10-Q 1 adap-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number  001-37368

ADAPTIMMUNE THERAPEUTICS PLC

(Exact name of Registrant as specified in its charter)

England and Wales

Not Applicable

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

60 Jubilee Avenue, Milton Park

Abingdon, Oxfordshire OX14 4RX

United Kingdom

(Address of principal executive offices)

(44) 1235 430000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

American Depositary Shares, each representing 6 Ordinary Shares, par value £0.001 per share

ADAP

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No

As of May 6, 2022, the number of outstanding ordinary shares par value £0.001 per share of the Registrant is 971,191,902.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

4

Item 1.

Financial Statements:

4

Unaudited Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

4

Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021

5

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021

6

Unaudited Condensed Consolidated Statements of Change in Equity for the three months ended March 31, 2022 and 2021

7

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

9

Notes to the Unaudited Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

29

PART II — OTHER INFORMATION

29

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

30

Signatures

31

2

General information

In this Quarterly Report on Form 10-Q (“Quarterly Report”), “Adaptimmune,” the “Group,” the “Company,” “we,” “us” and “our” refer to Adaptimmune Therapeutics plc and its consolidated subsidiaries, except where the context otherwise requires.

Information Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” or the negative of these words or other comparable terminology.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. Risk Factors of this Quarterly Report and under Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources.

3

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

March 31, 

December 31, 

    

2022

    

2021

Assets

Current assets

Cash and cash equivalents

$

89,539

$

149,948

Marketable securities - available-for-sale debt securities

214,679

219,632

Accounts receivable, net of allowance for doubtful accounts of $0 and $0

1,826

752

Other current assets and prepaid expenses

53,417

45,126

Total current assets

359,461

415,458

Restricted cash

1,716

1,718

Operating lease right-of-use assets, net of accumulated amortization

21,145

20,875

Property, plant and equipment, net of accumulated depreciation of $36,671 and $36,253

36,689

30,494

Intangible assets, net of accumulated amortization of $4,209 and $4,051

788

1,000

Total assets

$

419,799

$

469,545

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

$

7,017

$

8,113

Operating lease liabilities, current

2,735

2,320

Accrued expenses and other current liabilities

31,627

29,909

Deferred revenue, current

24,772

22,199

Total current liabilities

66,151

62,541

Operating lease liabilities, non-current

23,220

23,148

Deferred revenue, non-current

166,613

177,223

Other liabilities, non-current

670

673

Total liabilities

256,654

263,585

Stockholders’ equity

Common stock - Ordinary shares par value £0.001, 1,240,853,520 authorized and 940,866,006 issued and outstanding (2021: 1,240,853,520 authorized and 937,547,934 issued and outstanding)

1,342

1,337

Additional paid in capital

965,227

959,611

Accumulated other comprehensive loss

(9,313)

(11,142)

Accumulated deficit

(794,111)

(743,846)

Total stockholders' equity

163,145

205,960

Total liabilities and stockholders’ equity

$

419,799

$

469,545

See accompanying notes to unaudited condensed consolidated financial statements.

4

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

    

Three months ended

March 31, 

    

2022

    

2021

Revenue

$

3,575

$

434

Operating expenses

Research and development

 

(36,752)

 

(24,506)

General and administrative

 

(16,804)

 

(13,817)

Total operating expenses

(53,556)

 

(38,323)

Operating loss

 

(49,981)

 

(37,889)

Interest income

 

338

 

425

Other income (expense), net

 

12

 

(1)

Loss before income tax expense

 

(49,631)

 

(37,465)

Income tax expense

 

(634)

 

(298)

Net loss attributable to ordinary shareholders

$

(50,265)

$

(37,763)

Net loss per ordinary share

Basic and diluted

$

(0.05)

$

(0.04)

Weighted average shares outstanding:

Basic and diluted

 

940,029,247

 

931,088,810

See accompanying notes to unaudited condensed consolidated financial statements.

5

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

Three months ended

March 31, 

2022

2021

Net loss

$

(50,265)

$

(37,763)

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustments, net of tax of $0, and $0

16,792

(3,001)

Foreign currency gains (losses) on intercompany loan of a long-term investment nature, net of tax of $0, and $0

(13,808)

3,048

Unrealized holding losses on available-for-sale debt securities, net of tax of $0, and $0

(1,155)

(223)

Total comprehensive loss for the period

$

(48,436)

$

(37,939)

See accompanying notes to unaudited condensed consolidated financial statements.

6

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

(In thousands, except share data)

Accumulated

Additional

other

Total

Common

Common

paid in

comprehensive

Accumulated

stockholders'

    

stock

    

stock

    

capital

    

loss

    

deficit

equity

Balance as of 1 January 2022

937,547,934

$

1,337

$

959,611

$

(11,142)

$

(743,846)

$

205,960

Net loss

 

 

 

 

(50,265)

(50,265)

Other comprehensive loss

1,829

1,829

Issuance of shares upon exercise of stock options

 

3,318,072

 

5

 

30

 

 

35

Share-based compensation expense

 

 

 

5,586

 

 

5,586

Balance as of March 31, 2022

 

940,866,006

$

1,342

$

965,227

$

(9,313)

$

(794,111)

$

163,145

See accompanying notes to unaudited condensed consolidated financial statements.

7

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

(In thousands, except share data)

Accumulated

Additional

other

Total

Common

Common

paid in

comprehensive

Accumulated

stockholders’

stock

stock

capital

(loss) income

deficit

equity

Balance as of 1 January 2021

 

928,754,958

 

$

1,325

 

$

935,706

 

$

(10,048)

 

$

(585,756)

 

$

341,227

Net loss

 

 

 

 

 

(37,763)

 

(37,763)

Other comprehensive loss

(176)

(176)

Issuance of shares upon exercise of stock options

 

4,062,210

 

6

 

529

 

 

 

535

Share-based compensation expense

 

 

 

5,334

 

 

 

5,334

Balance as of March 31, 2021

 

932,817,168

$

1,331

$

941,569

$

(10,224)

$

(623,519)

$

309,157

See accompanying notes to unaudited condensed consolidated financial statements.

8

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three months ended

    

March 31, 

    

2022

    

2021

    

Cash flows from operating activities

Net loss

$

(50,265)

$

(37,763)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

1,386

1,436

Amortization

209

Share-based compensation expense

5,586

5,334

Unrealized foreign exchange (gains)/losses

(244)

1,249

Amortization on available-for-sale debt securities

999

1,499

Other

220

1,299

Changes in operating assets and liabilities:

Increase in receivables and other operating assets

(10,759)

(11,155)

Increase/ (decrease) in payables and other current liabilities

964

(8,601)

(Decrease)/ increase in deferred revenue

(2,497)

162

Net cash used in operating activities

(54,401)

(46,540)

Cash flows from investing activities

Acquisition of property, plant and equipment

(7,114)

(1,152)

Acquisition of intangible assets

(133)

Maturity or redemption of marketable securities

44,536

84,646

Investment in marketable securities

(42,197)

(61,599)

Net cash (used in)/ provided by investing activities

(4,775)

21,762

Cash flows from financing activities

Proceeds from exercise of stock options

35

534

Net cash provided by financing activities

35

534

Effect of currency exchange rate changes on cash, cash equivalents and restricted cash

(1,270)

(204)

Net decrease in cash, cash equivalents and restricted cash

(60,411)

(24,448)

Cash, cash equivalents and restricted cash at start of period

151,666

61,484

Cash, cash equivalents and restricted cash at end of period

$

91,255

$

37,036

See accompanying notes to unaudited condensed consolidated financial statements.

9

ADAPTIMMUNE THERAPEUTICS PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 General

Adaptimmune Therapeutics plc is registered in England and Wales. Its registered office is 60 Jubilee Avenue, Milton Park, Abingdon, Oxfordshire, OX14 4RX, United Kingdom. Adaptimmune Therapeutics plc and its subsidiaries (collectively “Adaptimmune” or the “Company”) is a clinical-stage biopharmaceutical company primarily focused on providing novel cell therapies to people with cancer. We are a leader in the development of T-cell therapies for solid tumors. The Company’s proprietary platform enables it to identify cancer targets, find and develop cell therapy candidates active against those targets and produce therapeutic candidates for administration to patients.

The Company is subject to a number of risks similar to other biopharmaceutical companies in the early stage of clinical development including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical programs or clinical programs, the need to obtain marketing approval for its cell therapies, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of its cell therapies, the need to develop a reliable commercial manufacturing process, the need to commercialize any cell therapies that may be approved for marketing, and protection of proprietary technology. If the Company does not successfully commercialize any of its cell therapies, it will be unable to generate product revenue or achieve profitability. The Company had an accumulated deficit of $794,111,000 as of March 31, 2022.

Note 2 Summary of Significant Accounting Policies

(a)          Basis of presentation

The condensed consolidated financial statements of Adaptimmune Therapeutics plc and its subsidiaries and other financial information included in this Quarterly Report are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars. All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated on consolidation.

The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2022 (the “Annual Report”). The balance sheet as of December 31, 2021 was derived from audited consolidated financial statements included in the Company’s Annual Report but does not include all disclosures required by U.S. GAAP. The Company’s significant accounting policies are described in Note 2 to those consolidated financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. However, these interim financial statements include all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to fairly state the results of the interim period. The interim results are not necessarily indicative of results to be expected for the full year.

(b)          Use of estimates in interim financial statements

The preparation of interim financial statements, in conformity with U.S. GAAP and SEC regulations, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the interim financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are made in various areas, including in relation to valuation allowances relating to deferred tax assets, revenue recognition, and estimation of the incremental borrowing rate for operating leases. If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

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(c)          Fair value measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The hierarchy defines three levels of valuation inputs:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 - Unobservable inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability

The carrying amounts of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The fair value of marketable securities, which are measured at fair value on a recurring basis is detailed in Note 6, Fair value measurements.

(d)          Significant concentrations of credit risk

The Company held cash and cash equivalents of $89,539,000, marketable securities of $214,679,000 and restricted cash of $1,716,000 as of March 31, 2022. The cash and cash equivalents and restricted cash are held with multiple banks and the Company monitors the credit rating of those banks. The Company maintains cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation in the United States and the U.K. Government Financial Services Compensation Scheme in the United Kingdom. The Company’s investment policy limits investments to certain types of instruments, such as money market instruments, corporate debt securities and commercial paper, places restrictions on maturities and concentration by type and issuer and specifies the minimum credit ratings for all investments and the average credit quality of the portfolio.

The Company has three customers, which are Genentech, Astellas and GSK. There were accounts receivable of $1,826,000 as of March 31, 2022 and $752,000 as of December 31, 2021. The Company has been transacting with Genentech since 2021, Astellas since 2020 and GSK since 2014, during which time no impairment losses have been recognized. As of March 31, 2022, there were no overdue accounts receivable.

(e) New accounting pronouncements

To be adopted in future periods

Measurement of credit losses on financial instruments

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit losses, which replaces the incurred loss impairment methodology for financial instruments in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for the fiscal year beginning January 1, 2020, including interim periods within that fiscal year. In November 2019, the FASB issued ASU 2019-10 which resulted in the postponement of the effective date of the new guidance for eligible smaller reporting companies (as defined by the SEC), including the Company, at that time to the fiscal year beginning January 1, 2023. The Company intends to adopt the guidance in the fiscal year beginning January 1, 2023. The guidance must be adopted using a modified-retrospective approach and a prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU 2021-08 – Business Combinations (Topic 805)- Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in and inconsistency related to the following: (1) recognition of an acquired contract liability

11

and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU resolve this inconsistency by requiring that an entity (acquirer) recognize and measure contract assets and liabilities acquired in a business combination in accordance with Topic 606, in contrast to current GAAP which requires that assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities, are measured at fair value as of the acquisition date. For public business entities, including the Company, the guidance is effective for fiscal years beginning on or after December 15, 2022, including interim periods within that fiscal year. The Company intends to adopt the guidance in the fiscal year beginning January 1, 2023. The amendments in this ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

Note 3 Revenue

The Company has three revenue-generating contracts with customers compared to two in the three months ended March 31, 2021: a collaboration and license agreement with GSK, a collaboration agreement with Astellas and a strategic collaboration and license agreement with Genentech.

Revenue comprises the following categories (in thousands):

 

Three months ended

 

March 31, 

     

2022

     

2021

Development revenue

 

$

3,575

 

$

434

 

$

3,575

 

$

434

As of December 31, 2021, there was deferred revenue of $199,422,000 of which $2,790,000 was recognized as revenue in the three months ended March 31, 2022.

The aggregate amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the agreements as of March 31, 2022 was $386,381,000.

The Genentech Collaboration and License Agreement

The amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the Genentech agreement as of March 31, 2022 was $306,227,000. Of this amount $188,941,000 is allocated to the research services and rights granted for the initial ‘off-the-shelf’ collaboration targets, $97,758,000 is allocated to the research services and rights granted for the personalized therapies, $13,182,000 is allocated to the material rights to designate the additional ‘off-the-shelf’ collaboration targets, $5,077,000 is allocated to the material right for the first option to extend the research term and $1,269,000 is allocated to the material right for the option to extend the research term a second time.

The Company expects to satisfy the performance obligations relating to the initial ‘off-the-shelf’ collaboration targets and the personalized therapies as development progresses and recognizes revenue based on an estimate of the percentage of completion of the project determined based on the costs incurred on the project as a percentage of the total expected costs. The Company expects to satisfy the performance obligations relating to the material rights to designate additional ‘off-the-shelf’ collaboration targets from the point that the options are exercised and then as development progresses, in line with the initial ‘off-the-shelf’ collaboration targets, or at the point in time that the rights expire. The Company expects to satisfy the performance obligations relating to the material rights to extend the research term from the point that the options are exercised and then over period of the extension, or at the point in time that the rights expire.

The Astellas Collaboration Agreement

The amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the Astellas agreement as of March 31, 2022 was $72,940,000, of which $14,603,000 is allocated to the rights granted for each of the two independent Astellas targets, $17,455,000 is allocated to research services and rights granted under the co-exclusive license for the first co-development target, $19,230,000 is allocated to research services and rights granted under the co-exclusive license for the second co-development target and $7,050,000 is allocated to research services and rights under the co-exclusive license for the third co-development

12

targets. The Company expects to satisfy the performance obligations relating to the three co-development targets as development progresses and recognizes revenue based on an estimate of the percentage of completion of the project determined based on the costs incurred on the project as a percentage of the total expected costs. The Company has determined that the performance obligations relating to the two independent Astellas targets would be recognized at a point-in-time, upon commencement of the licenses in the event of nomination of the target, since they are right-to-use licenses.

The GSK Collaboration and License Agreement

The amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the GSK agreement as of March 31, 2022 was $7,214,000. The Company satisfies the performance obligations relating to the development of each target over time and recognizes revenue based on an estimate of the percentage of completion of the project determined based on the costs incurred on the project as a percentage of the total expected costs.

Future research, development, regulatory and sales milestones under each of the agreements are not considered probable as of March 31, 2022 and have not been included in the transaction price. Reimbursement of the research funding over the co-development period under the Astellas agreement is variable consideration and included in the transaction price as of March 31, 2022 to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

Note 4 Loss per share

The dilutive effect of 150,064,226 and 113,556,283 stock options outstanding as of March 31, 2022 and 2021 respectively have been excluded from the diluted loss per share calculation for the three months ended March 31, 2022 and 2021 because they would have an antidilutive effect on the loss per share for the period.

Note 5 Accumulated other comprehensive loss

The Company reports foreign currency translation adjustments and the foreign exchange gain or losses arising on the revaluation of intercompany loans of a long-term investment nature within Other comprehensive (loss) income. Unrealized gains and losses on available-for-sale debt securities are also reported within Other comprehensive (loss) income until a gain or loss is realized, at which point they are reclassified to Other (expense) income, net in the Condensed Consolidated Statement of Operations.

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The following tables show the changes in Accumulated other comprehensive (loss) income (in thousands):

Accumulated

Accumulated

Total

foreign

unrealized

accumulated

currency

gains (losses) on

other

    

translation

    

available-for-sale

comprehensive

adjustments

debt securities

(loss) income

Balance at January 1, 2022

 

$

(10,785)

$

(357)

$

(11,142)

Foreign currency translation adjustments

16,792

16,792

Foreign currency losses on intercompany loan of a long-term investment nature, net of tax of $0

(13,808)

(13,808)

Unrealized holding losses on available-for-sale debt securities, net of tax of $0

(1,155)

(1,155)

Balance at March 31, 2022

$

(7,801)

$

(1,512)

$

(9,313)

Accumulated

Accumulated

Total

foreign

unrealized

accumulated

currency

gains (losses) on

other

    

translation

    

available-for-sale

comprehensive

adjustments

debt securities

(loss) income

Balance at January 1, 2021

 

$

(10,158)

$

110

$

(10,048)

Foreign currency translation adjustments

(3,001)

(3,001)

Foreign currency gains on intercompany loan of a long-term investment nature, net of tax of $0

3,048

3,048

Unrealized holding losses on available-for-sale debt securities, net of tax of $0

(223)

(223)

Balance at March 31, 2021

$

(10,111)

$

(113)

$

(10,224)

Note 6 Fair value measurements

Assets and liabilities measured at fair value on a recurring basis based on Level 1, Level 2, and Level 3 fair value measurement criteria as of March 31, 2022 are as follows (in thousands):

Fair value measurements using

March 31, 

Level 1

Level 2

Level 3

     

2022

    

    

    

Assets:

Corporate debt securities

$

167,645

$

167,645

$

$

U.S. Treasury securities

42,144

42,144

Agency bonds

 

4,890

4,890

 

$

214,679

 

$

167,645

 

$

47,034

 

$

The Company estimates the fair value of available-for-sale debt securities with the aid of a third party valuation service, which uses actual trade and indicative prices sourced from third-party providers on a daily basis to estimate the fair value. If observed market prices are not available (for example securities with short maturities and infrequent secondary market trades), the securities are priced using a valuation model maximizing observable inputs, including market interest rates.

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Note 7 — Marketable securities – available-for-sale debt securities

As of March 31, 2022, the Company has the following investments in marketable securities (in thousands):

Gross

Gross

Aggregate

Remaining

Amortized

unrealized

unrealized

estimated

    

contractual maturity

    

cost

    

gains

    

losses

    

fair value

Available-for-sale debt securities:

 

  

 

  

 

  

 

  

 

  

Corporate debt securities

 

Less than 3 months

$

49,028

$

26

$

(10)

$

49,044

Corporate debt securities

3 months to 1 year

78,123

(623)

77,500

U.S. Treasury securities

3 months to 1 year

42,192

(48)

42,144

Agency bonds

1 year to 2 years

5,000

(110)

4,890

Corporate debt securities

1 year to 2 years

41,848

(747)

41,101

 

  

$

216,191

$

26

$

(1,538)

$

214,679

The aggregate fair value (in thousands) and number of securities held by the Company (including those classified as cash equivalents) in an unrealized loss position as of March 31, 2022 and 31 December, 2021 are as follows:

March 31, 2022

December 31, 2021

     

Fair market value of investments in an unrealized loss position

Number of investments in an unrealized loss position

Unrealized losses

Fair market value of investments in an unrealized loss position

Number of investments in an unrealized loss position

Unrealized losses

Marketable securities in a continuous loss position for 12 months or longer:

Corporate debt securities

$

29,672

5

$

(275)

$

8,232

1

(35)

Marketable securities in a continuous loss position for less than 12 months:

Corporate debt securities

 

$

112,253

 

24

$

(1,105)

 

$

163,258

 

34

 

$

(348)

U.S. Treasury securities

 

42,144

 

9

 

(48)

 

 

 

Agency bond

4,890

1

(110)

4,993

1

(7)

 

$

188,959

 

39

$

(1,538)

 

$

176,483

 

36

 

$

(390)

As of March 31, 2022, the securities in an unrealized loss position are not considered to be other than temporarily impaired because the impairments are not severe and have been for a short duration. Five securities have been in an unrealized loss position for more than one year with a net total unrealized loss of $275,000. Furthermore, the Company does not intend to sell the debt securities in an unrealized loss position, believes that it has the ability to hold the debt securities to maturity, and it is unlikely that the Company will be required to sell these securities before the recovery of the amortized cost.

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Note 8 — Other current assets

Other current assets consisted of the following (in thousands):

March 31, 

December 31, 

    

2022

    

2021

Corporate tax receivable

 

$

37,893

$

30,773

Prepayments

 

10,077

9,043

Clinical materials

 

175

746

VAT receivable

3,169

2,482

Other current assets

 

2,103

2,082

$

53,417

$

45,126

Note 9 — Operating leases

The Company has operating leases in relation to property for office and research facilities.

On March 30, 2022, the Company entered into an agreement to modify the lease of 39 Innovation Drive, Milton Park, Abingdon, Oxfordshire, UK at a later date. However, for purposes of ASC 842 Leases, the Company determined that the effective date of the modification is March 30, 2022. The effect of the modification was a partial reduction of the scope of the lease and an increase in contractual lease payments relating to a non-lease component. The modification did not result in the identification of a separate contract but did result in the identification of a non-lease component relating to a leasehold improvement.

Upon modification, the lease liability has been remeasured using the current estimate of the Company’s incremental borrowing rate. The remeasurement of the lease liability also resulted in variable lease payments not previously included in the amount of the lease liability becoming included in the amount of the lease payments as at the date of the modification. The amount of the remeasurement of the lease liability due to the inclusion of variable lease payments that depend on an index or rate has been recognized as an adjustment to the corresponding right-of-use asset. The effect of the modification was to increase the lease liability and the corresponding right-of-use asset by $75,000.

The following table shows the weighted-average remaining lease term and the weighted-average discount rate as at March 31, 2022 and 2021:

March 31, 

2022

2021

Weighted-average remaining lease term - operating leases

7.6 years

8.0 years

Weighted-average discount rate - operating leases

6.8%

6.8%

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The maturities of operating lease liabilities as of March 31, 2022 are as follows (in thousands):

     

Operating leases

2022

 

$

3,119

2023

 

4,178

2024

 

4,124

2025

 

4,172

2026

 

4,226

after 2026

 

13,580

Total lease payments

33,399

Less: imputed interest

(7,444)

Present value of lease liability

$

25,955

The maximum lease term without activation of termination options is to 2041.

Note 10 Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

March 31, 

December 31, 

    

2022

    

2021

Accrued clinical and development expenditure

$

18,841

$

13,436

Accrued employee expenses

5,961

11,758

Other accrued expenditure

5,945

4,388

Other

 

880

 

327

$

31,627

$

29,909

Note 11 Contingencies and commitments

Alpine Collaboration Agreement

On May 14, 2019, the Company entered into a Collaboration Agreement relating to the development of next-generation SPEAR T-cell products with Alpine. The Company paid an upfront exclusive license option fee of $2,000,000 to Alpine in June 2019. Under the agreement, Adaptimmune will pay Alpine for ongoing research and development funding costs and development and commercialization milestone payments up to a maximum of $288,000,000 may be payable if all possible targets are selected and milestones achieved. The upfront payment of $2,000,000 and the payments for ongoing research was recognized within Research and development in the Consolidated Statement of Operations for the year ended December 31, 2019. A further payment of $1,000,000 was recognized within Research and development in the Consolidated Statement of Operations for the three months ended March 31, 2022. Alpine would also receive low single-digit royalties on worldwide net sales of applicable products.

Universal Cells Research, Collaboration and License Agreement and Co-development and Co-commercialization agreement

On November 25, 2015, the Company entered into a Research, Collaboration and License Agreement relating to gene editing and Human Leukocyte Antigen (“HLA”) engineering technology with Universal Cells, Inc. (“Universal Cells”). The Company paid an upfront license and start-up fee of $2,500,000 to Universal Cells in November 2015, a milestone payment of $3,000,000 in February 2016 and further milestone payments of $200,000 and $900,000 were made in the year ended December 31, 2018 and 2017, respectively. The agreement was amended and re-stated as of January 13, 2020, primarily to reflect changes to the development plan agreed between the

17

parties. Further milestone payments of up to $37,600,000 are payable if certain development and product milestones are achieved of which milestones of $800,000, $500,000 and $2,000,000 have been accrued, but not yet paid, as of March 31, 2022. Universal Cells would also receive a profit-share payment for the first product, and royalties on sales of other products utilizing its technology. The upfront license and start-up fee and milestone payments were expensed to research and development when incurred.

Note 12 Share-based compensation

The following table shows the total share-based compensation expense included in the unaudited consolidated statements of operations (in thousands):

Three months ended

March 31, 

    

2022

    

2021

Research and development

$

2,523

$

2,375

General and administrative

 

3,063

2,959

$

5,586

$

5,334

The following table shows information about share options and options which have a nominal exercise price (similar to restricted stock units (RSUs)) granted:

Three months ended

March 31, 

    

2022

    

2021

Number of options over ordinary shares granted

22,876,464

14,803,056

Weighted average fair value of ordinary shares options

$

0.43

$

0.75

Number of additional options with a nominal exercise price granted

17,688,432

12,663,792

Weighted average fair value of options with a nominal exercise price

$

0.59

$

1.03

Note 13 Stockholders’ equity

On August 10, 2020 the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) (the “Sales Agreement”) under which we may from time to time issue and sell American Depositary Shares (“ADSs”) representing our ordinary shares through Cowen in at-the-market (“ATM”) offerings for an aggregate offering price of up to $200 million. As of March 31, 2022, $197,360,000 remained available for sale under the Sales Agreement. On April 8, 2022 the Company entered into a new sales agreement pursuant to which it may sell up to $200 million of ADSs as described in Note 14 below.

Note 14 Subsequent Events

On April 8, 2022 the Company entered into a sales agreement with Cowen (the “2022 Sales Agreement”) under which we may from time to time issue and sell ADSs representing our ordinary shares through Cowen in ATM offerings for an aggregate offering price of up to $200 million. In April 2022, the Company sold 5,000,000 ADSs representing 30,000,000 ordinary shares resulting in gross proceeds to the Company of $8,750,000 prior to deducting commissions payable under the 2022 Sales Agreement and issuance costs. As of May 9, 2022, $191,250,000 remained available for sale under the 2022 Sales Agreement.

On May 4, 2022 the Company announced that it had appointed Dr. Joanna Brewer as its Chief Scientific Officer with immediate effect.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021, included in our Annual Report on Form 10-K that was filed with the SEC on March 14, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2021, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company focused on providing novel cell therapies to people with cancer. We are a leader in the development of T-cell therapies for solid tumors and have reported clinical responses (per RECIST 1.1) in seven solid tumor indications.

Our proprietary platform enables us to identify cancer targets, find and develop cell therapy candidates active against those targets and produce therapeutic candidates for administration to patients. Our cell therapy candidates include Specific Peptide Enhanced Affinity Receptor (“SPEAR”) T-cells, which use genetically engineered T-cell receptors; next generation Tumor Infiltrating Lymphocytes (“TiLs”) where a patient’s own T-cells are co-administered with our next generation technology, and HLA-independent TCRs (“HiTs”) where surface proteins are targeted independently of the peptide-HLA complex.

We have multiple clinical trials ongoing:

SPEARHEAD-1 Phase 2 Trial with afamitresgene autoleucel (“afami-cel”): A registration directed Phase 2 clinical trial is underway in synovial sarcoma and myxoid round cell liposarcoma (“MRCLS”) indications in which the MAGE-A4 antigen is expressed. Enrollment in Cohort 1 is complete, and Cohort 2 is currently recruiting. Initial data from Cohort 1 of this trial was presented at the American Society of Clinical Oncology (ASCO) on June 4, 2021. Data from cohort 1 of this trial is intended to support the filing of a Biologics License Application (BLA) in 2022 and, upon approval from the U.S. Food and Drug Administration (“FDA”), the Company plans to commercially launch afami-cel. Pooled data from the prior Phase 1 clinical trial and cohort 1 of this Phase 2 trial will be presented at ASCO in June 2022.

SURPASS Phase 1 Trial with ADP-A2M4CD8: Enrollment is ongoing in a Phase 1 trial for our next generation SPEAR T-cells, ADP-A2M4CD8, focusing on treatment of patients with lung, gastroesophageal, head and neck, ovarian and bladder cancers in which the MAGE-A4 antigen is expressed. This next generation SPEAR T-cell utilizes the same engineered T-cell receptor as afami-cel, but with the addition of a CD8α homodimer. The addition of the CD8α homodimer has been shown in vitro to increase helper cell response and SPEAR T-cell potency. Data from the SURPASS trial was presented at the European Society for Medical Oncology (ESMO) meeting in September 2021.

SURPASS-2 Phase 2 Trial with ADP-A2M4CD8: A Phase 2 clinical trial with ADP-A2M4CD8 in esophageal and esophagogastric junction (“EGJ”) cancers is currently recruiting.

SURPASS-3 Phase 2 Trial with ADP-A2M4CD8: Based on the initial responses seen in the SURPASS Phase 1 trial in patients with ovarian cancer, including a complete response which remained ongoing at the time of the data cut-off on August 2, 2021, we are planning to initiate a Phase 2 clinical trial with ADP-A2M4CD8 in ovarian cancer in 2022.

ADP-A2AFP Phase 1 Trial: We continue treating patients in our Phase 1 trial designed to evaluate the safety and anti-tumor activity of our alpha fetoprotein (“AFP”) specific therapeutic candidate for the treatment of hepatocellular carcinoma (“HCC”). Screening has now ceased in this trial.

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SPEARHEAD-2 Phase 2 Trial with afami-cel: Adaptimmune is in the process of evaluating its strategy for the use of checkpoint inhibitors in combination with its cell therapies, including the evaluation of ADP-A2M4CD8 with a checkpoint inhibitor, and as a result we have decided to cease enrolment in the Spearhead-2 trial.

We have an active preclinical pipeline of cell therapy candidates with the aim of delivering five new cell therapies to the clinic in the next five years. The pipeline includes new autologous SPEAR T-cells, SPEAR T-cells addressing alternative HLA-types, next generation SPEAR T-cells, next-generation TILs and HiTs.

We are also developing allogeneic or “off-the-shelf” cell therapies utilizing a proprietary allogeneic platform.

During Q3 2021 we announced a strategic collaboration with Genentech Inc (“Genentech”) and F. Hoffman-La Roche Ltd.to research, develop, and commercialize allogeneic T-cell therapies (the “Genentech Collaboration”). The collaboration covers the research and development of “off-the-shelf” cell therapies for up to five shared cancer targets (“off the shelf” products) and the development of a novel allogeneic personalized cell therapy platform.

We also have a strategic collaboration program ongoing with Astellas (through its wholly owned subsidiary Universal Cells) in relation to up to three targets with the aim of co-developing T-cell therapy candidates directed to those targets and utilizing our allogeneic platform for “off-the-shelf” cell therapies. The first target subject to the collaboration is the mesothelin target to which a HiT cell therapy is being developed and a second target has been nominated by Astellas.

We also have a number of development and research collaborations including our collaboration with GSK for the development, manufacture and commercialization of TCR therapeutic candidates for up to five programs, a clinical and preclinical alliance agreement with MD Anderson Cancer Center and research collaborations with Alpine, Noile-Immune, and the Center for Cancer Immune Therapy (CCIT).

Financial Operations Overview

Revenue

The Company has three contracts with customers: the GSK Collaboration and License Agreement, the Astellas Collaboration Agreement and the Genentech Collaboration Agreement.

The GSK Collaboration Agreement

We entered into the GSK Collaboration and License Agreement regarding the development, manufacture and commercialization of TCR therapeutic candidates in May 2014. The collaboration is for up to five programs. The first program was the NY-ESO SPEAR T-cell program, in relation to which GSK has now exercised its option to take an exclusive license. The second program related to development of a SPEAR T-cell to a peptide derived from the PRAME antigen. This program has now completed. The third target program with GSK remains ongoing and is also directed to the PRAME target. We are responsible for taking the third target program through preclinical testing and up to IND application filing. GSK is responsible for the IND filing itself should the preclinical testing and development be favorable.

The GSK Collaboration and License Agreement consists of multiple performance obligations. GSK nominated its third target under the Collaboration and License Agreement in 2019, and the Company received $3.2 million following the nomination of the target. The Company received a milestone payment of $4.2 million in 2021 following achievement of a development milestone. These amounts are being recognized as revenue as development progresses.

The Astellas Collaboration Agreement

In January 2020, the Company entered into a collaboration agreement with Astellas. The Company received $50.0 million as an upfront payment after entering into the agreement. Under the agreement the parties will agree on up to three targets and will co-develop T-cell therapies directed to those targets pursuant to an agreed research plan. For each target, Astellas will fund co-development up until completion of a Phase 1 trial for products directed to such target. In addition, Astellas was also granted the right to develop, independently

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of Adaptimmune, allogeneic T-cell therapy candidates directed to two targets selected by Astellas. Astellas will have sole rights to develop and commercialize products resulting from these two targets.

The agreement consists of the following performance obligations: (i) research services and rights granted under the co-exclusive license for each of the three co-development targets and (ii) the rights granted for each of the two independent Astellas targets. The revenue allocated to the co-development targets is recognized as the development of products directed to the targets progresses up until completion of a Phase 1 trial. The revenue allocated to each of the research licenses for the targets being independently developed by Astellas will be recognized when the associated license commences, which is upon designation of a target by Astellas.

The Genentech Collaboration Agreement

On September 3, 2021, Adaptimmune Limited, a wholly owned subsidiary of Adaptimmune Therapeutics Plc, entered into a Strategic Collaboration and License Agreement with Genentech, Inc. (“Genentech”) and F. Hoffman-La Roche Ltd. The collaboration has two components:

1)development of allogeneic T-cell therapies for up to five shared cancer targets
2)development of personalized allogeneic T-cell therapies utilizing αβ T-cell receptors (TCRs) isolated from a patient, with such therapies being administered to the same patient.

The parties will collaborate to perform a research program, initially during an eight-year period (which may be extended for up to two additional two-year terms at Genentech’s election upon payment of an extension fee for each two-year term), to develop the cell therapies, following which Genentech will determine whether to further develop and commercialize such therapies. The Company received an upfront payment of $150 million in October 2021. The Company began recognizing revenue for the performance obligations relating to the initial “off-the-shelf” collaboration targets and the personalized therapies in 2021; however, this did not have a material impact on the consolidated financial statements.

The Company identified the following performance obligations under the agreement: (i) research services and rights granted under the licenses for each of the initial “off-the-shelf” collaboration targets, (ii) research services and rights granted under the licenses for the personalized therapies, (iii) material rights relating to the option to designate additional “off-the-shelf” collaboration targets and (iv) material rights relating to the two options to extend the research term. The revenue allocated to the initial “off-the-shelf” collaboration targets and the personalized therapies is recognized as development progresses. The revenue allocated to the material rights to designate additional ‘off-the-shelf’ collaboration targets is recognized from the point that the options are exercised and then as development progresses, in line with the initial “off-the-shelf” collaboration targets, or at the point in time that the rights expire. The revenue from the material rights to extend the research term is recognized from the point that the options are exercised and then over period of the extension, or at the point in time that the options expire.

Research and Development Expenses

Research and development expenditures are expensed as incurred. Research and development expenses consist principally of the following:

salaries for research and development staff and related expenses, including benefits;
costs for production of preclinical compounds and drug substances by contract manufacturers;
fees and other costs paid to contract research organizations in connection with additional preclinical testing and the performance of clinical trials;
costs associated with the development of a process to manufacture and supply our lentiviral vector and cell therapies for use in clinical trials;
costs to develop manufacturing capability at our U.S. facility for manufacture of cell therapies for use in clinical trials;
costs relating to facilities, materials and equipment used in research and development;

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costs of acquired or in-licensed research and development which does not have alternative future use;
costs of developing assays and diagnostics;
an allocation of indirect costs clearly related to research and development;
amortization and depreciation of property, plant and equipment and intangible assets used to develop our cells therapies; and
share-based compensation expenses.

These expenses are partially offset by:

reimbursable tax and expenditure credits from the U.K. government.

Research and development expenditure is presented net of reimbursements from reimbursable tax and expenditure credits from the U.K. government.

As a company that carries out extensive research and development activities, we benefit from the U.K. research and development tax credit regime for small and medium sized companies (“SME R&D Tax Credit Scheme”), whereby our principal research subsidiary company, Adaptimmune Limited, is able to surrender the trading losses that arise from its research and development activities for a payable tax credit of up to approximately 33.4% of eligible research and development expenditures. Qualifying expenditures largely comprise employment costs for research staff, consumables and certain internal overhead costs incurred as part of research projects for which we do not receive income. Subcontracted research expenditures are eligible for a cash rebate of up to approximately 21.7%. A large proportion of costs in relation to our pipeline research, clinical trials management and manufacturing development activities, all of which are being carried out by Adaptimmune Limited, are eligible for inclusion within these tax credit cash rebate claims.

Expenditures incurred in conjunction with our collaboration agreements are not qualifying expenditures under the SME R&D Tax Credit Scheme but certain of these expenditures can be reimbursed through the U.K. research and development expenditure credit scheme (the “RDEC Scheme”). Under the RDEC Scheme tax relief is given at 13% of allowable R&D costs, which may result in a payable tax credit at an effective rate of approximately 10.5% of qualifying expenditure for the three months ended March 31, 2022.

Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, which depends upon the timing of initiation of clinical trials and the rate of enrollment of patients in clinical trials. The duration, costs, and timing of clinical trials and development of our cell therapies will depend on a variety of factors, including:

the scope, rate of progress, and expense of our ongoing as well as any additional clinical trials and other research and development activities;
uncertainties in clinical trial enrollment rates;
future clinical trial results;
significant and changing government regulation;
the timing and receipt of any regulatory approvals; and
supply and manufacture of lentiviral vector and cell therapies for clinical trials.

A change in the outcome of any of these variables may significantly change the costs and timing associated with the development of that cell therapy. For example, if the FDA, or another regulatory authority, requires us to conduct clinical trials beyond those that we currently anticipate will be required for regulatory approval, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

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General and Administrative Expenses

Our general and administrative expenses consist principally of:

salaries for employees other than research and development staff, including benefits;
business development expenses, including travel expenses;
professional fees for auditors, lawyers and other consulting expenses;
costs of facilities, communication, and office expenses;
cost of establishing commercial operations;
information technology expenses;
amortization and depreciation of property, plant and equipment and intangible assets not related to research and development activities; and
share-based compensation expenses.

Other (Expense) Income, Net

Other (expense) income, net primarily comprises foreign exchange (losses) gains. We are exposed to foreign exchange rate risk because we currently operate in the United Kingdom and United States. Our expenses are generally denominated in the currency in which our operations are located, which are the United Kingdom and United States. However, our U.K.-based subsidiary incurs significant research and development costs in U.S. dollars and, to a lesser extent, Euros. Our U.K. subsidiary has an intercompany loan balance in U.S. dollars payable to the ultimate parent company, Adaptimmune Therapeutics plc, which is considered of a long-term investment nature as repayment is not planned or anticipated in the foreseeable future. It is Adaptimmune Therapeutics plc’s intent not to request payment of the intercompany loan for the foreseeable future. The foreign exchange gains or losses arising on the revaluation of intercompany loans of a long-term investment nature are reported within other comprehensive (loss) income, net of tax.

Our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. We seek to minimize this exposure by maintaining currency cash balances at levels appropriate to meet forthcoming expenditure in U.S. dollars and pounds sterling. To date, we have not used hedging contracts to manage exchange rate exposure, although we may do so in the future.

Taxation

We are subject to corporate taxation in the United Kingdom and the United States. We incur tax losses and tax credit carryforwards in the United Kingdom. No deferred tax assets are recognized on our U.K. losses and tax credit carryforwards because there is currently no indication that we will make sufficient taxable profits to utilize these tax losses and tax credit carryforwards. On June 10, 2021, the U.K. 2021 Finance Bill received Royal Assent. Under this bill, the rate of U.K. corporation tax will increase to 25% in 2023, with lower rates and tapered relief to be applied to companies with profits below £250,000.

We benefit from reimbursable tax credits in the United Kingdom through the SME R&D Tax Credit Scheme as well as the RDEC Scheme which are presented as a deduction to research and development expenditure.

Our subsidiary in the United States has generated taxable profits due to a Service Agreement between our U.S. and U.K. operating subsidiaries and is subject to U.S. federal corporate income tax of 21%. Due to its activity in the United States, and the sourcing of its revenue, the U.S. subsidiary is not currently subject to any state or local income taxes. The Company also benefits from the U.S Research Tax Credit and Orphan Drug Credit.

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In the future, if we generate taxable income in the United Kingdom, we may benefit from the United Kingdom’s “patent box” regime, which would allow certain profits attributable to revenues from patented products to be taxed at a rate of 10%. As we have many different patents covering our products, future upfront fees, milestone fees, product revenues, and royalties may be taxed at this favorably low tax rate.

U.K. Value Added Tax (“VAT”) is charged on all qualifying goods and services by VAT-registered businesses. An amount of 20% of the value of the goods or services is added to all relevant sales invoices and is payable to the U.K. tax authorities. Similarly, VAT paid on purchase invoices paid by Adaptimmune Limited and Adaptimmune Therapeutics plc is reclaimable from the U.K. tax authorities.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the revenues and expenses incurred during the reported periods. We base our estimates on historical experience and on various other factors that we believe are relevant under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies considered to be critical to the judgments and estimates used in the preparation of our financial statements are disclosed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Results of Operations

Comparison of Three Months Ended March 31, 2022 and 2021

The following table summarizes the results of our operations for the three months ended March 31, 2022 and 2021, together with the changes to those items (in thousands):

Three months ended

 

March 31, 

    

 

    

2022

    

2021

    

Increase/decrease

 

Revenue

$

3,575

$

434

$

3,141

 

724

%

Research and development expenses

 

(36,752)

 

(24,506)

 

(12,246)

 

50

%

General and administrative expenses

 

(16,804)

 

(13,817)

 

(2,987)

 

22

%

Total operating expenses

 

(53,556)

 

(38,323)

 

(15,233)

 

40

%

Operating loss

 

(49,981)

 

(37,889)

 

(12,092)

 

32

%

Interest income

 

338

 

425

 

(87)

 

(20)

%

Other income (expense), net

 

12

 

(1)

 

13

 

(1,300)

%

Loss before income taxes

 

(49,631)

 

(37,465)

 

(12,166)

 

32

%

Income taxes

 

(634)