Lyell Immunopharma, Inc. [LYEL] Filings

10-Q 1 lyel-20240930.htm 10-Q lyel-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

__________________________

FORM 10-Q

__________________________

(Mark One)


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

For the quarterly period ended September 30, 2024


☐			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: 001-40502

__________________________

Lyell Immunopharma, Inc.

(Exact Name of Registrant as Specified in its Charter)

__________________________


Delaware			83-1300510
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
201 Haskins Way South San Francisco, California			94080
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (650) 695-0677

__________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

LYEL

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,” “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	☐

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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 standards 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 November 5, 2024, the registrant had 279,220,614 shares of common stock, $0.0001 par value per share, outstanding.

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Lyell Immunopharma, Inc.

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		Page
Special Note Regarding Forward-Looking Statements		1
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	77
Item 6.	Exhibits	78
Signature		80

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned nonclinical studies and clinical trials, results of nonclinical studies and clinical trials, research and development costs, planned regulatory submissions, regulatory approvals and the timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential” or “continue,” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the sufficiency of our existing cash to fund our future operating expenses and capital expenditure requirements;

•the accuracy and timing of our estimates regarding expenses, revenue opportunities, capital requirements and needs for additional financing;

•the scope, progress, results and costs of developing IMPT-314, LYL119 or any other product candidates we may acquire or develop, and conducting nonclinical studies and clinical trials, including for IMPT-314 and LYL119;

•the timing and costs involved in obtaining and maintaining regulatory approvals of IMPT-314, LYL119 or any other product candidates we may acquire or develop, and the timing or likelihood of regulatory filings and approvals, including any expectations or plans regarding seeking special designations, such as Regenerative Medicine Advanced Therapy designation or Fast Track designation, for our product candidates for various diseases;

•our plans relating to the commercialization of IMPT-314, LYL119 or any other product candidates we may acquire or develop, if approved, including the geographic areas of focus, and our ability to commercially differentiate such product candidates and grow a sales force;

•the size of the market opportunities for IMPT-314, LYL119 or any other product candidates we may acquire or develop in each of the diseases we may target;

•our reliance on third parties to conduct research activities for IMPT-314, LYL119 or any other product candidates we may acquire or develop;

•the characteristics, safety, efficacy and therapeutic effects of IMPT-314, LYL119 or any other product candidates we may acquire or develop;

•the advancement of our technology platform and the effectiveness and expected benefits of any of our technologies and manufacturing processes;

•our estimates of the number of patients in the United States and worldwide who suffer from the diseases we target and the number of patients that may enroll in our clinical trials;

•the progress and focus of the current and planned clinical trials of our product candidates, and the reporting of data from those trials, including the timing thereof;

•the ability of our clinical trials to sufficiently demonstrate the safety and efficacy of IMPT-314, LYL119 or any other product candidates we may acquire or develop, and other clinical trial results;

•the success of competing therapies that are, or may become, available;

•developments relating to our competitors and our industry, including any existing or future competing product candidates or therapies;

•our plans relating to the further development and manufacturing of IMPT-314, LYL119 or any other product candidates we may acquire or develop, including additional indications that we may pursue;

•existing regulations and regulatory developments in the United States and other jurisdictions;

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•our potential and ability to successfully manufacture and supply or our ability to contract with third parties to manufacture and supply IMPT-314, LYL119 or any other product candidates we may acquire or develop for clinical trials and for commercial use, if approved;

•the rate and degree of market acceptance, as well as the pricing and reimbursement, of IMPT-314, LYL119 or any other product candidates we may acquire or develop, if approved;

•our continued reliance on third parties to assist us in conducting additional clinical trials of IMPT-314, LYL119 or any other product candidates we may acquire or develop;

•the scope of protection we are able to establish and maintain for intellectual property rights, including covering our product candidates and technology platforms;

•our ability to retain the continued service of our key personnel and to identify, hire and then retain additional qualified personnel;

•our expectations regarding the impact of inflation, macroeconomic conditions and geopolitical conflicts on our business and operations, including on our manufacturing suppliers, collaborators, contract research organizations (CROs) and employees;

•our ability to realize the anticipated benefits of and potential value created by our acquisition of ImmPACT Bio USA Inc. (ImmPACT) or any other acquisition or strategic transaction and our success in commercializing any product candidates we acquire in connection therewith, including IMPT-314;

•the inherent risks, costs and uncertainties associated with integrating the businesses in the merger with ImmPACT successfully and the amount of any costs, fees, expenses, impairments and charges relating to the merger with ImmPACT; and

•our anticipated use of our existing cash, cash equivalents and marketable securities.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described under “Risk Factors” in Part II, Item 1A, and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in these forward-looking statements. Except as required by applicable law, we undertake no obligation to update or supplement any forward-looking statements publicly, or to update or supplement the reasons that actual results could differ materially from those projected in these forward-looking statements, even if new information becomes available in the future.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

Lyell Immunopharma, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

(unaudited)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	100,299	$	145,647
Marketable securities	340,248		400,576
Prepaid expenses and other current assets	9,498		8,463
Total current assets	450,045		554,686
Restricted cash	288		284
Marketable securities, non-current	20,112		16,506
Other investments	19,000		32,001
Property and equipment, net	88,047		102,654
Operating lease right-of-use assets	36,662		39,663
Other non-current assets	5,061		4,235
Total assets	$	619,215	$	750,029

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,596	$	4,817
Accrued liabilities and other current liabilities	29,009		28,126
Success payment liabilities	907		1,576
Total current liabilities	33,512		34,519
Operating lease liabilities, non-current	51,441		56,894
Other non-current liabilities	3,565		3,664
Total liabilities	88,518		95,077
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized at September 30, 2024 and December 31, 2023; no shares issued and outstanding at September 30, 2024 and December 31, 2023	—		—
Common stock, $0.0001 par value; 500,000 shares authorized at September 30, 2024 and December 31, 2023; 256,564 and 253,958 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively	26		25
Additional paid-in capital	1,683,082		1,657,133
Accumulated other comprehensive income (loss)	760		(94)
Accumulated deficit	(1,153,171)		(1,002,112)
Total stockholders’ equity	530,697		654,952
Total liabilities and stockholders’ equity	$	619,215	$	750,029

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Lyell Immunopharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	34	$	25	$	50	$	117
Operating expenses:
Research and development	39,500		43,849		122,935		135,950
General and administrative	11,769		15,507		37,519		53,816
Other operating income, net	(730)		(292)		(2,796)		(2,149)
Total operating expenses	50,539		59,064		157,658		187,617
Loss from operations	(50,505)		(59,039)		(157,608)		(187,500)
Interest income, net	5,965		6,608		19,148		16,369
Other (expense) income, net	(43)		1,578		402		2,352
Impairment of other investments	—		—		(13,001)		(12,923)
Total other income, net	5,922		8,186		6,549		5,798
Net loss	(44,583)		(50,853)		(151,059)		(181,702)
Other comprehensive loss:
Net unrealized gain on marketable securities	1,157		1,198		854		6,418
Comprehensive loss	$	(43,426)	$	(49,655)	$	(150,205)	$	(175,284)

Net loss per common share, basic and diluted	$	(0.17)	$	(0.20)	$	(0.59)	$	(0.73)
Weighted-average shares used to compute net loss per common share, basic and diluted	256,309		251,318		255,323		250,377

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Lyell Immunopharma, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


		Three Months Ended September 30, 2024

	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
		Shares			Amount
Balance as of June 30, 2024		255,948	$	26		$	1,675,460	$	(397)	$	(1,108,588)	$	566,501
Issuance of common stock in connection with restricted stock units, net of tax		616	—			—		—		—		—
Stock-based compensation		—	—			7,622		—		—		7,622
Other comprehensive income		—	—			—		1,157		—		1,157
Net loss		—	—			—		—		(44,583)		(44,583)
Balance as of September 30, 2024		256,564	$	26		$	1,683,082	$	760	$	(1,153,171)	$	530,697


	Nine Months Ended September 30, 2024

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2023	253,958	$	25	$	1,657,133	$	(94)	$	(1,002,112)	$	654,952
Issuance of common stock upon exercise of stock options	1,246	1		154		—		—		155
Issuance of common stock under employee stock purchase plan	491	—		810		—		—		810
Issuance of common stock in connection with restricted stock units, net of tax	869	—		(76)		—		—		(76)
Stock-based compensation	—	—		25,061		—		—		25,061
Other comprehensive income	—	—		—		854		—		854
Net loss	—	—		—		—		(151,059)		(151,059)
Balance as of September 30, 2024	256,564	$	26	$	1,683,082	$	760	$	(1,153,171)	$	530,697

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Lyell Immunopharma, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


	Three Months Ended September 30, 2023

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of June 30, 2023	251,027	$	25	$	1,637,538	$	(2,379)	$	(898,329)	$	736,855
Issuance of common stock upon exercise of stock options	646	—		72		—		—		72
Issuance of common stock in connection with restricted stock units, net of tax	196	—		(215)		—		—		(215)
Stock-based compensation	—	—		10,516		—		—		10,516
Other comprehensive income	—	—		—		1,198		—		1,198
Net loss	—	—		—		—		(50,853)		(50,853)
Balance as of September 30, 2023	251,869	$	25	$	1,647,911	$	(1,181)	$	(949,182)	$	697,573


	Nine Months Ended September 30, 2023

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2022	249,567	$	25	$	1,608,306	$	(7,599)	$	(767,480)	$	833,252
Issuance of common stock upon exercise of stock options	1,479	—		155		—		—		155
Issuance of common stock under employee stock purchase plan	543	—		1,163		—		—		1,163
Issuance of common stock in connection with restricted stock units, net of tax	280	—		(334)		—		—		(334)
Stock-based compensation	—	—		38,621		—		—		38,621
Other comprehensive income	—	—		—		6,418		—		6,418
Net loss	—	—		—		—		(181,702)		(181,702)
Balance as of September 30, 2023	251,869	$	25	$	1,647,911	$	(1,181)	$	(949,182)	$	697,573

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Lyell Immunopharma, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(151,059)	$	(181,702)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	25,061		38,621
Depreciation and amortization expense	14,605		15,193
Impairment of other investments	13,001		12,923
Net amortization and accretion on marketable securities	(11,716)		(6,212)
Non-cash lease income	(1,591)		(1,344)
Change in fair value of success payment liabilities	(669)		(3,309)
Loss on property and equipment disposals, net	417		1,072
Gain on marketable equity security	(47)		—
Changes in operating assets and liabilities:
Prepaid expenses, other current assets and other assets	(1,861)		(23)
Accounts payable	(1,198)		1,039
Accrued liabilities and other current liabilities	4		1,020
Other non-current liabilities	(99)		(337)
Net cash used in operating activities	(115,152)		(123,059)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(420)		(2,661)
Purchases of marketable securities	(355,905)		(220,095)
Maturities of marketable securities	425,244		507,494
Net cash provided by investing activities	68,919		284,738
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options	155		155
Proceeds from employee stock purchase plan	810		1,163
Taxes paid related to net share settlement of equity awards	(76)		(334)
Net cash provided by financing activities	889		984
Net (decrease) increase in cash, cash equivalents and restricted cash	(45,344)		162,663
Cash, cash equivalents and restricted cash at beginning of period	145,931		123,834
Cash, cash equivalents and restricted cash at end of period	$	100,587	$	286,497
Represented by:
Cash and cash equivalents	$	100,299	$	286,214
Restricted cash	288		283
Total	$	100,587	$	286,497
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for amounts included in the measurement of lease liabilities	$	8,449	$	8,030
Non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities	$	23	$	2

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Lyell Immunopharma, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization

Lyell Immunopharma, Inc. (the “Company”) was incorporated in Delaware in June 2018. The Company is a clinical-stage cell therapy company advancing a pipeline of product candidates enhanced with proprietary anti-exhaustion T-cell reprogramming technologies for patients with solid tumors or hematologic malignancies. The Company’s primary activities since incorporation have been to develop T‑cell therapies, conduct research and development, acquire technology and product candidates, enter into strategic collaboration and license arrangements, enable and execute manufacturing activities in support of its product candidate development efforts, organize and staff the Company, conduct business planning, establish its intellectual property portfolio, submit regulatory submissions, execute clinical trials, raise capital and provide general and administrative support for these activities.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.

The Condensed Consolidated Balance Sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date. Certain information and footnote disclosures typically included in the Company’s audited consolidated financial statements have been condensed or omitted. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented, but are not necessarily indicative of results to be expected for any future annual or interim period.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Liquidity and Management’s Plan

The Company discovers and develops product candidates that involve experimental technologies. The product candidates may require several years and substantial expenditures to complete and ultimately may be unsuccessful. The Company plans to finance operations with available cash resources or from the issuance of equity or debt securities. The Company believes that its available cash, cash equivalents and marketable securities as of September 30, 2024 will be adequate to fund its operations at least through the next 12 months from the date these unaudited Condensed Consolidated Financial Statements are issued.

Use of Estimates

The preparation of the Company’s unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect reported amounts and related disclosures. Specific accounts that require management estimates include, but are not limited to, stock-based compensation, valuation of success payments, valuation of other investments and accrued expenses. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.

Concentrations of Credit Risk and Off-balance Sheet Risk

The Company maintains its cash, cash equivalents and restricted cash with high quality, accredited financial institutions. Restricted cash is cash held in a bank account and is used as collateral associated with the Company’s corporate credit card program. Cash, cash equivalents and restricted cash amounts, at times, may exceed federally insured limits. The Company also makes short-term investments in money market funds, U.S. Treasury securities, U.S. government agency securities and corporate debt securities, which can be subject to certain credit risk. The Company mitigates the risks by investing in high‑grade instruments, limiting exposure to any one issuer or type of investment and monitoring the

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ongoing creditworthiness of the financial institutions and issuers. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to significant risk on these funds. The Company has no off‑balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Significant Accounting Policies

There have been no material changes to the significant accounting policies from the Annual Report on Form 10-K for the year ended December 31, 2023, except as set forth below regarding the Company’s stock-based compensation policy for performance-based restricted stock units (“PSUs”).

Stock-based Compensation

Under ASC 718, the Company measures and recognizes expense for PSUs that settle in stock. The Company granted PSUs that vest upon the achievement of certain performance conditions to certain key employees. For awards with performance conditions that do not vest unless a performance condition is met, the Company recognizes expense if, and to the extent that, the Company estimates that the achievement of the performance condition is probable. At each reporting date, the Company is required to evaluate whether achievement of a performance condition is probable. Compensation expense is recorded over the appropriate service period based upon the Company’s assessment of accomplishing each performance condition.

The fair values of the Company’s PSUs that have market-based metrics are estimated using Monte Carlo simulations. The Company applies an accelerated attribution method to recognize stock-based compensation expense over the applicable service period for these awards. The number of shares expected to be earned is considered in the grant date valuation; therefore, the expense is not subsequently adjusted to reflect the actual shares ultimately earned.

The fair values of PSUs that do not have market-based metrics are based upon the grant date stock price. Compensation expense is recognized for the number of shares expected to be earned after assessing the probability that a certain performance condition will be met and the targeted payout level associated with the performance condition expected to be achieved. Cumulative adjustments are recorded each quarter to reflect the estimated outcome of the performance-related conditions until the date results are determined and settled. If performance conditions are not met or not expected to be met, any compensation expense previously recognized associated with the awards will be reversed.

Recent Accounting Pronouncements

Recently Adopted

None.

Not Yet Adopted

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands required disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. Entities with a single reportable segment are required to provide all the updated and existing segment disclosures required by Topic 280. The amendments are effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is assessing the effect of the new disclosure requirements and does not anticipate the adoption will have a material impact to the Company’s financial statements.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024 and may be applied either prospectively or retrospectively. The Company is assessing the effect of the new disclosure requirements and does not anticipate the adoption will have a material impact to the Company’s financial statements.

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3. License, Collaboration and Success Payment Agreements

Fred Hutch

License Agreement - In 2018, the Company entered into a license agreement with Fred Hutchinson Cancer Center (“Fred Hutch”) that grants the Company a worldwide, sublicensable license under certain patent rights (exclusive) and certain technology (non-exclusive) to research, develop and commercialize products and processes for all fields of use utilizing chimeric antigen receptors (“CARs”) and/or T-cell receptors (“TCRs”), subject to certain exceptions.

The Company is required to pay Fred Hutch annual license maintenance payments of $50,000 on the second anniversary of the effective date, and each anniversary of the effective date thereafter until the first commercial sale of a licensed product.

Collaboration - In 2018, the Company entered into a research and collaboration agreement with Fred Hutch (“Fred Hutch Collaboration Agreement”) focused on research and development of cancer immunotherapy products. The Company funded aggregate research performed by Fred Hutch of $12.0 million under the Fred Hutch Collaboration Agreement, with the research conducted in accordance with a research plan and budget approved by the parties. The Fred Hutch Collaboration Agreement has a six-year term. The Company incurred $0.2 million and $0.3 million in expense in connection with the Fred Hutch Collaboration Agreement for the three months ended September 30, 2024 and 2023, respectively, and $0.4 million and $0.7 million for the nine months ended September 30, 2024 and 2023, respectively.

Success Payments - In 2018, the Company granted Fred Hutch rights to certain success payments, pursuant to the terms of the Fred Hutch Collaboration Agreement. The potential payments for the Fred Hutch success payments are based on multiples of increased value ranging from 10 times to 50 times based on a comparison of the per share fair market value of the Company’s common stock relative to the original $1.83 per share issuance price of the Company’s Series A convertible preferred stock, which converted into an equal number of shares of the Company’s common stock in connection with the closing of the Company’s initial public offering (“IPO”). The aggregate success payments to Fred Hutch are not to exceed $200.0 million, which would only occur upon a 50 times increase in value. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to $200.0 million at $91.44 per share, payable if such threshold is reached during the measurement period. Any previous success payments made are credited against the success payment owed as of any valuation date, such that Fred Hutch does not receive multiple success payments in connection with the same threshold. The term of the success payment agreement ends on the earlier to occur of (i) the nine-year anniversary of the date of the agreement and (ii) a change in control transaction.

The following table summarizes the aggregate potential success payments, which are payable to Fred Hutch in cash or cash equivalents, or at the Company’s discretion, publicly-tradeable shares of the Company’s common stock:


Multiple of initial equity value at issuance	10x		20x		30x		40x		50x
Per share common stock price required for payment	$	18.29	$	36.58	$	54.86	$	73.15	$	91.44
Aggregate success payment(s) (in millions)	$	10	$	40	$	90	$	140	$	200

The success payments will be owed if the per share fair value of the Company’s common stock on the contractually specified valuation measurement dates during the term of the success payment agreement equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by the following events: the one-year anniversary of the Company’s IPO and each two-year anniversary of the Company’s IPO thereafter, the closing of a change in control transaction and the last day of the term of the success payment agreement, unless the term has ended due to the closing of a change of control transaction. As of September 30, 2024, no success payments have been incurred as the per share fair value of the Company’s common stock was below the price required for payment.

The success payment liability was $0.3 million and $0.7 million as of September 30, 2024 and December 31, 2023, respectively. With respect to the Fred Hutch Collaboration Agreement success payment obligations, the Company recognized success payment expense reversal of $0.1 million and $1.5 million for the three months ended September 30, 2024 and 2023, respectively, and $0.4 million and $2.1 million for the nine months ended September 30, 2024 and 2023, respectively, which are recognized in other (expense) income, net.

Stanford

License Agreement - In 2019, the Company entered into a license agreement with The Board of Trustees of the Leland Stanford Junior University (“Stanford”) to license specified patent rights. The Company is required to pay Stanford annual license maintenance payments of $50,000 on the second anniversary of the effective date, and each anniversary of the effective date thereafter until the date of the first commercial sale of a licensed product.

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Milestone payments to Stanford of up to a maximum of $3.7 million per target are payable upon achievement of certain specified clinical and regulatory milestones. The Company is also obligated to pay Stanford $2.5 million collectively for all licensed products upon the achievement of a certain commercial milestone. Additionally, low single‑digit tiered royalties based on annual net sales of the licensed products are payable to Stanford.

Collaboration Agreement - In October 2020, the Company entered into a research and collaboration agreement with Stanford (“Stanford Collaboration Agreement”), focused on research and development of cellular immunotherapy products. The Stanford Collaboration Agreement has a four-year term. The Company funded aggregate research performed by Stanford of $12.0 million under the Stanford Collaboration Agreement, with the research conducted in accordance with a research plan and budget approved by the parties. The Company incurred $0.8 million in expense in connection with the Stanford Collaboration Agreement for both the three months ended September 30, 2024 and 2023, and $2.3 million for both the nine months ended September 30, 2024 and 2023.

Success Payments - In October 2020, the Company granted Stanford rights to certain success payments, pursuant to the terms of the Stanford Collaboration Agreement. The potential payments for the Stanford Collaboration Agreement success payments are based on multiples of increased value ranging from 10 times to 50 times based on a comparison of the per share fair market value of the Company’s common stock relative to the original $1.83 per share issuance price of the Company’s Series A convertible preferred stock, which converted into an equal number of shares of the Company’s common stock in connection with the closing of the Company’s IPO. The aggregate success payments to Stanford are not to exceed $200.0 million, which would only occur upon a 50 times increase in value. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to $200.0 million at $91.44 per share, payable if such threshold is reached during the measurement period. Any previous success payments made are credited against the success payment owed as of any valuation date, so that Stanford does not receive multiple success payments in connection with the same threshold. The term of each success payment agreement ends on the earlier to occur of (i) the nine-year anniversary of the date of the agreement and (ii) a change in control transaction.

The following table summarizes the aggregate potential success payments, which are payable to Stanford in cash or cash equivalents, or at the Company’s discretion, publicly-tradeable shares of the Company’s common stock:


Multiple of initial equity value at issuance	10x		20x		30x		40x		50x
Per share common stock price required for payment	$	18.29	$	36.58	$	54.86	$	73.15	$	91.44
Aggregate success payment(s) (in millions)	$	10	$	40	$	90	$	140	$	200

The estimated fair values of the success payments to Stanford as of September 30, 2024 and December 31, 2023 were $0.6 million and $1.1 million, respectively. The success payment liability is estimated at the fair value at inception and at each subsequent reporting period and the expense is accreted over the service period of the Stanford Collaboration Agreement as research and development expense. The success payment liability was $0.6 million and $0.9 million as of September 30, 2024 and December 31, 2023, respectively. With respect to the Stanford Collaboration Agreement success payment obligations, the Company recognized success payment expense reversal of approximately zero and $1.2 million for the three months ended September 30, 2024 and 2023, respectively, and $0.3 million and $1.2 million for the nine months ended September 30, 2024 and 2023, respectively.

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4. Cash Equivalents and Marketable Securities

The fair value and amortized cost of cash equivalents and fixed income marketable securities by major security type are as follows (in thousands):


	September 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Money market funds	$	51,654	$	—	$	—	$	51,654
U.S. Treasury securities	307,175		621		—		307,796
U.S. government agency securities	39,467		108		(4)		39,571
Corporate debt securities	40,083		43		(8)		40,118
Total cash equivalents and fixed income marketable securities	$	438,379	$	772	$	(12)	$	439,139


Classified as:	Fair Value
Cash equivalents	$	78,826
Marketable securities	340,201
Marketable securities, non-current	20,112
Total cash equivalents and fixed income marketable securities	$	439,139


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Money market funds	$	62,075	$	—	$	—	$	62,075
U.S. Treasury securities	374,214		237		(95)		374,356
U.S. government agency securities	48,924		3		(177)		48,750
Corporate debt securities	59,668		—		(62)		59,606
Total cash equivalents and fixed income marketable securities	$	544,881	$	240	$	(334)	$	544,787


Classified as:	Fair Value
Cash equivalents	$	127,705
Marketable securities	400,576
Marketable securities, non-current	16,506
Total cash equivalents and fixed income marketable securities	$	544,787

The fair values of money market and fixed income marketable securities held by the Company in an unrealized loss position for less than 12 months were $22.3 million and $117.8 million as of September 30, 2024 and December 31, 2023, respectively. The fair values of money market and fixed income marketable securities held by the Company in an unrealized loss position for greater than 12 months were $9.3 million and $43.6 million as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, all of the Company’s money market and fixed income marketable securities had a maturity date of two years or less, were available for use and were classified as available‑for‑sale. The Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before recovery of their amortized cost basis. The Company determined that there was no material change in the credit risk of the above investments as of both September 30, 2024 and December 31, 2023. As such, an allowance for credit losses has not been recognized. Gross realized gains and losses were de minimis for the three and nine months ended September 30, 2024 and 2023 and as a result, amounts reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023 were also de minimis. See Note 6, Fair Value Measurements, for additional information regarding cash equivalents and fixed income marketable securities.

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5. Other Investments

In prior years the Company made minority ownership strategic investments. As of September 30, 2024 and December 31, 2023, the aggregate carrying amount of the Company’s strategic investments in non-publicly traded companies was $19.0 million and $32.0 million, respectively. These investments are measured at initial cost, minus impairment, if any, and plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Cumulative impairments of strategic investments in equity investments without readily determinable fair values still held as of September 30, 2024 and December 31, 2023 were $23.0 million and $15.0 million, respectively.

As a part of the acquisition of each of the Company’s other investments, the Company determines whether an investment or other interest is considered a variable interest. As of both September 30, 2024 and December 31, 2023, the Company held an interest in one entity that was concluded to be a variable interest for which the Company was not the primary beneficiary as the Company did not have the power to direct the activities that most significantly impact the economic performance of the variable interest entity. As of September 30, 2024 and December 31, 2023, the carrying value and maximum exposure to loss of the Company’s variable interests were zero and $13.0 million, respectively, which are recorded in other investments in the Company’s Condensed Consolidated Balance Sheets.

In connection with the preparation of the financial statements for the three and nine months ended September 30, 2024 and 2023, the Company performed a qualitative assessment of potential indicators of impairment and determined that indicators existed for certain of its other investments with carrying amounts of zero for both the three months ended September 30, 2024 and 2023, and $13.0 million and $12.9 million for the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024, the anticipated funding for one of its other investments was not secured within the expected timeframe. The Company considered all of the underlying companies’ operating cash flow requirements over the next year, liquid asset balances to fund those requirements and the underlying companies’ inability to raise funds as indicators of impairment. Due to these indicators, the Company assessed the valuation of these investments and determined the fair values to be negligible and the impairments to be other‑than‑temporary in nature. As a result, the Company recorded no impairment expense for both the three months ended September 30, 2024 and 2023 and impairment expenses of $13.0 million for one investment and $12.9 million for two investments for the nine months ended September 30, 2024 and 2023, respectively. The impairment expenses were recorded within impairment of other investments on the Condensed Consolidated Statements of Operations and Comprehensive Loss and as a reduction to the investment balances within other investments on the Condensed Consolidated Balance Sheets.

6. Fair Value Measurements

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):


	September 30, 2024
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	51,654	$	—	$	—	$	51,654
U.S. Treasury securities	—		307,796		—		307,796
U.S. government agency securities	—		39,571		—		39,571
Corporate debt securities	—		40,118		—		40,118
Marketable equity security	47		—		—		47
Total financial assets	$	51,701	$	387,485	$	—	$	439,186
Financial liabilities:
Success payment liabilities	$	—	$	—	$	907	$	907
Total financial liabilities	$	—	$	—	$	907	$	907

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	December 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	62,075	$	—	$	—	$	62,075
U.S. Treasury securities	—		374,356		—		374,356
U.S. government agency securities	—		48,750		—		48,750
Corporate debt securities	—		59,606		—		59,606
Total financial assets	$	62,075	$	482,712	$	—	$	544,787
Financial liabilities:
Success payment liabilities	$	—	$	—	$	1,576	$	1,576
Total financial liabilities	$	—	$	—	$	1,576	$	1,576

The Company measures the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities. The Company measures the fair value of marketable equity securities traded in active markets based on quoted prices of identical assets. The Level 2 marketable securities include U.S. Treasury securities, U.S. government agency securities and corporate debt securities, which are valued using third-party pricing sources. The pricing services applied industry standard valuation models. Inputs utilized include market pricing based on real-time trade data for the same or similar securities and other significant inputs derived from or corroborated by observable market data.

The Company’s marketable equity security relates to a company that began being publicly traded on the Nasdaq Global Market in February 2024 and had a fair value of approximately $47 thousand as of September 30, 2024. The Company recorded unrealized losses of $102 thousand and zero for the three months ended September 30, 2024 and 2023, respectively, and unrealized gains of $47 thousand and zero for the nine months ended September 30, 2024 and 2023, respectively, within other (expense) income, net in the Company’s Condensed Consolidated Statement of Operations and Comprehensive Loss. Prior to being publicly traded, as of December 31, 2023, the investment was fully impaired and classified in the Company’s Condensed Consolidated Balance Sheet as other investments.

The Company’s success payment liabilities are Level 3 financial instruments, which were estimated using Monte Carlo simulations through December 31, 2023. Monte Carlo simulations model the future movement of stock prices based on several key variables combined with empirical knowledge of the process governing the behavior of the stock price. The following variables were incorporated in the Monte Carlo simulation to determine the estimated fair value of the success payment liabilities: fair value of the Company’s common stock, expected volatility, the risk-free interest rate and the estimated number and timing of valuation measurement dates on the basis of which payments may be triggered. The computation of expected volatility was estimated based on available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption. As of September 30, 2024, success payment liabilities were estimated by management using its historical experience of the correlation of success payment fair values relative to the Company’s stock price.

The following assumptions were incorporated into the calculation of the estimated fair value of the Fred Hutch and Stanford success payment liabilities as of December 31, 2023:


	Fred Hutch			Stanford
Fair value of common stock	$	1.94		$	1.94
Risk-free interest rate	3.51% - 5.19%			3.51% - 5.19%
Expected volatility	80.0		%	80.0		%
Expected term (in years)	0.46 - 3.97			0.46 - 5.75

The Company utilizes estimates and assumptions in determining the estimated success payment liabilities and associated changes in fair value. A small change in the valuation of the Company’s common stock may have a relatively large change in the estimated fair value of the success payment liability and associated changes in fair value.

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The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands):


	Success Payment Liabilities
Balance at December 31, 2023	$	1,576
Change in fair value (1)	(669)
Balance at September 30, 2024	$	907

(1)The change in the fair value associated with the Fred Hutch success payment liabilities is recorded in other (expense) income, net. The change in the fair value associated with the Stanford success payment liabilities is recorded as research and development expenses. (See Note 3, License, Collaboration and Success Payment Agreements).

7. Leases

The Company’s lease portfolio is comprised of operating leases for laboratory, office and manufacturing facilities located in South San Francisco, California, and Seattle and Bothell, Washington with contractual periods expiring between December 2028 and March 2031. In addition to minimum rent, the leases require payment of real estate taxes, insurance, common area maintenance charges and other executory costs. These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred.

The following table summarizes the Company’s future minimum operating lease commitments as of September 30, 2024 (in thousands):


Year Ending December 31:
2024 (remaining three months)	$	2,898
2025	11,859
2026	12,209
2027	12,569
2028	12,940
Thereafter	22,585
Total undiscounted lease payments	75,060
Less: imputed interest	(16,485)
Total operating lease liabilities	$	58,575

Reported as of September 30, 2024:
Short-term portion of lease liabilities (included in accrued liabilities and other current liabilities)	$	7,134
Operating lease liabilities, non-current	51,441
Total	$	58,575

The operating lease costs for all operating leases were $2.2 million and $2.3 million for the three months ended September 30, 2024 and 2023, respectively, and $6.8 million and $6.7 million for the nine months ended September 30, 2024 and 2023, respectively. The operating lease costs and total commitments for short-term leases were de minimis for the three and nine months ended September 30, 2024 and 2023. Variable lease costs for operating leases were $1.6 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively, and $5.5 million and $4.1 million for the nine months ended September 30, 2024 and 2023, respectively. The weighted-average remaining lease terms for operating leases were 6.1 and 6.8 years as of September 30, 2024 and December 31, 2023, respectively. The weighted‑average discount rate for operating leases was 8.5% as of both September 30, 2024 and December 31, 2023.

The Company entered into subleases in May 2021 and September 2024, whereby the Company agreed to sublease approximately 11,000 and 12,150 square feet, respectively, of its currently leased space in South San Francisco, California. These subleases are classified as operating leases and will expire in March 2031 and July 2026, respectively. The Company recognized sublease income for these subleases of $0.3 million and $0.2 million for the three months ended September 30, 2024 and 2023, respectively, and $0.7 million and $0.6 million for the nine months ended September 30, 2024 and 2023, respectively.

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In September 2021, the Company entered into a sublease with Sonoma Biotherapeutics, Inc. (“Sonoma”), a related party, whereby the Company agreed to sublease approximately 18,000 square feet of space in South San Francisco, California currently leased by the Company. See Note 12, Related-Party Transactions. As a part of the sublease, in September 2021, the Company received a $4.6 million tenant improvement contribution payment, which is recognized over the term of the sublease. The sublease is classified as an operating lease and will expire in March 2031. The Company recognized Sonoma sublease income of $0.5 million for both the three months ended September 30, 2024 and 2023, and $1.4 million for both the nine months ended September 30, 2024 and 2023.

The Company's sublease income is recognized within other operating income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

8. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10.0 million shares of preferred stock with a par value of $0.0001 per share. As of September 30, 2024 and December 31, 2023, no shares of preferred stock were outstanding.

Common Stock

The Company is authorized to issue 500.0 million shares of common stock with a par value of $0.0001 per share. As of September 30, 2024 and December 31, 2023, there were 256,563,684 shares and 253,957,709 shares of the Company’s common stock outstanding, respectively.

On February 28, 2024, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) acting as the Company’s sales agent (the “Sales Agreement”), pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to $150.0 million from time to time in a series of one or more at‑the‑market equity offerings. The Company will pay Cowen commissions of up to 3.0% of the gross proceeds of the sale, and reimbursement of certain expenses, under this agreement. Neither the Company nor Cowen is obligated to sell any shares and, to date, the Company has not made any sales under the Sales Agreement.

9. Stock-based Compensation

2021 Equity Incentive Plan

In June 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”), which on the date of the underwriting agreement related to the Company’s IPO became effective with an initial reserve of 26,662,087 shares, plus any shares subject to outstanding awards granted under the 2018 Equity Incentive Plan (“2018 Plan”) that, on or after the effectiveness of the 2021 Plan, terminate or expire before exercise or settlement, are not issued because the award is settled in cash, are forfeited because of the failure to vest, or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares reserved for issuance under the 2021 Plan automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, in an amount equal to (1) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors no later than December 31 of the immediately preceding year. On January 1, 2024, the Company reserved an additional 12,697,885 shares of common stock for issuance under the 2021 Plan representing 5% of the total common shares outstanding as of December 31, 2023. Under the 2021 Plan, the Company may grant incentive stock options, non-statutory stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), PSUs, stock appreciation rights, performance awards and other stock-based awards. Terms of stock awards, including vesting requirements, are determined by the Company’s board of directors or by a committee authorized by the Company’s board of directors, subject to provisions of the 2021 Plan. The term of any stock option granted under the 2021 Plan cannot exceed ten years. Generally, option and RSU awards granted by the Company vest over four years but may be granted with different vesting terms. PSUs generally vest over three years, subject to the achievement of the associated performance conditions. In conjunction with adopting the 2021 Plan, the Company discontinued the 2018 Plan with respect to new equity awards.

As of September 30, 2024, 42,151,699 shares were available for future issuance pursuant to the 2021 Plan.

2021 Employee Stock Purchase Plan

In June 2021, the Company adopted the 2021 Employee Stock Purchase Plan (“2021 ESPP”), which became effective immediately prior to the execution of the underwriting agreement related to the Company’s IPO with an initial reserve of 2,470,000 shares. The 2021 ESPP allows eligible employees to purchase shares of the Company’s common

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stock at a discount through payroll deductions of up to 15% of their earnings, subject to plan limitations. Unless otherwise determined by the Company’s board of directors, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first date of an offering or on the purchase date. The number of shares of the Company’s common stock reserved for issuance under the 2021 ESPP automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (1) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, and (2) 4,940,000 shares; provided, however, that the Company’s board of directors may act to provide a lesser increase in number of shares. On January 1, 2024, the Company reserved an additional 2,539,577 shares of common stock for issuance under the 2021 ESPP representing 1% of the total common shares outstanding as of December 31, 2023. The Company may specify offerings with durations not more than 27 months and may specify shorter purchase periods within each offering. Under the 2021 ESPP, zero shares were issued for both of the three months ended September 30, 2024 and 2023, and 491,303 and 542,921 shares for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, 5,509,903 shares were available for future issuance pursuant to the 2021 ESPP.

2018 Equity Incentive Plan

In 2018, the Company established the 2018 Plan that provided for the grant of incentive stock options, non‑statutory stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards. Terms of stock awards, including vesting requirements, were determined by the board of directors or by a committee authorized by the Company’s board of directors, subject to provisions of the 2018 Plan. The term of any stock option granted under the 2018 Plan cannot exceed ten years. Generally, awards granted by the Company vest over four years, but could have been granted with different vesting terms. Pursuant to the terms of the 2021 Plan, any shares subject to outstanding options originally granted under the 2018 Plan that terminate, expire or lapse for any reason without the delivery of shares to the holder thereof become available for issuance pursuant to awards granted under the 2021 Plan. While no shares are available for future issuance under the 2018 Plan, it continues to govern outstanding equity awards granted thereunder.

Stock-based Compensation Expense

Stock-based compensation expense by classification included within the Condensed Consolidated Statements of Operations and Comprehensive Loss was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Research and development	$	3,625	$	4,548	$	11,282	$	14,439
General and administrative	3,997		5,968		13,779		24,182
Total stock-based compensation expense	$	7,622	$	10,516	$	25,061	$	38,621

At September 30, 2024, total stock-based compensation cost related to unvested awards not yet recognized was $50.2 million, which is expected to be recognized over a remaining weighted-average period of 2.4 years.

Stock Options Repricing

In November 2023, the Board of Directors of the Company approved, effective November 16, 2023, a one-time repricing of certain stock option awards that had been granted to date under the 2021 Plan and 2018 Plan. The repricing impacted stock options with exercise prices greater than $2.37 held by employees who remained employed as of November 16, 2023 and were not impacted by the Company’s November 2023 reduction in workforce. The original exercise prices of the repriced stock options ranged from $2.61 to $17.95 per share for 200 total grantees with 23,416,860 shares repriced. Each stock option was repriced to have a per share exercise price of $1.87, which was the closing price of the Company’s common stock on November 16, 2023. To receive the new exercise price, option holders must remain employed with the Company through November 15, 2024. Additionally, the vesting schedule for the unvested shares underlying repriced stock options held by executives at the level of senior vice president and above was extended for an additional year. There were no changes to the vesting schedules for employees below the level of senior vice president. No changes were made to the expiration dates of, or the number of shares underlying, the repriced stock options. Incremental stock-based compensation expense resulting from the repricing was $8.9 million in the aggregate. Expense for vested awards will be recognized through November 15, 2024 and expense for unvested awards will be recognized over the remaining service life of the option.

Performance-Based Restricted Stock Units

During the nine months ended September 30, 2024, the Company granted PSU awards to certain key employees. PSUs awarded to employees have a three-year performance period and vest based upon the Company’s performance

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against a two and three-year relative total shareholder return (“rTSR”) metric, as well as upon the achievement of certain clinical development milestones. None of the clinical development milestones were probable of achievement as of September 30, 2024. For the portion of PSUs subject to certain clinical development milestones (other than the bonus clinical development milestone), 50% vest upon the achievement of the applicable milestone, and the remaining 50% vest upon the earlier of (a) one year of service from the date of such achievement and (b) the end of the three-year performance period. The vesting of all PSU awards granted is also subject to the respective employee’s continued employment. The Company valued the portion of PSUs subject to the rTSR metric using a Monte Carlo simulation. The number of PSUs granted subject to the rTSR metrics represents the target number of units that are eligible to be earned based on the achievement of the metrics established at the beginning of the performance period, which ends on December 31st of the three-year performance period. For the portion of PSUs subject to the rTSR metrics, employees may ultimately earn between zero and 200% of the target number of PSUs granted based on the degree of achievement of the applicable rTSR metric. Accordingly, additional PSUs may be issued or currently outstanding PSUs may be cancelled upon final determination of the number of units earned.

A summary of the Company’s PSU activity was as follows:


	Performance-Based Restricted Stock Units Outstanding	Weighted-Average Value at Grant Date Per Share
Unvested PSUs as of December 31, 2023	—	$	—
PSUs granted(1)	2,703,400	$	1.88
PSUs vested	—	$	—
PSUs forfeited or canceled	—	$	—
Unvested PSUs as of September 30, 2024	2,703,400	$	1.88

(1) PSU grants reflect the target number of shares eligible to be earned at the time of grant.

Restricted Stock Units

A summary of the Company’s RSU activity was as follows:


	Restricted Stock Units Outstanding	Weighted-Average Value at Grant Date Per Share
Unvested RSUs as of December 31, 2023	2,072,855	$	2.96
RSUs granted	3,735,601	$	1.82
RSUs vested	(910,921)	$	2.59
RSUs forfeited or canceled	(468,263)	$	2.07
Unvested RSUs as of September 30, 2024	4,429,272	$	2.17

Stock Options

A summary of the Company’s stock option activity was as follows:


	Number of Stock Options	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Options outstanding as of December 31, 2023	55,596,831	$	4.75	6.89	$	7,368
Granted	3,405,500	$	1.97
Exercised	(1,245,836)	$	0.12
Canceled or forfeited	(12,397,616)	$	6.71
Options outstanding as of September 30, 2024	45,358,879	$	4.13	7.04	$	3,505
Options exercisable as of September 30, 2024	29,015,590	$	4.60	6.30	$	3,505

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The fair value of stock options granted to employees and directors was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted-average assumptions:


	Nine Months Ended September 30,
	2024		2023
Risk-free interest rate	4.17	%	4.13	%
Expected volatility	76.0	%	88.2	%
Expected term (in years)	5.90		6.06
Expected dividend yield	0	%	0	%

The weighted-average grant date fair value of options granted for the nine months ended September 30, 2024 and 2023 were $1.35 per share and $1.69 per share, respectively.

10. Net Loss Per Share

Basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include unvested RSUs, unvested PSUs and options to purchase common stock, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. Shares subject to options to purchase common stock, unvested RSUs and unvested PSUs were all excluded from consideration in the calculation of diluted net loss per share in all periods presented due to their anti-dilutive effects.

11. Commitments and Contingencies

License and Collaboration Agreements

The Company has entered into certain license and collaboration agreements, including those identified in Note 3, License, Collaboration and Success Payment Agreements above, with third parties that include the funding of certain development, manufacturing and commercialization efforts with the potential for future milestone and royalty payments upon the achievement of pre-established developmental, regulatory and/or commercial milestones. The Company’s obligation to fund these efforts is contingent upon continued involvement in the programs and/or the lack of any adverse events that could cause the discontinuance of the programs, including termination of such agreements. Due to the nature of these agreements, the future potential payments are inherently uncertain, and accordingly no amounts had been recorded for the potential future achievement of these targets as of both September 30, 2024 and December 31, 2023.

12. Related-party Transactions

In September 2021, the Company entered into a sublease with Sonoma (“Sonoma Sublease”), with whom the Company has common stockholders with board seats, whereby the Company agreed to sublease approximately 18,000 square feet of space in South San Francisco, California currently leased by the Company. Dr. Klausner, the Chair of the Company’s board of directors, also serves as Board Chair of Sonoma’s board of directors. As a part of the Sonoma Sublease, a $4.6 million tenant improvement contribution payment was made by Sonoma, which is recognized over the term of the Sonoma Sublease. As of both September 30, 2024 and December 31, 2023, there were accrued liabilities and other current liabilities of $0.5 million and as of September 30, 2024 and December 31, 2023, other non-current liabilities of $2.7 million and $3.0 million, respectively, in connection with the Sonoma Sublease. Total operating income from Sonoma and income solely attributable to the Sonoma Sublease are shown in the table below (in thousands). Total operating income includes income attributable to the sublease, as well as additional operating fees recognized in “other operating income, net” such as common area maintenance charges. See Note 7, Leases, for more detail on the Sonoma Sublease.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Sonoma other operating income, net	$	677	$	638	$	2,161	$	1,955
Sonoma sublease income	$	466	$	466	$	1,396	$	1,396

13. Subsequent Events

On October 31, 2024, the Company completed the acquisition of ImmPACT Bio USA Inc. (“ImmPACT”), a Delaware corporation and a clinical-stage biotechnology company developing a new generation of cellular therapies using

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its logic‑gate-based CAR T-cell platform, pursuant to an Agreement and Plan of Merger, dated as of October 24, 2024 (“Merger Agreement”), by and among the Company, ImmPACT, Inspire Merger Sub Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of the Company (“Merger Sub”), and WT Representative LLC, a Delaware limited liability company, solely in its capacity as the representative, agent and attorney-in-fact of ImmPACT securityholders, pursuant to which Merger Sub merged with and into ImmPACT, with ImmPACT surviving as an indirect, wholly-owned subsidiary of the Company (the “Merger”). Pursuant to the Merger Agreement, the Company acquired all of the outstanding equity interests of ImmPACT in exchange for an upfront payment of $30.0 million in cash (as adjusted by approximately $12.0 million for ImmPACT’s existing cash balance) and the issuance of 37.5 million shares of the Company’s common stock at closing. Contingent consideration payable following the closing includes (a) additional equity consideration of 12.5 million shares of the Company’s common stock upon the achievement of the earlier to occur of (i) the demonstration of certain clinical milestones or (ii) the receipt of certain regulatory approvals and (b) a low single-digit royalty on future net sales of IMPT-314 in the United States.

Each share of ImmPACT preferred stock, par value $0.0001 per share, issued and outstanding immediately prior to the effective time of the Merger was canceled and converted automatically at closing into the right to receive (i) a number of shares of the Company’s common stock based on a stock exchange ratio, (ii) an amount in cash equal to the per share closing cash amount set forth in the Merger Agreement and (iii) if applicable, an amount in cash, without interest, rounded down to the nearest cent, in lieu of any fractional share interest in the Company’s common stock to which such holder otherwise would have been entitled.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. See also the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage cell therapy company advancing a pipeline of proprietary next-generation chimeric antigen receptor (CAR) T-cell product candidates for patients with solid tumors or hematologic malignancies. We have developed novel technologies and manufacturing protocols designed to generate T cells that resist exhaustion and have qualities of durable stemness to drive durable tumor cytotoxicity and achieve consistent and long-lasting clinical responses. Our investigational therapies use the patient’s own living cells as the starting point. We incorporate our innovative technology and manufacturing protocols to expand and activate the patient’s T cells. Our technologies are designed to generate highly tumor‑reactive, longer-lasting functional T cells with enhanced ability to persist, self‑renew and kill cancer cells over time. Our technology can be applied in a target agnostic manner to multiple T‑cell modalities, including CAR, tumor-infiltrating lymphocytes (TIL) and T‑cell receptor (TCR) therapies.

Our pipeline of next-generation CAR T-cell product candidates target indications with large unmet need and provide opportunities to expand into additional indications beyond the patient populations we are initially evaluating. Our lead product candidates are summarized in Table 1 below:

We were incorporated in June 2018. Our primary activities to date have included clinical development of T‑cell therapies, conducting research and development, acquiring technology and product candidates, entering into strategic collaboration and license agreements, enabling and executing manufacturing activities in support of our product candidate development efforts, organizing and staffing our company, business planning, establishing our intellectual property portfolio, making regulatory submissions, executing clinical trials, raising capital and providing general and administrative support for these activities. We are early in our research and development efforts.

We recently acquired ImmPACT Bio USA Inc. (ImmPACT), a privately-owned clinical stage biotechnology company developing next-generation CAR T-cell product candidates including a dual-targeting CD19/CD20 CAR T‑cell product candidate currently in Phase 1 clinical development for the treatment of aggressive B-cell non-Hodgkin lymphoma. In conjunction with this acquisition, we prioritized our pipeline to focus resources on our most differentiated next generation CAR T‑cell product candidates, including IMPT-314 for patients with aggressive B-cell lymphoma and

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LYL119. LYL119, our next-generation ROR1‑targeted CAR T‑cell product candidate, has received FDA clearance of its Investigational New Drug (IND) application and is entering a Phase 1 dose-escalation, dose-expansion clinical trial, initially in patients with platinum-resistant ovarian cancer or relapsed/refractory endometrial cancer. We do not have any products approved for sale.

Pipeline Programs

IMPT-314 - A next-generation dual-targeting CD19/CD20 CAR T-cell product candidate designed to increase complete response rates and prolong the duration of the response as compared to the approved CD19‑targeted CAR therapies for the treatment of large B-cell lymphoma.

IMPT-314 is an autologous dual-targeting CD19/CD20 CAR T-cell therapy designed to kill B‑cells expressing CD19 and/or CD20 antigens for the treatment of patients with aggressive B-cell malignancies. We acquired this product candidate through our acquisition of ImmPACT in October 2024.

A dual-targeting, or bispecific, CAR recognizes two targets. IMPT-314 is rationally designed with an ‘OR’ logic gate to target B cells that express either CD19, CD20 or both (Figure 1). This differentiates IMPT-314 from cell therapies and other therapeutic modalities that singularly target only CD19 or only CD20. Preclinical data demonstrated that this optimized tandem CAR design is capable of killing target cells that express CD19 only, CD20 only or both antigens, thus it has the potential to achieve a higher percentage of complete responses than a single targeting agent, particularly in those patients with lymphoma who may have a lower or heterogeneous CD19 antigen density.

Additionally, IMPT-314 is manufactured to produce a CAR T-cell product with higher proportions of naïve and central memory T cells through a proprietary process that enriches for CD62L-expressing cells. This manufacturing process is designed to generate CAR T cells with enhanced antitumor activity, that we believe could result in both increased complete response rates and more durable responses. Naïve T cells are mature T lymphocytes that have differentiated in the bone marrow and undergone central tolerance selection in the thymus, but have not interacted with their antigen. CAR T cells generated from these less differentiated T cells are known to have better engraftment, improved persistence, reduced exhaustion and lower cytokine production compared to CAR T cells generated from traditional processes. The enrichment of CD62L-positive naïve T cells does not increase the manufacturing time which is similar to that of the approved CD19 CAR T-cell therapies. Data from the ZUMA-7 pivotal trial of axicabtagene ciloleucel in patients with relapsed/refractory large B-cell lymphoma demonstrated an improved overall survival in those patients with a higher median percentage of T cells in the product with a naïve/stem memory phenotype (Westin JR, NEJM, 2023).

Figure 1: IMPT-314 contains separate, tandem single-chain variable fragment (scFV) antibody domains designed to target both CD19 and CD20 and is manufactured using a CAR that contains the 4-1BB costimulatory domain and a process to enrich for CD62-positive naïve and central memory T cells.

Non-Hodgkin lymphoma (NHL) is a common blood cancer in the United States and worldwide. Annually, it is estimated that approximately 81,000 people in the United States and 545,000 worldwide will be diagnosed with NHL. B‑cell lymphoma is the most common type of non-Hodgkin lymphoma, comprising approximately 85% of all lymphomas

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in the United States. While the first generation of CD19 CAR T-cell therapies delivered a major advance in treatment for patients with B-cell lymphoma, there remains a need for therapies that deliver more complete and durable responses. More than 40% of patients treated with a CD19 CAR T-cell therapy are not disease-free after treatment and 30% of patients do not respond at all. Of patients treated with an approved CD19 CAR T-cell therapy, approximately 50% of patients progress or relapse within six months. The overall survival at one year for patients treated with a CD19 CAR is only 50% to 60%.

ImmPACT licensed its dual-targeting CD19/CD20 CAR T-cell product candidate from the University of California Los Angeles (UCLA). Interim Phase 1 data in 13 patients with relapsed/refractory aggressive non-Hodgkin lymphoma treated in a UCLA‑sponsored clinical trial were presented at the 2024 American Association for Cancer Research (AACR) Special Conference in Cancer Research: Tumor Immunology and Immunotherapy (Figure 2). CAR T-cell naïve patients with relapsed/refractory diffuse large B-cell lymphoma or primary mediastinal B‑cell lymphoma after at least two lines of therapy or mantle cell lymphoma, follicular lymphoma or chronic lymphocytic leukemia/small lymphocytic lymphoma after at least three lines of therapy were evaluated. Autologous T cells were obtained and enriched for CD14-/CD25-/CD62L+ naïve or memory T cells. Two doses were to be evaluated including 50 and 200 million cells. Three patients received cell doses below 50 million cells due to manufacturing issues. Twelve out of 13 patients achieved a complete or partial response (92% objective response rate), with ten achieving a confirmed complete response (77% complete response rate). The median progression-free survival was 50.1 months, and median overall survival was not reached with a median follow‑up of 32 months (range: 5.7 – not estimable). A favorable safety profile was observed with no case of cytokine release syndrome (CRS) above Grade 1 and no reported cases of immune effector cell‑associated neurotoxicity syndrome (ICANS).

Figure 2: Interim Phase 1 data in 13 patients with relapsed/refractory aggressive non-Hodgkin lymphoma treated with UCLA-314 in a UCLA-sponsored clinical trial were presented at the 2024 AACR Special Conference in Cancer Research: Tumor Immunology and Immunotherapy.

ImmPACT initiated a Phase 1-2 clinical trial of this dual-targeting CD19/CD20 CAR T-cell product candidate, IMPT-314, in 2023, and we are now advancing this trial. It is a multi-center, open-label dose-escalation and dose-expansion clinical trial designed to evaluate the safety and clinical benefit of IMPT-314 and to determine a recommended Phase 2 dose in patients with relapsed/refractory aggressive B-cell lymphoma. IMPT-314 has received Fast Track designation from the U.S. Food and Drug Administration (FDA) for the treatment of relapsed/refractory aggressive B-cell lymphoma.

•Initial data from the ongoing multi-center Phase 1-2 trial of IMPT-314 will be presented at the American Society of Hematology (ASH) Annual Meeting in December 2024.

•We expect to initiate a pivotal trial in patients with relapsed/refractory large B-cell lymphoma in the 3rd line setting who have not yet been exposed to CAR T-cell therapy in 2025.

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LYL119 - A next-generation ROR1-targeted CAR T-cell product candidate enhanced with Lyell’s four stackable and complementary anti-exhaustion technologies

LYL119 is an autologous CAR T‑cell investigational product targeting the receptor tyrosine kinase-like orphan receptor 1 (ROR1) protein and enhanced with four of Lyell’s novel reprogramming technologies: c-Jun overexpression, NR4A3 knockout, Epi-R manufacturing protocol and Stim‑RTM T-cell activation technology. These technologies are stackable and complementary and are designed to enable T cells to resist exhaustion and to improve antitumor potency and durability. LYL119 targets ROR1, a fetal protein expressed during embryogenesis and is believed to be important in cell migration, polarity and survival. Significant subsets of patients with common cancers express ROR1, including ovarian cancer, endometrial cancer, non-small cell lung cancer (NSCLC), triple-negative breast cancer (TNBC) and chronic lymphocytic leukemia (CLL), and is generally associated with a poor prognosis.

LYL119 builds on what we learned from the preclinical and clinical development of LYL797, our first-generation ROR1-targeted CAR T‑cell product candidate that demonstrated dose-dependent clinical activity in the Phase 1 trial of patients with TNBC. LYL797 was enhanced with c-Jun overexpression and manufactured with our Epi-R protocol. A key pillar of our strategy is to continually innovate to develop and advance novel, breakthrough technologies that address key barriers to effective cell therapy for solid tumors and LYL119, our next-generation ROR1-targeted CAR T‑cell product candidate incorporates four technologies designed to further enhance the anti-exhaustion functionality and stem-like qualities of T cells. These technologies include c-Jun overexpression, NR4A3 knockout by gene editing, and manufacturing using our Epi-R protocol and Stim-R novel T-cell activation technology.

The enhanced anti-exhaustion technology incorporated into LYL119 has the potential to achieve improved efficacy at lower cell doses with an acceptable safety profile. In a preclinical mouse model of non-small cell lung cancer, LYL119 demonstrated greater antitumor potency and complete tumor control at a very low cell dose of only 100,000 cells, as well as significantly enhanced sustained tumor cell killing in a repetitive cancer cell killing assay in vitro as compared to LYL797 (Figures 3 and 4). The lower doses used with LYL119 also resulted in much more gradual cell expansion as demonstrated in Figure 5 with a logarithmic scale on the y-axis.

Figure 3: LYL119 demonstrated more potent anti-tumor activity in vivo in a NSCLC (H1975) xenograft model, with significantly improved elimination of tumors at the lower 0.1 x 106 CAR T-cell dose.

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Figure 4: LYL119 demonstrates superior tumor cell killing following serial antigen restimulation.

Figure 5: More gradual cell in vivo expansion at lower doses of LYL119 suggests greater tolerability.

The Phase 1 trial of LYL119 will initially include patients with platinum-resistant ovarian and endometrial cancers, where it is estimated in the literature that approximately 50% of patients have tumors in both indications that express ROR1.

•The Phase 1 trial of LYL119 is designed as an open label dose escalation and expansion trial in patients with ROR1‑positive solid tumors and will initially enroll patients with ROR1‑positive platinum-resistant ovarian cancer or relapsed/refractory endometrial cancer. LYL119 is expected to enroll its first patient later this year or early next year and initial clinical data are expected in the second half of 2025.

•Presenting a poster at the Society for Immunotherapy of Cancer (SITC) Annual Meeting titled “Multiomic profiling of LYL119: A Reprogrammed ROR1 CAR T Product Generates T cells with Reduced Exhaustion and Enhanced Memory Characteristics Associated with Increased AP-1 and Reduced NR4A Bindings.” In a validated preclinical xenograft model of NSCLC, LYL119 achieved complete tumor control and prolonged survival even at very low doses compared to LYL797, Lyell’s first generation ROR1-targeted CAR T‑cell product candidate. The study presented potential molecular mechanisms underlying the functional reduction of T-cell exhaustion and enhancement of memory‑related characteristics of LYL119 CAR T cells after antigen encounter in vitro and in vivo.

Additional Pipeline and Business Updates

In connection with the acquisition of ImmPACT, we acquired worldwide rights to ImmPACT’s pipeline, including the next-generation bispecific CD19/CD20 autologous CAR T-cell therapy (IMPT-314), currently in clinical development for B-cell lymphoma and autoimmune diseases, and an activating TGF-beta Claudin 18.2 CAR T-cell

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candidate, which is in preclinical development. We have prioritized our pipeline to focus on the development of IMPT-314 for patients with B-cell lymphoma and LYL119 for patients with solid tumors and have discontinued development of LYL797, our first-generation ROR1-targeted CAR T-cell product candidate.

In June 2024, we reported initial clinical and translational data from our Phase 1 trial of LYL797, our first-generation ROR1‑targeting CAR T-cell product candidate enhanced with c-Jun overexpression and manufactured with Epi‑R protocol. These initial clinical data demonstrated dose-dependent clinical activity, including a 40% objective response rate at the 150 x 106 cell dose level, robust cell expansion and histologic evidence of CAR T-cell infiltration into on study tumor biopsies. In this study, CRS was generally mild (Grade 1 or 2 only), and there were no reports of ICANS attributed to LYL797. Pneumonitis was the most frequently reported Grade >3 related adverse event (17%) as well as the expected cytopenia from lymphodepletion (78%). Our manufacturing success was 100%. We believe these initial clinical and translational data provide early validation of our in vivo preclinical models. In our in vivo studies LYL797 ROR1 CAR T cells reprogrammed with our c-Jun overexpression and Epi-R anti-exhaustion technology enhanced tumor control resulting in prolonged survival as compared to control ROR1 CAR T cells without our technologies. Translational data from the LYL797 Phase 1 clinical trial are being presented at the 39th Annual Meeting of SITC in November 2024.

While LYL797 achieved enhanced tumor cell killing over historical control clinical data, we subsequently discontinued development of this first-generation product candidate on October 31, 2024 due to continued events of pneumonitis despite dexamethasone prophylaxis, resulting in a narrow therapeutic window. We have prioritized our resources on the development of the next-generation product candidate, LYL119, which we believe has the potential for a broader therapeutic window as described above.

We have also discontinued, LYL845, our TIL clinical program because it did not achieve our criteria for differentiation from the approved TIL product, as well as our next-generation TIL and rejuvenation programs that were in preclinical development.

Acquisition of ImmPACT

Pursuant to the Agreement and Plan of Merger (the Merger Agreement) by and among us, ImmPACT, Inspire Merger Sub Inc., a Delaware corporation and our indirect, wholly-owned subsidiary, and WT Representative LLC, a Delaware limited liability company, solely in its capacity as the representative, agent and attorney-in-fact of ImmPACT securityholders, dated October 24, 2024, we acquired all of the outstanding equity interests of ImmPACT in exchange for an upfront payment of $30.0 million in cash (as adjusted by approximately $12.0 million for ImmPACT’s existing cash balance) and the issuance of 37.5 million shares of our common stock at closing. Contingent consideration payable following the closing includes (a) additional equity consideration of 12.5 million shares of our common stock upon the achievement of the earlier to occur of (i) the demonstration of certain clinical milestones or (ii) the receipt of certain regulatory approvals and (b) a low single‑digit royalty on future net sales of IMPT-314 in the United States.

As a result of the acquisition of ImmPACT, we assumed its rights and obligations under its license agreement with the Regents of the University of California, acting through The Technology Development Group of UCLA, dated February 18, 2021 (the UCLA License Agreement). Pursuant to the UCLA License Agreement, we are obligated to pay a nominal, tiered annual license maintenance fee each year of the term of the UCLA License Agreement until we make the first commercial sale of a licensed product and, upon the achievement of specified development, regulatory and commercial milestones, we are obligated to pay UCLA one-time milestone payments of up to an aggregate amount in the mid-single digit millions for each commercialized licensed product. In addition, we are obligated to pay UCLA a tiered royalty on worldwide annual net sales of any commercialized licensed products in the low- to mid-single digits percentage, subject to specified and capped reductions and a tiered minimum annual royalty payment of between a low-five figure and a low-six figure amount.

Our Manufacturing Capabilities

We believe it is critically important to control and continuously monitor all aspects of the cell therapy manufacturing process to mitigate risks, including challenges in managing production, supply chain, patient specimen chain of custody and quality control. As we developed our technologies, we made a strategic decision to invest in building our own manufacturing facility to control our supply chain, maximize efficiencies in cell product production time, optimize cost and quality, protect proprietary aspects of our reprogramming technologies and have the ability to rapidly incorporate advancements and new innovations. We view our manufacturing team and capabilities as a significant competitive advantage.

Our LyFE Manufacturing Center™ (LyFE) located in Bothell, Washington is approximately 73,000 square feet and is comprised of manufacturing suites, laboratories and offices. Our LyFE Manufacturing Center was designed to be in compliance with U.S. and European Union current Good Manufacturing Practices (cGMP) standards and has a flexible and modular design enabling CAR T-cell, TIL, TCR T-cell and cGMP viral vector production to control and de-risk the

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manufacturing sequence and timing of the major components of our supply chain. Owning our own facility has enabled seamless collaboration across research, process development and manufacturing for high-quality reproducibility at manufacturing scale. Clinical supply for our Phase 1 trial of LYL119 will be produced at LyFE and clinical supply for our Phase 1-2 trial of IMPT-314 is currently manufactured in our wholly-owned manufacturing facility in Los Angeles, California, that we acquired in connection with the acquisition of ImmPACT. As we accelerate development of IMPT-314, we expect to supplement our Los Angeles manufacturing capacity and will evaluate options either at LyFE or through a contract development manufacturing organization. We are focused on maintaining a manufacturing strategy that is operationally efficient to maximize our capacity and avoid any disruption to clinical trial supply.

At full staffing and capacity, we expect to be able to manufacture approximately 1,000 CAR T-cell products per year at LyFE depending on product candidate mix. While we believe this capacity is sufficient to support our pipeline programs into pivotal trials and, if approved, early commercialization, we are also advancing multiple strategic alternatives to innovate and scale manufacturing in the future. We are evaluating third-party manufacturing options as part of an overall CAR T‑cell manufacturing strategy to build scale and reduce cost.

Macroeconomic Environment

Our business and operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges such as the effects of the ongoing geopolitical conflicts in Ukraine, armed conflicts and turmoil in the Middle East, tensions in U.S.-China relations, inflationary pressures, fluctuations in the interest rate environment, instability in the banking industry, supply constraints and overall market volatility. Economic uncertainty may persist into the remainder of 2024, and the market dynamics discussed above and similar adverse conditions may negatively impact our business.

For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Components of Results of Operations

Revenue

We have no products approved for sale and have never generated any revenue from product sales. In the future, we may generate additional revenue from collaborations, strategic alliances, licensing agreements, product sales, or a combination of these.

Operating Expenses

Research and Development

To date, research and development expenses consist of costs incurred by us for the discovery and development of our technology platforms and product candidates and include costs incurred in connection with strategic collaborations, costs to license technology, personnel-related costs, including stock-based compensation expense, facility and technology related costs, research and laboratory expenses, as well as other expenses, which include consulting fees and other costs. Upfront payments and milestones paid to third parties in connection with technology platforms that have not reached technological feasibility and do not have an alternative future use are expensed as incurred.

Research and development expenses also include non-cash expenses related to the change in the estimated fair value of the success payment obligations over their respective requisite service terms granted to Fred Hutchinson Cancer Center (Fred Hutch) and The Board of Trustees of the Leland Stanford Junior University (Stanford). As of December 31, 2022, Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration. For the three and nine months ended September 30, 2023 and future periods, the change in the Fred Hutch success payment liability fair value is recognized in other (expense) income, net, as the requisite service obligation had been met. See Note 3, License, Collaboration and Success Payment Agreements, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q. Research and development expenses related to our success payment liabilities are unpredictable and may vary significantly from quarter‑to‑quarter and year‑to‑year due to changes in our assumptions used in the calculation.

We deploy our employee and infrastructure resources across multiple research and development programs for identifying and developing product candidates and establishing manufacturing capabilities. Due to the stage of development and number of ongoing programs and our ability to use resources across several programs, most of our research and development costs are not recorded on a program-specific basis. These include costs for personnel, laboratory and other indirect facility and operating costs.

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Research and development activities account for a significant portion of our operating expenses. We anticipate that our research and development expenses will increase over the foreseeable future as we expand our research and development efforts including completing nonclinical studies, commencing planned clinical trials, conducting and completing current and planned clinical trials, seeking regulatory approvals of our product candidates, identifying new product candidates and incurring costs to acquire and license technology platforms. A change in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates. Because we are early in our research and clinical development efforts of our product candidates, and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the nonclinical development, clinical development and commercialization of product candidates or whether, or when, we may achieve profitability.

Our research and development expenses may vary significantly based on factors such as:

•the number and scope of nonclinical and IND-enabling studies;

•per patient trial costs;

•the number of trials required for approval;

•the number of sites included in the trials;

•the countries in which the trials are conducted;

•the length of time required to enroll eligible patients;

•the number of patients that participate in the trials;

•the drop-out or discontinuation rates of patients;

•potential additional safety monitoring requested by regulatory agencies;

•the duration of patient participation in the trials and follow-up;

•the cost and timing of manufacturing our product candidates;

•the phase of development of our product candidates;

•the efficacy and safety profile of our product candidates;

•the extent to which we establish additional collaboration or license agreements; and

•whether we choose to partner any of our product candidates and the terms of such partnership.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates. We may obtain unexpected results from our nonclinical studies and clinical trials.

General and Administrative

General and administrative costs include personnel-related expenses, including stock-based compensation expense for personnel in executive, legal, finance and other administrative functions, legal costs, transaction costs related to collaboration and licensing agreements, as well as fees paid for accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expenses. Legal costs include those related to corporate, dispute and patent matters.

We anticipate that our general and administrative expenses will increase over the foreseeable future to support our continued research and development activities, operations generally, future business development opportunities, consulting fees, as well as the costs of operating as a public company such as costs related to accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission (SEC) requirements, director and officer insurance costs and investor and public relations costs.

Other Operating Income, Net

Other operating income, net consists primarily of service and occupancy fees received associated with subleases as well as losses on the retirement of property and equipment.

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Interest Income, Net

Interest income, net consists primarily of interest earned on our cash, cash equivalents and marketable securities balances.

Other (Expense) Income, net

Other (expense) income, net consists primarily of the change in fair value associated with our success payment liabilities to Fred Hutch and adjustments to the fair value of our marketable equity security that is publicly traded.

Impairment of Other Investments

Impairment of other investments consists of a reduction in the value of certain other investments.

Results of Operations

Three and Nine Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024		2023		Change		2024		2023		Change
Revenue	$	34	$	25	$	9	$	50	$	117	$	(67)
Operating expenses:
Research and development	39,500		43,849		(4,349)		122,935		135,950		(13,015)
General and administrative	11,769		15,507		(3,738)		37,519		53,816		(16,297)
Other operating income, net	(730)		(292)		(438)		(2,796)		(2,149)		(647)
Total operating expenses	50,539		59,064		(8,525)		157,658		187,617		(29,959)
Loss from operations	(50,505)		(59,039)		8,534		(157,608)		(187,500)		29,892
Interest income, net	5,965		6,608		(643)		19,148		16,369		2,779
Other (expense) income, net	(43)		1,578		(1,621)		402		2,352		(1,950)
Impairment of other investments	—		—		—		(13,001)		(12,923)		(78)
Total other income, net	5,922		8,186		(2,264)		6,549		5,798		751
Net loss	$	(44,583)	$	(50,853)	$	6,270	$	(151,059)	$	(181,702)	$	30,643

Research and Development Expenses

The following table summarizes the components of our research and development expenses for the periods presented (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024		2023		Change		2024		2023		Change
Personnel	$	15,048	$	19,922	$	(4,874)	$	47,501	$	61,727	$	(14,226)
Facilities and technology	12,258		12,899		(641)		37,173		39,732		(2,559)
Research activities, collaborations and outside services	12,234		12,274		(40)		38,569		35,740		2,829
Success payments	(40)		(1,246)		1,206		(308)		(1,249)		941
Total research and development expenses	$	39,500	$	43,849	$	(4,349)	$	122,935	$	135,950	$	(13,015)

Research and development expenses were $39.5 million and $43.8 million for the three months ended September 30, 2024 and 2023, respectively. The $4.3 million decrease was primarily due to a $4.9 million reduction in personnel‑related expenses, mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce. These decreases were partially offset by a change of $1.2 million in success payment expense primarily driven by the change in our stock price.

Research and development expenses were $122.9 million and $136.0 million for the nine months ended September 30, 2024 and 2023, respectively. The $13.0 million decrease was primarily due to a $14.2 million reduction in

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personnel-related expenses mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce and a decrease of $2.6 million in facilities and technology costs primarily driven by the reduction in workforce and lower software implementation costs. These decreases were partially offset by an increase of $2.8 million in research activities, collaborations and outside services primarily driven by clinical trials activity and a change of $0.9 million in success payment expense primarily driven by the change in our stock price.

General and Administrative Expenses

General and administrative expenses were $11.8 million and $15.5 million for the three months ended September 30, 2024 and 2023, respectively. The $3.7 million decrease was primarily due to a $3.3 million reduction in personnel costs, including a $2.0 million decrease in stock-based compensation expense, primarily related to significant awards being fully expensed in the previous periods and a decrease of $1.4 million in personnel‑related expenses mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce.

General and administrative expenses were $37.5 million and $53.8 million for the nine months ended September 30, 2024 and 2023, respectively. The $16.3 million decrease was primarily due to a $14.6 million reduction in personnel costs, including a $10.4 million decrease in stock-based compensation expense, primarily related to significant awards being fully expensed in the previous periods and a decrease of $4.1 million in personnel-related expenses mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce. General and administrative expenses also decreased due to a reduction of $1.6 million in other administrative expenses.

Other Operating Income, Net

Other operating income, net was $0.7 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively, and $2.8 million and $2.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Interest Income, Net

Interest income, net was $6.0 million and $6.6 million for the three months ended September 30, 2024 and 2023, respectively, and $19.1 million and $16.4 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in interest income, net for the nine months ended September 30, 2024 was primarily driven by higher interest rates in 2024.

Other (Expense) Income, net

Other (expense) income, net was approximately zero and $1.6 million for the three months ended September 30, 2024 and 2023, respectively, and $0.4 million and $2.4 million for the nine months ended September 30, 2024 and 2023, respectively. Other (expense) income, net consists primarily of the change in fair value associated with our success payment liabilities to Fred Hutch and for the three and nine months ended September 30, 2024, also includes adjustments to the fair value of our marketable equity security investment that is publicly traded.

Impairment of Other Investments

Impairment of other investments was zero for both the three months ended September 30, 2024 and 2023, and $13.0 million and $12.9 million for the nine months ended September 30, 2024 and 2023, respectively, which consisted of the full impairment of one of our other investments for the nine months ended September 30, 2024 and the full impairment of two of our other investments for the nine months ended September 30, 2023. See Note 5, Other Investments, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q, for additional details regarding the impairments of other investments.

Liquidity and Capital Resources

Sources of Liquidity

As of September 30, 2024, we had $460.7 million in cash, cash equivalents and marketable securities. To date we have raised an aggregate of $1.4 billion in gross proceeds from sales of common stock and convertible preferred stock.

Since our inception, we have incurred significant operating losses. We have not yet commercialized any product candidates, and we do not expect to generate revenue from sales of any product candidates for a number of years, if ever.

On February 28, 2024, we entered into a sales agreement (Sales Agreement) with Cowen and Company, LLC (Cowen) acting as our sales agent, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $150.0 million from time to time in a series of one or more at-the-market equity offerings. We will pay Cowen commissions of up to 3.0% of the gross proceeds of the sale, and reimbursement of certain expenses,

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under this agreement. Neither us nor Cowen is obligated to sell any shares and, to date, we have not made any sales under the Sales Agreement.

Future Funding Requirements

We expect to incur additional losses in the foreseeable future as we conduct and expand our research and development efforts, including conducting nonclinical studies and clinical trials, developing new product candidates, establishing internal manufacturing capabilities and funding our operations generally. Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure needs into 2027. However, we anticipate that we will need to raise additional capital in the future to fund our operations, including further development of our product candidates and the commercialization of any approved product candidates. In addition, we regularly consider fund-raising opportunities and may decide, from time to time, to raise additional capital, including pursuant to the Sales Agreement, based on various factors, including market conditions and our plans of operation. We are subject to the risks typically related to the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

Our future capital requirements will depend on many factors, including:

•the scope, timing, progress, costs and results of discovery, nonclinical development and clinical trials for our current and future product candidates and any additional nonclinical studies;

•the number of clinical trials required for regulatory approval of our current and future product candidates;

•the costs, timing and outcome of regulatory review of any of our current and future product candidates;

•the cost of manufacturing clinical and commercial supplies of our current and future product candidates;

•the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

•further investment to build additional manufacturing facilities or expand the capacity of our existing ones;

•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

•our ability to maintain existing, and establish new, collaborations, licenses, product acquisitions or other strategic transactions and the fulfillment of our financial obligations under any such agreements, including the timing and amount of any success payment, future contingent payments, milestone, royalty or other payments due under any such agreement;

•any future acquisitions, strategic investments, partnerships or alliances and the related financial terms and obligations, including liabilities assumed in connection with our acquisition of ImmPACT;

•the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

•expenses to attract, hire and retain skilled personnel;

•the costs of operating as a public company, including legal, accounting and other related expenses as well as costs relating to maintaining or expanding our operational, financial and management systems and compliance programs;

•addressing or responding to any potential disputes or litigation; and

•the extent to which we acquire or invest in businesses, products and technology platforms.

Until such time as we complete nonclinical and clinical development and receive regulatory approval of our product candidates and can generate significant revenue from product sales, if ever, we expect to finance our operations from the sale of additional equity or debt financings, or other capital that is generated from strategic collaborations, licensing or other arrangements. In the event that additional capital is required, we may not be able to raise it on terms acceptable to us, or at all. If we raise additional funds through the issuance of equity or convertible debt securities, including pursuant to the Sales Agreement, it may result in dilution to our existing stockholders. Debt financing or preferred equity financing, if available, may result in increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that may restrict our operations. If we raise funds through strategic collaboration, licensing or other arrangements, we may relinquish significant rights or grant licenses on terms that are not favorable to us. Our ability to

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raise additional funds may be adversely impacted by potentially unfavorable global economic conditions and any disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from actual or perceived changes in interest rates and economic inflation, the anticipated impact of any geopolitical instability and otherwise. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be adversely affected.

Material Cash Requirements

We continually evaluate our liquidity and capital resources to ensure that we can adequately and efficiently finance our operations. As of September 30, 2024, our material cash requirements consisted primarily of paying salaries and benefits, administering clinical trials, conducting research, manufacturing products for our clinical trials, providing the technology and facilities necessary to support our operations, funding operating lease obligations and other payments related to our collaborative agreements. See Note 3, License, Collaboration and Success Payment Agreements, and Note 7, Leases, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information.

Subsequent to September 30, 2024, we entered into the Merger Agreement with ImmPACT pursuant to which we acquired all of the outstanding equity interests of ImmPACT in exchange for an upfront payment of $30.0 million in cash (as adjusted by approximately $12.0 million for ImmPACT’s existing cash balance) and the issuance of 37.5 million shares of our common stock at closing and agreeing to issue an additional 12.5 million shares of our common stock upon the achievement of certain clinical or regulatory milestones. Pursuant to the Merger Agreement, we have also agreed to make cash royalty payments to the pre-closing stockholders of ImmPACT based on a low single-digit royalty on future net sales of IMPT-314 in the United States.

In addition, as a result of the Merger, we assumed ImmPACT’s rights and obligations under the UCLA License Agreement, pursuant to which we are obligated to pay a nominal, tiered annual license maintenance fee each year of the term of the UCLA License Agreement until we make the first commercial sale of a licensed product and, upon the achievement of specified development, regulatory and commercial milestones, we are obligated to pay UCLA one‑time milestone payments of up to an aggregate amount in the mid-single digit millions for each commercialized licensed product. In addition, we are obligated to pay UCLA a tiered royalty on worldwide annual net sales of any commercialized licensed products in the low- to mid-single digits, subject to specified and capped reductions and a tiered minimum annual royalty payment of between a low-five figure and a low-six figure amount.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):


	Nine Months Ended September 30,
	2024		2023
Net cash (used in) provided by:
Operating activities	$	(115,152)	$	(123,059)
Investing activities	68,919		284,738
Financing activities	889		984
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(45,344)	$	162,663

Operating Activities

During the nine months ended September 30, 2024, net cash used in operating activities was $115.2 million, reflecting our net loss of $151.1 million, partially offset by $39.1 million of non-cash items primarily related to stock-based compensation expense of $25.1 million, depreciation and amortization expense of $14.6 million and the impairment of other investments of $13.0 million, partially offset by net amortization and accretion on marketable securities of $11.7 million and non-cash lease income of $1.6 million. Net operating assets and liabilities decreased by $3.2 million, which also contributed to the net cash used in operating activities.

During the nine months ended September 30, 2023, net cash used in operating activities was $123.1 million, primarily reflecting our net loss of $181.7 million, partially offset by $56.9 million of non-cash items primarily related to stock-based compensation expense of $38.6 million, depreciation and amortization of $15.2 million and impairment of other investments of $12.9 million. Non-cash net amortization and accretion on marketable securities of $6.2 million also contributed to net cash used in operating activities.

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Investing Activities

During the nine months ended September 30, 2024, cash provided by investing activities was $68.9 million, consisting primarily of net maturities and purchases of marketable securities.

During the nine months ended September 30, 2023, cash provided by investing activities was $284.7 million, consisting of net maturities and purchases of marketable securities of $287.4 million offset by purchases of property and equipment of $2.7 million.

Financing Activities

During the nine months ended September 30, 2024, cash provided by financing activities was $0.9 million, consisting of proceeds from the employee stock purchase plan of $0.8 million and proceeds from the exercise of stock options of $0.2 million, partially offset by taxes paid related to the net share settlement of equity awards of $0.1 million.

During the nine months ended September 30, 2023, cash provided by financing activities was $1.0 million, consisting of proceeds from the employee stock purchase plan of $1.2 million and proceeds from the exercise of stock options of $0.2 million, partially offset by taxes paid related to the net share settlement of equity awards of $0.3 million.

Off-Balance Sheet Arrangements

Since our inception, we have not had, and we do not currently have, any off-balance sheet arrangements as defined under the applicable rules and regulations of the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

Our unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these unaudited Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited Condensed Consolidated Financial Statements, as well as the reported revenue and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates as compared to those described in our Annual Report on Form 10‑K for the year ended December 31, 2023 (Annual Report) other than our stock‑based compensation policy for performance-based restricted stock units. For information related to our stock‑based compensation policy for performance-based restricted stock units, see Note 2, Summary of Significant Accounting Policies, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. Our primary risks include interest rate sensitivities.

Interest Rate Risk

We had cash equivalents of $78.8 million as of September 30, 2024, which consisted of money market funds and highly liquid investments purchased with original maturities of three months or less from the purchase date. We also had fixed income marketable securities of $360.3 million as of September 30, 2024. The primary objective of our investment activities is to preserve capital to fund our operations, and we currently do not hedge our interest rate risk exposure. Because our fixed income marketable securities are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant, and a hypothetical 10% relative change in interest rates during any of the periods presented would not have had a material effect on our unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We had no debt outstanding as of September 30, 2024.

Foreign Currency Exchange Risk

All of our employees and operations are currently located in the United States and our expenses are generally denominated in U.S. dollars. We therefore are not currently exposed to significant market risk related to changes in foreign currency exchange rates. However, we have contracted with and may continue to contract with non-U.S. vendors who we may pay in their local currency. Our operations may be subject to fluctuations in foreign currency exchange rates in the future. To date, foreign currency transaction gains and losses have not been material to our unaudited Condensed

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Consolidated Financial Statements, and we have not had a formal hedging program with respect to foreign currency. We believe a hypothetical 10% change in exchange rates during any of the periods presented would not have a material effect on our unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and our clinical trial costs. We believe that inflation has not had a material effect on our unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of September 30, 2024, management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, the design and operation of our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we have been or may become involved in material legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently not party to any legal proceedings material to our operations or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by a government authority or otherwise. Regardless of outcome, any such proceedings or claims are subject to inherent uncertainties and can have an adverse impact on us because of defense and settlement costs, diversion of time and resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

Item 1A. Risk Factors.

Our business involves significant risks, some of which are described below. You should carefully consider the risks described below, as well as the other information contained in this Quarterly Report on Form 10-Q, including our unaudited Condensed Consolidated Financial Statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. The risk factors set forth below that are marked with an asterisk (*) contain substantive changes to the similarly titled risk factors included in, or did not appear as separate risk factors in, Item 1A of our Annual Report, which was filed with the SEC on February 28, 2024.

Summary of Risk Factors

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, follows this summary. This summary is qualified in its entirety by that more complete discussion of such risks and uncertainties.

•We are an early clinical stage biopharmaceutical company and have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing net losses for the foreseeable future.

•We operate in a rapidly evolving field and have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

•We currently have no products approved for sale and have never generated revenue from product sales. We may never generate revenue from product sales or achieve profitability.

•We will require substantial additional capital to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

•Our success payment obligations in our success payment agreements and other milestone and royalty obligations may result in dilution to our stockholders or may reduce the availability of our cash resources to satisfy other payment obligations.

•Our product candidates and technology platforms are based on novel technologies that are unproven and may not result in approvable or marketable products, which exposes us to unforeseen risks and makes it difficult for us to predict the time and cost of product development and potential for regulatory approval, and we may not be successful in our efforts to use and expand our technology platforms to develop any product candidate.

•We currently have no marketing, sales or distribution infrastructure, and we intend to either establish a sales and marketing infrastructure or outsource this function to a third party. Either of these commercialization strategies carries substantial risks to us.

•We currently manufacture drug products for our clinical trials ourselves. Delays in further qualifying or in receiving regulatory approvals for any manufacturing facility or product candidates, or in expanding our manufacturing capacity or finding suitable third-party manufacturing partners, could delay our development plans and thereby limit our ability to generate product revenues.

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•The manufacturing of cellular therapies is very complex. We are subject to a multitude of manufacturing risks, including risks associated with supply chain complexity related to patient materials, any of which could substantially increase our costs, delay our programs or limit supply of our product candidates.

•We may rely on third parties to manufacture our product candidates, which subjects us to risks and could delay or prevent our development and/or commercialization, if approved, of our product candidates.

•We rely on third parties to conduct, supervise and monitor a significant portion of our research and nonclinical studies and clinical trials for our product candidates, and, if those third parties do not successfully carry out their contractual duties, comply with regulatory requirements or otherwise perform satisfactorily, we may not be able to obtain regulatory approval or commercialize product candidates, or such approval or commercialization may be delayed, and our business may be substantially harmed.

•We have in the past, and we may in the future, form or seek collaborations or strategic alliances or enter into additional licensing arrangements, and we may not realize the benefits of such alliances or licensing arrangements.

•We depend on the enrollment and retention of patients in our current and planned clinical trials for our product candidates. If we experience delays or difficulties enrolling or retaining patients in our clinical trials, our research and development efforts and business, financial condition and results of operations could be materially adversely affected.

•We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

•Our cellular therapy product candidates represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinical development or delays in or our inability to achieve regulatory approvals, commercialization or payor coverage of our product candidates.

•The results of research, nonclinical studies or earlier clinical trials are not necessarily predictive of future results, initial clinical results in a clinical trial may not be predictive of future results in the same clinical trial and results in one indication may not be predictive of results to be expected for the same product candidate in another indication. If clinical trials of our product candidates fail to produce positive results or demonstrate satisfactory safety and efficacy, at the appropriate dose level or at all, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates. Any product candidate we advance into clinical trials may not have favorable results in later clinical trials or receive regulatory approval.

•Interim, topline or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available or as we make changes to our manufacturing processes and are subject to audit and verification procedures that could result in material changes in the final data.

•We recently acquired ImmPACT and may not be able to successfully integrate ImmPACT into our business, including manufacturing of IMPT-314 at LyFE, or realize the benefits of such acquisition or any potential future collaborations, licenses, product acquisitions or other strategic transactions.

•Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

•If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete effectively may be adversely affected.

•We have in-licensed a portion of our intellectual property from our partners. If we breach any of our license agreements with these partners, we could potentially lose the ability to continue the development and potential commercialization of one or more of our product candidates.

Risks Related to Our Financial Condition, Limited Operating History and Need for Additional Capital

We are an early clinical stage biopharmaceutical company and have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing net losses for the foreseeable future. *

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to prove safe and effective, gain regulatory approval or become commercially viable. We are an early clinical stage biopharmaceutical company, and we do not have any products approved by regulatory authorities and have incurred significant research, development and other expenses related to our ongoing operations and expect to continue to incur such expenses. Since our inception, we have not

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generated any revenue from product sales and have incurred significant net losses. Substantially all of our net losses since inception have resulted from our research and development programs and general and administrative costs associated with our operations.

We do not expect to generate revenue from product sales for the foreseeable future, if at all. We also expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate these losses to increase as we continue to research, develop and seek regulatory approvals for our product candidates, expand our manufacturing capabilities, in-license or acquire additional technologies and potentially begin to commercialize product candidates that may achieve regulatory approval. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. Moreover, our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period‑to‑period comparison of our results of operations may not be a good indication of our future performance. If any of our product candidates fails in research and development or clinical trials or does not gain regulatory approval, or, if approved, fails to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

We expect to incur additional expenses and operating losses in the foreseeable future, as we:

•continue nonclinical development of our current and future product candidates and initiate additional nonclinical studies;

•commence and continue clinical trials of our current and future product candidates;

•advance our genetic and epigenetic reprogramming technologies as well as other research and development efforts;

•attract, hire and retain qualified personnel;

•seek regulatory approval of our current and future product candidates;

•expand our manufacturing and process development capabilities;

•expand our operational, financial and management systems and compliance programs;

•acquire and license technology or technology platforms;

•integrate ImmPACT and IMPT-314 into our business;

•continue to develop, protect and defend our intellectual property portfolio; and

•incur additional legal, accounting or other expenses in operating our business, including the additional costs associated with operating as a public company.

We operate in a rapidly evolving field and have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

We operate in a rapidly evolving field and, having commenced operations in June 2018, have a limited operating history, which makes it difficult to evaluate our business and prospects. Our primary activities to date have included clinical development of T‑cell therapies, conducting research and development, acquiring technology, entering into strategic collaboration and license agreements, enabling and executing manufacturing activities in support of our product candidate development efforts, executing clinical trials, organizing and staffing the company, business planning, establishing our intellectual property portfolio, regulatory submissions and other preparations to initiate and execute clinical trials, raising capital and providing general and administrative support for these activities. Any predictions about our future success, performance or viability may not be as accurate as they could be if we had a longer operating history or approved products on the market.

In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition. We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, any of our quarterly or annual periods’ results are not indicative of future operating performance.

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We currently have no products approved for sale and have never generated revenue from product sales. We may never generate revenue from product sales or achieve profitability.

To date, we have not generated any revenues from product sales. Our ability to generate revenues from product sales and achieve profitability will depend on our ability to successfully develop and subsequently obtain regulatory approval for and commercialize our product candidates. Our ability to generate revenues and achieve profitability also depends on a number of additional factors, including our ability to:

•successfully complete our research activities to identify the technologies and product candidates to further investigate in clinical trials;

•successfully complete development activities, including the necessary clinical trials;

•complete and submit regulatory submissions to the FDA, the European Medicines Agency or other agencies and obtain regulatory approval for indications for which there is a commercial market;

•obtain coverage and adequate reimbursement from third parties, including government and private payors;

•set commercially viable prices for our products, if any;

•develop manufacturing and distribution processes for our product candidates;

•produce commercial quantities of our products at acceptable cost levels;

•maintain adequate supply of our product candidates, including the starting materials and reagents needed;

•maintain the supply of our product candidates in a manner that is compliant with global legal requirements or to the extent necessary;

•establish and maintain manufacturing relationships with reliable third parties;

•achieve market acceptance of our products, if any;

•attract, hire and retain qualified personnel;

•protect our rights in our intellectual property portfolio;

•develop a commercial organization capable of sales, marketing and distribution for any products we intend to sell ourselves in the markets in which we choose to commercialize on our own; and

•find suitable distribution partners to help us market, sell and distribute our approved products in other markets.

Our revenues for any product for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price and whether we own the commercial rights for that territory. In addition, we anticipate incurring significant costs associated with commercializing any approved product. As a result, even if we generate revenue from product sales, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

We will require substantial additional capital to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.*

We expect to expend substantial resources for the foreseeable future to advance and expand our research pipeline, conduct nonclinical studies and pursue clinical development and manufacturing of our product candidates. We also expect to continue to expend resources for the development of our technology platforms. These expenditures will include costs associated with research and development, potentially acquiring or licensing new technologies, conducting nonclinical studies and clinical trials and potentially obtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for sale, if any. We will also need to make significant expenditures to develop a commercial organization capable of sales, marketing and distribution for any products, if any, that we intend to sell ourselves in the markets in which we choose to commercialize. In addition, we may be required to make substantial payments related to our success payment agreements and other contingent consideration payments under our license and collaboration agreements. Because the design and outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the discovery, development and commercialization of our existing and potential product candidates, and other unanticipated costs may arise.

As of September 30, 2024, we had $460.7 million in cash, cash equivalents and marketable securities. As a result of expense timing, as well as diligent expense management, we believe that our existing cash, cash equivalents and

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marketable securities will be sufficient to meet our working capital and capital expenditure needs into 2027. However, our future capital requirements and the period for which our existing resources will support our operations may vary significantly from what we expect, and we will in any event require additional capital to complete clinical development of any of our current programs.

We do not have any committed external source of funds. Additional funds may not be available when we need them on terms that are acceptable to us, or at all, and our ability to raise additional capital may be adversely impacted by potentially unfavorable global economic conditions or conditions in the biotechnology sector of the market, including disruptions to, or volatility in, the credit and financial markets in the United States and worldwide, actual or perceived changes in interest rates and economic inflation, the current or anticipated impact of geopolitical instability and otherwise. If adequate funds are not available to us on a timely basis, including pursuant to the Sales Agreement (as defined below), we may be required to delay, limit, reduce or terminate nonclinical studies, clinical trials or other development activities for our product candidates or delay, limit, reduce or terminate our establishment of sales, marketing and distribution capabilities or other activities that may be necessary to commercialize our product candidates.

Our success payment obligations in our success payment agreements and other milestone and royalty obligations may result in dilution to our stockholders or may be a drain on our cash resources to satisfy the payment obligations.*

We agreed to make success payments payable in cash or publicly-tradeable shares of our common stock at our discretion pursuant to our success payment agreements with Fred Hutch and Stanford. On each contractually prescribed measurement date, we may be required to make success payments based on increases in the per share fair value of our common stock. The total amount of success payments that we may become obligated to make is currently $400.0 million and may increase in the future due to amendments of our existing success payment agreements. For information related to our success payment obligations, see Note 3, License, Collaboration and Success Payment Agreements, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.

Moreover, in connection with the Merger Agreement, we agreed to issue additional shares of our common stock upon the achievement of certain IMPT-314 clinical or regulatory milestones and to make certain cash royalty payments to the pre-closing stockholders of ImmPACT based on future annual net sales of IMPT-314 in the United States. In addition, as a result of the Merger, we have assumed ImmPACT’s rights and obligations under the UCLA License Agreement, pursuant to which we are obligated to pay a nominal, tiered annual license maintenance fee, one-time milestone payments for each commercialized licensed product and a tiered royalty on worldwide annual net sales of commercialized licensed products. For information related to our milestone and royalty obligations, see Note 13, Subsequent Events, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.

In order to satisfy our obligations to make these success and milestone payments, if and when they are triggered, we may issue equity or convertible debt securities, as applicable, that may cause dilution to our stockholders, or we may use our existing cash to satisfy the success payment or milestone obligations in cash, which may adversely affect our financial position. The cash royalty payments, if and when they are triggered, may likewise adversely affect our financial position. In addition, these success, milestone and royalty payments may impede our ability to raise money in future public offerings of debt or equity securities or to obtain a third-party line of credit.

The success payment agreements and the Merger Agreement may cause operating results to fluctuate significantly from quarter to quarter and year to year, which may reduce the usefulness of our consolidated financial statements.

Our success payment obligations are recorded as liabilities on our condensed consolidated balance sheets. Under U.S. generally accepted accounting principles (GAAP), we are required to estimate the fair value of these liabilities as of each quarter end and changes in the estimated fair value are accreted to research and development expense over the service period of the collaboration agreement. Once the requisite service obligation to earn the potential success payment consideration is met under our continued collaboration agreements, the change in the success payment liabilities fair value is recognized in other income or expense, net. For example, in December 2022, Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration; accordingly in 2023 and future periods, the change in the success payments liability fair value is recognized in other income or expense, net. Factors that may lead to increases or decreases in the estimated fair value of our success payment liabilities include, among others, changes in the value of the common stock, changes in volatility and changes in the risk-free rate.

In addition, in connection with the Merger Agreement, we agreed to make certain cash royalty payments to the pre-closing stockholders of ImmPACT based on future annual net sales of IMPT-314 in the United States and, as a result of the Merger, we have also assumed ImmPACT’s rights and obligations under the UCLA License Agreement, pursuant to which we are obligated to pay a nominal, tiered annual license maintenance fee, one-time milestone payments for each

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commercialized licensed product and a tiered royalty on worldwide annual net sales of commercialized licensed products. We may use our existing cash to satisfy the success payment, milestone or royalty obligations, if and as applicable, in the future. As a result, our operating results and financial condition as reported by GAAP may fluctuate significantly from quarter to quarter and from year to year and may reduce the usefulness of our GAAP consolidated financial statements. See Note 3, License, Collaboration and Success Payment Agreements, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Risks Related to Our Business and Industry

We are early in our research and clinical development efforts. If we are unable to successfully develop, manufacture and commercialize product candidates or experience significant delays in doing so, our business may be harmed.*

We are early in our research and clinical development efforts for our product candidates. IMPT-314 is in Phase 1 clinical development and LYL119 is entering Phase 1 clinical development. We have not yet demonstrated our ability to successfully complete any clinical trials (including any Phase 3 or other pivotal clinical trials), obtain regulatory approvals, manufacture a commercial‑scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. We have invested substantial resources in developing our technology platforms and our product candidates, conducting nonclinical studies, commencing clinical trials and building our manufacturing facilities and capabilities, each of which will be required prior to any regulatory approval and commercialization. Our ability to generate revenue from product sales, which we do not expect will occur for several years, if ever, will depend heavily on the successful research and development and eventual commercialization of one or more product candidates in profitable indications and markets. The success of our efforts to identify, develop, manufacture and commercialize product candidates will depend on many factors, including the following:

•timely and successful completion of our nonclinical studies and research activities to identify and develop product candidates to investigate in clinical trials;

•submission of INDs to the FDA to proceed with clinical trials, or comparable applications to foreign regulatory authorities that allow the commencement of our planned clinical trials for our product candidates;

•successful enrollment and completion of clinical trials in compliance with Good Clinical Practice (GCP) requirements with positive results;

•the level of efficacy observed with our product candidates;

•the prevalence and severity of adverse events experienced with any of our product candidates;

•successfully developing, or making arrangements with third parties for, manufacturing and distribution processes for our product candidates and for commercial manufacturing and distribution for any of our product candidates that receive regulatory approval;

Lyell Immunopharma, Inc. [LYEL] Filings
10-Q	[2024-11]
10-Q	[2024-08]
10-Q	[2024-05-06]
10-K	[2024-02-28]
10-Q	[2023-11-07]
10-Q	[2023-08-08]
10-Q	[2023-05-04]
10-K	[2023-02-28]
10-Q	[2022-11-08]
10-Q	[2022-08-04]
10-Q	[2022-05-10]
10-K	[2022-03-29]
10-Q	[2021-11-12]
10-Q	[2021-08-12]
S-1	[2021-05-25]