterogeneity, and to express more than one TCR for each patient and/or to target driver mutations, which helps address intra-tumor heterogeneity. The genetic modification using the Sleeping Beauty system of recipient-derived products enables us to target neoantigens in two ways, which we refer to as our Library TCR-T Approach and as our Personalized TCR-T Approach. We believe we are the only company that is using non-viral gene transfer to develop both personalized TCR + T therapies and TCR + T therapies from a library of TCRs derived from internal research and third parties. We believe using the Sleeping Beauty system to scale TCR-T to infuse multiple products per patient and develop a library of TCRs to facilitate the recruitment of patients is a competitive advantage. Library TCR-T Approach Our Library TCR-T Approach is based on the finding that subsets of neoantigens are shared between patients and between classes of tumors. These neoantigens can be considered as “drivers” for tumor formation. These neoantigens are referred to as “hotspots” and their presence allows us to potentially administer TCR+ T cells expressing TCRs from a library derived from internal research and third parties. The advantage of the Library TCR-T Approach is that subsets of patients with solid tumors may be rapidly treated based on screening them for targeted neoantigens (e.g., KRAS, TP53), identifying patient HLA, and matching these two data sets to the TCRs in the library. Once a match has been identified, the TCR is introduced into peripheral blood-derived T cells using the Sleeping Beauty system, propagated to clinically sufficient numbers and then infused into the patient. We have in-licensed from the NCI multiple allogeneic TCRs derived from third parties that are reactive to mutated KRAS, TP53 and EGFR in hotspots and we plan to expand our TCR library as part of our commitment to advance clinical development for the treatment of patients whose solid tumors have driver mutations. 11 Table of Contents Personalized TCR-T Approach Most neoantigens are unique to each patient’s tumor. We plan to address this uniqueness in our Personalized TCR-T Approach by infusing TCR + T cells expressing recipient-derived TCRs. There are three essential steps in creating a T cell therapy targeting personalized neoantigens: 1. Detecting and prioritizing neoantigens . Detecting a patient’s unique set of neoantigens usually requires one or more samples of the patient’s malignant tissue(s) and sampling of normal cells, followed by sequencing to reveal a catalog of candidate neoantigens that are found in the tumor cells, but not in normal cells. Bioinformatics can be used to identify and prioritize the candidate neoantigens that are attractive targets. 2. Detecting and prioritizing TCRs . Only a subset of candidate sequence changes are neoantigens as defined by their ability to stimulate a T cell response and thus are characterized as antigens. Validating targets requires the presentation of candidate neoantigens via HLA with T cells to be co-cultured with antigen presenting cells to efficiently identify the reactive T cells. One or more of the TCRs from individual reactive T cells are then sequenced. The TCRs are typically sequenced from TIL responding to the targeted neoantigens. 3. Manufacturing TCR + T cells . The sequences of one or more TCRs recognizing one or more neoantigens are placed into DNA plasmids as Sleeping Beauty transposons. These DNA plasmids are inserted into T cells derived from peripheral blood using a process called electroporation. T cells stably expressing the introduced TCR(s) are then propagated to produce the TCR + T cells in clinically-sufficient numbers before they are released for administration into a patient. The process for the production and infusion of Sleeping Beauty TCR-modified T cells for our Library TCR-T Approach and Personalized TCR-T Approach is based on the electro-transfer of DNA plasmids coding for TCR(s) recognizing one or more neoantigens into T cells derived from a patient’s peripheral blood. Following electroporation, the genetically modified T cells are propagated prior to infusion. We believe the use of T cells from peripheral blood as the source of effector cells, rather than TIL, will improve the T cell’s ability to kill tumor cells because these circulating lymphocytes are generally “young” and can proliferate and survive in vivo to sustain anti-tumor effects. Infrastructure and Capabilities During 2020, we made significant progress building critical manufacturing infrastructure, hiring personnel and adding R&D capabilities to support our clinical activities. We completed a buildout of our laboratory and office space on MD Anderson’s campus which will support our internal research and development activities. We have begun construction of both a sequencing core laboratory as well as a pilot clinical production unit, or pilot CPU, for GMP cell therapy manufacturing. We expect the pilot CPU will be operational by the end of 2021 and will be used to manufacture a portion of the TCR-T therapies for our clinical trials. We have also established processes in-house for neoantigen identification, TCR hunting, and TCR-T manufacturing process development. These processes will continue to be optimized to increase efficiencies, utilize new powerful technologies, and reduce time to treatment for the patient. Clinical Development of TCR-T Program We believe that a non-viral platform represents the most commercially feasible way of manufacturing neoantigen therapies due to the obstacles presented by inter-tumor heterogeneity and intra-tumor heterogeneity. We are conducting a Phase 1/2 clinical trial to evaluate our Library TCR-T Approach. The FDA cleared our company-sponsored IND in February 2021 and we have selected MD Anderson as the initial clinical site for this trial. Our library of TCRs will be tested for the treatment of lung, cholangiocarcinoma, pancreatic, colorectal and 12 Table of Contents gynecological cancers. We expect to begin dosing patients in this trial in the second half of 2021. The primary objective of the Phase 1 portion of the clinical trial is to evaluate the safety and tolerance of the cell therapy product. We anticipate adding new TCRs to the library and clinical program as they are qualified by our laboratory. In 2017, we entered into a Cooperative Research and Development Agreement, or CRADA, with the NCI for the development of adoptive cell transfer-based immunotherapies to treat solid tumors under the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI. Under our CRADA, the NCI will perform clinical evaluations of Sleeping Beauty -engineered T cells to express TCRs that are typically reactive against unique neoantigens to mediate cancer regression in patients with refractory solid tumors for several tumor types, including gastrointestinal and genitourinary, breast, ovarian, non-small cell lung cancer and glioblastoma. We anticipate that patients will receive populations of T cells genetically modified to express more than one TCR so that more than one neoantigen can be targeted in the patient. We expect infusing multiple TCRs per patient will reduce the probability of leaving some cancer cells unaddressed, lowering the risk of cancer relapse. The primary objective of the clinical trial is to evaluate tumor response rate with the secondary objective to evaluate the safety and tolerability of the therapy. The FDA has cleared the IND application submitted by the NCI for this Personalized TCR-T clinical trial and the trial was initiated in 2019. However, enrollment in this clinical trial has been temporarily suspended due to issues internal to the NCI and unrelated to our technology. The progress and timeline for this trial, including the timeline for dosing patients, are under the control of the NCI. Solid Tumor Malignancy Prevalence Cancer is the second most common cause of death in the United States, accounting for nearly one of every four deaths. Approximately 1,806,590 new cancer cases were expected to be diagnosed, and 606,520 cancer deaths expected to occur, in the United States in 2020 according to the American Cancer Society. Of these, the majority were caused by solid tumors. Invasive cancer, such as malignancies of epithelial tissue represent 80% to 90% of cancer cases according to the Surveillance, Epidemiology, and End Results Program of the NCI. These diseases include colorectal, lung, ovarian, skin, bladder, head and neck cancers, among others. SLEEPING BEAUTY CAR + T PROGRAM Background We are developing CAR + T cell therapies targeting CD19 for hematologic malignancies using our Sleeping Beauty platform. Our CAR + T program is focused on (1) shortening the time the patient must wait for treatment with engineered T cells, (2) increasing the access of medical centers to deliver, and patients to receive, this therapy, and (3) providing safe and efficacious T cell therapies to patients. CARs are engineered molecules that, when present on the surface of a T cell, enable the T cell to directly recognize specific proteins or antigens that are present on the surface of other cells. CAR + T cell therapies are manufactured individually for the recipient’s use by modifying T cells outside the body, causing the T cells to stably express CARs. Our CAR + T program is focused on CD19, which is a protein expressed on the cell surface of B cells and a validated target for B cell driven hematological malignancies. Autologous anti-CD19 CAR + T cell therapies have been approved by the FDA for the treatment of relapsed/refractory (R/R) B-cell lymphomas (Kymriah ® ,Yescarta ® , and Breyanzi ® ). These approaches have been successful in helping patients fight CD19-positive cancers, resulting in significant remission rates. We believe our Sleeping Beauty CAR + T therapy could offer distinct advantages to the approach used by currently commercially available CAR + T cell companies. In particular, the ability of the DNA plasmids from the Sleeping Beauty system under our RPM approach to integrate into resting T cells from peripheral blood, 13 Table of Contents coupled with expression of mbIL15 and CAR, will enable infused T cells to propagate within the patient to target leukemias and lymphoma, thereby avoiding the need to numerically expand T cells for weeks in bioreactors before administration. The reduced cost associated with using DNA plasmids, instead of virus and avoiding lengthy ex vivo manufacturing provides a solution to the cost and complexity of the current approach to manufacturing CAR + T cells. Clinical Development of CAR + T In the preclinical setting, the time to manufacture and administer Sleeping Beauty-modified CAR + T cells expressing mbIL15 has been reduced to two days or less from gene transfer. This includes time to release the product. This very rapid manufacturing process may deliver genetically modified T cells with superior therapeutic potential in vivo. Preclinical studies of our third generation Sleeping Beauty CAR + T cells, presented at the 2017 Annual Meeting of ASH, demonstrated that a single dose of T cells co-expressing a CD19-specific CAR, mbIL15, and kill switch resulted in sustained in vivo persistence that produced potent anti-tumor effects and superior leukemia-free survival in mice. In conjunction with TriArm Therapeutics, Ltd., or TriArm, we launched Eden BioCell to lead clinical development and commercialization of Sleeping Beauty-generated CAR-T therapies in the People’s Republic of China (including Macau and Hong Kong), Taiwan and Korea. Eden BioCell is focused on advancing our RPM technology using patient-derived (autologous) T cells in order to treat patients with relapsed or refractory CD19+ leukemias and lymphomas. In the fourth quarter of 2020, the Taiwan FDA cleared the IND for a Phase 1 trial to evaluate the CAR-T CD19 RPM therapy in patients with relapsed CD19+ leukemias and lymphomas. This trial will be conducted at the National Taiwan University Hospital and will enroll up to 24 patients, with the goal of infusing 16 patients. The primary endpoint of the trial will be to evaluate the safety and tolerability of autologous CD19-specific T cells manufactured using the RPM technology. We expect patients will be enrolled in this trial in the first half of 2021. We have advanced our CAR+ T technology in the United States in collaboration with MD Anderson in a Phase 1 clinical trial infusing CD19-specific CAR+ T therapies manufactured using our RPM technology. In this trial, we plan to infuse donor-derived T cells after allogeneic BMT for recipients who have relapsed with CD19+ leukemias and lymphomas. We announced the FDA cleared the IND application submitted by MD Anderson for this clinical trial in 2019 and MD Anderson initiated the trial in the first half of 2020. Patients have entered the study and corresponding donor cells have been collected. These patients are expected to be dosed upon progression of their cancer. Hematologic Tumor Malignancy Prevalence According to the Leukemia and Lymphoma Society, an estimated 178,520 people are expected to be diagnosed with leukemia, lymphoma, or myeloma in 2020. New diagnoses for such hematologic malignancies in the United States represented approximately 10% of the new cancer cases in the United States in 2020. CONTROLLED IL-12 PLATFORM TECHNOLOGY Background Ad-RTS-hIL-12 plus veledimex is our gene delivery system to regulate production of IL-12, a potent, naturally occurring anti-cancer protein which functions as a master regulator of the immune system. We control the generation of recombinant IL-12 using a replication-incompetent adenoviral, or Ad, vector administered via a single injection of virus into the brain tumor and engineered to conditionally express human IL-12, or hIL-12. The conditional expression of hIL-12 is modulated with the RheoSwitch Therapeutic System ® (RTS ® ) by the small molecule veledimex, an activator ligand orally administered that has been shown to cross the blood-brain barrier. 14 Table of Contents In this way, Ad-RTS-hIL-12 is administered within the tumor under the control of the RTS “switch”. Activation of the switch, and therefore conditional gene expression and subsequent IL-12 protein production, is tightly controlled by the activator ligand, veledimex, delivered to the patient as a daily oral capsule, typically over 14 days. When veledimex is administered to a patient, the switch is turned “on” and IL-12 is produced; when veledimex is withdrawn, the switch is turned “off” and production of recombinant IL-12 ceases. The amount of IL-12 produced is proportional to the dosing of veledimex which further enhances control of this cytokine. We believe the ability regulate production of IL-12 after administration of the virus is critical for the development of this potent cytokine. Recombinant IL-12 has been shown to be biologically active as, for example, it can stimulate production of the body’s own interferon-gamma, or IFN- g . IL-12 is a potent pro-inflammatory cytokine capable of reversing immune escape mechanisms and improving the function of tumor fighting natural killer, or NK, cells and T cells. Controlled IL-12 has been shown to biologically turn “cold tumors hot.” In our clinical trials, we have seen deep and sustained infiltration of activated T cells (i.e., “hot” tumors) where previously there had been very little T cell infiltration (i.e., “cold” tumors). Data from repeat biopsies obtained four to six months following administration of Ad-RTS-hIL-12 plus veledimex has shown an increased and sustained infiltration of activated T cells producing IFN- g within the brain-tumor lesion as reported in Science Translation Medicine . Data from our Phase 1 monotherapy clinical trial provided compelling evidence from biopsies, taken more than four months after administration of Ad-RTS-hIL-12 plus veledimex, demonstrating that Controlled IL-12 causes a sustained influx of activated killer (CD8 + ) T cells into brain tumors. These data also show upregulated expression of PD-1/PDL-1 biomarkers, suggesting that the combination of Ad-RTS-hIL-12 plus veledimex with an immune checkpoint inhibitor, such as targeting PD-1, may improve patient outcomes. Clinical Development of Controlled IL-12 Glioblastoma Prevalence We are currently developing Controlled IL-12 to treat patients with rGBM. Glioblastoma is an aggressive primary brain tumor affecting approximately 74,000 people worldwide each year; it is a fast-growing, aggressive type of central nervous system tumor, with an estimated 12,760 new adult cases predicted in the United States for 2018 according to the American Brain Tumor Association. Recurrence rates for this type of cancer are near 90 percent, and prognosis for adult patients is poor with treatment often combining multiple approaches including surgery, radiation and chemotherapy. Recurrent glioblastoma is an aggressive cancer with one of the lowest 3-year survival rates, at 3%, among all cancers. For patients who have experienced multiple recurrences, the prognosis is particularly poor, with an overall survival of six to seven months, while overall survival in patients who have failed temozolomide and bevacizumab, or equivalent salvage chemotherapy, is approximately three to five months. Clinical Development Ad-RTS-IL-12 plus Veledimex for Adult rGBM (Monotherapy and in Combination) We previously conducted a Phase 1 clinical trial of patients with rGBM, referred to as the Main Study, in patients with rGBM. The primary objective of the trial is to determine the safety and tolerability of a single intra-tumoral Ad-RTS-hIL-12 injection activated upon dosing with oral veledimex. Secondary objectives are to determine the maximum tolerated dose, the immune responses elicited, and assessment of biologic response. A subset of patients in the Main Study (n=6) with unifocal disease who received single administration of Ad-RTS-hIL-12 with 20 mg daily dosing (15 total planned doses) of veledimex along with low-dose steroids, achieved 17.8 months median overall survival, or mOS. Based on this result, we enrolled 36 subjects in a substudy, referred to as the Expansion Substudy, designed to encourage use of low-dose steroids and 20 mg veledimex to further understand the potential of Controlled IL-12 as a monotherapy. 15 Table of Contents We are conducting a Phase 1 clinical trial to evaluate Ad-RTS-hIL-12 plus veledimex in combination with Bristol-Myers Squibb Company’s OPDIVO ® (nivolumab), an immune checkpoint inhibitor, or PD-1 inhibitor, in adult patients with rGBM. This trial was initiated in 2018 and is exploring the potentially synergistic effect of this combination in 21 patients, which have been enrolled. This multi-center, open-label, single-arm trial is being conducted at four sites. Patients with rGBM scheduled for resection who had not been treated previously with inhibitors of immune-checkpoint pathways received Ad-RTS-hIL-12 intratumorally at the time of surgical resection plus a dose of veledimex (10 or 20mg), daily for 14 days. Patients receive nivolumab intravenously (1 or 3 mg/kg) every two weeks until documented progression or withdrawal from the clinical trial and an expansion cohort at the full dose of 20 mg veledimex and 3mg/kg of nivolumab was included. In November 2018, we announced our entry into a clinical supply agreement with Regeneron to evaluate Ad-RTS-hIL-12 plus veledimex in combination with Regeneron’s PD-1 antibody Libtayo ® (cemiplimab-rwlc) to treat patients with rGBM. Libtayo has been approved in the United States for the treatment of patients with metastatic cutaneous squamous cell carcinoma, or CSCC, or locally advanced CSCC who are not candidates for curative surgery or curative radiation. This multi-center, open-label, single-arm trial includes 36 patients and is fully enrolled, with the primary endpoints being safety and efficacy. Patients with rGBM scheduled for resection who have not been treated previously with inhibitors of immune-checkpoint pathways received Ad-RTS-hIL-12 intratumorally at the time of surgical resection plus a dose of veledimex (20mg), daily for 14 days. Patients will receive cemiplimab intravenously (350 mg) every three weeks until documented progression or withdrawal from the clinical trial. We provided interim updates for these trials at the 2020 American Society of Clinical Oncology (ASCO) Annual (Virtual) and 2020 Society for Neuro-Oncology (SNO) Annual Meeting, where we announced that: • Subjects receiving Ad (Day 0, craniotomy) and 20 mg (Days 0 to 14) veledimex with unifocal disease (“Main” and “Expansion” n=20) administered low-dose corticosteroids showed mOS of 16.2 months (mean follow-up of 14.1 months); • Subjects receiving Ad (Day 0, craniotomy) and 10 mg (Days 0 to 14) veledimex with 1 mg/kg or 3 mg/kg of nivolumab (n=6; 83% unifocal, 67% low dose steroids) showed mOS 16.9 months with mOS among all subjects (across both 10 mg and 20 mg veledimex dosing, n=21) of 9.8 months; • Subjects receiving Ad (Day 0, craniotomy) and 20 mg (Days 0 to 14) veledimex with 350 mg/kg of cemiplimab have a mean a follow-up time of 6.5 months with mOS that has not been reached as of the data cut-off date; • Most patients received low dose steroids, defined as <= 20 mg cumulative dosing of dexamethasone during veledimex administration; • Serial MRIs show partial responses in each study (6 partial responses reported as of the data cut-off date); and • Adverse reactions (in monotherapy and in combination) remained consistent with previously reported results, being predictable and promptly reversible upon discontinuation of veledimex, and there were no drug-related deaths reported as of the data cut-off date. Monotherapy: Clinical Development Ad-RTS-IL-12 plus Veledimex for Pediatric Brain Tumors In July 2020, we announced the first patient had been dosed in a Phase 1/2 clinical trial evaluating Ad-RTS-hIL-12 plus veledimex for the treatment of DIPG. We provided an interim update for this trial at the 2020 SNO Annual Meeting where we announced that: • Controlled IL-12 monotherapy was well-tolerated at the initial dose level (10 mg/day veledimex, BSA adjusted); 16 Table of Contents • Adverse Events (AEs) were similar to adult and older pediatric supratentorial brain tumor subjects in being mild to moderate and predominantly reversible upon withholding of veledimex doses; and • Survival of the first subject dosed was within the historical reference range. Future Development of Controlled IL-12 Program As each of our programs progresses to clinical development, we strategically prioritize our portfolio to ensure our resources and capital are deployed in the optimal manner. With the clearance of the IND for our Ziopharm-sponsored TCR-T clinical trial and the IND for the Eden BioCell-sponsored CAR-T clinical trial, we have elected to allocate an increasing amount of our resources and capital to our Sleeping Beauty TCR program. As a result, we expect to reduce the amount of resources and capital allocated to our Controlled IL-12 program in 2021 and continue to explore partnership opportunities for this program to support its further development. In connection with this reduction in spend, we are evaluating potential changes to data collection of long term follow up and reducing other activities. License Agreements, Intellectual Property and Other Agreements Our goal is to obtain, maintain, and enforce patent protection for our products, formulations, processes, methods, and other proprietary technologies to preserve our trade secrets and other confidential information and to operate without infringing the proprietary rights of other parties. Our policy is to actively seek the strongest possible intellectual property protection for our product candidates through a combination of contractual arrangements and patents, both in the United States and abroad. Exclusive License Agreement with PGEN Therapeutics On October 5, 2018, we entered into an exclusive license agreement, or the License Agreement, with PGEN Therapeutics, or PGEN, a wholly owned subsidiary of Precigen Inc., or Precigen, which was formerly known as Intrexon Corporation. As between us and PGEN, the terms of the License Agreement replace and supersede the terms of: (a) that certain Exclusive Channel Partner Agreement by and between us and Precigen, dated January 6, 2011, as amended by the First Amendment to Exclusive Channel Partner Agreement effective September 13, 2011, the Second Amendment to the Exclusive Channel Partner Agreement effective March 27, 2015, and the Third Amendment to Exclusive Channel Partner Agreement effective June 29, 2016, which was subsequently assigned by Precigen to PGEN; (b) certain rights and obligations pursuant to that certain License and Collaboration Agreement effective March 27, 2015 between us, Precigen and ARES TRADING S.A., or Ares Trading, a subsidiary of Merck KGaA, or Merck, as assigned by Precigen to PGEN, or the Ares Trading Agreement; (c) that certain License Agreement between us, Precigen, and MD Anderson, with an effective date of January 13, 2015, or the MD Anderson License, which was subsequently assigned by Precigen and assumed by PGEN effective as of January 1, 2018; and (d) that certain Research and Development Agreement between us, Precigen and MD Anderson with an effective date of August 17, 2015, or the Research and Development Agreement, and any amendments or statements of work thereto. Pursuant to the terms of the License Agreement, we have exclusive, worldwide rights to research, develop and commercialize (i) products utilizing Precigen’s RheoSwitch ® gene switch, or RTS, for the treatment of cancer, referred to as IL-12 Products, (ii) CAR products directed to (A) CD19 for the treatment of cancer, referred to as CD19 Products, and (B) a second target for the treatment of cancer, subject to certain obligations to pursue such target under the Ares Trading Agreement, and (iii) TCR products designed for neoantigens for the treatment of cancer. Under the License Agreement, we also have exclusive, worldwide rights for certain patents relating to the Sleeping Beauty technology to research, develop and commercialize TCR products for both neoantigens and shared antigens for the treatment of cancer, referred to as TCR Products. We will be solely responsible for all aspects of the research, development and commercialization of the exclusively licensed products for the treatment of cancer. We are required to use commercially reasonable efforts to develop and commercialize IL-12 products, CD19 products and TCR Products. 17 Table of Contents In consideration of the licenses and other rights granted by PGEN, we will pay PGEN an annual license fee of $100 thousand and we have agreed to reimburse PGEN for certain historical costs of the licensed programs up to $1.0 million, which was fully paid during the year ending December 31, 2019. We will make 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 will pay PGEN tiered royalties ranging from low-single digit to high-single digit on the net sales derived from the sales of any approved IL-12 products and CAR products. We will also pay PGEN royalties ranging from low-single digit to mid-single digit 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 will also pay PGEN 20% of any sublicensing income received by us relating to the licensed products. We are responsible for all development costs associated with each of the licensed products. PGEN will pay us royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of PGEN’s CAR products, up to a maximum royalty amount of $50.0 million. In consideration of our entry into the License Agreement, Precigen has forfeited and returned to us all shares of our Series 1 preferred stock held by or payable to Precigen as of the date of the License Agreement. In October 2020, we entered into an amendment to the License Agreement relating to the transfer of certain materials and PGEN’s obligations to provide transition assistance relating to the IL-12 products. We determined that this transaction represented a capital transaction between related parties. We fair valued the preferred stock and the derivative liability on the date of the transaction, noting a total fair value of $163.3 million. The relinquishment of our obligation under the Ares Trading Agreement was also considered part of the overall capital transaction. We recognized an additional credit to accumulated deficit of $49.5 million as a result of the relief of the obligation under the Ares Trading Agreement. The total amount of the settlement was $212.8 million. We incurred approximately $7.4 million of transaction advisory costs with third-party vendors, of which $5.4 million was considered a direct cost associated with the Series 1 preferred stock extinguishment and is also included as part of the consideration transferred. The remaining $2.0 million of transaction costs were recognized as an expense during the year ended December 31, 2018. We recognized a net credit to accumulated deficit of $207.3 million, calculated as the difference in the carrying value of the Series 1 preferred stock, derivative liability, and contract liability, and the consideration transferred of $5.4 million, in connection with the transaction. This amount is included in net income available to common shareholders in the calculation of earnings per share. License Agreement and 2015 Research and Development Agreement—The University of Texas MD Anderson Cancer Center On January 13, 2015, we, together with Precigen, entered into the MD Anderson License with MD Anderson (which Precigen subsequently assigned to PGEN). Pursuant to the MD Anderson License, we, together with PGEN, hold an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CAR T-cell therapies, non-viral gene transfer systems, genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs, arising from the laboratory of Laurence Cooper, M.D., Ph.D., who served as our Chief Executive Officer from May 2015 to February 2021 and was formerly a tenured professor of pediatrics at MD Anderson. On August 17, 2015, we, Precigen and MD Anderson entered into the Research and Development Agreement, or the 2015 R&D Agreement, to formalize the scope and process for the transfer by MD Anderson, pursuant to the 18 Table of Contents terms of the MD Anderson License, of certain existing research programs and related technology rights, as well as the terms and conditions for future collaborative research and development of new and ongoing research programs. The rights and obligations of Precigen under the 2015 R&D Agreement were assigned to us pursuant to the Fourth Amendment to Research and Development Agreement which was entered into on September 18, 2019 (the “Fourth Amendment”) with an effective date of October 5, 2018. The activities under the 2015 R&D Agreement are directed by a joint steering committee comprised of two members from our company and one member from MD Anderson. As provided under the MD Anderson License, we provided funding for research and development activities in support of the research programs under the 2015 R&D Agreement for a period of three years and in an amount of no less than $15.0 million and no greater than $20.0 million per year. On November 14, 2017, we entered into an amendment to the 2015 R&D Agreement extending its term until April 15, 2021. During the year ended December 31, 2019, we made no payments to MD Anderson compared to $2.7 million during the year ended December 31, 2018. The decrease in cash paid to MD Anderson during the year ended December 31, 2019 as compared to the same period in the prior year is a result of the final quarterly payment being made to MD Anderson in January 2018 and the result of approved expenditures incurred by us being deducted from the January 2018 quarterly payment. The net balance of cash resources on hand at MD Anderson available to offset expenses and future costs is $8.1 million, which is included in other current assets on our balance sheet at December 31, 2020. The term of the MD Anderson License expires on the last to occur of (a) the expiration of all patents licensed thereunder, or (b) the twentieth anniversary of the date of the MD Anderson License; provided, however, that following the expiration of the term of the MD Anderson License, we, together with Precigen, shall then have a fully-paid up, royalty free, perpetual, irrevocable and sublicensable license to use the licensed intellectual property thereunder. After ten years from the date of the MD Anderson License and subject to a 90-day cure period, MD Anderson will have the right to convert the MD Anderson License into a non-exclusive license if we and Precigen are not using commercially reasonable efforts to commercialize the licensed intellectual property on a case-by-case basis. After five years from the date of the MD Anderson License and subject to a 180-day cure period, MD Anderson will have the right to terminate the MD Anderson License with respect to specific technology(ies) funded by the government or subject to a third-party contract if we and Precigen are not meeting the diligence requirements in such funding agreement or contract, as applicable. MD Anderson may also terminate the agreement with written notice upon material breach by us and Precigen, if such breach has not been cured within 60 days of receiving such notice. In addition, the MD Anderson License will terminate upon the occurrence of certain insolvency events for both us and Precigen and may be terminated by the mutual written agreement of us, Precigen, and MD Anderson. In connection with the execution of the 2019 R&D Agreement described below, on October 22, 2019, we amended the 2015 R&D Agreement to extend the term of the 2015 R&D Agreement until December 31, 2026 and to allow cash resources on hand at MD Anderson under the 2015 R&D Agreement to be used for development costs under the 2019 R&D Agreement. 2019 Research and Development Agreement—The University of Texas MD Anderson Cancer Center On October 22, 2019, we entered into the 2019 Research and Development Agreement, or the 2019 R&D Agreement, with MD Anderson pursuant to which the parties agreed to collaborate with respect to the TCR program. Under the 2019 R&D Agreement, the parties will, among other things, collaborate on programs to expand our TCR library and conduct clinical trials. The activities under the 2019 R&D Agreement are directed by a joint steering committee comprised of two members from our company and one member from MD Anderson. We will own all intellectual property developed under the 2019 R&D Agreement and we will retain all rights to intellectual property for oncology products manufactured using non-viral gene transfer technologies under the 19 Table of Contents 2019 R&D Agreement, including our Sleeping Beauty technology. We have granted MD Anderson an exclusive license for such intellectual property outside the field of oncology and to develop and commercialize autologous TCR products manufactured using viral gene transfer technologies, and a non-exclusive license for allogeneic TCR products manufactured using viral-based technologies. Under the 2019 R&D Agreement, we agreed, beginning on January 1, 2021, to reimburse MD Anderson up to a total of $20 million for development costs under the 2019 R&D Agreement, after the funds from the 2015 R&D Agreement are exhausted. In addition, we will pay MD Anderson royalties on net sales of its TCR products at rates in the low single digits. We are required to make performance-based payments upon the successful completion of clinical and regulatory benchmarks relating to its TCR products. The aggregate potential benchmark payments are $36.5 million, of which only $3.0 million will be due prior to the first marketing approval of our TCR products. The royalty rates and benchmark payments owed to MD Anderson may be reduced upon the occurrence of certain events. We also agreed to sell our TCR products to MD Anderson at preferential prices and will sell our TCR products in Texas exclusively to MD Anderson for a limited period of time following the first commercial sale of our TCR products. The 2019 R&D Agreement will terminate on December 31, 2026 and either party may terminate the 2019 R&D Agreement following written notice of a material breach. The 2019 R&D Agreement also contains customary provisions related to indemnification obligations, confidentiality and other matters. In connection with the execution of the 2019 R&D Agreement, on October 22, 2019, we issued MD Anderson a warrant to purchase 3,333,333 shares of our common stock, which is referred to as the MD Anderson Warrant. The MD Anderson Warrant has an initial exercise price of $0.001 per share, expires on December 31, 2026 and vests upon the occurrence of certain clinical milestones. As of December 31, 2020, none of the milestones have been met. The MD Anderson Warrant and the shares of our common stock to be issued upon exercise of the MD Anderson Warrant have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. License Agreement with the National Cancer Institute On May 28, 2019, we entered into a patent license agreement, or the Patent License, with the National Cancer Institute, or the NCI. Pursuant to the Patent License, we hold an exclusive, worldwide license to certain intellectual property to develop and commercialize patient-derived (autologous), peripheral blood T-cell therapy products engineered by transposon-mediated gene transfer to express TCRs reactive to mutated KRAS, p53 and EGFR neoantigens. In addition, pursuant to the Patent License, we hold an exclusive, worldwide license to certain intellectual property for manufacturing technologies to develop and commercialize autologous, peripheral blood T-cell therapy products engineered by non-viral gene transfer to express TCRs, as well as a non-exclusive, worldwide license to certain additional manufacturing technologies. On January 8, 2020 and September 28, 2020, we amended the Patent License to expand the TCR library licensed from the NCI to include additional TCRs reactive to mutated KRAS and TP53 neoantigens. Pursuant to the terms of the Patent License, we are required to pay the NCI a cash payment in the aggregate amount of $1.5 million payable in $0.5 million installments within sixty days, six-months, and the twelve-month anniversary of the effective date of the agreement for the Patent License. We also reimbursed the NCI for past patent expenses in the aggregate amount of approximately $46 thousand. Under the amendment to the patent license signed in January 2020, we agreed to pay the NCI a cash payment of $600,000 within sixty days of the amendment and under the amendment to the patent license signed in September 2020, we agreed to pay the NCI a cash payment of $411,000 within sixty days of the amendment. The terms of the Patent License also require us to pay the NCI minimum annual royalties in the amount of $0.3 million, which amount will be reduced to $0.1 million once the aggregate minimum annual royalties paid by us equals $1.5 million. 20 Table of Contents We are also required to make performance-based payments upon successful completion of clinical and regulatory benchmarks relating to the licensed products. The aggregate potential benchmark payments are $4.3 million, of which aggregate payments of $3.0 million are 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 will be due upon the initiation of our first sponsored Phase 1 clinical trial of a licensed product or licensed process in the field of use licensed under the Patent License. In addition, we are required to pay the NCI one-time benchmark payments following aggregate net sales of licensed products at certain net sales up to $1.0 billion. The aggregate potential amount of these benchmark payments is $12.0 million. We must also pay the NCI royalties on net sales of products covered by the Patent License at rates in the low to mid-single digits depending upon the technology included in a licensed product. To the extent we enter into a sublicensing agreement relating to a licensed product, we are required to pay the NCI a percentage of all consideration received from a sublicensee, which percentage will decrease based on the stage of development of the licensed product at the time of the sublicense. The Patent License will expire upon expiration of the last patent contained in the licensed patent rights, unless terminated earlier. The NCI may terminate or modify the Patent License in the event of a material breach, including if we do not meet certain milestones by certain dates, or upon certain insolvency events that remain uncured following the date that is 90 days following written notice of such breach or insolvency event. We may terminate the Patent License, or any portion thereof, in our sole discretion at any time upon 60 days’ written notice to the NCI. In addition, the NCI has the right to: (i) require us to sublicense the rights to the product candidates covered by the Patent License upon certain conditions, including if we are not reasonably satisfying required health and safety needs and (ii) terminate or modify the Patent License, including if we are not satisfying requirements for public use as specified by federal regulations. Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute On January 10, 2017, we announced the signing of the CRADA with the NCI for the development of adoptive cell transfer, or ACT,-based immunotherapies genetically modified using the Sleeping Beauty transposon/transposase system to express TCRs for the treatment of solid tumors. The principal goal of the CRADA is to develop and evaluate ACT for patients with advanced cancers using autologous peripheral blood lymphocytes, or PBL, genetically modified using the non-viral Sleeping Beauty system to express TCRs that recognize neoantigens expressed within a patient’s cancer. Research conducted under the CRADA will be at the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI, in collaboration with our researchers and PGEN researchers. During the year ended December 31, 2020 and 2019, the Company made payments of $2.5 million, each year. In February of 2019, the Company extended the CRADA with the NCI for two years, committing an additional $5.0 million to this program. Patents and Other Intellectual Property Rights and Protection Patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. The actual protection offering by a patent, which can vary from country to country, depends of the type of patent, the scope of its coverage and the availability of legal remedies in the country. Pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, some of our patents, under certain conditions, may be eligible for limited patent term extension for a period of up to five years as compensation for patent term lost during drug development and the FDA regulatory review process. However, this extension period cannot be extended beyond 14 years from the drug’s approval date. The patent term restoration period is generally one-half the period of time elapsed between the effective date of an IND application or the issue date of the patent, whichever is later, and the submission date of an NDA, plus the period of time between the submission date of the NDA or the issue date of the patent, 21 Table of Contents whichever is later, and FDA approval. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves applications for any patent term extension or restoration. We intend to seek the benefits of this statute, but there can be no assurance that we will be able to obtain any such benefits. We also depend upon the skills, knowledge, and experience of our scientific and technical personnel, as well as those of our advisors, consultants, and other contractors, none of which may be patentable. To help protect unpatentable proprietary know-how, and for inventions for which patents may be difficult to enforce, we currently rely, and in the future, will continue to rely, on trade secret protection and confidentiality agreements to protect our interests. To this end, we generally require employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. Our patent position and proprietary rights are subject to certain risks and uncertainties. Please read the “ Risk Related to Our Intellectual Property ” section for further information about certain risks and uncertainties that may affect our patent position and proprietary rights. Additional information as of December 31, 2019 about material patents and other proprietary rights covering our product candidates is set forth below. TCR + T and CAR + T In January 2015, we in-licensed from MD Anderson a technology portfolio that includes intellectual property directed to certain non-viral Sleeping Beauty technology as well as TCR + T and CAR + T cell therapy and bioprocessing technology. Under the terms of the agreement, we have an exclusive license to certain of the intellectual property technology, a co-exclusive license to certain of the intellectual property technology and a non-exclusive license to certain of the intellectual property technology. Our rights to the MD Anderson intellectual property flow to us via our agreement with PGEN. In May 2019, we in-licensed from NCI a technology portfolio that includes intellectual property directed to certain TCR + T cell therapy and manufacturing technology. Under the terms of the agreement, we hold an exclusive, worldwide license to certain intellectual property to develop, manufacture and commercialize patient-derived (autologous), peripheral blood T-cell therapy products engineered by transposon-mediated gene transfer to express TCRs reactive to mutated KRAS, TP53 and EGFR neoantigens. In addition, we hold an exclusive, worldwide license to certain intellectual property for manufacturing technologies to develop and commercialize autologous, peripheral blood T-cell therapy products engineered by non-viral gene transfer to express TCRs, as well as a non-exclusive, worldwide license to certain additional manufacturing technologies. Ad-RTS-IL-12 plus veledimex The patent estate licensed to us by PGEN covering Ad-RTS-IL-12 plus activator ligands, such as veledimex ligand compositions, methods of use, methods of manufacture, and formulations includes over one hundred patents and applications. This portfolio includes issued patents and pending applications in Europe, Canada, Japan, Australia and other countries. The term of one or more of the issued patents may be extended due to the regulatory approval process. Governmental Regulation and Product Approval As a biopharmaceutical company, we are subject to extensive regulation. Our programmed T-cell product candidates are regulated as biologics. With this classification, commercial production of our products will need to occur in registered and licensed facilities in compliance with current Good Manufacturing Practices, or cGMPs, for biologics. 22 Table of Contents Human immunotherapy products are a new category of therapeutics. The FDA categorizes human cell- or tissue-based products as either minimally manipulated or more than minimally manipulated and has determined that more than minimally manipulated products require clinical trials to demonstrate product safety and efficacy and the submission of a Biologics License Application, or BLA, for marketing authorization. Government authorities in the United States (at the federal, state and local level) and in other countries and jurisdictions, extensively regulate, among other things, the research, development, preclinical and clinical testing, manufacturing, quality control, labeling, packaging, storage, record-keeping, promotion, advertising, sale, distribution, post-approval monitoring and reporting, marketing and export and import of biopharmaceutical products such as those we are developing. Our product candidates must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the United States, although there can be important differences. The process for obtaining regulatory marketing approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. U.S. Product Development Process In the United States, the FDA regulates biological products under the Public Health Service Act, or PHSA, and the Federal Food, Drug and Cosmetic Act, or FDCA, and implementing regulations. Products are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. FDA sanctions could include, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters and similar public notice of alleged non-compliance with laws, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA before a biological product may be approved for marketing in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies according to Good Laboratory Practices, or GLPs, and applicable requirements for the humane use of laboratory animals or other applicable regulations; • submission to the FDA of an Investigational New Drug Application, or IND, which must become effective before human clinical trials may begin; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as Good Clinical Practices, or GCPs, and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use; • preparation and submission to the FDA of a Biologics License Application, or BLA, for marketing approval that includes substantive evidence of safety, purity, and potency from results of nonclinical testing and clinical trials; • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities where the biological product is produced to assess compliance with cGMP to assure that the facilities, methods and controls used in product manufacture are adequate to preserve the biological product’s identity, strength, quality and purity and, if applicable, the FDA’s current Good Tissue Practices, or GTPs, for the use of human cellular and tissue products; 23 Table of Contents • potential FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; • payment of user fees for FDA review of the BLA; and • FDA acceptance, review and approval, or licensure, of the BLA, which might include review by an advisory committee, a panel typically consisting of independent clinicians and other experts who provide recommendations as to whether the application should be approved and under what conditions. Before testing any biological product candidate, including our product candidates, in humans, the product candidate must undergo rigorous preclinical testing. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations as well as in vitro and animal studies to assess the potential safety and efficacy of the product candidate. The clinical trial sponsor must submit an IND to the FDA before clinical testing can begin in the United States. An IND must contain the results of the preclinical tests, manufacturing information, analytical data, any available clinical data or literature, a proposed clinical protocol, an investigator’s brochure, a sample informed consent form, and other materials. Clinical trial protocols detail, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Some preclinical testing, such as toxicity studies, may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical trials or places the trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Clinical trials involving recombinant or synthetic nucleic acid molecules also must be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment. Clinical trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1 . The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients with the target disease or condition. • Phase 2 . The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule. 24 Table of Contents • Phase 3 . Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population, generally at geographically dispersed clinical trial sites. These clinical trials are intended to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk to benefit profile of the product and to provide an adequate basis for product labeling. Phase 1, Phase 2, and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA, the NIH and the investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a significant risk for human patients, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. The FDA or the sponsor or its data safety monitoring board, an independent group of experts that evaluates study data for safety and makes recommendations concerning continuation, modification, or termination of clinical trials, may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research patients are being exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated with unexpected serious harm to patients. Concurrently with clinical trials, companies usually complete additional nonclinical studies and must also develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life. The FDA has a fast track designation program that is intended to expedite or facilitate the process for reviewing new drug or biologic products that meet certain criteria. Specifically, new drugs or biologics are eligible for Fast Track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Unique to a fast track product, the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA. After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must include results of product development, 25 Table of Contents laboratory and animal studies, human trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual program fee for approved biological products. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication. Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and/or effective for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to ensure that the benefits of the product outweigh its risks and to assure the safe use of the biological product, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required. Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. For immunotherapy products, the FDA also will not approve the product if the manufacturer is not in compliance with the GTPs, to the extent applicable. These are FDA regulations and guidance documents that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues, and cellular and tissue-based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA GTP regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements. Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval. If the agency decides not to approve the BLA in its present form, the FDA will issue a Complete Response Letter, which generally outlines the specific deficiencies in the BLA identified by the FDA and may require additional clinical or other data or impose other conditions that must be met in order to secure final approval of the application. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Even with the submission of additional information, the FDA may ultimately decide that the application does not satisfy the 26 Table of Contents regulatory criteria for approval. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. The FDA may require that certain contraindications, warnings or precautions be included in the product labeling, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. In addition, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Post-Approval Requirements Any products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements. In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval to ensure the long-term stability of the product. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market. The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product. Discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, with manufacturing processes, or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, complete withdrawal from the market, product recalls, warning letters from the FDA, mandated corrective advertising or communications with doctors, product seizure or detention, injunctions, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development. Moreover, the FDA strictly regulates marketing, labeling, advertising and promotion of products. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label, although physicians, in the practice of medicine, may prescribe approved drugs for unapproved indications. However, companies may share truthful and not misleading information that is otherwise consistent with the labeling. The 27 Table of Contents FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. U.S. Marketing Exclusivity The Biologics Price Competition and Innovation Act, or BPCIA, amended the PHSA to authorize the FDA to approve similar versions of innovative biologics, commonly known as biosimilars. Biosimilars are approved pursuant to an abbreviated pathway whereby applicants need not submit the full slate of preclinical and clinical data, and approval is based in part on the FDA’s findings of safety, purity, and potency for the original biologic (i.e., the reference product). Reference products are eligible to receive 12 years of exclusivity from the time of first licensure of the product, which prevents the FDA from approving any biosimilars to the reference product through the abbreviated pathway, but does not prevent approval of BLAs that are accompanied by a full data package and that do not rely on the reference product. A biosimilar may be approved if the product is highly similar to the reference product notwithstanding minor differences in clinically inactive components and there are no clinically meaningful differences with the reference product in terms of the safety, purity, and potency. Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial. Orphan Drug Designation Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States or, if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a drug or biologic product available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan designation must be requested before submitting a marketing application. After the FDA grants orphan designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biological product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or inability to manufacture the product in sufficient quantities. The designation of such drug also entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user fee waivers. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same product as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease. If an orphan designated product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan exclusivity. Orphan drug status in the European Union has similar but not identical benefits in that jurisdiction. Coverage, Pricing and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in significant part, on the extent to which 28 Table of Contents third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. Third-party payors are increasingly challenging the price, examining the medical necessity of and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. Reimbursement may impact the demand for, and/or the price of, any product candidate which obtains marketing approval. Even if coverage and reimbursement is obtained for a given product candidate by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with those medications. Patients are unlikely to use a product, and physicians may be less likely to prescribe a product, unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of the product. Therefore, coverage and adequate reimbursement is critical to new drug product acceptance. The downward pressure on health care costs in general, particularly prescription drugs and biologics, has become very intense. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. As a result, increasingly high barriers are being erected to the entry of new products. The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide favorable coverage and adequate reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on healthcare pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Health Care Laws Governing Interactions with Healthcare Providers Healthcare providers, and third-party payors in the United States play a primary role in the recommendation and prescription of drug products. Arrangements with healthcare providers, third-party payors and customers can expose pharmaceutical manufactures to broadly applicable fraud and abuse and other healthcare laws, including false claims, privacy and security, price reporting, and physician sunshine laws or regulations. Some of our pre-commercial activities are subject to some of these laws. . The applicable federal, state and foreign healthcare laws and regulations laws that may affect a pharmaceutical manufacture’s ability to operate include, but are not limited to: • The federal Anti-Kickback Statute, which regulates our business activities, including our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • Federal civil and criminal false claims laws, including the False Claims Act which permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the False Claims Act, and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent; 29 Table of Contents • The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal civil and criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information on entities and individuals subject to the law including certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as individuals and entities that perform services for them which involve the use, or disclosure of, individually identifiable health information, known as business associates as well as their covered subcontractors; • Requirements to report annually to the Centers for Medicare & Medicaid Services, or CMS certain financial arrangements with physicians and teaching hospitals, as defined in the ACA and its implementing regulations, including reporting any “transfer of value” made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and reporting any ownership and investment interests held by physicians and their immediate family members and applicable group purchasing organizations during the preceding calendar year. Beginning in 2022, applicable manufacturers also will be required to report such information regarding its payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives during the previous year; and • State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government that otherwise restricts certain payments that may be made to healthcare providers and entities; state laws that require drug manufacturers to report information related to payments and other transfer of value to physicians and other healthcare providers and entities; state laws that require the reporting of information related to drug pricing; state and local laws that require the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Efforts to ensure that business arrangements comply with applicable healthcare laws involve substantial costs. It is possible that governmental and enforcement authorities will conclude that a pharmaceutical manufacturer’s business practices do not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against a pharmaceutical manufacturer, and it is not successful in defending itself or asserting its rights, it may be subject to the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of operations, as well as additional reporting obligations and oversight if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. In addition, the approval and commercialization of drug products outside the United States may also subject a pharmaceutical manufacturer to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. Healthcare Reform Efforts A primary trend in the United States healthcare industry and elsewhere is cost containment. Over the last several years, there have been federal and state proposals and legislation enacted regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, and making changes to healthcare financing and the delivery of care in the United States. 30 Table of Contents In March 2010, the ACA was enacted, which includes measures that have significantly changed healthcare financing by both governmental and private insurers. The provisions of the ACA of importance to the pharmaceutical and biotechnology industry are, among others, the following: • created an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drug agents or biologic agents, which is apportioned among these entities according to their market share in certain government healthcare programs; • increased the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for branded and generic drugs, respectively; • created a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; • extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, unless the drug is subject to discounts under the 340B drug discount program; • created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; • expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; • expanded the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; • created a new requirement to annually report drug samples that certain manufacturers and authorized distributors provide to physicians; • expanded healthcare fraud and abuse laws, including the False Claims Act and the federal Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance; • created new requirements under the federal Physician Payments Sunshine Act for drug manufacturers to annually report information related to payments and other transfers of value made to physicians and teaching hospitals as well as ownership or investment interests held by physicians and their immediate family members; • created a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; • established a Center for Medicare & Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending; and • created a licensure framework for follow on biologic products. There have been executive, legal and political challenges to certain aspects of the ACA. For Example, President Trump signed several executive orders and other directives designed to delay, circumvent or loosen certain requirements mandated by the ACA. Concurrently, Congress considered legislation to repeal or repeal and replace all or part of the ACA. While Congress has not passed repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or 31 Table of Contents part of a year that is commonly referred to as the “individual mandate”. Further, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. On December 14, 2018, a Texas U.S. District Court Judge ruled that ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The U.S. Supreme Court is currently reviewing this case, but it is unknown when a decision will be reached. Although the U.S. Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration will impact the ACA and our business. In addition, other federal health reform measures have been proposed and adopted in the United States since the ACA was enacted. For example, as a result of the Budget Control Act of 2011, providers are subject to Medicare payment reductions of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2030 unless additional Congressional action is taken. However, COVID-19 relief support legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2021. Further, the American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments from providers from three to five years. The Medicare Access and CHIP Reauthorization Act of 2015 also introduced a quality payment program under which certain individual Medicare providers will be subject to certain incentives or penalties based on new program quality standards. In November 2019, CMS issued a final rule finalizing the changes to the Medicare Quality Payment Program. Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals. The FDA also released a final rule, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which 32 Table of Contents would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. However, it is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. At the state level, legislatures have increasingly enacted legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. U.S. Foreign Corrupt Practices Act, U.K. Bribery Act and Other Laws The Foreign Corrupt Practices Act, or the FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts. Our operations are also subject to non-U.S. anti-corruption laws such as the U.K. Bribery Act 2010, or the Bribery Act. As with the FCPA, these laws generally prohibit us and our employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other business advantage. Under the Bribery Act, we may also be liable for failing to prevent a person associated with us from committing a bribery offense. We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United Kingdom and the United States and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as trade control laws. Failure to comply with the Bribery Act, the FCPA and other anti-corruption laws and trade control laws could subject us to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses. Competition The development and commercialization for new products to treat cancer, including the indications we are pursuing, is highly competitive and considerable competition exists from major pharmaceutical, biotechnology and specialty cancer companies. Many of these companies have more experience in preclinical and clinical development, manufacturing, regulatory, and global commercialization. We are also competing with academic institutions, governmental agencies, and private organizations that are conducting research in the field of cancer. Our genetically engineering T-cell programs face significant competition in the CAR and TCR technology space from multiple companies and their collaborators. Three such companies, Novartis International AG (Kymriah ® ), 33 Table of Contents Kite Pharma Inc./Gilead Sciences, Inc. (Yescarta ® ) and Bristol-Myers Squibb Company (Breyanzi ® ), have now commercialized autologous CAR+ T cells against CD19. Additional companies developing autologous CAR+ T targets include Bristol-Myers Squibb Company, Precigen, Inc., bluebird bio, Inc., Nanjing Legend Biotech and Janssen Biotech, Inc., a subsidiary of Johnson & Johnson, Gracell Biotechnologies Inc., CARsgen Therapeutics Co. Ltd., Bellicum Pharmaceuticals, Inc., Autolus Therapeutics plc, Mustang Bio, Inc., Crispr Therapeutics AG, Precision Biosciences Inc., Protheragen Inc.and Marker Therapeutics, Inc. Several companies are pursuing the development of allogeneic CAR+ T therapies, including Allogene Therapeutics, Inc. (in collaboration with Pfizer Inc.), Atara Biotherapeutics, Inc. and Cellectis SA (in collaboration with Servier) which may compete with our product candidates. Our TCR program faces competition from several companies, including from Adaptimmune Therapeutics plc in collaboration with GlaxoSmithKline plc, ArsenalBio, Lyell, bluebird bio, Kite Pharma Inc./Gilead Sciences, Inc., Achilles Therapeutics Limited, Iovance Biotherapeutics, Inc., Immatics Biotechnologies GmbH, Tmunity Therapeutics Inc, Medigene AG, Tactiva Therapeutics, LLC, Takara Bio, Inc., TCR2 Therapeutics Inc., Zelluna Immunotherapy AS, PACT Pharma, Inc. and others. Several companies, including Advaxis Inc./Amgen Inc., BioNTech AG and Gritstone Oncology, Inc., are pursuing vaccine platforms to target neoantigens for solid tumors. Other companies are developing non-viral gene therapies, including Poseida Therapeutics, Inc. and several companies developing CRISPR technology. We also face competition from companies developing therapies using cells other than T cells such as Takeda Pharmaceutical Company, NantKwest, Inc., IN8bio, Inc., Fate Therapeutics Inc. and TC BioPharm Limited. We also face competition from companies developing T cells with cytokines such as Torque Therapeutics and Obsidian Therapeutics, Inc. We also face competition from non-cellbased treatments offered by other companies such as Amgen Inc., AstraZeneca plc, Bristol-Myers Squibb Company, Incyte Corporation, Merck & Co., Inc., and Roche Holding AG. We are initially developing our Controlled IL-12 platform for the treatment of rGBM. Companies that sell marketed drugs for rGBM are Genentech Inc. and Roche Holding AG with Avastin (bevacizumab), a vascular endothelial growth factor directed antibody indicated for the treatment of adults with rGBM. Arbor Pharmaceuticals Inc. markets GLIADEL Wafer, which is indicated in patients with newly diagnosed high-grade malignant glioma as an adjunct to surgery and radiation and is also indicated in patients with recurrent glioblastoma multiforme as an adjunct to surgery. Additionally, Novocure has developed Optune (tumor treating fields) for newly diagnosed and recurrent glioblastoma. Several companies have product candidates in Phase 3 development for the treatment of glioblastoma, including, but not limited to, Cordgenics, LLC, Bayer AG, Kazia Therapeutics Limited, and Kintara Therapeutics, Inc. Several companies and institutions have product candidates currently in Phase 2 clinical trials, including, but not limited to, Abbvie Inc., DNAtrix Therapeutics, Istari Oncology, Karyopharm and MedImmune LLC/AstraZeneca plc, and other companies are actively developing additional products to treat brain cancer including Mustang Bio Inc. and Northwest Biotherapeutics, Inc. Other competitors with product candidates currently in Phase 2 clinical trials include AbbVie Inc.’s Depatus-M (ABT-414) and DNA-2401, a conditionally replicative adenovirus being evaluated in combination with pembrolizumab (KEYTRUDA ® ) for rGBM by DNATrix Inc. and Merck & Co., Inc. Duke University is enrolling a randomized Phase 2 clinical trial of oncolytic polio/rhinovirus recombinant (PVSRIPO) alone or in combination with lomustine in recurrent WHO Grade IV malignant glioma patients. Also, MedImmune, LLC/ AstraZeneca plc’s durvalumab was evaluated in a Phase 2 clinical trial in patients with rGBM. Employees and Human Capital Resources As of February 16, 2021, we had 103 full-time employees and 3 part-time employees, 80 of whom were engaged in research and development activities and 26 of whom were engaged in business development, finance, information systems, facilities, human resources or administrative support. None of our employees are subject to a collective bargaining agreement and we believe our relations with our employees is good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to 34 Table of Contents attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. Corporate Information We originally incorporated in Colorado in September 1998 (under the name Net Escapes, Inc.) and later changed our name to “EasyWeb, Inc.” in February 1999. We re-incorporated in Delaware on May 16, 2005 under the same name. On September 13, 2005, we completed a “reverse” acquisition of privately held Ziopharm, Inc., a Delaware corporation. To effect this transaction, we caused ZIO Acquisition Corp., our wholly-owned subsidiary, to merge with and into Ziopharm, Inc., with Ziopharm, Inc. surviving as our wholly owned subsidiary. In accordance with the terms of the merger, the outstanding common stock of Ziopharm, Inc. automatically converted into the right to receive an aggregate of approximately 97.3% of our outstanding common stock (after giving effect to the transaction). Following the merger, we caused Ziopharm, Inc. to merge with and into us and we changed our name to “Ziopharm Oncology, Inc.” Although EasyWeb, Inc. was the legal acquirer in the transaction, we accounted for the transaction as a reverse acquisition under generally accepted accounting principles. As a result, Ziopharm, Inc. became the registrant with the Securities and Exchange Commission, or the SEC, and the historical financial statements of Ziopharm, Inc. became our historical financial statements. Our principal executive offices are located at One First Avenue, Parris Building 34, Navy Yard Plaza, Boston, Massachusetts 02129, and our telephone number is (617) 259-1970. Available Information Our website address is www.ziopharm.com. Our website and information included in or linked to our website are not part of this Annual Report on Form 10-K. We file reports with the SEC, which we make available on our website free of charge. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, each of which is provided on our website as soon as reasonably practicable after we electronically file such materials with or furnish them to the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers, like us, that file electronically with the SEC, including us. 35 Table of Contents