What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-05 compared with 2024-03-06 · 75 added, 61 removed, 257 unchanged (35% of the section changed)

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As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

We are a clinical-stage biopharmaceutical company focused on developing a robust pipeline of T cell receptor (TCR)-engineered T cell, or TCR-T, therapies for the treatment of patients with cancer.

We are a clinical-stage biotechnology company focused on developing a robust pipeline of T cell receptor (TCR)-engineered T cell, or TCR-T, therapies for the treatment of patients with cancer.

Our approach is based on the central premise that we can learn from patients who are winning their fight against cancer to treat those who are not.

Over the past several years, we have built our ImmunoBank, a repository of therapeutic TCRs that recognize diverse targets and are associated with multiple human leukocyte antigen, or HLA, types.

These TCRs are then used to manufacture enhanced TCR-T therapies to treat a broad population of patients with both heme and solid tumor malignancies.

We then use these TCRs to manufacture enhanced TCR-T therapies to treat a broad population of patients with both hematologic, or heme, and solid tumor malignancies.

Every TCR in our ImmunoBank has come from our proprietary platform technologies, and we are continuing to expand our ImmunoBank.

Using TargetScan, we analyze the T cells of cancer patients with exceptional responses to immunotherapy to discover how the immune system naturally recognizes and eliminates tumor cells in these patients.

This allows us to precisely identify the targets of TCRs that are driving these exceptional responses.

We then use these anti-cancer TCRs to treat patients by genetically engineering T cells to recognize and eliminate their cancer.

In addition to discovering TCRs against novel targets, we are using our ReceptorScan technology to identify high affinity naturally occurring TCRs for known targets.

Once we identify therapeutic candidates using these technologies, we reduce the safety risk of clinical development by comprehensively screening these TCRs against the human proteome using SafetyScan to identify potential off-target interactions.

We then eliminate any TCR-T candidates that cross-react with proteins expressed at high levels in normal tissues.

We are advancing a robust pipeline of TCR-T candidates for the treatment of patients with hematologic malignancies and solid tumors.

Our lead product candidates, TSC-100 and TSC-101, are in development for the treatment of patients with hematologic malignancies to eliminate residual disease and prevent relapse following allogeneic hematopoietic cell transplantation (HCT).

We are advancing a robust pipeline of TCR-T therapy product candidates for the treatment of patients with heme malignancies and solid tumors.

Our lead product candidates, TSC-100 and TSC-101, are in development for the treatment of patients with acute myeloid leukemia (AML), myelodysplastic syndrome (MDS), and acute lymphoblastic leukemia (ALL), who are undergoing allogeneic hematopoietic cell transplantation (HCT).

The products are designed to eliminate residual disease and promote complete donor chimerism, thereby preventing relapse.

TSC-100 and TSC-101 target the antigens HA-1 and HA-2, respectively, which are well-recognized TCR targets that were first identified in patients with exceptional responses to HCT-associated immunotherapy.

We have initiated a multi-arm Phase 1 "umbrella" clinical study of TSC-100 and TSC-101 with over ten clinical sites activated, and we plan to add more sites in 2024.

In addition, we are developing multiple TCR-T candidates for the treatment of solid tumors.

We are currently conducting a multi-arm Phase 1 "umbrella" clinical study of TSC-100 and TSC-101, the ALLOHA Phase 1 heme trial, with 15 clinical sites activated, and we plan to open additional sites before the end of 2025.

In addition, we are developing multiple TCR-T therapy product candidates for the treatment of solid tumors.

One of the challenges of treating solid tumors is that they are heterogeneous – not every tumor cell expresses a given target and some tumor cells lose half their HLA genes.

To address this challenge, we are developing what we refer to as multiplexed TCR-T therapy - treating a patient with more than one TCR-T candidate at a time.

We are designing these multiplexed therapies to be a simultaneous administration of up to three highly active TCR-T therapy candidates, selected from our ImmunoBank, that are customized for each patient based on which targets are expressed in their tumors and which HLA genes are still intact.

We continue to prioritize expanding the ImmunoBank with TCRs for multiple targets and multiple HLA types for each target.

We have now advanced six TCR-T therapy candidates into Phase 1 development for solid tumors:

To address this challenge, we are developing what we refer to as multiplex TCR-T therapy, or T-Plex, in which we treat a patient with more than one TCR-T therapy product candidate at a time.

We are designing these multiplex therapies to be a simultaneous administration of up to three highly active TCR-T therapy product candidates, selected from our ImmunoBank, that are customized for each patient based on which targets are expressed in their tumors and which HLA genes are still intact.

We continue to prioritize expanding the ImmunoBank with TCRs for additional targets and multiple HLA types for each target.

We have now advanced seven TCR-T therapy product candidates into Phase 1 development for solid tumors:

TSC-203-A0201 (PRAME, HLA-A*02:01);

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TSC-202-A0201 (MAGE-A4, HLA-A*02:01);

TSC-204-A0201 (MAGE-A1, HLA-A*02:01);

TSC-204-C0702 (MAGE-A1, HLA-C*07:02);

and TSC-204-A0101 (MAGE-A1, HLA-A*01:01).

In addition to clearing these six solid-tumor investigational new drug (IND) applications, the FDA has cleared our IND application for T-Plex, enabling us to treat patients with multiplexed TCR-T therapy.

We plan to further expand the ImmunoBank in 2024 by filing IND applications for additional TCR-Ts.

Since our inception in 2018, we have devoted our efforts to raising capital, obtaining financing, filing, prosecuting and maintaining intellectual property rights, organizing and staffing our Company and incurring research and development costs related to the identification of novel targets for TCRs and development of TCR-Ts to target and eliminate cancer cells.

In addition to clearing these seven solid-tumor investigational new drug (IND) applications, the U.S.

Food and Drug Administration (FDA) has cleared our IND application for T-Plex, enabling us to treat patients with multiplex TCR-T therapy.

We plan to further expand the ImmunoBank by filing IND applications for additional TCR-T therapy product candidates.

We have initiated a Phase 1 solid tumor clinical trial, the PLEXI-T trial, with 15 clinical sites activated, and we plan to open additional sites before the end of 2025.

We do not have any therapies approved for sale and have not generated any revenue from product sales.

To date, we have funded our operations primarily with proceeds from sales of capital stock, revenue received under our collaboration agreements, as well as a debt facility with K2HV.

To date, we have funded our operations primarily with proceeds from sales of capital stock, revenue received under our collaboration agreements, as well as debt facilities.

Components of Results of Operations

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The collaboration included an upfront fee and research funding together totaling $30.0 million.

During the years ended December 31, 2023 and 2022, we recognized $5.8 million and $13.5 million, respectively, of revenue associated with the Novartis Agreement, of which $1.9 million and $4.5 million, respectively, related to cost reimbursements under the Novartis Agreement that offset costs incurred within research and development expenses in the statements of operations.

During the year ended December 31, 2023, we recognized $5.8 million of revenue associated with the Novartis Agreement, of which $1.9 million related to cost reimbursements under the Novartis Agreement that offset costs incurred within research and development expenses in the statements of operations.

In March 2023, all performance obligations were considered fulfilled, and the arrangement was completed.

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We have identified performance obligations for research and development activities, the license, data reporting and participation in joint steering and research committees, which were determined to be a single combined performance obligation due to the services and licenses being highly interrelated.

During the year ended December 31, 2023, we recognized $14.2 million of revenue associated with the Amgen Agreement.

During the years ended December 31, 2024 and 2023, we recognized $2.8 million and $14.2 million, respectively, of revenue associated with the Amgen Agreement.

The research term of the Amgen Agreement is expected to be approximately 3 years.

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• expenses incurred in connection with our research programs, including under agreements with third parties, such as consultants and contract research organizations, or CROs;

• the cost of raw materials, developing and scaling our manufacturing process, and manufacturing our product candidates for use in our research and preclinical studies, including under agreements with third parties, such as consultants, contractors, and contract manufacturing organizations, or CMOs;

• laboratory supplies and research materials;

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Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred.

Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.

Our direct external research and development expenses consist of costs that include fees, reimbursed materials, direct material costs, and other costs paid to consultants, contractors, CMOs and CROs in connection with our development and manufacturing activities.

Milestone payments under license

agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.

Our direct external research and development expenses consist of costs that include fees, reimbursed materials, direct material costs, and other costs paid to consultants, contractors, CDMOs and CROs in connection with our development and manufacturing activities.

We do not allocate employee costs, general laboratory supplies, and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform technology and, as such, are not separately classified.

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General and administrative expenses consist primarily of salaries and personnel expenses, including stock-based compensation, for our personnel in executive, legal, finance and accounting, human resources, and other administrative functions.

General and administrative expenses also include legal fees relating to corporate matters;

administrative expenses also include legal fees relating to corporate matters;

professional fees paid for accounting, auditing, consulting, and tax services;

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We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates.

We have incurred significantly increased accounting, audit,

legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company and anticipate these expenses to increase in 2024 as we continue to expand the business.

We have incurred significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company and anticipate these expenses to increase in 2025 as we continue to expand the business.

In addition, if we obtain regulatory approval for a product candidate and do not enter into a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support sales, marketing and distribution activities.

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Interest expense

Loss on extinguishment of debt

Total other income

We had $21.0 million in revenue for the year ended December 31, 2023 and $13.5 million of revenue for the year ended December 31, 2022.

The increase in revenue was primarily related to the recognition of revenue associated with the Amgen Agreement, which commenced in May 2023.

We have recognized $14.2 million of deferred revenue related to the Amgen Agreement.

Additionally in 2023, we recognized the remaining revenue associated with the Novartis Agreement totaling $5.8 million, of which $3.9 million was based on completion of performance obligations and $1.9 million was associated with cost reimbursements.

Revenue for the years ended December 31, 2024 and 2023 was $2.8 million and $21.0 million, respectively.

The decrease was primarily due to the timing of research activities performed pursuant to our collaboration agreements.

Revenue for the 2024 period was related solely to our collaboration agreement with Amgen which commenced in May 2023.

Revenue for the 2023 period was primarily driven by $14.2 million related to our collaboration agreement with Amgen, and $5.8 million related to our collaboration agreement with Novartis, which concluded in March 2023.

Research and Development Expenses

The following table summarizes our research and development expenses for the years ended December 31, 2024 and 2023 (in thousands):

Personnel expenses

Laboratory supplies, research materials and studies

Facility-related and other

Clinical studies

Facility-related and other

Stock-based compensation

Depreciation expense

Total research and development expenses

Research and development expenses increased $28.3 million and was primarily attributable to a $9.1 million increase for the expansion of our facilities and equipment associated with the ramp up of clinical and related manufacturing activities, as well as an $8.1 million increase in clinical studies expense due to Phase 1 study start-up activities and enrollment for TSC-100 and TSC-101 and Phase 1 study start-up activities for the solid tumor clinical trial.

In support of the expanded research and development activities, personnel expenses increased by $6.8 million and laboratory expenses increased by $4.5 million.

Research and development expenses increased $19.2 million and was primarily attributable to a $9.0 million increase in clinical studies expense driven by enrollment in the ALLOHA Phase 1 heme clinical trial as well as start-up activities and enrollment in the PLEXI-T Phase 1 solid tumor clinical trial.

There was also a $7.6 million increase in personnel expenses due to additional headcount in support of expanded research and development activities, a $1.4 million increase in laboratory supplies, research materials and studies due to start-up activities with a global contract development and manufacturing organization, or CDMO, a $0.4 million increase in facility-related expenses, and a $1.1 million decrease in depreciation expense.

Research and development expenses included non-cash stock compensation of $4.8 million and $2.9 million for the years ended December 31, 2024 and 2023, respectively.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the years ended December 31, 2024 and 2023 (in thousands):

Personnel expenses (including stock-based compensation)

Facility-related and other

Personnel expenses

Legal and professional fees

Facility-related and other

Stock-based compensation

Depreciation expense

Total general and administrative expenses

General and administrative expenses increased by $6.0 million and was primarily due to a $3.4 million increase in legal and professional fees associated with certain financing and strategic transactions entered into during 2023.

Facilities-related costs increased $2.9 million primarily related to depreciation expense and facilities maintenance costs.

General and administrative expenses increased by $3.9 million and was primarily due to a $1.8 million increase in personnel expenses due to additional headcount.

There was also a $0.3 million increase in legal and professional fees, a $0.4 million decrease in facility-related expenses, and a $0.1 million decrease in depreciation expense.

General and administrative expenses included non-cash stock compensation expense of $4.7 million and $2.3 million for the years ended December 31, 2024 and 2023, respectively.

Other (Expense) Income

Other income has increased $3.8 million primarily due to a $6.4 million increase in interest income attributable to higher cash balances available for investment, offset by a $2.6 million increase in interest expense due to 2023 being the first full year of interest payments after the commencement of the Loan Agreement with K2HV in September 2022.

Other income has increased $3.1 million primarily due to a $4.1 million increase in interest income attributable to higher cash balances available for investment, offset by a $1.1 million non-recurring charge for loss on extinguishment of debt related to the K2HV Loan Agreement repayment.

Liquidity and Capital Resources

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Under the terms of the Amgen Agreement, we received an upfront payment of $30.0 million in July 2023.

In addition, we are eligible to earn success-based milestone payments of over $500 million, based upon the achievement of certain clinical development and commercial milestones, as well as tiered single-digit royalty payments on net sales of products developed from the collaboration, subject to reductions set forth in the Amgen Agreement.

Pursuant to the Loan Agreement with K2HV (the Loan Agreement), K2HV may provide us with convertible term loans in an aggregate principal amount of up to $60 million, of which $30 million gross proceeds was provided on the closing date.

We have the option to draw the remaining tranches subject to certain conditions, including certain clinical milestones.

See “Notes to Condensed Consolidated Financial Statements” and “Risk factors—The terms of our loan agreement place restrictions on our operating and financial flexibility.

If we raise additional capital through debt financing, the terms of any new debt could further restrict our operating and financial flexibility” for additional details regarding the Loan Agreement.

On June 1, 2023, the Company completed an underwritten public offering of (a) 23,287,134 shares of the Company's Voting Common Stock, inclusive of the underwriters’ 30-day option to purchase 297,660 additional shares of Voting Common Stock, at a price

of $2.00 per share, and (b) the Pre-Funded Warrants to purchase up to 47,010,526 shares of the Voting Common Stock, at a price of $1.9999 per warrant with an exercise price of $0.0001 per share.

In addition, we are eligible to earn success-based milestone payments of over $500 million, based upon the

achievement of certain clinical development and commercial milestones, as well as tiered single-digit royalty payments on net sales of products developed from the collaboration, subject to reductions set forth in the Amgen Agreement.

On June 1, 2023, we completed an underwritten public offering of (a) 23,287,134 shares of the Company's Voting Common Stock, inclusive of the underwriters’ 30-day option to purchase 297,660 additional shares of Voting Common Stock, at a price of $2.00 per share, and (b) the Pre-Funded Warrants to purchase up to 47,010,526 shares of the Voting Common Stock, at a price of $1.9999 per warrant with an exercise price of $0.0001 per share.

The Company received aggregate net proceeds from the offering of $134.7 million after deducting underwriting discounts, commissions and other offering expenses.

On April 24, 2024, we completed an underwritten public offering resulting in the issuance and sale of (a) 4,958,068 shares of Voting Common Stock, including the partial exercise of the underwriters’ option to purchase 2,485,487 additional shares of Voting Common Stock, at the closing market price on April 16, 2024, of $7.13 per share, and (b) Pre-Funded Warrants to purchase up to 18,577,419 shares of the Voting Common Stock, at a price of $7.1299 per warrant with an exercise price of $0.0001 per share.

We received aggregate net proceeds of approximately $161.4 million after deducting underwriting discounts, commissions and other estimated offering expenses.

Pursuant to the K2HV Loan Agreement dated September 9, 2022, K2HV extended an initial convertible term loan of $30.0 million to the Company in accordance with the K2HV Loan Agreement.

On November 20, 2024, K2HV converted $15.0 million outstanding principal under the loan in exchange for 3,134,796 shares of our voting common stock.

On December 20, 2024, we entered into a loan agreement with SVB (the SVB Loan Agreement), terminated the K2HV Loan Agreement and repaid all remaining outstanding loan obligations to K2HV.

The SVB Loan Agreement provides for term loans up to an aggregate principal amount of $52.5 million, of which $32.5 million was provided on the closing date.

We have the option to draw a second tranche of $20.0 million at the lender's sole discretion on or prior to June 30, 2026.

See “Notes to Condensed Consolidated Financial Statements” and “Item 1A.

Risk factors—The terms of our loan agreement place restrictions on our operating and financial flexibility.

If we raise additional capital through debt financing, the terms of any new debt could further restrict our operating and financial flexibility” for additional details regarding the SVB Loan Agreement.

On December 27, 2024, we completed a registered direct offering with an existing investor for the issuance of pre-funded warrants to purchase up to 7,500,000 shares of the Company's Voting Common Stock with an exercise price of $0.0001 per warrant.

The pre-funded warrants were issued at a purchase price of $4.00 per warrant, resulting in gross proceeds of approximately $30.0 million, before deducting offering expenses of $0.2 million.

As of December 31, 2024, we had cash, cash equivalents and marketable securities of $290.1 million, excluding restricted cash of $5.0 million.

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• the costs of continuing to operate as a public company.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our planned operating expenses and capital expenditure requirements into 2026.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our planned operating expenses and capital expenditure requirements into the first quarter of 2027.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

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(2) obtain applicable regulatory approvals;

and (3) successfully commercialize or enter

into collaborative agreements for our product candidates.

and (3) successfully commercialize or enter into collaborative agreements for our product candidates.

We do not know with certainty when, or if, any of these items will ultimately occur.

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If we raise additional funds by issuing equity securities, our stockholders may experience dilution.

Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions, in addition to those contained in our Loan Agreement.

Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

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Operating Activities

During the year ended December 31, 2024, net cash used in operating activities of $110.8 million was primarily driven by our net loss of $127.5 million, partially offset by non-cash charges of $11.6 million related to depreciation expense, accretion of marketable securities, stock-based compensation, non-cash interest expense related to note payable, and loss on extinguishment of debt.

During 2024, working capital changes contributed $5.1 million to our cash flows.

The change in working capital was primarily driven by the timing of payments to our vendors.

During the year ended December 31, 2023, net cash used in operating activities of $61.4 million was primarily driven by our net loss of $89.2 million, partially offset by non-cash charges of $10.3 million related to depreciation expense, accretion of marketable securities, stock-based compensation, and non-cash interest expense related to note payable.

During 2023, working capital changes contributed $17.6 million to our cash flows.

The change in working capital was primarily driven by changes in deferred revenue arising from the Amgen and Novartis arrangements as well as the timing of payments related to our vendors.

During the year ended December 31, 2022, net cash used in operating activities of $66.5 million was primarily driven by our net loss of $66.2 million, partially offset by non-cash charges of $9.9 million related to depreciation expense, stock-based compensation, and non-cash interest expense related to note payable.

During 2023, working capital changes resulted in a use of $10.2 million.

The change in working capital was primarily driven by changes in deferred revenue arising from the Novartis arrangement and the recognition of the new lease upon commencement.

The change in working capital was primarily driven by changes in deferred revenue arising from the Amgen and Novartis arrangements as well as the timing of payments to our vendors.

Investing Activities

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Financing Activities

During the year ended December 31, 2024, net cash provided by financing activities was $208.8 million, consisting of net proceeds of $161.4 million from our follow-on public offering in April 2024, cash proceeds of $32.5 million from borrowings under SVB Loan Agreement, cash proceeds of $30.0 million from our direct offering in December 2024, $1.7 million of proceeds from the exercise of

stock options, and $0.3 million of proceeds from the issuance of common stock under 2021 ESPP.

These proceeds are partially offset by $17.1 million of repayments of the K2HV Loan Agreement.

During the year ended December 31, 2023, net cash provided by financing activities was $135.4 million, consisting of net proceeds of $134.7 million from our follow-on public offering in June 2023 and $0.7 million of proceeds from the exercise of stock options.

During the year ended December 31, 2022, net cash provided by financing activities was $29.4 million, consisting primarily of net proceeds from the issuance of convertible debt under the Loan Agreement with K2HV.

Critical Accounting Policies and Estimates

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(i) identification of the promised goods or services in the contract;

(ii) determination of whether

the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including the assessment of the constraint on variable consideration;

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• CROs in connection with preclinical and clinical studies and testing;

• CMOs in connection with the process development and scale up activities and the production of materials.

• CDMOs in connection with the process development and scale up activities and the production of materials.

We record the expense and accrual related to contract research and manufacturing based on our estimates of the services received and efforts expended considering a number of factors, including our knowledge of the progress towards completion of the research, development, and manufacturing activities;

invoicing to date under contracts;

communication from the contract research organizations, contract manufacturing organizations and other companies of any actual costs incurred during the period that have not yet been invoiced;

communication from the contract research organizations, contract development and manufacturing organizations and other companies of any actual costs incurred during the period that have not yet been invoiced;

and the costs included in the contracts and purchase orders.

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If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expense accordingly.

we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis