Company Quick10K Filing
Quick10K
Adaptimmune Therapeutics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$4.30 105 $450
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
20-F 2015-12-31 Annual: 2015-12-31
8-K 2019-08-01 Earnings, Exhibits
8-K 2019-07-27 Officers, Other Events, Exhibits
8-K 2019-07-25 Other Events, Exhibits
8-K 2019-07-22 Other Events, Exhibits
8-K 2019-07-18 Other Events, Exhibits
8-K 2019-06-26 Officers, Other Events, Exhibits
8-K 2019-05-14 Enter Agreement, Other Events, Exhibits
8-K 2019-05-06 Other Events, Exhibits
8-K 2019-05-06 Earnings, Exhibits
8-K 2019-05-06 Regulation FD, Other Events, Exhibits
8-K 2019-05-02 Other Events, Exhibits
8-K 2019-05-02 Shareholder Vote
8-K 2019-04-02 Other Events, Exhibits
8-K 2019-02-27 Earnings, Exhibits
8-K 2019-01-07 Other Events, Exhibits
8-K 2018-12-10 Officers, Regulation FD, Exhibits
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-10-20 Other Events, Exhibits
8-K 2018-09-07 Other Events, Exhibits
8-K 2018-09-05 Enter Agreement, Other Events, Exhibits
8-K 2018-08-15 Other Events, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-07-20 Enter Agreement, Other Events, Exhibits
8-K 2018-07-18 Other Events, Exhibits
8-K 2018-07-05 Officers, Exhibits
8-K 2018-06-20 Shareholder Vote
8-K 2018-06-02 Other Events, Exhibits
8-K 2018-04-12 Officers, Regulation FD, Exhibits
8-K 2018-01-08 Regulation FD, Other Events, Exhibits
UGI UGI 9,410
DCI Donaldson 6,650
ESGR Enstar 3,170
FORM Formfactor 1,250
TPVG Triplepoint Venture Growth Bdc 351
MEET Meet Group 331
LITB Lightinthebox Holding 101
MSN Emerson Radio 26
CHPII CNL Healthcare Properties II 0
NVGI Noble Vici Group 0
ADAP 2019-06-30
Part I - Financial Information
Item 1. Financial Statements.
Note 1 - General
Note 2 - Summary of Significant Accounting Policies
Note 3 - Revenue
Note 4 - Operating Leases
Note 5 - Other Expense, Net
Note 6 - Loss per Share
Note 7 - Accumulated Other Comprehensive Income (Loss)
Note 8 - Fair Value Measurements
Note 9 - Available-For-Sale Debt Securities
Note 10 - Other Current Assets
Note 11 - Accrued Expenses and Other Current Liabilities
Note 12 - Share-Based Compensation
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.1 adap-20190630ex10114cee6.htm
EX-31.1 adap-20190630ex3117d44f4.htm
EX-31.2 adap-20190630ex312d4d379.htm
EX-32.1 adap-20190630ex321083474.htm
EX-32.2 adap-20190630ex322172d5a.htm

Adaptimmune Therapeutics Earnings 2019-06-30

ADAP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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Table of Contents

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 June 30, 2019

OR

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

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 July 29, 2019, the number of outstanding ordinary shares par value £0.001 per share of the Registrant is 630,762,860.

Table of Contents

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

5

Item 1.

Financial Statements:

5

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

5

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018

6

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018

7

Unaudited Condensed Consolidated Statements of Change in Equity for the three and six months ended June 30, 2019 and 2018

8

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018

10

Notes to the Unaudited Condensed Consolidated Financial Statements

11

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II — OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

79

Item 3.

Defaults Upon Senior Securities

79

Item 4.

Mine Safety Disclosures

79

Item 5.

Other Information

79

Item 6.

Exhibits

80

Signatures

81

2

Table of Contents

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 are based on our current expectations, assumptions, estimates and projections about us and our industry. All statements other than statements of historical fact in this Quarterly Report are forward-looking statements.

These forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause our actual results of operations, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. These forward-looking statements are based on assumptions regarding our present and future business strategies and the environment in which we expect to operate in the future. Important factors that could cause those differences include, but are not limited to:

our ability to successfully advance our ADP-A2M4 (MAGE-A4) and ADP-A2AFP (AFP) products through clinical development and the timing within which we can recruit patients and treat patients in all of our clinical trials;
our ability to successfully and reproducibly manufacture SPEAR T-cells in order to meet patient demand;
our ability to further develop our commercial manufacturing process for our SPEAR T-cells, transfer such commercial process to third party contract manufacturers, if required, and for such third party contract manufacturers or ourselves to manufacture SPEAR T-cells to the quality and on the timescales we require;
the scope and timing of performance of our ongoing collaboration with GlaxoSmithKline (“GSK”);
our ability to successfully advance our SPEAR T-cell technology platform to improve the safety and effectiveness of our existing SPEAR T-cell candidates and to submit Investigational New Drug Applications, or INDs, for new SPEAR T-cell candidates;
the rate and degree of market acceptance of T-cell therapy generally, and of SPEAR T-cells;
government regulation and approval, including, but not limited to, the expected regulatory approval timelines for SPEAR T-cells and the level of pricing and reimbursement for SPEAR T-cells, if approved for marketing;
the existence of any third party patents preventing further development of any SPEAR T-cells, including, any inability to obtain appropriate third party licenses, or enforcement of patents against us or our collaborators;
our ability to obtain granted patents covering any SPEAR T-cells and to enforce such patents against third parties;
volatility in equity markets in general and in the biopharmaceutical sector in particular;
fluctuations in the price of materials and bought-in components;
our relationships with suppliers, contract manufacturing organizations or CROs and other third-party providers including fluctuations in the price of materials and services, ability to obtain reagents particularly where such reagents are only available from a single source, and performance of third party providers;
increased competition from other companies in the biotechnology and pharmaceutical industries including where such competition impacts ability to recruit patients in to clinical trials;

3

Table of Contents

claims for personal injury or death arising from the use of SPEAR T-cell candidates;
our ability to attract and retain qualified personnel; and
additional factors that are not known to us at this time.

Additional factors that could cause actual results, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results to differ materially include, but are not limited to, those discussed under “Risk Factors” in Part II, Item 1A in this Quarterly Report and in our other filings with the Securities and Exchange Commission (the “SEC”). Additional risks that we may currently deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in this Quarterly Report not to occur. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only at the date they were made, and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this Quarterly Report might not occur, and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, inclusive of, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.

4

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

June 30, 

December 31, 

    

2019

    

2018

Assets

Current assets

Cash and cash equivalents

$

34,574

$

68,379

Marketable securities - available-for-sale debt securities

98,832

136,755

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

3,809

192

Other current assets and prepaid expenses (including current portion of clinical materials)

37,918

25,769

Total current assets

175,133

231,095

Restricted cash

4,403

4,097

Clinical materials

2,690

3,953

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

21,507

Property, plant and equipment, net of accumulated depreciation of $19,528 (2018: $15,924)

33,722

36,118

Intangibles, net of accumulated amortization

2,066

1,473

Total assets

$

239,521

$

276,736

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

4,344

4,083

Operating lease liabilities, current

2,338

Accrued expenses and other accrued liabilities

18,595

20,354

Deferred revenue

3,016

Total current liabilities

28,293

24,437

Operating lease liabilities, non-current

23,666

Other liabilities, non-current

571

5,414

Total liabilities

52,530

29,851

Stockholders’ equity

Common stock - Ordinary shares par value £0.001, 785,857,300 authorized and 630,672,578 issued and outstanding (2018: 701,103,126 authorized and 627,454,270 issued and outstanding)

943

939

Additional paid in capital

581,245

574,208

Accumulated other comprehensive loss

(8,199)

(9,763)

Accumulated deficit

(386,998)

(318,499)

Total stockholders' equity

186,991

246,885

Total liabilities and stockholders’ equity

$

239,521

$

276,736

See accompanying notes to unaudited condensed consolidated financial statements.

5

Table of Contents

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

Three months ended

    

Six months ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

Revenue

$

157

$

9,038

$

157

$

17,234

Operating expenses

Research and development

(25,511)

(26,624)

 

(47,530)

 

(52,016)

General and administrative

(10,148)

(11,291)

 

(21,921)

 

(22,495)

Total operating expenses

(35,659)

(37,915)

(69,451)

 

(74,511)

Operating loss

(35,502)

(28,877)

 

(69,294)

 

(57,277)

Interest income

757

540

 

1,709

 

1,199

Other expense, net

(6,277)

(15,406)

 

(847)

 

(8,276)

Loss before income taxes

(41,022)

(43,743)

 

(68,432)

 

(64,354)

Income taxes

(65)

(102)

 

(67)

 

(229)

Net loss attributable to ordinary shareholders

$

(41,087)

$

(43,845)

$

(68,499)

$

(64,583)

Net loss per ordinary share - Basic and diluted

Basic and diluted

$

(0.07)

$

(0.08)

$

(0.11)

$

(0.11)

Weighted average shares outstanding:

Basic and diluted

629,355,975

565,197,217

 

628,655,278

 

563,804,832

See accompanying notes to unaudited condensed consolidated financial statements.

6

Table of Contents

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

Three months ended

Six months ended

June 30, 

June 30, 

    

2019

    

2018

2019

    

2018

Net loss

$

(41,087)

$

(43,845)

$

(68,499)

$

(64,583)

Other comprehensive loss, net of tax

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

4,842

6,107

1,299

3,582

Unrealized gains on available-for-sale debt securities

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

68

5,223

278

1,167

Reclassification adjustment for (gains) losses on available-for-sale debt securities included in net loss, net of tax of $0, $0, $0 and $0

(13)

1,310

(13)

2,473

Total comprehensive loss for the period

$

(36,190)

$

(31,205)

$

(66,935)

$

(57,361)

See accompanying notes to unaudited condensed consolidated financial statements.

7

Table of Contents

ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

(In thousands, except share data)

Accumulated other

comprehensive loss

Accumulated

unrealized

Accumulated

gains

foreign

(losses) on

Additional

currency

available-for-

Total

Common

Common

paid in

translation

sale debt

Accumulated

stockholders'

    

stock

    

stock

    

capital

    

adjustments

    

securities

    

deficit

    

equity

Balance as of 1 January 2019

627,454,270

$

939

$

574,208

$

(9,607)

$

(156)

$

(318,499)

$

246,885

Net loss

 

 

 

 

 

 

(27,412)

 

(27,412)

Issuance of shares upon exercise of stock options

 

840,432

 

1

 

35

 

 

 

 

36

Foreign currency translation adjustments

 

 

 

 

(3,543)

 

 

 

(3,543)

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

 

 

 

 

 

210

 

 

210

Share-based compensation expense

 

 

 

3,479

 

 

 

 

3,479

Balance as of March 31, 2019

 

628,294,702

$

940

$

577,722

$

(13,150)

$

54

$

(345,911)

$

219,655

Net loss

 

 

 

 

 

 

(41,087)

 

(41,087)

Issuance of shares upon exercise of stock options

 

2,377,876

 

3

 

327

 

 

 

 

330

Foreign currency translation adjustments

 

 

 

 

4,842

 

 

 

4,842

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

 

 

 

 

 

68

 

 

68

Reclassification from accumulated other comprehensive income of gains on available-for-sale debt securities included in net income, net of tax of $-

(13)

(13)

Share-based compensation expense

 

 

 

3,196

 

 

 

 

3,196

Balance as of June 30, 2019

 

630,672,578

$

943

$

581,245

$

(8,308)

$

109

$

(386,998)

$

186,991

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ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

(In thousands, except share data)

Accumulated other

comprehensive loss

    

    

    

    

    

Accumulated

    

    

unrealized

Accumulated

gains

foreign

(losses ) on

Additional

currency

available-for-

Total

Common

Common

paid in

translation

sale debt

Accumulated

stockholders’

stock

stock

capital

adjustments

securities

deficit

equity

Balance as of 1 January 2018 (under previous guidance)

562,119,334

$

854

$

455,401

$

(17,867)

$

(3,774)

$

(231,630)

$

202,984

Cumulative effect of applying new accounting standards

 

 

 

 

 

 

8,645

 

8,645

Balance as of 1 January 2018 (adjusted)

 

562,119,334

 

854

 

455,401

 

(17,867)

 

(3,774)

 

(222,985)

 

211,629

Net loss

 

  

 

  

 

  

 

  

 

  

 

(20,738)

 

(20,738)

Issuance of shares upon exercise of stock options

 

2,740,626

 

4

 

1,530

 

 

 

 

1,534

Other comprehensive loss before reclassifications

 

  

 

  

 

  

 

  

 

  

 

  

 

Foreign currency translation adjustments

 

 

 

 

(2,525)

 

 

 

(2,525)

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

 

 

 

 

 

(4,056)

 

 

(4,056)

Reclassification from accumulated other comprehensive income of losses on available-for-sale debt securities included in net income, net of tax of $-

 

 

 

 

 

1,163

 

 

1,163

Share-based compensation expense

 

 

 

4,672

 

 

 

 

4,672

Balance as of March 31, 2018

 

564,859,960

$

858

$

461,603

$

(20,392)

$

(6,667)

$

(243,723)

$

191,679

Net loss

 

  

 

  

 

  

 

  

 

  

 

(43,845)

 

(43,845)

Issuance of shares upon exercise of stock options

 

1,636,440

 

2

 

887

 

 

 

 

889

Other comprehensive loss before reclassifications

 

  

 

  

 

  

 

  

 

  

 

  

 

Foreign currency translation adjustments

 

 

 

 

6,107

 

 

 

6,107

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

 

 

 

 

 

5,223

 

 

5,223

Reclassification from accumulated other comprehensive loss of losses on available-for-sale debt securities included in net income, net of tax of $-

 

 

 

 

 

1,310

 

 

1,310

Share-based compensation expense

 

 

 

3,739

 

 

 

 

3,739

Balance as of June 30, 2018

 

566,496,400

$

860

$

466,229

$

(14,285)

$

(134)

$

(287,568)

$

165,102

See accompanying notes to unaudited condensed consolidated financial statements.

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ADAPTIMMUNE THERAPEUTICS PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Six months ended

    

June 30, 

    

2019

    

2018

    

Cash flows from operating activities

Net loss

$

(68,499)

$

(64,583)

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

Depreciation

3,642

3,499

Amortization

333

304

Share-based compensation expense

6,675

8,411

Realized (gain) loss on available-for-sale debt securities

(13)

2,473

Unrealized foreign exchange losses

1,048

2,915

Other

(153)

16

Changes in operating assets and liabilities:

Increase in receivables and other operating assets

(16,851)

(11,602)

Decrease in non-current operating assets

1,263

87

Increase (decrease) in payables and deferred revenue

2,184

(24,162)

Net cash used in operating activities

(70,371)

(82,642)

Cash flows from investing activities

Acquisition of property, plant and equipment

(1,202)

(3,139)

Acquisition of intangibles

(922)

(10)

Maturity or redemption of marketable securities

54,324

70,717

Investment in marketable securities

(15,983)

(33,556)

Net cash provided by investing activities

36,217

34,012

Cash flows from financing activities

Proceeds from exercise of stock options

366

2,424

Net cash provided by financing activities

366

2,424

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

289

4,417

Net decrease in cash and cash equivalents

(33,499)

(41,789)

Cash, cash equivalents and restricted cash at start of period

72,476

88,296

Cash, cash equivalents and restricted cash at end of period

$

38,977

$

46,507

See accompanying notes to unaudited condensed consolidated financial statements.

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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 patients, particularly for the treatment of solid tumors. The Company’s proprietary SPEAR (Specific Peptide Enhanced Affinity Receptor) T-cell platform enables it to identify cancer targets, find and genetically engineer T-cell receptors (“TCRs”), and produce therapeutic candidates (“SPEAR T-cells”) for administration to patients. Using its affinity engineered TCRs, the Company aims to become the first company to have a TCR T-cell approved for the treatment of a solid tumor indication.

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 SPEAR T-cells, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s SPEAR T-cells, the need to develop a suitable commercial manufacturing process and protection of proprietary technology. If the Company does not successfully commercialize any of its SPEAR T-cells, it will be unable to generate product revenue or achieve profitability. The Company had an accumulated deficit of $387.0 million as of June 30, 2019.

Note 2 Summary of Significant Accounting Policies

(a)          Basis of presentation

The condensed consolidated interim 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 interim 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 February 27, 2019 (the “Annual Report”). The balance sheet as of December 31, 2018 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.

On January 1, 2019, the Company adopted new guidance on the accounting for leases, which has been codified within Accounting Standard Codification Topic 842, Leases (“ASC 842”). The Company has adopted the guidance using the modified retrospective approach, with the cumulative effect of initially applying the guidance recognized as an adjustment to the opening balance of equity at January 1, 2019. Therefore, the comparative financial information for the three and six months ended June 30, 2018 and as of December 31, 2018 has not been restated and continues to be reported under previous guidance. The effect of adopting ASC 842 on the accumulated deficit, total stockholders’ equity and net assets as at January 1, 2019 was $0.

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(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 consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are primarily made in relation to the valuation of share options, valuation allowances relating to deferred tax assets, revenue recognition, estimating clinical trial expenses and estimating reimbursements from R&D tax and expenditure credits. 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.

(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 8, Fair value measurements.

(d)          Leases

On January 1, 2019, the Company adopted a new standard, Accounting Standard Update 2016-02 – Leases, which is codified in ASC 842. The comparative financial information for the three and six months ended June 30, 2018 and as of December 31, 2018 has not been restated and is prepared in accordance with the accounting policies that are described in Note 2 to the consolidated financial statements included in the Annual Report.

The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to use, or control the use of, identified property, plant, or equipment for a period of time in exchange for consideration. Leases may be classified as finance leases or operating leases. All the Company’s leases are classified as operating leases as they were previously classed as these and the lease classification is not reassessed on adoption of ASC 842. Operating lease right-of-use (ROU) assets and operating lease liabilities recognized in the Condensed Consolidated Balance Sheet represent the right to use an underlying asset for the lease term and an obligation to make lease payments arising from the lease respectively.

Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of minimum lease payments over the lease term. Since the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rates (the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment) based on the information available at commencement date in determining the discount rate used to calculate the present value of lease payments. As the Company has no external borrowings, the incremental borrowing rates are determined using information on indicative borrowing rates that would be available to the Company based on the value, currency and borrowing term provided by financial institutions, adjusted for company and market specific factors. The lease term is based on the non-cancellable period in the lease contract, and options to extend the lease are included when it is reasonably certain that the Company will exercise that option. Any termination fees are included in the calculation of the ROU asset and lease liability when it is assumed that the lease will be terminated.

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The Company accounts for lease components (e.g. fixed payments including rent and termination costs) separately from non-lease components (e.g. common-area maintenance costs and service charges based on utilization) which are recognized over the period in which the obligation occurs.

At each reporting date, the operating lease liabilities are increased by interest and reduced by repayments made under the lease agreements. The right-of-use asset is subsequently measured for an operating lease at the amount of the remeasured lease liability (i.e. the present value of the remaining lease payments), adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, and any unamortized initial direct costs.

The Company has operating leases in relation to property for office and research facilities. All of the leases have termination options, and it is assumed that the initial termination options for the buildings will be activated for most of these. The maximum lease term without activation of termination options is to 2041.

The Company has elected not to recognize a right-of-use asset and lease liability for short-term leases. A short-term lease is a lease with a lease term of 12 months or less and which does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

Operating lease costs are recognized on a straight line basis over the lease term, and they are categorized within Research and development and General and administrative expenses in the Condensed Consolidated Statement of Operations. The operating lease cash flows are categorized under Net cash used in operating activities in the Condensed Consolidated Statement of Cash Flows.

(e)          New accounting pronouncements

Adopted in the period

Leases

On January 1, 2019, the Company adopted Accounting Standard Update 2016-02 – Leases, which is codified in ASC 842. The Company has adopted the guidance using the modified retrospective approach, with the cumulative effect of initially applying the guidance recognized as an adjustment to the opening balance of equity at January 1, 2019. Therefore, the comparative information has not been adjusted and continues to be reported under previous guidance. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed it to carry forward the historical lease classification of the Company’s leases as operating leases. The effect on the accumulated deficit, total stockholders’ equity and net assets as at January 1, 2019 was $0.

The adoption of ASC 842 has had a material impact on the Company’s financial statements. At January 1, 2019 the Company recognized right-of-use assets and liabilities for operating leases following the adoption date of $22.2 million and $26.9 million respectively and derecognized $4.7 million of other liabilities and prepayments that had been recognized under previous guidance.

During the three months ended June 30, 2019, management performed further benchmarking of the incremental borrowing rate used in the determination of the right-of-use asset and the lease liability as more information became publicly available. This has highlighted that the Company is at the lower end of the range for comparable companies and as a result, management performed further analysis of the factors which were considered. Based on this additional analysis, the incremental borrowing rate has increased from a weighted-average of 4.65% to 7.2%. The change in the incremental borrowing rate has reduced the right-of-use asset and corresponding lease liability by $2.6 million. There is no impact on the Condensed Consolidated Statement of Operations and Condensed Consolidated Statement of Cash Flows.

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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. Early application is permitted for the fiscal year beginning January 1, 2019, including interim periods within that fiscal year. 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.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

In August 2018, the FASB issued ASU 2018-15 – Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The guidance is effective for the fiscal year beginning January 1, 2020, including interim periods within that fiscal year. Early application is permitted for the fiscal year beginning January 1, 2019, including interim periods within that fiscal year. The guidance may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13 – Fair Value Measurement (Topic 820) - Disclosure Framework— Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The guidance is effective for the fiscal year beginning January 1, 2020, including interim periods within that fiscal year. Early application is permitted. Certain amendments apply prospectively with the all other amendments applied retrospectively to all periods presented upon their effective date. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

Note 3 Revenue

Revenue from contracts with customers arises from one customer, which is GlaxoSmithKline (“GSK”), in one geographic location, which is the United Kingdom. Revenue comprises the following categories (in thousands):

Three months ended

Three months ended

 

Six months ended

Six months ended

 

June 30, 

June 30, 

June 30, 

June 30, 

     

2019

    

2018

2019

    

2018

Development

 

$

157

 

$

9,038

$

157

 

$

17,234

 

$

157

 

$

9,038

$

157

 

$

17,234

The Company has one contract with a customer, which is the GSK Collaboration and License Agreement. The GSK Collaboration and License Agreement consists of multiple performance obligations. In 2019, GSK nominated a third target under the Collaboration and License Agreement. Development of this target commenced during the three months ended June 30, 2019.

The amount of the transaction price probable of being received that is allocated to performance obligations that are unsatisfied or partially satisfied at June 30, 2019 was $3.0 million. The revenue allocated to the third target program will be recognized over an estimated period of 18 months as the development of the target progresses.

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The Company became entitled to invoice GSK $3.2 million upon the nomination of the third target. Under the terms of the GSK Collaboration and License Agreement, the Company may also be entitled to development and regulatory milestones. The development and regulatory milestones are per product milestones and are dependent on achievement of certain obligations, the nature of the product being developed, stage of development of product, territory in which an obligation is achieved and type of indication or indications in relation to which the product is being developed. In addition, for any program multiple products may be developed to address different HLA-types. These amounts have not been included within the transaction price as of June 30, 2019 because they are not considered probable.

The Company may also receive commercialization milestones upon the first commercial sale of a product based on the indication and the territory and mid-single to low double-digit royalties on worldwide net sales. These amounts have not been included within the transaction price as of June 30, 2019 because they are sales or usage-based royalties promised in exchange for a license of intellectual property, which will be recognized when the subsequent sale or usage occurs.

Development revenue recognized in the three and six months ended June 30, 2018 related to development of the second target program, PRAME, which ended in 2018, and the NY-ESO program, which was transferred to GSK on July 23, 2018.

The following table shows movements in deferred revenue for the six months ended June 30, 2019 (in thousands):

Deferred revenue

Deferred revenue at January 1, 2019

 

$

Revenue in the period

 

(157)

Amounts invoiced in the period

3,217

Foreign exchange arising on consolidation

(44)

Deferred revenue at June 30, 2019

$

3,016

Note 4 – Operating leases

The following table shows the lease costs for the three and six months ended June 30, 2019 (in thousands):

Three months ended

Six months ended

June 30, 

June 30, 

2019

     

2019

Lease cost:

Operating lease cost

$

1,024

 

$

2,014

Short-term lease cost

 

121

 

168

$

1,145

 

$

2,182

Six months ended

June 30, 

2019

Other information:

Operating cash flows from operating leases (in thousands)

$

2,194

June 30, 

2019

Weighted-average remaining lease term - operating leases

7.8 years

Weighted-average discount rate - operating leases

7.2%

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The maturities of operating lease liabilities are as follows (in thousands):

     

Operating leases

     

2019

 

$

2,037

 

2020

 

4,110

2021

 

4,153

2022

 

4,158

2023

 

3,918

after 2023

 

16,302

Total lease payments

34,678

Less: Imputed interest

(8,674)

Present value of lease liability

$

26,004

The Company has operating leases in relation to property for office and research facilities. The maximum lease term without activation of termination options is to 2041.

Note 5 Other expense, net

Other expense, net consisted of the following (in thousands):

Three months ended

Six months ended

June 30, 

June 30, 

     

2019

     

2018

     

2019

     

2018

Foreign exchange losses

 

$

(6,403)

 

$

(14,022)

 

$

(1,013)

 

$

(5,605)

Gains (losses) on redemption or maturity of available-for-sale debt securities

 

13

 

(1,310)

 

13

 

(2,473)

Other

 

113

 

(74)

 

153

 

(198)

 

$

(6,277)

 

$

(15,406)

 

$

(847)

 

$

(8,276)

Note 6 Loss per share

The dilutive effect of 97,292,240 and 87,434,329 stock options outstanding as of June 30, 2019 and 2018, respectively, have been excluded from the diluted loss per share calculation, because they would have an antidilutive effect on the loss per share for the period.

Note 7 — Accumulated other comprehensive income (loss)

The following amounts were reclassified out of other comprehensive income during the three and six months ended June 30, 2019 and 2018 (in thousands):

Amount reclassified

Amount reclassified

Three months ended

Three months ended

Six months ended

Six months ended

June 30, 

June 30, 

June 30, 

June 30, 

Component of accumulated other comprehensive income

2019

2018

 

2019

2018

Unrealized gains (losses) on available-for-sale securities

 

 

 

 

 

Reclassification adjustment for (gains) losses on available-for-sale debt securities

 

$

(13)

$

1,310

$

(13)

$

2,473

The affected line in the Condensed Consolidated Statement of Operations for the amounts reclassified out of other comprehensive income above is “Other expense, net”.

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Table of Contents

Note 8 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 June 30, 2019 are as follows (in thousands):

Fair value measurements using

June 30, 

Level 1

Level 2

Level 3

     

2019

    

    

    

Assets:

Marketable securities:

Corporate debt securities

 

$

91,831

 

$

91,831

 

$

 

$

Agency bond

3,999

3,999

Certificate of deposit

3,002

 

 

3,002

 

 

$

98,832

 

$

91,831

 

$

7,001

 

$

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.

Note 9 — Available-for-sale debt securities

As of June 30, 2019, the Company has the following investments in available-for-sale debt securities (in thousands):

Gross

Gross

Aggregate

Remaining

Amortized

Unrealized

Unrealized

Estimated

    

Contractual Maturity

    

Cost

    

Gains

    

Losses

    

Fair Value

Cash equivalents:

 

  

 

  

 

  

 

  

 

  

Money market funds

 

Less than 3 months

$

10,241

$

$

$

10,241

 

  

$

10,241

$

$

$

10,241