Instil Bio, Inc. [TIL] Filings

10-Q 1 til-20240930.htm 10-Q til-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended 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 001-40215

Instil Bio, Inc.

(Exact name of registrant as specified in its charter)

Delaware

83-2072195

(State or other jurisdiction of incorporation or organization)

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

3963 Maple Avenue, Suite 350

Dallas, Texas

75219

(Zip Code)

(Address of Principal Executive Offices)

(972) 499-3350

Registrant’s telephone number, including area code

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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, $0.000001 par value per share	TIL	The Nasdaq Stock Market LLC

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 and posted on its corporate web site, if any, 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 files). Yes ☒ No ☐

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class of Common Stock			Outstanding at
6,525,887 shares of Common Stock, $0.000001 par value per share			November 11, 2024

TABLE OF CONTENTS


			Page
Part I. Financial Information			2
Item 1. Financial Statements (Unaudited)			2
Condensed Consolidated Balance Sheets			2
Condensed Consolidated Statements of Operations and Comprehensive Loss			3
Condensed Consolidated Statements of Stockholders’ Equity			4
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
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			33
Part II. Other Information			35
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			94
Item 3. Defaults Upon Senior Securities			94
Item 4. Mine Safety Disclosures			94
Item 5. Other Information			94
Item 6. Exhibits			95
Signatures			97

Part I. Financial Information

Item 1. Financial Statements (Unaudited)

INSTIL BIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	6,663	$	9,195
Restricted cash	—		1,501
Marketable securities	113,690		141,161
Prepaid expenses and other current assets	11,583		8,902
Assets held for sale	637		—
Total current assets	132,573		160,759
Property, plant and equipment, net	130,147		138,684
Operating lease right-of-use assets	1,104		2,387
Long-term investments	2,557		23,161
Other long-term assets	6,181		639
Total assets	$	272,562	$	325,630
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,195	$	1,212
Accrued expenses and other current liabilities	9,085		9,347
Total current liabilities	10,280		10,559
Contingent consideration, net of current portion	2,358		4,858
Operating lease liabilities, non-current	1,411		2,877
Loan payable	82,173		81,427
Other long-term liabilities	8		80
Total liabilities	96,230		99,801
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, par value $0.000001 per share; 10,000,000 shares authorized; zero shares issued and outstanding as of September 30, 2024, and December 31, 2023	—		—
Common stock, par value $0.000001 per share; 300,000,000 shares authorized; 6,525,266 and 6,503,913 shares issued and outstanding as of September 30, 2024, and December 31, 2023	—		—
Additional paid-in capital	820,073		807,158
Accumulated other comprehensive loss	(520)		(348)
Accumulated deficit	(643,221)		(580,981)
Total stockholders’ equity	176,332		225,829
Total liabilities and stockholders’ equity	$	272,562	$	325,630

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSTIL BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Operating expenses:
In-process research and development	$	10,000	$	—	$	10,000	$	—
Research and development	562		8,492		10,739		37,621
General and administrative	10,707		11,941		33,837		36,681
Restructuring and impairment charges	2,362		46,283		7,146		71,847
Total operating expenses	23,631		66,716		61,722		146,149
Loss from operations	(23,631)		(66,716)		(61,722)		(146,149)
Interest income	1,654		2,313		5,635		6,671
Interest expense	(2,007)		(2,003)		(5,988)		(3,229)
Other rental income	1,493		—		1,493		—
Other expense, net	(530)		(1,026)		(1,658)		(455)
Net loss	(23,021)		(67,432)		(62,240)		(143,162)
Other comprehensive loss:
Foreign currency translation	(291)		231		(252)		(210)
Unrealized gain on available-for-sale securities, net	398		39		80		178
Net comprehensive loss	$	(22,914)	$	(67,162)	$	(62,412)	$	(143,194)
Net loss per share, basic and diluted	$	(3.54)	$	(10.37)	$	(9.57)	$	(22.01)
Weighted-average shares used in computing net loss per share, basic and diluted	6,506,681		6,503,913		6,504,842		6,503,913

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSTIL BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount				(Loss) Income
Balance - December 31, 2023	6,503,913	$	—	$	807,158	$	(348)	$	(580,981)	$	225,829
Stock-based compensation	—	—		4,515		—		—		4,515
Net loss	—	—		—		—		(24,302)		(24,302)
Other comprehensive loss	—	—		—		(215)		—		(215)
Balance - March 31, 2024	6,503,913	—		811,673		(563)		(605,283)		205,827
Stock-based compensation	—	—		4,173		—		—		4,173
Net loss	—	—		—		—		(14,917)		(14,917)
Other comprehensive loss	—	—		—		(64)		—		(64)
Balance - June 30, 2024	6,503,913	—		815,846		(627)		(620,200)		195,019
Shares of common stock issued in connection with incentive stock plan	21,353	—		159		—		—		159
Stock-based compensation	—	—		4,068		—		—		4,068
Net loss	—	—		—		—		(23,021)		(23,021)
Other comprehensive income	—	—		—		107		—		107
Balance - September 30, 2024	6,525,266	$	—	$	820,073	$	(520)	$	(643,221)	$	176,332

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSTIL BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(in thousands, except share amounts)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount				(Loss) Income
Balance - December 31, 2022	6,503,913	$	—	$	788,992	$	(493)	$	(424,894)	$	363,605
Stock-based compensation	—	—		4,530		—		—		4,530
Net loss	—	—		—		—		(57,068)		(57,068)
Other comprehensive income	—	—		—		87		—		87
Balance - March 31, 2023	6,503,913	—		793,522		(406)		(481,962)		311,154
Stock-based compensation	—	—		4,413		—		—		4,413
Net loss	—	—		—		—		(18,662)		(18,662)
Other comprehensive loss	—	—		—		(389)		—		(389)
Balance - June 30, 2023	6,503,913	—		797,935		(795)		(500,624)		296,516
Stock-based compensation	—	—		4,670		—		—		4,670
Net loss	—	—		—		—		(67,432)		(67,432)
Other comprehensive income	—	—		—		270		—		270
Balance - September 30, 2023	6,503,913	$	—	$	802,605	$	(525)	$	(568,056)	$	234,024

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSTIL BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(62,240)	$	(143,162)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	12,756		13,613
Non-cash lease expense	174		610
Foreign exchange remeasurement gain	(278)		(147)
Impairment of fixed assets	4,285		60,088
Impairment of right-of-use assets	827		7,724
Change in fair value of contingent consideration	(2,500)		(41)
Depreciation	2,869		3,720
In-process research and development expenses	10,000		—
Accretion on invested securities	(3,861)		(4,716)
Non-cash interest expense	754		762
Change in fair value of derivative financial instrument	265		528
Loss on disposals of property and equipment	343		338
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(4,033)		(1,082)
Other long-term assets	(3,115)		275
Accounts payable	(34)		(652)
Operating lease liabilities	(995)		(1,198)
Long term liabilities	—		(12)
Accrued expenses and other current liabilities	(354)		(5,296)
Net cash used in operating activities	(45,137)		(68,648)
Cash flows from investing activities:
Purchase of marketable securities	(106,684)		(250,517)
Maturities of marketable securities	158,700		298,300
Purchases of property, plant and equipment	—		(20,605)
Cash received from held for sale assets	546		—
Acquired in-process research and development	(10,000)		—
Purchase of derivative financial instrument	(1,588)		—
Net cash provided by investing activities	40,974		27,178
Cash flows from financing activities:
Principal payments on loan	—		(587)
Proceeds from exercise of stock options	159		—
Proceeds from note payable	—		8,669
Net cash provided by financing activities	159		8,082
Net decrease in cash, cash equivalents and restricted cash	(4,004)		(33,388)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(29)		(182)
Cash, cash equivalents and restricted cash—beginning of period	10,696		43,716
Cash, cash equivalents and restricted cash—end of period	$	6,663	$	10,146
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	5,241	$	4,908
Supplemental disclosure of noncash information:
Purchases of property, plant and equipment in accounts payable and accrued expenses and other current liabilities	$	—	$	67

The accompanying notes are an integral part of these condensed consolidated financial statements.

INSTIL BIO, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Instil Bio, Inc. (the “Company”) is headquartered in Dallas, Texas and was incorporated in the state of Delaware in August 2018. The Company is a clinical-stage biopharmaceutical company focused on developing a pipeline of novel therapies. In particular, the Company seeks to in-license or acquire and develop novel therapeutic candidates in diseases with significant unmet medical need.

In August 2024, the Company’s wholly owned subsidiary, SynBioTx, Inc. (“SynBioTx”), in-licensed certain bispecific antibodies, including SYN-2510/IMM2510, a bispecific antibody targeting both programmed death-ligand 1 (PD-L1) and vascular endothelial growth factor (VEGF), as well as SYN-27M/IMM27M, a monoclonal antibody targeting cytotoxic T-lymphocyte associated antigen 4 (CTLA-4), from ImmuneOnco Biopharmaceuticals (Shanghai) Inc. (“ImmuneOnco”). Pursuant to the license and collaboration agreement with ImmuneOnco (the “IO Collaboration Agreement”), SynBioTx has an exclusive license to research, develop, manufacture and commercialize these product candidates outside of China, including mainland China, Hong Kong, Macau and Taiwan (“Greater China”). ImmuneOnco retains development and commercialization rights in Greater China.

The Company also has a proprietary (FRα) co-stimulatory antigen receptor (“CoStAR”) tumor infiltrating lymphocyte (“TIL”) cell therapy technology for the treatment of cancer, which the Company is seeking to advance via collaboration. In December 2023, the Company entered into an agreement with a third-party collaborator to develop an autologous FRα CoStAR TIL (the “CoStAR-TIL Collaboration Product”) for a potential investigator-initiated trial (“IIT”) in non-small cell lung cancer in China. The collaborator has an option to exclusively license the CoStAR-TIL Collaboration Product in China and Taiwan.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2024 and 2023, and the results of its cash flows for the nine months ended September 30, 2024 and 2023. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2024 and 2023 are also unaudited. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other periods, or any future year period. The Company has evaluated subsequent events through the date the condensed consolidated financial statements were issued.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) on March 21, 2024.

Reverse Stock Split

Effective December 7, 2023, the Company effected a 1-for-20 reverse stock split of its outstanding shares of common stock. Where applicable, all share and per share amounts in this Quarterly Report have been adjusted to reflect the effect of the reverse stock split.

Segments

Operating segments are identified as components of an entity for which separate discrete financial information is available and that is regularly reviewed by the chief operating decision-maker in deciding how to allocate resources to an individual segment and in assessing performance. The Company has determined it operates in a single operating segment and has one operating segment.

Cash, Cash Equivalents, Restricted Cash, Marketable Securities, and Long-Term Investments

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents include amounts invested in money market accounts.

Restricted cash consists of a cash reserve which serves as collateral for the Company’s construction loan and is classified within current assets on the condensed consolidated balance sheet as of September 30, 2024. There was no restricted cash as of September 30, 2024 and $1.5 million of restricted cash as of December 31, 2023 on the condensed consolidated balance sheet.

The Company’s investments in marketable securities and long-term investments have been classified and accounted for as available-for-sale. The Company classifies its maturities as either short-term or long-term based on each instrument’s underlying contractual maturity date, which are carried at their fair values based on the quoted market prices of the securities. Unrealized gains and losses are reported as accumulated other comprehensive income (loss). Realized gains and losses on available-for-sale securities are included in net loss in the period earned or incurred. As of September 30, 2024 and December 31, 2023, marketable securities consisted of U.S. Treasury bills.

The Company periodically reviews whether its securities may be other-than-temporarily impaired, including whether or not (i) the Company has the intent to sell the security or (ii) it is more likely than not that the Company will be required to sell the security before its anticipated recovery. If one of these factors is met, the Company will record an impairment loss associated with its impaired investment. The impairment loss will be recorded as a write-down of investments in the condensed consolidated balance sheets and a realized loss within other expense in the condensed consolidated statements of operations and comprehensive loss.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the amounts shown in the condensed consolidated statements of cash flows (in thousands):


	September 30, 2024		December 31, 2023
Cash and cash equivalents	$	6,663	$	9,195
Restricted cash	—		1,501
Cash, cash equivalents and restricted cash	$	6,663	$	10,696

Assets Held for Sale

The Company classifies long-lived assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met: management, having the authority to approve the action, commits to a plan to sell the asset or disposal group; the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets or disposal group; the sale of the asset or disposal group is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond the Company’s control extend the period

of time required to sell the asset or disposal group beyond one year; the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan to sell have been initiated.

The Company initially measures a long-lived asset or disposal group that is held for sale at the lower of its carrying value or fair value less any costs to sell. Fair value is estimated by the Company through evaluations of quoted market prices received for other comparable held for sale assets sold by the Company. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale. The Company assesses the fair value of a long-lived asset or disposal group less any costs to sell each reporting period it remains classified as held for sale and reports any subsequent changes as an adjustment to the carrying value of the asset or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale. Upon determining that a long-lived asset or disposal group meets the criteria to be classified as held for sale, the Company ceases depreciation and reports long-lived assets in the line item “assets held for sale” in its condensed consolidated balance sheet. To date, the Company has recorded impairment losses on assets held for sale associated with the Plan as defined below in Note 11. During the three and nine months ended September 30, 2024, the Company recognized non-cash impairment charges for assets held for sale of $1.5 million and $4.3 million, respectively, while during the three and nine months ended September 30, 2023 charges were $4.6 million and $16.2 million, respectively. The non-cash impairment charge was recorded in the condensed consolidated statements of operations and comprehensive loss in the line item “restructuring and impairment charges.”

Business Combinations

The Company evaluates acquisitions of assets and related liabilities and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the requirements of a business.

The Company accounts for its business combinations using the acquisition method of accounting which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their full fair value as of the date it obtains control. The Company has determined the fair value of assets acquired and liabilities assumed based upon management’s estimates of the fair values of assets acquired and liabilities assumed in the acquisitions. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. The Company accounts for contingent consideration at the acquisition-date fair value as part of the consideration transferred in the transaction.

While management has used its best estimates and assumptions to measure the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, not to exceed one year from the date of acquisition, any changes in the estimated fair values of the net assets recorded for the acquisitions will result in an adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, the Company records any subsequent adjustments to the consolidated statements of operations and comprehensive loss. Acquisition-related costs, such as legal and consulting fees, are expensed as incurred.

The Company accounts for an asset acquisition by recognizing net assets based on the cost to the acquiring entity on a relative fair value basis, which includes transaction costs in addition to consideration given. Goodwill is not recognized in an asset acquisition; any excess consideration transferred over the fair value of the net assets acquired is allocated to the non-monetary identifiable assets and liabilities assumed based on relative fair values. Acquired in-process research and development is expensed as incurred provided there is no alternative future use.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset over its remaining useful life. If such assets are impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. If the useful life is shorter than originally estimated, the Company depreciates or amortizes the remaining carrying value over the revised shorter useful life. Assets to be disposed of by sale are reflected at the lower of their carrying amount or fair value less costs to sell. To date, the Company has recorded impairment losses on long-lived assets associated with a sustained decrease in the Company’s stock price and in connection with the Plan as defined below in Note 11. The Company recognized a non-cash impairment charge of $0.1 million and $0.3 million during the three and nine months ended September 30, 2024, respectively, and nil and $2.6 million for the three and nine months ended September 30, 2023, respectively, related to leasehold improvements. Additionally, the Company recognized impairment charges of $41.5 million for the three and nine months ended September 30, 2023 relating to real estate. These impairment charges were recorded in the condensed consolidated statements of operations and comprehensive loss in the line item “restructuring and impairment charges.” See Notes 7 and 11 for more information.

Research and Development

Research and development costs are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from its external service providers. The Company adjusts its accrual as actual costs become known. Where contingent milestone payments are due to third parties under research and development arrangements or license agreements, the milestone payment obligations are expensed when the milestone results are achieved.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this ASU 2023-07 on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topics 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this ASU 2023-09 on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU no. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update require disclosure, in the notes to the financial statements, of specific expense categories present within expense captions presented on the face of the income statement within continuing operations of public business entities. The amendments in this update are effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027.

A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such

proposed standards, the Company has not yet determined the effect, if any, that the implementation of such proposed standards would have on its condensed consolidated financial statements.

3. Balance Sheet Components

Prepaid and other current assets

Prepaid and other current assets consist of the following (in thousands):


	September 30, 2024		December 31, 2023
Prepaid general and administration	$	1,397	$	1,033
Prepaid research and development	4,870		300
Other receivable	2,915		3,643
Prepaid contract research organization expenses	443		1,322
Other current assets	1,958		2,604
Total prepaid and other current assets	$	11,583	$	8,902

Property, Plant and Equipment, Net

Property, plant and equipment, net consist of the following (in thousands):


	September 30, 2024		December 31, 2023
Land	$	31,243	$	31,243
Laboratory equipment	—		8,291
Buildings	102,433		102,433
Office and computer equipment	509		831
Leasehold improvements	—		1,424
Manufacturing equipment	—		2,017
Total property, plant and equipment, gross	134,185		146,239
Less: accumulated depreciation	(4,038)		(7,555)
Total property, plant and equipment, net	$	130,147	$	138,684

Depreciation expense was $0.9 million and $1.0 million for the three months ended September 30, 2024 and 2023, respectively, and was $2.9 million and $3.7 million for the nine months ended September 30, 2024 and 2023, respectively, in the condensed consolidated statements of operations and comprehensive loss.

The Company capitalized interest of nil during the three months ended September 30, 2024 and 2023, while during the nine months ended September 30, 2024 and 2023, the Company capitalized nil and $2.4 million, respectively, of interest related to qualifying expenditures for construction work-in-progress for its Tarzana manufacturing facility.

Accrued Expenses and Other Current Liabilities

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


	September 30, 2024		December 31, 2023
Accrued compensation and benefits	$	2,401	$	1,026
Accrued operational expenses	957		1,412
Accrued restructuring costs	3,453		3,136
Accrued research, development and clinical trial expenses	406		1,833
Operating lease liabilities, current	1,761		1,750
Other current liabilities	107		190
Total accrued expenses and other current liabilities	$	9,085	$	9,347

4. Fair Value Measurement

The fair value of cash and cash equivalents approximates carrying value since cash and cash equivalents consist of short-term highly liquid investments with maturities of less than three months at the time of purchase. Cash and cash equivalents are quoted market prices in active markets for identical assets and are therefore classified as Level 1 assets. Money market funds are open-end mutual funds that invest in cash, government securities, and/or repurchase agreements that are collateralized fully. To the extent that these funds are valued based upon the reported net asset value, they are categorized in Level 1 of the fair value hierarchy.

Short-term and long-term marketable securities comprised U.S. Treasury bills that are classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations, alternative pricing sources or U.S. Government Treasury yield of appropriate term.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring and nonrecurring basis:


	September 30, 2024
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Money market funds	$	3,275	$	—	$	—	$	3,275
U.S. Treasury bills	—		116,247		—		116,247
Derivative financial instrument	—		790		—		790
Total	$	3,275	$	117,037	$	—	$	120,312
Financial Liabilities
Contingent consideration	$	—	$	—	$	2,358	$	2,358

	December 31, 2023
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial Assets
Money market funds	$	5,684	$	—	$	—	$	5,684
U.S. Treasury bills	—		164,322		—		164,322
Derivative financial instrument	—		1,055		—		1,055
Total	$	5,684	$	165,377	$	—	$	171,061
Financial Liabilities
Contingent consideration	$	—	$	—	$	4,858	$	4,858

There were no transfers in or out of Level 1, 2 and 3 measurements for the nine months ended September 30, 2024 and the year ended December 31, 2023. As of September 30, 2024 and December 31, 2023, there were no securities within Level 3 of the fair value hierarchy. The derivative financial instrument above relates to the interest rate swap discussed in Note 7, and is included in prepaid expenses and current assets in the condensed consolidated balance sheets.

As of September 30, 2024, the fair value of the Company’s Loan (as defined in Note 7) was $77.7 million. The fair value was determined on the basis of its net present value and is considered Level 2 in the fair value hierarchy.

5. Financial Instruments

Marketable securities and long-term investments classified as available-for-sale on September 30, 2024 and December 31, 2023 consisted of the following (in thousands):


	September 30, 2024
	Maturity	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury bills	Less than one year	$	113,496	$	194	$	—	$	113,690
U.S. Treasury bills	Between one and two years	2,559		—		(2)		2,557
Total		$	116,055	$	194	$	(2)	$	116,247


	December 31, 2023
	Maturity	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury bills	Less than one year	$	141,075	$	86	$	—	$	141,161
U.S. Treasury bills	Between one and two years	23,134		27		—		23,161
Total		$	164,209	$	113	$	—	$	164,322

As of September 30, 2024 and December 31, 2023, marketable securities that had contractual maturities less than one year are classified as current because management considers these marketable securities to be available for current operations. As of September 30, 2024 and December 31, 2023, marketable securities that had contractual maturities between one and two years are classified as long-term because management considers these marketable securities to be available for operations beyond one year. The Company does not intend to sell its marketable securities and it is not likely that the Company will be required to sell these securities before recovery of their amortized cost basis. There were $113.7 million of marketable securities and $2.6 million of long-term investments maturing in less than two years classified as available-for-sale as of September 30, 2024. There were $141.2 million of marketable securities and $23.2 million of long-term investments maturing in less than two years classified as available-for-sale as of December 31, 2023.

6. License and Collaboration Agreement with ImmuneOnco

On August 1, 2024, SynBioTx and ImmuneOnco entered into the IO Collaboration Agreement pursuant to which SynBioTx in-licensed certain bispecific antibodies, including SYN-2510/IMM2510 and SYN-27M/IMM27M from ImmuneOnco. Pursuant the IO Collaboration Agreement, SynBioTx paid ImmuneOnco a $10.0 million upfront payment and prepaid ImmuneOnco $5.0 million in development costs in the quarter ended September 30, 2024. ImmuneOnco is eligible to receive additional potential near-term payments of up to $35.0 million, up to $2.1 billion in commercial, development and regulatory milestones (including up to $270.0 million in longer term development and regulatory milestones and up to $1.8 billion in commercial milestones) plus single-digit to low double-digit percentage royalties on global net sales of the licensed products outside of Greater China.

The expenses recognized in connection with the IO Collaboration Agreement were $10.0 million and nil for the three and nine months ended September 30, 2024 and 2023, respectively, recorded as a component of In-process research and development on the condensed consolidated statement of operations and comprehensive loss. As of September 30, 2024, no additional milestones had been accrued as the underlying contingencies had not yet been resolved.

7. Commitments and Contingencies

Leases

Company as a Lessee: Operating Lease Obligations

The Company currently leases office spaces and laboratory spaces located in Greater Los Angeles, California, Dallas, Texas, and the United Kingdom. The Company’s leased facilities have original lease terms ranging from 2 to 5 years that predominately require the Company to provide a security deposit, while certain leases provide the right for the Company to renew the lease upon the expiration of the initial lease term, and various leases have scheduled rent increases on an annual basis. The exercise of lease renewal options for the Company’s existing leases is at the Company’s sole discretion, and not included in the measurement of right of use asset or lease liability as they are not reasonably certain to be exercised. Certain leases have leasehold improvements and are being amortized over the shorter of the estimated useful life of the improvements or the remaining life of the lease. Such improvements incurred by the Company will revert to the landlord at the expiration of the lease and will be removed from Company’s condensed consolidated balance sheets.

The Company’s lease costs consist of the following (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Operating lease cost	$	172	$	351	$	1,097	$	1,867
Variable lease cost	283		234		649		906
Total lease cost	$	455	$	585	$	1,746	$	2,773

The following table summarizes cash flow information related to the Company’s lease obligations (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Cash paid for operating lease liabilities	$	494	$	491	$	1,756	$	1,806

The following table summarizes the Company’s lease assets and liabilities (in thousands):


	September 30, 2024		December 31, 2023
Operating lease right-of-use assets	$	1,104	$	2,387
Current operating lease liabilities	$	1,761	$	1,750
Non-current operating lease liabilities	$	1,411	$	2,877

The following table summarizes other supplemental information related to the Company’s lease obligations:


	September 30, 2024		December 31, 2023
Weighted-average remaining lease term (in years)	1.93		2.60
Weighted-average discount rate	6.75	%	6.75	%

Future minimum lease payments under operating lease liabilities were (in thousands):


	September 30, 2024
2024 (remaining three months)	$	735
2025	1,591
2026	1,195
Total future lease payments	3,521
Less: imputed interest	349
Total lease liability balance	3,172
Less: current portion of operating lease liabilities	1,761
Total operating lease liabilities, non-current	$	1,411

During the nine months ended September 30, 2024 and 2023, the Company evaluated its remaining right-of-use assets for impairment, as the Plan (as defined below in Note 11) has resulted in a cessation of use for several locations. The Company determined these assets were impaired, and has recognized an impairment loss of $0.6 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively, and $0.8 million and $7.2 million for the nine months ended September 30, 2024 and 2023 respectively, which are recorded in the line item “restructuring and impairment charges” in the condensed consolidated statements of operations and comprehensive loss.

Company as Lessor: Tarzana Facility Lease with AstraZeneca

On July 10, 2024, Complex Therapeutics LLC entered into a lease (the “Lease”) with AstraZeneca Pharmaceuticals LP (“Tenant”) pursuant to which Tenant is leasing the Property located in Tarzana, CA. The Lease

has an initial term of approximately 15 years, beginning on July 10, 2024 (the “Commencement Date”) and ending on July 31, 2039, with Tenant having two consecutive options to extend the term for a five-year period each and a one-time option to terminate the Lease on the tenth anniversary of the Commencement Date, which, if exercised, obligates Tenant to pay Complex Therapeutics LLC a termination fee. The initial base rent is $0.6 million per month ($7.5 million annually) and the base rent will escalate by 3% per annum. Tenant is also required to pay certain operating expenses and tax expenses as additional rent. There is rent abatement during the first year of the Lease such that Tenant will pay no rent or reduced rent during this period. Tenant also has a right of first offer to purchase the premises that are subject to the Lease.

The Lease is classified as an operating lease and revenue will be recognized on a straight-line basis and will be recorded within the condensed consolidated statements of operations and comprehensive loss in the line item “Other rental income” as this is not a part of the Company’s core operations rental income has been presented in other income rather than as revenue on the statement of operations and comprehensive loss. Lease income related to the operating lease was as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Rental income related to fixed lease income	$	1,493	$	—	$	1,493	$	—

Approximate future fixed contractual lease payments to be received under a non-cancelable operating lease in effect as of September 30, 2024, are as follows (in thousands):


	September 30, 2024
2024 (remaining three months)	$	1,493
2025	8,957
2026	8,957
2027	8,957
2028	8,957
Thereafter	94,795
Total	$	132,116

Legal Proceedings

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company does not expect that the resolution of these matters will have a material adverse effect on its financial position, results of operations or cash flows.

Debt

In June 2022, the Company’s wholly owned subsidiary, Complex Therapeutics Mezzanine LLC, and the Company’s wholly owned indirect subsidiary, Complex Therapeutics LLC, entered into a mortgage construction loan and mezzanine construction loan (together, the “Loan”) secured by its Tarzana, California land and building (the “Property”). The initial principal amount of the Loan was $52.1 million, with additional future principal of up to $32.9 million to fund ongoing Property construction costs. Construction has been completed and on July 10, 2024, Complex Therapeutics LLC entered into the Lease. If the Company does not refinance or sell the Property prior to July 2025, when the Loan will be payable, the Company intends to use its option to extend the Loan until July 2026; the Company also has an another option to extend the Loan until July 2027. As of September 30, 2024, the outstanding principal amount under the Loan was $82.8 million and unamortized debt issuance costs were $0.7 million. During the year ended December 31, 2023, $0.6 million in additional principal was paid in accordance

with the Loan. The Loan is guaranteed by the Company and secured by the Property, and bears interest at the one-month Secured Overnight Financing Rate, plus 5.25% per annum. The Company discontinued capitalizing interest in June 2023 as the building was substantially complete at such time. The Loan contains customary negative and affirmative covenants that include limitations on the ability of the Company to enter into significant contracts and incur additional debt. The Company is also required to maintain consolidated net worth and liquid assets of at least $85.0 million as of September 30, 2024 and December 31, 2023 as defined in the loan agreement. As of September 30, 2024, the Company was in compliance with the covenants of the Loan. The Company is also required to maintain certain insurance coverage on the Property. In connection with the Loan, the Company entered into an interest rate swap to effectively limit its maximum interest rate, as discussed in Note 4.

The net carrying amount of the liability component of the Loan was as follows (in thousands):


	September 30, 2024		December 31, 2023
Principal amount	$	82,837	$	82,837
Unamortized debt issuance cost	(664)		(1,410)
Net carrying amount	$	82,173	$	81,427

The following table sets forth the interest expense recognized related to the Loan (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Contractual interest expense	$	1,758	$	1,754	$	5,241	$	2,482
Amortization of debt issuance cost	249		249		747		747
Total interest expense related to the Loan	$	2,007	$	2,003	$	5,988	$	3,229

Other Commitments

In the normal course of business, the Company enters into contracts and various purchase agreements commitments with third-party vendors for clinical research services, products and other services from third parties for operating purposes. These agreements generally provide for termination or cancellation, other than for costs already incurred. As of September 30, 2024 and December 31, 2023, the Company had no outstanding liabilities, respectively, in commitments for employee benefits as part of the Plan. As of September 30, 2024 and December 31, 2023, the Company had $2.0 million and $3.1 million, respectively, in commitments for contract terminations as part of the Plan (see Note 11).

The Company has entered into an agreement with a third-party collaborator to develop the CoStAR-TIL Collaboration Product with the aim of enrolling patients in IITs in China. Milestone payments of $2.6 million were made during the nine months ended September 30, 2024 and were recorded within research and development expense in the condensed consolidated statements of operations and comprehensive loss, and upon successful completion of future milestones, the Company may be required to pay up to $3.4 million for clinical development.

8. Equity

Common Stock

Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and if declared by the Company’s Board of Directors (the “Board of Directors”), subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No cash dividends have been declared by the Board of Directors from inception.

As of September 30, 2024 and December 31, 2023, the Company had 6,525,266 and 6,503,913 shares of common stock outstanding, respectively.

Preferred Stock Activity

The Company’s current amended and restated certificate of incorporation authorizes the Company to issue up to 10,000,000 shares of preferred stock at $0.000001 par value per share. The Board of Directors is authorized to provide for the issuance of the preferred stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in subsequent resolution or resolutions adopted by the board providing for the issuance of such shares. As of September 30, 2024 and December 31, 2023, there were no shares of preferred stock issued or outstanding.

9. Stock-Based Compensation

2021 Equity Incentive Plan

In March 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”), which became effective in connection with the Company’s initial public offering (“IPO”). The 2021 Plan was approved by the Board of Directors and stockholders in March 2021. The 2021 Plan is an equity incentive plan pursuant to which the Company may grant the following awards: (i) incentive stock options; (ii) nonstatutory stock options; (iii) stock appreciation rights; (iv) restricted stock awards; (v) restricted stock unit awards; (vi) performance awards; and (vii) other forms of stock awards to employees, directors, and consultants, including employees and consultants of the Company’s affiliates. The 2021 Plan is a successor to the Company’s 2018 Stock Incentive Plan (the “2018 Plan”). Following the effectiveness of the 2021 Plan, no further grants may be made under the 2018 Plan; however, any outstanding equity awards granted under the 2018 Plan will continue to be governed by the terms of the 2018 Plan.

As of September 30, 2024, 185,883 shares of common stock remained available for issuance under the 2021 Plan. As of September 30, 2024, the total number of shares authorized for issuance under the 2021 Plan was 642,722 shares.

The following table sets forth stock-based compensation included in the Company’s statement of operations and comprehensive loss (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Research and development expense	$	506	$	567	$	1,587	$	999
General and administrative expense	3,562		4,103		11,169		12,614
Total stock-based compensation expense	$	4,068	$	4,670	$	12,756	$	13,613

As of September 30, 2024, there was $21.3 million of total unrecognized compensation cost related to unvested stock options granted under the 2018 Plan and 2021 Plan, which is expected to be recognized over a weighted average period of 2.2 years.

Employee Stock Purchase Plan

In March 2021, the Company adopted the Employee Stock Purchase Plan (the “ESPP”), which became effective in connection with the IPO. The ESPP was adopted by the Board of Directors and stockholders in March 2021, but the Company has not yet commenced offerings to employees under the ESPP. The ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 61,850 shares of common stock. The number of shares reserved under the ESPP automatically increases on January 1 of each year through and until January 1, 2031, in an amount equal to the lesser of (i) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, and (ii) 123,700 shares; provided, however, that before the date of any such increase, the Board of Directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

10. Net Loss Per Share

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect:


	September 30,
	2024	2023
Stock options to purchase common stock	1,251,394	868,753

11. Corporate Restructuring Plan

In December 2022, the Board of Directors approved a strategic reprioritization of the Company’s preclinical and clinical development programs (referred to as the “2022 Plan”). In January 2023, the Board approved an additional restructuring plan (referred to as the “2023 Plan”) and the Company announced the consolidation of the ITIL-306 Phase 1 clinical trial and related manufacturing of CoStAR-TIL to its operations in Manchester, UK and stopped recruiting for the ITIL-306 clinical trial.

In January 2024, the Board of Directors approved a comprehensive restructuring plan, which included the closure of the Company’s UK manufacturing facility and clinical trial operations, as well as the cessation of the ITIL-306 clinical trial. In September 2024, the Board of Directors approved additional UK restructuring actions, which has resulted in the elimination of the majority of the remaining UK workforce, with the remaining reduction and restructuring activities anticipated to be largely completed by the end of 2024. Collectively, these actions are referred to as the “2024 Plan.”

The 2022 Plan, 2023 Plan and 2024 Plan are collectively referred to as the “Plan”.

Restructuring and Impairment Charges

As a result of the Plan, the Company recorded charges of $2.4 million and $7.1 million within the condensed consolidated statements of operations and comprehensive loss in the line item “restructuring and impairment charges” for the three and nine months ended September 30, 2024, respectively, and $46.3 million and $71.8 million for the three and nine months ended September 30, 2023, respectively.

The Company estimates that it will incur additional charges of up to $0.5 million by the end of 2024, including employee termination costs, severance and other benefits, and contract termination costs. The charges that the Company expects to incur in connection with the 2024 Plan are subject to a number of assumptions, and actual results may differ materially.

These charges relate to asset impairments, contract terminations, severance payments and other employee-related costs incurred. The following table summarizes the restructuring and impairment charges by category (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Asset impairment for leasehold improvements	$	51	$	—	$	343	$	2,644
One-time employee termination benefits	1,449		41		2,427		1,816
Building and construction work in progress impairment	—		41,542		—		41,542
Contract terminations	(1,282)		—		(736)		1,888
Right-of-use asset impairment	640		128		827		7,724
Impairment of long-lived assets held for sale	1,504		4,572		4,285		16,233
Total restructuring and impairment charges	$	2,362	$	46,283	$	7,146	$	71,847

Restructuring Liability

As a result of the Plan, the restructuring liability was recorded in the condensed consolidated balance sheets under “Accrued expenses and other current liabilities” and was measured at the amount expected to be paid, or that was paid. During the three and nine months ended September 30, 2024, the Company paid nil and $1.4 million of restructuring costs, respectively, and expects to pay the remainder of the restructuring costs by the end of 2024. The following table shows the liability related to the Plan (in thousands):


	Employee Benefits		Contract Terminations		Total
Restructuring liability as of December 31, 2023	$	—	$	3,136	$	3,136
Additions, net	2,395		720		3,115
Payments	(978)		(471)		(1,449)
Adjustments	—		(1,349)		(1,349)
Total restructuring liability as of September 30, 2024	$	1,417	$	2,036	$	3,453

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 21, 2024. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to Instil Bio, Inc. and our consolidated subsidiaries.

Forward-Looking Statements

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, our expectations regarding our collaborations and clinical trials, future financial position, future revenues, projected costs, prospects, and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company focused on developing a pipeline of novel therapies. In particular, we seek to in-license or acquire and develop additional novel therapeutic candidates in diseases with significant unmet medical need.

In August 2024, our wholly owned subsidiary, SynBioTx, Inc. or SynBioTx, in-licensed certain bispecific antibodies, including SYN-2510/IMM2510, a bispecific antibody targeting both programmed death-ligand 1, or PD-L1, and vascular endothelial growth factor, or VEGF, and SYN-27M/IMM27M, a monoclonal antibody targeting cytotoxic T-lymphocyte associated antigen 4, or CTLA-4, from ImmuneOnco Biopharmaceuticals (Shanghai) Inc., or ImmuneOnco. SYN-2510, the lead in-licensed product candidate, is a novel and differentiated PD-L1xVEGF bispecific antibody in development for the treatment of multiple solid tumor cancers. Pursuant to the license and collaboration agreement with ImmuneOnco, or the IO Collaboration Agreement, SynBioTx has an exclusive license to research, develop, manufacture and commercialize these product candidates outside of China, including mainland China, Hong Kong, Macau and Taiwan, or Greater China. ImmuneOnco retains development and commercialization rights in Greater China.

SYN-2510, our lead product candidate, is a potentially best-in-class PD-L1xVEGF bispecific antibody in development for the treatment of multiple solid tumor cancers. ImmuneOnco is conducting a Phase I open label trial in China of SYN-2510/IMM2510 as monotherapy in patients with advanced solid tumors that have failed prior therapies, including triple-negative breast cancer, or TNBC, squamous non-small cell lung cancer, or NSCLC, hepatocellular carcinoma, renal cell carcinoma, and rare solid tumors including soft tissue sarcomas and thymic cancer. Approximately 65 additional patients have been dosed with SYN-2510/IMM2510 monotherapy in addition to the initial 33 patients reported in ImmuneOnco’s ASCO 2024 publication. The preliminary data showed:

•As of December 21, 2023, 33 patients had received IMM2510 at 9 dose levels (0.007-20.0 mg/kg), the median age was 57 years (range 36-74), the median prior line of therapy was 3 (range 1-13), and 27.3% patients received prior anti PD-1/PD-L1 inhibitor therapies.

•Treatment-related adverse events (TRAEs) occurred in 32 patients (97.0%). Most TRAEs were grade 1 or 2. The most common TRAEs (≥ 20%) of all grades were infusion related reaction (IRR) (72.7%), platelet count decreased (39.4%), anemia (33.3%) and diarrhea (21.2%). Grade ≥3 TRAEs occurred in 11 patients (33.3%). Grade ≥3 TRAEs (≥5%) were IRR (9.1%), platelet count decreased (6.1%), lymphocyte count decreased (6.1%) and diarrhea (6.1%). TRAEs leading to treatment discontinuation occurred in 3 patients (9.1%) which were IRR, hypersensitivity and pyrexia, respectively. No dose limiting toxicities (DLT) occurred.

•In 25 response evaluable patients, 3 patients had confirmed partial response (PR): 1 patient with sq-NSCLC (onco-driver gene negative, previous IO treatment failure) at 3 mg/kg with tumor shrinkage 46% and still on the treatment with treatment duration over 20 months; 1 patient with sq-NSCLC at 10 mg/kg with tumor shrinkage about 32% along with treatment duration 9.4 months; 1 patient with thymus adeno-squamous carcinoma (PD-L1 CPS 80) at 20 mg/kg with tumor shrinkage over 53% and still remains on the treatment along with treatment duration 8.1 months. In addition, 7 patients with best objective response stable disease (BOR SD) and 4 of them had over 15% decreased tumor burden (1 cervical cancer at 3 mg/kg, 2 non-sq NSCLC at 10 and 20 mg/kg respectively, 1 ovarian cancer at 20 mg/kg).

•The half-life of IMM2510 in 20.0mg/kg dose group was around 6.8 days. The recommended phase 2 dose (RP2D) was determined by ImmuneOnco to be 20.0 mg/kg.

SYN-27M is an antibody-dependent cellular cytotoxicity-enhanced monoclonal antibody targeting CTLA-4, which has been designed to promote intratumoral regulatory T cell depletion to enhance the efficacy and reduce the toxicity associated with first-generation anti-CTLA-4 antibodies. By end of 2023, ImmuneOnco completed a first-in-human dose escalation study of SYN-27M/IMM27M in patients with solid tumor cancers in China with 25 subjects dosed. ImmuneOnco is currently pursing cohort expansions of the RP2D in this Phase I trial in patients with hormone receptor-positive breast cancer and hepatocellular carcinoma who have failed prior therapy.

ImmuneOnco is also conducting a Phase I open label clinical trial in China of SYN-2510/IMM2510 combined with SYN-27M/IMM27M in patients with advanced solid tumors that have failed prior therapies.

We also have a proprietary folate receptor alpha (FRα) co-stimulatory antigen receptor, or CoStAR, tumor infiltrating lymphocyte, or TIL, cell therapy for the treatment of cancer, which we are seeking to advance via collaboration. In December 2023, we entered into an agreement with a third-party collaborator to develop an autologous folate receptor alpha (FRα) CoStAR-TIL, or the CoStAR-TIL Collaboration Product, for a potential investigator-initiated trial, or IIT, in non-small cell lung cancer, or NSCLC, in China. The collaborator has an option to exclusively license the CoStAR-TIL Collaboration Product in China and Taiwan.

Since inception, we have had significant operating losses. Our net loss was $23.0 million for the three months ended September 30, 2024 and $62.2 million for the nine months ended September 30, 2024. As of September 30, 2024, we had an accumulated deficit of $643.2 million. As of September 30, 2024, we had cash, cash equivalents, marketable securities and long-term investments of $122.9 million, which consists of $6.7 million in cash and cash equivalents, $113.7 million in marketable securities and $2.6 million in long-term investments. We expect to continue to incur net losses for the foreseeable future.

Recent Developments

In July 2024, Complex Therapeutics LLC entered into a lease, or the Lease with AstraZeneca Pharmaceuticals LP pursuant to which AstraZeneca Pharmaceuticals LP is leasing Complex Therapeutic LLC’s manufacturing facility located in Tarzana, CA. The Lease has an initial term of approximately 15 years and the initial base rent is $0.6 million per month ($7.5 million annually), the base rent will escalate by 3% per annum and AstraZeneca

Pharmaceuticals LP is required to pay certain operating expenses and tax expenses as additional rent. There is rent abatement during the first year of the Lease such that AstraZeneca Pharmaceuticals LP will initially pay no rent or reduced rent.

Components of Operating Results

Operating Expenses

In-Process Research and Development

In-process research and development (IPR&D), expenses include IPR&D acquired as part of in-license payments made to ImmuneOnco for which there is no alternative future use, and are expensed as incurred.

Research and Development

Research and development expenses consist primarily of research and development, manufacturing, monitoring and other services payments and, to a lesser extent, salaries, benefits and other personnel-related costs, including stock-based compensation, professional service fees, and facility and other related costs. In addition, research and development expense is presented net of reimbursements from reimbursable tax and expenditure credits and grants from the UK government. For the three and nine months ended September 30, 2024 and 2023, we did not allocate our research and development expenses by program.

We expect our future research and development expenses to change in line with our clinical development activities for SYN-2510 and SYN-27M, our CoStAR-TIL Collaboration Product or other next-generation TIL technologies and other potential business development activities. Our expenditures on future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including:

•the scope, rate of progress and expenses of clinical trials and other research and development activities;

•potential safety monitoring and other studies requested by regulatory agencies;

•significant and changing government regulation; and

•the timing and receipt of regulatory approvals, if any.

The process of conducting the necessary clinical research to obtain regulatory approval from the FDA, Medicines and Healthcare Products Regulatory Agency, or MHRA, European Medicines Agency, or EMA, and comparable foreign authorities is costly and time consuming and the successful development of product candidates is highly uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in the section of this Quarterly Report titled “Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.

General and Administrative

General and administrative expenses consist primarily of compensation and personnel-related expenses, including stock-based compensation, for our personnel in executive, finance and other administrative functions. General and administrative expenses also include professional fees paid for accounting, auditing, legal, tax and consulting services, insurance costs, recruiting costs, travel expenses, facility and other related costs, depreciation, and other general and administrative costs.

Additionally, we expect to continue to incur expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, director and officer insurance expenses, and any investor relations related expenses, as well as other administrative and professional services.

Restructuring and Impairment Charges

Restructuring and impairment charges consist primarily of:

•for the nine months ended September 30, 2023, asset impairment charges related to our facility in Tarzana;

•for the nine months ended September 30, 2024, asset impairment charges related to our former manufacturing facility in Manchester;

•contract terminations, including contract terminations related to the Tarzana, Thousand Oaks and Manchester facilities; and

•severance and other employee termination related costs.

As part of a restructuring plan adopted in January 2023, we transitioned clinical manufacturing and trial operations of ITIL-306 to the United Kingdom, and as a result, in 2023 we reduced our U.S. workforce by approximately 96% and our UK workforce by approximately 42%. Subsequently, in January 2024, we decided to close our UK manufacturing and clinical operations, and in September 2024 we decided to close most of our remaining Manchester, UK operations, which resulted in the elimination of the majority of the UK workforce, with the remaining reduction anticipated to be largely completed by the end of 2024, which collectively we refer to as the 2024 Plan. As a result of the 2024 Plan, we incurred charges of $7.1 million during the nine months ended September 30, 2024 and we estimate we will incur additional charges of up to $0.5 million in 2024 related to the 2024 Plan.

Interest Income

Interest income consists of interest income from funds held in our cash and cash equivalent accounts, marketable securities and long-term investments.

Interest Expense

Interest expense consists of interest expense on our Loan and amortization of loan origination costs.

Other Rental Income

Other rental income consists primarily of straight-lined rental income related to the Tarzana manufacturing facility.

Other Expense, Net

Other expense, net consists primarily of interest cap derivative instrument fair value gain or loss, foreign exchange remeasurement gain or loss and other expenses and income.

Income Tax Provision

We are subject to income taxes in the United States and the foreign jurisdiction where we operate, the United Kingdom. The United Kingdom has statutory tax rates that differ from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of United Kingdom to United States income, the availability of research and development tax credits, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Due to the uncertainty of the business in which we operate, projections of future profitability are difficult and past profitability is not necessarily indicative of future profitability. We maintain full valuation allowance against net deferred tax assets for the United States and the United Kingdom. The valuation allowance has been provided based on the positive and negative evidence relative to our company, including the existence of cumulative net operating losses, or NOLs, since our inception, and the inability to carryback these NOLs to prior periods. Furthermore, we have determined that it is more likely than not that the benefit of these assets would not be realized in the foreseeable future. The timing and the reversal of our valuation allowance will continue to be monitored.

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended September 30,				Change
	2024		2023		$
Operating expenses:
In-process research and development	$	10,000	$	—	$	10,000
Research and development	562		8,492		(7,930)
General and administrative	10,707		11,941		(1,234)
Restructuring and impairment charges	2,362		46,283		(43,921)
Total operating expenses	23,631		66,716		(53,085)
Loss from operations	(23,631)		(66,716)		53,085
Interest income	1,654		2,313		(659)
Interest expense	(2,007)		(2,003)		(4)
Other rental income	1,493		—		1,493
Other expense, net	(530)		(1,026)		496
Net loss	$	(23,021)	$	(67,432)	$	52,918

In-process Research and Development Expenses

In-process research and development expenses were $10.0 million and nil for three months ended September 30, 2024 and 2023, respectively. The net increase of $10.0 million was primarily due to:

•$10.0 million increase in research and development costs related to payments made to ImmuneOnco.

Research and Development Expenses

Research and development expenses were $0.6 million and $8.5 million for the three months ended September 30, 2024 and 2023, respectively. The net decrease of $7.9 million was primarily due to:

•$3.9 million decrease in costs mainly related to our discontinuation of our ITIL-168 clinical manufacturing activities;

•$2.1 million decrease in costs from reduced headcount, consisting primarily of a decrease of $2.0 million in wages and benefits and a $0.1 million decrease in stock-based compensation expense; and

•$1.9 million decrease in expenses related to facilities and overhead, depreciation, and other expenses due to reductions made in these areas.

General and Administrative Expenses

General and administrative expenses were $10.7 million and $11.9 million for the three months ended September 30, 2024 and 2023, respectively. The net decrease of $1.2 million was primarily due to:

•$0.9 million decrease in costs from reduced headcount, consisting of decreases in wages and benefits of $0.4 million and stock-based compensation expense of $0.5 million;

•$0.1 million decrease in consulting and professional services costs, mainly consisting of a decrease in costs of legal consultants and executive service fees; and

•$0.2 million decrease in facility and other office expenses.

Restructuring and Impairment Charges

Restructuring and impairment charges were approximately $2.4 million and $46.3 million for the three months ended September 30, 2024 and 2023, respectively. The net decrease of $43.9 million was primarily due to:

•$3.1 million decrease in costs from impairments of assets held for sale;

•$41.5 million decrease in costs related to the impairment of the Tarzana manufacturing facility; and

•$1.3 million decrease in costs resulting from termination of contracts; offset by

•$0.5 million increase in costs from impairments of right-of-use assets;

•$0.1 million increase in leasehold improvement impairments; and

•$1.4 million increase in severance payments and benefits continuation costs.

We expect to incur additional restructuring and impairment charges in 2024 as result of reducing our UK workforce and other actions related to our 2024 Plan.

Interest Income, Interest Expense, Other Rental Income and Other Expense, Net

Interest income, interest expense, other rental income and other expense, net was $0.6 million of income and $0.7 million of expense for the three months ended September 30, 2024 and 2023, respectively. The increase in income of $1.3 million was primarily due to:

•$0.5 million increase in other losses, including loss from our derivative financial instrument;

•$0.7 million decrease of interest income related to our investments; offset by

•$1.0 million increase in gain on foreign currency transactions; and

•$1.5 million increase in rental income related to the Tarzana manufacturing facility.

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):


	Nine Months Ended September 30,				Change
	2024		2023		$
Operating expenses:
In-process research and development	$	10,000	$	—	$	10,000
Research and development	10,739		37,621		(26,882)
General and administrative	33,837		36,681		(2,844)
Restructuring and impairment charges	7,146		71,847		(64,701)
Total operating expenses	61,722		146,149		(94,427)
Loss from operations	(61,722)		(146,149)		94,427
Interest income	5,635		6,671		(1,036)
Interest expense	(5,988)		(3,229)		(2,759)
Other rental income	1,493		—		1,493
Other expense, net	(1,658)		(455)		(1,203)
Net loss	$	(62,240)	$	(143,162)	$	89,429

In-process Research and Development Expenses

In-process research and development expenses were $10.0 million and nil for three months ended September 30, 2024 and 2023, respectively. The net increase of $10.0 million was primarily due to:

•$10.0 million increase in research and development costs related to payments made to ImmuneOnco.

Research and Development Expenses

Research and development expenses were $10.7 million and $37.6 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease in research and development expenses of $26.9 million was primarily due to:

•$11.9 million decrease in costs from reduced headcount, consisting primarily of a decrease of $11.9 million in wages and benefits, $0.2 million decrease in other employee-related expenses in relation to our research and development personnel and $0.4 million decrease in professional services; offset by an increase of $0.6 million in stock-based compensation expense;

•$8.1 million decrease in expenses related to facilities and overhead, depreciation, and other expenses due to reductions made in these areas; and

•$6.9 million decrease in costs mainly related to the discontinuation of our ITIL-168 clinical manufacturing activities.

General and Administrative Expenses

General and administrative expenses were $33.8 million and $36.7 million for the nine months ended September 30, 2024 and 2023, respectively. The net decrease of $2.8 million was primarily due to:

•$3.9 million decrease in costs, mainly due to a decrease in wages of $2.8 million and a decrease in stock-based compensation expense of $1.4 million; offset by an increase in other employee-related expenses of $0.3 million;

•$0.1 million decrease in consulting and professional services costs, mainly consisting of a decrease in costs of legal and finance consultants; offset by,

•$1.2 million increase in depreciation and facility costs, offset by a decrease in insurance expenses.

Restructuring and Impairment Charges

Restructuring and impairment charges were $7.1 million and $71.8 million for the nine months ended September 30, 2024 and 2023, respectively. The net decrease of $64.7 million was primarily due to:

•$11.9 million decrease in costs from impairments of assets held for sale;

•$7.0 million decrease in costs from impairments of right-of-use assets;

•$2.3 million decrease in costs from leasehold improvement impairments;

•$41.5 million decrease in costs related to the impairment of Tarzana manufacturing facility; and

•$2.6 million decrease in costs resulting from termination of contracts; offset by,

•$0.6 million increase in severance payments and benefits continuation costs.

We expect to incur additional restructuring and impairment charges in 2024 as result of reducing our UK workforce and other actions related to our 2024 Plan.

Interest Income, Interest Expense, Other Rental Income and Other Expense, Net

Interest income, interest expense, other rental income and other expense, net were $0.5 million of expense and $3.0 million of income for the nine months ended September 30, 2024 and 2023, respectively. The increase in expense of $3.5 million was primarily due to:

•$1.0 million decrease of interest income related to our investments;

•$2.8 million increase of interest expense from our Loan; and

•$1.3 million increase of other losses, including loss from our derivative financial instrument; offset by,

•$0.1 million increase in gain on foreign currency transactions; and

•$1.5 million increase in rental income related to the Tarzana manufacturing facility.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have not generated any revenue from product sales and we have incurred significant operating losses. We do not have any products that have achieved regulatory marketing approval and we do not expect to generate revenue from sales of any product candidates for at least several years, if ever.

As of September 30, 2024, we had cash, cash equivalents, marketable securities and long-term investments of $122.9 million, which consisted of $6.7 million in cash and cash equivalents, $113.7 million in marketable securities and $2.6 million in long-term investments. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Prior to our initial public offering, or IPO, we funded our operations primarily through the issuance and sale of convertible preferred stock. From our inception through March 2021, we raised net cash proceeds of $380.1 million from the issuance and sale of our convertible preferred stock.

In the first quarter of 2021, we raised net proceeds of $339.0 million in our IPO, pursuant to which we sold an aggregate of 920,000 shares of common stock.

In June 2022, our wholly owned subsidiary, Complex Therapeutics Mezzanine LLC, and our wholly owned indirect subsidiary, Complex Therapeutics LLC, entered into a mortgage construction loan and mezzanine construction loan, or together, the Loan, secured by our Tarzana, California land and building. Construction of the Tarzana facility has been completed and the facility has been leased to AstraZeneca Pharmaceuticals LP. The initial principal amount of the Loan was $52.1 million, with additional future principal of up to $32.9 million to fund then

ongoing construction costs. As of September 30, 2024, the outstanding principal amount under the Loan was $82.8 million and unamortized debt issuance costs were $0.7 million. We have agreed with the lender to terminate commitments in respect of any unadvanced amounts and, accordingly, do not have additional borrowing capacity under the Loan.

Future Funding Requirements

Based on our current operating plan, we believe our existing cash, cash equivalents, restricted cash and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements beyond 2026. We are evaluating opportunities for a potential sale of our Tarzana manufacturing site, as well as subleases of other facilities under lease. If we are successful in selling the Tarzana facility, such a transaction could extend our expected cash runway. We have based this estimate on assumptions that may prove to be wrong, we may not be successful in securing a sale of the Tarzana facility or sublease of the other facilities on favorable terms, or at all and we could utilize our available capital resources sooner than we expect. AstraZeneca Pharmaceuticals LP has leased the Tarzana manufacturing facility and has a right of first offer to purchase the property.

We use our cash to fund operations, primarily to fund our business development, research and development expenditures and related personnel costs. We expect our expenses to continue to be significant as we invest in research and development activities, particularly as we in-license or acquire product candidates, advance product candidates into later stages of development and conduct clinical trials, seek regulatory approvals for and commercialize any product candidates that successfully complete clinical trials, hire personnel and invest in and grow our business, expand and protect our intellectual property portfolio, and operate as a public company. Because of the numerous risks and uncertainties associated with acquiring product candidates, and the research, development and commercialization of product candidates, we are unable to estimate the exact timing and amount of our funding requirements. Our future operating expenditures will depend on many factors, including:

•the results of our collaborations and the number and characteristics of any product candidates we develop or acquire;

•the scope, rate of progress, costs and results of future clinical and preclinical development activities;

•the costs, timing and outcome of regulatory review of any product candidates, and the number of trials required for regulatory approval;

•the cost of manufacturing any product candidates, as well as any products we successfully commercialize;

•the cost of commercialization activities of our product candidates, if approved for sale, including marketing, sales and distribution costs;

•the timing, receipt and amount of sales of any product candidates, if approved;

•costs related to our Tarzana facility and our ability to complete a sale of our Tarzana, California facility, as well as subleases of other facilities under lease;

•the extent to which we acquire or in-license other companies’ product candidates and technologies;

•our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of any such arrangements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

•any product liability or other lawsuits or claims;

•the expenses needed to attract, hire and retain skilled personnel;

•our investments in our operational, financial and management information systems;

•the costs associated with operating as a public company;

•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and

•any delays or issues resulting from the impact of adverse geopolitical and economic conditions.

In February 2019, we entered into a license agreement with Immetacyte Ltd., or Immetacyte, pursuant to which we obtained a worldwide license to Immetacyte’s proprietary technology, know-how and intellectual property for the research, development, manufacture and commercialization of TIL therapies. In March 2020, we acquired 100% of the share capital of Immetacyte for total cash and non-cash consideration, including contingent

consideration, of $15.4 million. In connection with the acquisition, we terminated the Immetacyte license agreement and associated payment obligations. The maximum consideration that remained unpaid as of September 30, 2024, which payment is contingent on future events, was $13.3 million.

As discussed above, in August 2024, we entered into the IO Collaboration Agreement with ImmuneOnco. Among other things, pursuant to that agreement, SynBioTx paid ImmuneOnco an up-front payment of $10.0 million and prepaid ImmuneOnco $5.0 million in development costs, and has agreed to pay up to $35.0 million in potential near-term payments, as well as up to $2.1 billion in commercial, development and regulatory milestones (including up to $270.0 million in longer term development and regulatory milestones and up to $1.8 billion in commercial milestones) plus single-digit to low double-digit percentage royalties on global net sales of the licensed products outside of Greater China.

We lease various operating spaces in the United States and the United Kingdom under non-cancelable operating lease arrangements that expire on various dates through 2026. These arrangements require us to pay certain operating expenses, such as taxes, repairs, and insurance and contain landlord or tenant incentives or allowances, renewal and escalation clauses. As of September 30, 2024, our future minimum lease payments under committed or non-cancelable lease agreements were $3.5 million.

As discussed above, in connection with the 2024 Plan, we currently estimate that we will incur additional charges of up to $0.5 million in 2024, including employee termination costs, severance and other benefits, and contract termination costs. The charges that we expect to incur in connection with the 2024 Plan are subject to a number of assumptions, and actual results may differ materially. We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the 2024 Plan as well as additional costs in connection with any additional restructuring actions.

Until we can generate substantial revenue from the sales of our product candidates, if that occurs, we plan to fund our operations through equity offerings, debt financings, or other capital sources. This may include leasing income, strategic collaborations or other arrangements with third parties. Additional funds may not be available to us on acceptable terms or at all. If we raise additional funds by issuing equity or convertible debt securities, our stockholders will suffer dilution, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Debt financing, if available, may involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities receive any distribution of our corporate assets. If we raise funds through collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to technologies, future revenue streams, product candidates or research programs or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our ability to raise additional funds may be adversely impacted by worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from, among other things, heightened inflation, higher interest rates, conflicts in Ukraine and the Middle East, and recent and potential future bank failures. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. See “Risk Factors.”

Cash Flows

The following table sets forth the significant sources and uses of cash for the periods set forth below (in thousands):


	Nine Months Ended September 30,
	2024		2023
Net cash provided by (used in):
Cash used in operating activities	$	(45,137)	$	(68,648)
Cash provided by investing activities	40,974		27,178
Cash provided by financing activities	159		8,082
Net decrease in cash, cash equivalents, and restricted cash	$	(4,004)	$	(33,388)

Cash Flows from Operating Activities

Cash used in operating activities for the nine months ended September 30, 2024 was $45.1 million, which consisted of the net loss of $62.2 million, a $8.5 million net change to our net operating assets and liabilities, and $25.6 million in non-cash charges and other adjustments to reconcile net loss to net cash used in operating activities. The net change in our operating assets and liabilities was primarily due to a decrease of $0.4 million in accrued expenses, and other current liabilities, an increase of $4.0 million in prepaid expenses and other current assets, an increase of $3.1 million in other long-term assets, and a decrease of $1.0 million in operating lease liabilities. The non-cash charges primarily consisted of stock-based compensation expense of $12.8 million, in-process research and development expenses of $10.0 million, impairment of fixed assets and right-of-use assets, and loss on disposal of property and equipment of $5.5 million, change in fair value of interest cap derivative instrument and non-cash interest expense of $1.0 million, and depreciation expense of $2.9 million, offset by accretion on invested securities of $3.9 million and the change in fair value of contingent consideration of $2.5 million.

Cash used in operating activities for the nine months ended September 30, 2023 was $68.6 million, which consisted of the net loss of $143.2 million, and a $8.0 million net change to our net operating assets and liabilities, partially offset by $82.5 million in non-cash charges and other adjustments to reconcile net loss to net cash used in operating activities. The net change in our operating assets and liabilities was primarily due to a decrease of $0.7 million in accounts payable, a decrease of $5.3 million in accrued expenses, accrued restructuring expenses and other current liabilities, an increase of $1.1 million in prepaid expenses and other current assets, a decrease of $0.3 million in other long-term assets, and a decrease of $1.2 million in operating lease liabilities. The non-cash charges primarily consisted of stock-based compensation expense of $13.6 million, impairment of fixed assets of $60.1 million, impairment of right-of-use assets of $7.7 million and depreciation expense of $3.7 million, offset by accretion on invested securities of $4.7 million.

Cash Flows from Investing Activities

Cash provided by investing activities for the nine months ended September 30, 2024 was $41.0 million, consisting primarily of $52.0 million of cash provided by marketable securities investments and $0.5 million of cash received from held for sale assets, offset by $10.0 million of acquired in-process research and development and $1.6 million from the renewal of our derivative financial instrument.

Cash provided by investing activities for the nine months ended September 30, 2023 was $27.2 million, which consisted primarily of $47.8 million of cash provided by marketable securities investments, offset by $20.6 million used related to purchases of property, plant and equipment.

Cash Flows from Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2024 was $0.2 million, which was primarily related to proceeds from exercise of stock options.

Cash provided by financing activities for the nine months ended September 30, 2023 was $8.1 million, which was primarily related to cash proceeds from our note payable of $8.7 million, offset by loan payments of $0.6 million.

Critical Accounting Policies and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the 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 condensed financial statements, as well as the reported 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.

For a description of critical accounting policies that require significant judgments and estimates during the preparation of our financial statements, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and Note 2 to our Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023 and Note 2 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements applicable to us is included in Note 2 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Emerging Growth Company Status and Smaller Reporting Company Status

We are an “emerging growth company” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

In addition, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to avail ourselves of this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) December 31, 2026, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the

last business day of the second fiscal quarter of such year or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We are also a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250.0 million or (ii) our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Item 10 of Regulation S-K and are not required to provide the information otherwise required under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that 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 to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Part II. Other Information

Item 1. Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently subject to any material legal proceedings.

Item 1A. Risk Factors

RISK FACTORS

The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report on Form 10-Q and those we may make from time to time. You should carefully consider the risks described below, in addition to the other information contained in this Quarterly Report on Form 10-Q and our other public filings. Our business, financial condition or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.

Risks Associated with Our Business

Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common stock. These risks are more fully described in this “Risk Factors” section, including the following:

•We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

•We have a limited operating history and no history of completing any clinical trial or commercializing any product, which may make it difficult for an investor to evaluate the success of our business to date and to assess our future viability.

•We will need substantial additional funding to meet our financial obligations and to pursue our business objectives, including clinical development of SYN-2510. If we are unable to raise capital when needed, we could be forced to delay further development of our product candidates, including SYN-2510, or to curtail our planned operations and the pursuit of our growth strategy.

•Our lead product candidate, SYN-2510, as well as our other product candidates, are currently in early-stage clinical development. If we are unable to successfully develop, receive regulatory approval for and commercialize SYN-2510, or successfully develop any other product candidates, or experience significant delays in doing so, our business will be harmed.

•The regulatory approval processes of the FDA, Medicines and Healthcare Products Regulatory Agency, or MHRA, European Medicines Agency, or EMA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If we are not able to obtain required regulatory approval for our product candidates, our business will be substantially harmed.

•Success in preclinical studies or earlier clinical trials may not be indicative of results in future clinical trials. Our product candidates may not have favorable results in clinical trials, if any, or receive regulatory approval.

•Biologics are complex and difficult to manufacture. We intend to rely on ImmuneOnco in China to manufacture clinical supplies of SYN-2510, and we intend to rely on third parties to produce preclinical and clinical supply of other product candidates and commercial supplies of any approved product. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or any approved products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

•We have, and we may in the future, engage in strategic transactions to acquire or in-license new product candidates or technologies, and we may not be successful in the developing and commercializing any product candidates we acquire or in-license, including SYN-2510. The licensing or acquisition of third-party intellectual property rights is competitive, and if we are unable

to identify suitable candidates for such transactions on a timely basis or on commercially reasonable terms, it would negatively impact our ability to develop and commercialize product candidates and present significant distractions to our management.The treatable populations for our product candidates may be smaller than we or third parties currently project, which may affect the addressable markets for our product candidates.

•We face significant competition from other biotechnology and pharmaceutical companies, and from non-profit institutions, which may result in others discovering, developing or commercializing products before or more successfully than we do.

•If we or our licensors are unable to obtain and maintain sufficient patent protection for our product candidates, or if the scope of the patent protection is not sufficiently broad, third parties, including our competitors, could develop and commercialize products similar or identical to ours, and our ability to commercialize our product candidates may be adversely affected.

•Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain.

•We are subject to a variety of stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and data security, and our actual or perceived failure to comply with them could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits and other adverse business consequences.

Risks Related to our Financial Position and Capital Needs

We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

Since our inception, we have incurred significant net losses, and we expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses were $62.2 million and $143.2 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $643.2 million. We have financed our operations with $719.0 million in net proceeds raised in our initial public offering and private placements of convertible preferred stock to date. We have no products approved for commercialization and have never generated any revenue from product sales.

All of our product candidates are in preclinical development, potential investigator-initiated clinical stage or early-stage clinical development. We expect to continue to incur significant expenses and operating losses over the next several years. We expect that it could be many years, if ever, before we have a commercialized product. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will continue to be significant as we:

•pursue clinical development of SYN-2510 and our collaboration with ImmuneOnco, as well as our CoStAR-TIL collaboration; seek to potentially license-in or otherwise acquire additional new product candidates, as well as potentially initiate and complete clinical trials of new product candidates;

•seek regulatory approval for any product candidates that successfully complete clinical trials;

•scale up our clinical and regulatory capabilities;

•rely on collaborators or other third parties to manufacture current good manufacturing practices, or cGMP, material for clinical trials or potential commercial sales;

•establish a commercialization infrastructure and develop internal and external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval;

•adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;

•maintain, expand and protect our intellectual property portfolio;

•hire clinical, manufacturing quality control, regulatory, manufacturing and scientific and administrative personnel;

•add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, our CoStAR-TIL technology through collaborations or otherwise; and

•incur legal, accounting and other expenses in operating as a public company.

To date, we have not generated any revenue from product sales. To become and remain profitable, we must succeed in developing and eventually commercializing product candidates that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, obtaining regulatory approval, and manufacturing, marketing and selling any product candidates for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We are only in the preliminary stages of most of these activities and all of our product candidates are in early-stage development. We may never succeed in these activities and, even if we do, may never generate any revenue or revenue that is significant enough to achieve profitability.

Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our development efforts, obtain product approvals, diversify our offerings or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We have a limited operating history and no history of completing any clinical trial or commercializing any product, which may make it difficult for an investor to evaluate the success of our business to date and to assess our future viability.

We are a biopharmaceutical company with a limited operating history. Since we commenced operations in 2019, we have not yet demonstrated our ability to successfully complete any clinical trials, obtain regulatory approvals, manufacture a product on a commercial scale, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing products.

We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives. For example, from late 2022 through 2024, we implemented several strategic reprioritizations and restructurings of our preclinical and clinical development programs and elected to discontinue our TIL development program and our ITIL-168 and ITIL-306 clinical trials. As part of these various restructurings, we have significantly reduced our workforce. We may experience unforeseen delays or other challenges as a result of these actions, which could adversely impact our timelines and operations and, ultimately, our ability to develop product candidates for potential commercialization. We will need to develop clinical, manufacturing, regulatory and commercial capabilities, and we may not be successful in doing so.

We will need substantial additional funding to meet our financial obligations and to pursue our business objectives, including the clinical development of SYN-2510. If we are unable to raise capital when needed, we could be forced to delay further development of our product candidates, including SYN-2510, or curtail our planned operations and the pursuit of our growth strategy.

Our operations have consumed substantial amounts of cash since inception. Developing our in-licensed product candidates, including SYN-2510 and SYN-27M, identifying and potentially acquiring or in-licensing additional new product candidates, conducting preclinical testing and clinical trials and developing manufacturing operations for our product candidates is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. We expect to continue to incur significant expenses and operating losses over the next several years as we conduct clinical trials of our product candidates, seek to potentially license-in or otherwise acquire additional new product candidates, initiate future clinical trials of our product candidates, advance our preclinical programs, build our manufacturing capabilities, and seek marketing approval for any product candidates that successfully complete clinical trials. In addition, our product candidates, if approved, may not achieve commercial

success. Our revenue, if any, will be derived from sales of products that we do not expect to be commercially available for a number of years, if at all. If we obtain marketing approval for any product candidates that we develop or otherwise acquire, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. We also expect to continue to incur significant expenses associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in order to continue our operations.

As of September 30, 2024, we had cash, cash equivalents, marketable securities and long-term investments of $122.9 million, which consists of $6.7 million in cash and cash equivalents, $113.7 million in marketable securities and $2.6 million in long-term investments. We believe that our existing cash, cash equivalents, marketable securities and long-term investments will be sufficient to fund our operating expenses and capital requirements beyond 2026. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. Changes may occur beyond our control that would cause us to consume our available capital before that time, including changes in and progress of our development activities, acquisitions of additional product candidates, and changes in regulation. Our future capital requirements will depend on many factors, including:

•the scope, progress, cost and results of our collaboration with ImmuneOnco and the clinical development of the products licensed from ImmuneOnco, including SYN-2510 and SYN-27M and related activities;

•the scope, progress, costs and results of our collaborator to develop our CoStAR-TIL cell therapy technology;

•the extent to which we develop, in-license or otherwise acquire additional product candidates and technologies for our product candidate pipeline;

•the number and development requirements of product candidates that we may pursue;

•our ability to complete a potential refinancing and sale of our Tarzana, California facility, as well as subleases of other facilities under lease;

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

•our cost of human capital as we expand our capabilities;

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

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

•the costs of operating as a public company.

We will require additional capital to achieve our business objectives. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. Further, our ability to raise additional capital may be adversely impacted by worsening global economic conditions and the disruptions to and volatility in the credit and financial markets in the United States and worldwide, including those resulting from the ongoing armed conflicts in Ukraine, and in the Middle East, U.S.-China trade and political tensions, heightened inflation and interest rates, recent and potential future bank failures and supply chain disruptions, among other geopolitical and macroeconomic factors. If we are unable to raise sufficient additional capital, we could be forced to delay further development of our technologies or product candidates or curtail our planned operations and the pursuit of our growth strategy.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to technologies or product candidates.

We will need to raise additional capital to support our operations and execute on our business strategy. Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, government or private party grants, debt financings or license and collaboration agreements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring

additional debt, making capital expenditures or declaring dividends. For example, the agreements governing our construction loans contain certain affirmative and negative covenants, including maintaining a specified minimum net worth and amount of liquid assets, which could limit our operations.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams or product candidates, grant licenses on terms that may not be favorable to us or commit to future payment streams. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We have suffered, and in the future could suffer additional losses due to impairment charges, including as a result of being unsuccessful in completing a sale of our Tarzana, California manufacturing facility, or, if we are successful, the assets being sold for less than our carrying value.

To date, we have recorded significant impairment losses on long-lived assets associated with a sustained decrease in our stock price and multiple restructuring plans implemented since December 2022. Most recently, during the nine months ended September 30, 2024, we recorded aggregate impairment charges of approximately $7.1 million related to our restructuring plans.

We are evaluating opportunities for a potential refinancing and sale of our Tarzana, California manufacturing site, which effective July 10, 2024 has been leased to AstraZeneca Pharmaceuticals LP, as well as subleases of other facilities currently under lease; however, we can provide no assurances that we will successfully refinance or sell our Tarzana facility or enter into subleases of our other facilities, that we will do so in accordance with our expected timeline or that we will recover their carrying value. If we are unable to refinance our construction loans or otherwise repay our construction loans as they come due, our financial position and business will be materially adversely affected. The process of pursuing the plan to refinance and sell our Tarzana facility, or sublease our other facilities may be time consuming and disruptive to our business operations, and if we are unable to effectively manage the process, our businesses, financial condition, and results of operations could be adversely affected and may result in additional non-cash impairment charges. Any potential transactions, and the related valuations, would be dependent upon various external factors beyond our control, including, among others, market conditions, industry trends, interest of third parties, and the availability of financing to potential buyer(s) on reasonable terms.

Risks Related to the Development of our Product Candidates

Our lead product candidate, SYN-2510, as well as our other product candidates, are currently in early-stage clinical development. If we are unable to successfully develop, receive regulatory approval for and commercialize SYN-2510, or successfully develop any other product candidates, or experience significant delays in doing so, our business will be harmed.

We currently have no products approved for commercial sale, and all of our product candidates are currently in early-stage development, including our lead product candidate SYN-2510. As an organization, we have no prior experience completing any clinical trials; we have limited experience in preparing, submitting and prosecuting regulatory filings and have not previously submitted a biologics license application, or BLA, for any product candidate. Each of our programs and product candidates will require additional preclinical and/or clinical development, regulatory approval, obtaining manufacturing supply, capacity and expertise, building a commercial organization or successfully outsourcing commercialization, substantial investment and significant marketing efforts before we generate any revenue from product sales. We do not have any products that are approved for commercial sale, and we may never be able to develop or commercialize marketable products.

Our ability to generate revenue from our product candidates, which we do not expect will occur for several years, if ever, will depend heavily on the successful development, regulatory approval and eventual commercialization of our product candidates. The success of any product candidates that we develop or otherwise may acquire will depend on several factors, including:

•timely and successful completion of preclinical studies and clinical trials;

•effective INDs from the FDA, or comparable foreign applications that allow commencement of our planned clinical trials or future clinical trials for our product candidates;

•sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;

•successful enrollment and completion of clinical trials, including under the FDA’s current Good Clinical Practices, or GCPs, and current Good Laboratory Practices;

•successful development of, or making arrangements with third-party manufacturers for, our commercial manufacturing processes for any of our product candidates that receive regulatory approval;

•receipt of timely marketing approvals from applicable regulatory authorities;

•launching commercial sales of products, if approved, whether alone or in collaboration with others;

•acceptance of the benefits and use of our products, including method of administration, if approved, by patients, the medical community and third-party payors, for their approved indications;

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

•the availability, perceived advantages, cost, safety and efficacy of alternative therapies for any product candidate, and any indications for such product candidate, that we develop;

•our ability to produce any product candidates we develop on a commercial scale;

•obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity for our product candidates and otherwise protecting our rights in our intellectual property portfolio;

•maintaining compliance with regulatory requirements, including cGMPs, and complying effectively with other procedures;

•obtaining and maintaining third-party coverage and adequate reimbursement and patients’ willingness to pay out-of-pocket in the absence of such coverage and adequate reimbursement; and

•maintaining a continued acceptable safety, tolerability and efficacy profile of the products following approval.

If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize the product candidates we develop, which would materially harm our business. If we do not receive marketing approvals for any product candidate we develop, we may not be able to continue our operations. At any time, we may decide to discontinue the development of, or not to commercialize, a product candidate, such as our decision to discontinue our ITIL-168 development program. If we terminate a program in which we have invested significant resources, we will not receive any return on our investment and we will have missed the opportunity to allocate those resources to potentially more productive uses.

We may derive results and data for SYN-2510 and SYN-27M from clinical trials led by ImmuneOnco in China and for our CoStAR-TIL Collaboration Product from an open-label IIT led by our collaborator in China; our role in any such trials, and our access to the clinical results and data, will be limited and there is no assurance that the clinical data from any such trial will be accepted or considered by the FDA, or other comparable regulatory authorities.

Pursuant to the IO Collaboration Agreement, we expect to fund clinical trial(s) of SYN-2510 led by ImmuneOnco in China. In addition, we have a collaborator conducting our first collaborator-led IIT in China related to our CoStAR-TIL Collaboration Product. While these trials may provide us with clinical data that can inform our future development strategy, we do not have control over the protocols, administration, or conduct of the trials or their compliance with regulatory requirements. There is also no assurance that the clinical data from any such clinical trials will be accepted or considered by the FDA or other comparable regulatory authorities. In addition, due to our reliance on a third party to develop our CoStAR-TIL Collaboration Product, we are subject to risks associated with the way IITs are conducted. Third parties in such IITs may not perform their responsibilities on our anticipated schedule or consistent with clinical trial protocols or applicable regulations. Additional risks include difficulties or delays in communicating with investigators or administrators, procedural delays and other timing issues, and difficulties or differences in interpreting data. As a result, our minimal control over the conduct and timing of, and communications with the FDA, the National Medical Products Administration, or NMPA, and other comparable

regulatory authorities regarding IITs expose us to additional risks and uncertainties, many of which are outside our control, and the occurrence of which could adversely affect the prospects for our product candidates. Furthermore, any data integrity issues or patient safety issues arising out of any of these trials would be beyond our control, yet could adversely affect our reputation and damage the clinical and commercial prospects for our product candidates.

Preclinical studies and clinical trials are expensive, time-consuming, difficult to design and implement and involve an uncertain outcome. Further, we may encounter substantial delays in completing the development of our product candidates.

All of our product candidates are in early-stage development and their risk of failure is high. We ultimately ceased our TIL clinical trials after encountering manufacturing and other clinical development challenges and have elected to purse advancement of our CoStAR-TIL technology via a collaborator. The clinical trials and manufacturing of our product candidates are, and the manufacturing and marketing of our products, if approved, will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and market our product candidates. Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication. In particular, because our product candidates are subject to regulation as biological products, we will need to demonstrate that they are safe, pure and potent for use in their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.

Clinical trials are expensive and can take many years to complete, and their outcomes are inherently uncertain. We cannot guarantee that our clinical trials, including our potential collaborator-led clinical trials, will be conducted as planned or completed on schedule, if at all. Failure can occur at any time during the clinical trial process. Even if our clinical trials are completed as planned, we cannot be certain that their results will support the safety and effectiveness of our product candidates for their targeted indications or support continued clinical development of such product candidates. Our clinical trials may not be successful.

In addition, even if we successfully complete clinical trials, we cannot guarantee that the FDA, MHRA, EMA or other comparable foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. Moreover, results acceptable to support approval in one jurisdiction may be deemed inadequate by another regulatory authority to support regulatory approval in that other jurisdiction. To the extent that the results of the trials are not satisfactory to the FDA, MHRA, EMA or other comparable foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.

To date, we have not completed any clinical trials required for the approval of any product candidate. We may experience delays in conducting any clinical trials and we do not know whether our clinical trials will begin on time, need to be redesigned, recruit and enroll patients on time or be completed on schedule, or at all. Clinical trials can be delayed, suspended or terminated for a variety of reasons, including in connection with:

•inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical trials;

•delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for advanced clinical trials;

•delays in developing suitable assays for screening patients for eligibility for trials with respect to certain product candidates;

•delays in reaching agreement with the FDA, MHRA, EMA or other regulatory authorities as to the design or implementation of our clinical trials;

•obtaining regulatory authorization to commence a clinical trial;

•reaching an agreement on acceptable terms with clinical trial sites or prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different clinical trial sites;

•obtaining institutional review board, or IRB, approval at each trial site;

•recruiting suitable patients to participate in a clinical trial;

•having patients complete a clinical trial or return for post-treatment follow-up;

•inspections of clinical trial sites or operations by applicable regulatory authorities, or the imposition of a clinical hold;

•clinical sites, CROs or other third parties deviating from trial protocol or dropping out of a trial;

•failure to perform in accordance with the applicable regulatory requirements, including FDA’s GCP requirements, or applicable regulatory requirements in other countries;

•addressing patient safety concerns that arise during the course of a trial, including occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;

•adding a sufficient number of clinical trial sites;

•manufacturing sufficient quantities of product candidate for use in clinical trials; or

•suspensions or terminations by IRBs of the institutions at which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities due to a number of factors, including those described above.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates or significantly increase the cost of such trials, including:

•we may experience changes in regulatory requirements or guidance, or receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;

•clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon development programs;

•the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate;

•our third-party contractors and collaborators may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

•we or investigators might have to suspend or terminate clinical trials of our product candidates for various reasons, including non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other unexpected characteristics, or a finding that the participants are being exposed to unacceptable health risks;

•the cost of clinical trials of our product candidates may be greater than we anticipate, and we may not have funds to cover the costs;

•the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate;

•regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and

•any current or future collaborators that conduct clinical trials may face any of the above issues, and may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

•incur unplanned costs;

•be delayed in obtaining marketing approval for our product candidates or not obtain marketing approval at all;

•obtain marketing approval in some countries and not in others;

•obtain marketing approval for indications or patient populations that are not as broad as intended or desired;

•obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings or Risk Evaluation and Mitigation Strategies, or REMS;

•be subject to additional post-marketing testing requirements;

•be subject to changes in the way the product is administered; or

•have regulatory authorities withdraw or suspend their approval of the product or impose restrictions on its distribution after obtaining marketing approval.

We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the DSMB for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

All of our product candidates will require extensive clinical testing before we are prepared to submit a BLA or marketing authorization application, or MAA, for regulatory approval. We cannot predict with any certainty if or when we might complete the clinical development for our product candidates and submit a BLA or MAA for regulatory approval of any of our product candidates or whether any such BLA or MAA will be approved. We may also seek feedback from the FDA or other regulatory authorities on our clinical development program, and such regulatory authorities may not provide such feedback on a timely basis, or such feedback may not be favorable, which could further delay our development programs.

We cannot predict with any certainty whether or when we might complete a given clinical trial. If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates could be harmed, and our ability to generate revenues from our product candidates may be delayed or lost. In addition, any delays in our clinical trials could increase our costs, slow down the development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and results of operations. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Because our CoStAR-TIL Collaboration Product and any future product candidates developed from our CoStAR platform, represent novel approaches to the treatment of disease, there are many uncertainties regarding the development, market acceptance, third-party reimbursement coverage and commercial potential of our product candidates.

Human immunotherapy products are a new category of therapeutics, and to date, no TIL therapies have been approved by the FDA, MHRA, EMA or other comparable foreign regulatory authorities. Because this is a relatively new and expanding area of novel therapeutic interventions, there are many uncertainties related to development, marketing, reimbursement and the commercial potential for our product candidates. There can be no assurance as to the length of the trial period, the number of patients the FDA, MHRA, EMA or other regulatory authorities will require to be enrolled in the trials in order to establish the safety, efficacy, purity and potency of immunotherapy products or that the data generated in these trials will be acceptable to such authorities to support marketing approval. Regulatory authorities may take longer than usual to come to a decision on any BLA or other comparable application that we submit and may ultimately determine that there is not enough data, information, or experience with our product candidates to support an approval decision. Regulatory agencies may also require that we conduct additional post-marketing studies or implement risk management programs, such as Risk Evaluation and Mitigation Strategies, or REMS, until more experience with our product candidates is obtained. Finally, after increased usage,

we may find that our product candidates do not have the intended effect or have unanticipated side effects, potentially jeopardizing initial or continuing regulatory approval and commercial prospects.

The success of our business depends in part upon our ability to develop engineered TIL therapies using our CoStAR platform, in particular following our recent reprioritization of clinical programs. The CoStAR platform is novel and we have not completed a clinical trial of any product candidate developed using the CoStAR platform. The platform may fail to deliver TIL therapies that are effective in the treatment of cancer. Even if we are able to identify and develop TIL therapies using the CoStAR platform, we cannot assure that such product candidates will achieve marketing approval to safely and effectively treat cancer.

If we uncover any previously unknown risks related to our CoStAR platform, or if we experience unanticipated problems or delays in developing our CoStAR product candidates, we may be unable to achieve our strategy of building a pipeline of TIL therapies.

We may also find that the manufacture of our product candidates is more difficult than anticipated, resulting in an inability to produce a sufficient amount of our product candidates for our clinical trials or, if approved, commercial supply. For example, in October 2022 we paused enrollment in our then ongoing clinical trials to conduct manufacturing analysis and implement corrective and preventative actions and we subsequently discontinued our clinical trials.

There is no assurance that the approaches offered by our products will gain broad acceptance among doctors or patients or that governmental agencies or third-party medical insurers will be willing to provide reimbursement coverage for proposed product candidates. Since our current and future product candidates will represent novel approaches to treating various conditions, it may be difficult, in any event, to accurately estimate the potential revenues from these product candidates. Accordingly, we may spend significant capital trying to obtain approval for product candidates that have an uncertain commercial market. The market for any products that we successfully develop will also depend on the cost of the product. We do not yet have sufficient information to reliably estimate what it will cost to commercially manufacture our current or future product candidates, and the actual cost to manufacture these products could materially and adversely affect the commercial viability of these products. Our goal is to reduce the cost of manufacturing and providing our product candidates. However, unless we can reduce those costs to an acceptable amount, we may never be able to develop a commercially viable product. If we do not successfully develop and commercialize products based upon our approach or find suitable and economical sources for materials used in the production of our products, we will not become profitable, which would materially and adversely affect the value of our common stock.

Our therapies may be provided to patients in combination with other agents provided by third parties. The cost of such combination therapy may increase the overall cost of therapy and may result in issues regarding the allocation of reimbursements between our therapy and the other agents, all of which may affect our ability to obtain reimbursement coverage for the combination therapy from governmental or private third party medical insurers.

We may seek Fast Track designation for our product candidates, and we may be unsuccessful. Even if received, Fast Track designation may not actually lead to a faster review or approval process and does not increase the likelihood that our product candidates will receive marketing approval.

We may seek Fast Track designation for our product candidates, and we may be unsuccessful. If a drug or biologic is intended for the treatment of a serious or life-threatening condition and the product demonstrates the potential to address unmet medical needs for this condition, the sponsor may apply for FDA Fast Track designation for a particular indication. There is no assurance that the FDA will grant this status to any of our product candidates. If granted, Fast Track designation makes a product eligible for more frequent interactions with FDA to discuss the development plan and clinical trial design, as well as rolling review of the application, which means that the company can submit completed sections of its marketing application for review prior to completion of the entire submission. Marketing applications of product candidates with Fast Track designation may qualify for priority review under the policies and procedures offered by the FDA, but the Fast Track designation does not assure any such qualification or ultimate marketing approval by the FDA. The FDA has broad discretion whether or not to grant Fast Track designation, so even if we believe a particular product candidate is eligible for this designation, there can

be no assurance that the FDA would decide to grant it. Even if we do receive Fast Track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures, and receiving a Fast Track designation does not provide any assurance of ultimate FDA approval. In addition, the FDA may withdraw Fast Track designation at any time if it believes that the designation is no longer supported by data from our clinical development program.

The regulatory approval processes of the FDA, MHRA, EMA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If we are not able to obtain required regulatory approval for our product candidates, our business will be substantially harmed.

The time required to obtain approval or other marketing authorizations by the FDA, MHRA, EMA and comparable foreign authorities is unpredictable, and it typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, and the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate, and it is possible that we may never obtain regulatory approval for any product candidates we may seek to develop in the future. Neither we nor any current or future collaborator is permitted to market any drug product candidates in the United States until we receive regulatory approval of a BLA from the FDA, and we cannot market them in the European Union until we receive approval for a MAA from the EMA, or in other foreign countries until we receive the required regulatory approval in such other countries. To date, we have had no discussions with the FDA regarding our clinical development of SYN-2510 or regulatory approval for SYN-2510 . In addition, we have had no discussions with other comparable foreign authorities regarding clinical development programs or regulatory approval for any product candidate.

Prior to obtaining approval to commercialize any drug product candidate in the United States or abroad, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA, MHRA, EMA or other comparable foreign regulatory agencies, that such product candidates are safe, pure and effective for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. The FDA, MHRA, EMA or other regulatory agency may also require us to conduct additional preclinical studies or clinical trials for our product candidates either prior to or after approval, or it may object to elements of our clinical development programs.

Our product candidates could fail to receive regulatory approval for many reasons, including the following:

•the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

•we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

•the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

•we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

•the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

•the approval policies or regulations of the FDA or comparable foreign authorities may significantly change in a manner rendering our clinical data insufficient for approval.

Of the large number of products in development, only a small percentage successfully complete the FDA or foreign regulatory approval processes and are commercialized. The lengthy approval and marketing authorization process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval and marketing authorization to market our product candidates, which would significantly harm our business, financial condition, results of operations and prospects.

We have invested a significant portion of our time and financial resources in the development of our clinical and preclinical product candidates. Our business is dependent on our ability to successfully complete preclinical and clinical development of, obtain regulatory approval for, and, if approved, successfully commercialize product candidates in a timely manner.

Even if we eventually complete clinical testing and receive approval of a BLA or foreign marketing application for any product candidates, the FDA, MHRA, EMA or the applicable foreign regulatory agency may grant approval or other marketing authorization contingent on the performance of costly additional clinical trials, including post-marketing clinical trials. The FDA, MHRA, EMA or the applicable foreign regulatory agency also may approve or authorize for marketing a product candidate for a more limited indication or patient population than we originally request, and the FDA, MHRA, EMA or applicable foreign regulatory agency may not approve or authorize the labeling that we believe is necessary or desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval or other marketing authorization would delay or prevent commercialization of that product candidate and would materially adversely impact our business and prospects.

In addition, the FDA, MHRA, EMA and other regulatory authorities may change their policies, issue additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval of our future products under development on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain approvals, increase the costs of compliance or restrict our ability to maintain any marketing authorizations we may have obtained.

Success in preclinical studies or earlier clinical trials may not be indicative of results in future clinical trials. Our product candidates may not have favorable results in later clinical trials, if any, or receive regulatory approval.

Success in preclinical testing and any early investigator-initiated clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Preclinical tests and Phase 1 and Phase 2 clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics and to understand the side effects of product candidates at various doses and schedules. Success in preclinical or animal studies and early clinical trials does not ensure that later large-scale efficacy trials will be successful nor does it predict final results. For example, we may be unable to identify suitable animal disease models for our product candidates, which could delay or frustrate our ability to

proceed into clinical trials or obtain marketing approval. Our product candidates may fail to show the desired safety and efficacy in clinical development despite having progressed through preclinical studies and initial clinical trials.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including changes in regulatory policy during the period of our product candidate development. Any such delays could negatively impact our business, financial condition, results of operations and prospects.

Interim, “top-line” and preliminary results from our clinical trials that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim, top-line or preliminary results from our clinical trials. Interim results from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or top-line results also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Differences between preliminary, top-line or interim data and final data could significantly harm our business prospects and may cause the trading price of our common stock to fluctuate significantly. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

Further, others, including regulatory agencies may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular development program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure. Any information we determine not to disclose may ultimately be deemed meaningful by you or others with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If the interim, top-line or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, product candidates may be harmed, which could significantly harm our business prospects.

Our preclinical studies and clinical trials may fail to demonstrate substantial evidence of the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects may be identified during the development of our product candidates, which could prevent, delay or limit the scope of regulatory approval of our product candidates, limit their commercialization, increase our costs or necessitate the abandonment or limitation of the development of some of our product candidates.

To obtain the requisite regulatory approvals for the commercial sale of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are safe, pure and potent for use in each target indication. These trials are expensive and time consuming, and their outcomes are inherently uncertain. Failures can occur at any time during the development process. Preclinical studies and clinical trials often fail to demonstrate safety or efficacy of the product candidate studied for the target indication, and most product candidates that begin clinical trials are never approved.

We may fail to demonstrate with substantial evidence from adequate and well-controlled trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that our product candidates are safe and potent for their intended uses.

If our product candidates are associated with undesirable effects in preclinical studies or clinical trials or have characteristics that are unexpected, we may decide or be required to perform additional preclinical studies or to halt or delay further clinical development of our product candidates or to limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for the product candidate, if approved. In particular with respect our TIL product candidates, side effects may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from personalized cell therapy are not normally encountered in the general patient population and by medical personnel.

If any such adverse events occur, our clinical trials could be suspended or terminated. If we cannot demonstrate that any adverse events were not caused by the drug, the FDA, MHRA, EMA or comparable foreign regulatory authorities could order us to cease further development of, or deny approval of, our product candidates for any or all targeted indications. Even if we are able to demonstrate that all future serious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect, or are required, to not initiate, delay, suspend or terminate any future clinical trial of any of our product candidates, the commercial prospects of such product candidates may be harmed and our ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of these occurrences may harm our ability to develop other product candidates, and may harm our business, financial condition and prospects significantly.

If our product candidates are associated with side effects in clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. The FDA, MHRA, EMA, comparable foreign regulatory authorities or an IRB may also require that we suspend, discontinue, or limit our clinical trials based on safety information, or that we conduct additional animal or human studies regarding the safety and efficacy of our product candidates which we have not planned or anticipated. Such findings could further result in regulatory authorities failing to provide marketing authorization for our product candidates or limiting the scope of the approved indication, if approved. Many product candidates that initially showed promise in early-stage testing have later been found to cause side effects that prevented further development of the product candidate.

Additionally, if one or more of our product candidates receives marketing approval, and we or others identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

•regulatory authorities may suspend, withdraw or limit approvals of such product, or seek an injunction against its manufacture or distribution;

•regulatory authorities may require additional warnings on the label;

•we may be required to create a medication guide outlining the risks of such side effects for distribution to patients or other requirements subject to a REMS;

•we may be required to change the way a product is administered or conduct additional trials;

•we could be sued and held liable for harm caused to patients;

•we may decide to remove the product from the market;

•we may not be able to achieve or maintain third-party payor coverage and adequate reimbursement

•we may be subject to fines, injunctions or the imposition of civil or criminal penalties; and

•our reputation and physician or patient acceptance of our products may suffer.

There can be no assurance that we will resolve any issues related to any product-related adverse events to the satisfaction of the FDA or comparable foreign regulatory agency in a timely manner or at all. Moreover, any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

As an organization, we do not have experience completing clinical trials, and may be unable to complete clinical trials for any product candidates we may develop, including SYN-2510 or our CoStAR-TIL Collaboration Product.

We are early in our development efforts for our product candidates and will need to successfully complete clinical trials, including pivotal clinical trials, in order to obtain FDA, MHRA, EMA or comparable foreign regulatory authorities’ approval to market any of our product candidates. Carrying out clinical trials and the submission of a successful BLA or MAA is a complicated process. As an organization, we are early in the process of collaborating with ImmuneOnco on the development of SYN-2510 and SYN-27M and with our IIT collaborator in China, and have no prior experience in China or in similar collaborations, or in completing any clinical trial, have limited experience in preparing regulatory submissions and have not previously submitted a BLA or MAA for any product candidate. We do not have a clinical development team. We have no prior experience developing bispecific antibodies and have no experience treating patients with bispecific antibodies. We have only previously treated patients with our TIL product in a compassionate use program in the United Kingdom with a TIL product that was manufactured using a prior version of the ITIL-168 manufacturing process, and dosed one patient in our prior clinical trial for ITIL-306. We have had no interactions with the FDA related to SYN-2510 and cannot be certain how many clinical trials of SYN-2510 will be required or how such trials should be designed. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to submission of the applicable regulatory applications and approval of SYN-2510, or any other product candidate. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop, including SYN-2510. Failure to commence or complete, or delays in, our collaboration or planned clinical trials, could prevent us from or delay us in commercializing our product candidates, including SYN-2510.

We may experience delays or difficulties in the enrollment and/or retention of patients in clinical trials, which could delay or prevent our receipt of necessary regulatory approvals.

Successful and timely completion of clinical trials will require that we enroll a sufficient number of patients. Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population and competition for patients eligible for our clinical trials with competitors which may have ongoing clinical trials for product candidates that are under development to treat the same indications as one or more of our product candidates, or approved products for the conditions for which we are developing our product candidates.

Trials may be subject to delays as a result of patient enrollment taking longer than anticipated or patient withdrawal. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or comparable foreign regulatory authorities. We cannot predict how successful we will be at enrolling subjects in future clinical trials. Subject enrollment is affected by other factors including:

•the severity and difficulty of diagnosing the disease under investigation

•the eligibility and exclusion criteria for the trial in question;

•the size of the patient population and process for identifying patients;

•our ability to recruit clinical trial investigators with the appropriate competencies and experience;

•the design of the trial protocol;

•the perceived risks and benefits of the product candidate in the trial;

•the availability of competing commercially available therapies and other competing therapeutic candidates’ clinical trials for the disease or condition under investigation;

•the willingness of patients to be enrolled in our clinical trials;

•the efforts to facilitate timely enrollment in clinical trials;

•potential disruptions caused by disease outbreaks, epidemics and pandemics, including difficulties in initiating clinical sites, enrolling and retaining participants, diversion of healthcare resources away from clinical trials, travel or quarantine policies that may be implemented, and other factors;

•the patient referral practices of physicians;

•the ability to monitor patients adequately during and after treatment; and

•the proximity and availability of clinical trial sites for prospective patients.

Our inability to enroll a sufficient number of patients for clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in these clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing. Furthermore, we expect to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we will have limited influence over their performance.

Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining enrollment of such patients in our clinical trials.

We may seek orphan drug designation for some of our product candidates, and we may be unsuccessful, or may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity, for product candidates for which we obtain orphan drug designation.

We may seek orphan drug designation for some or all of our product candidates in specific orphan indications in which there is a medically plausible basis for the use of these product candidates. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population of 200,000 or more in the United States where there is no reasonable expectation that the cost of developing and making available the drug or biologic will be recovered from sales in the United States. Orphan drug designation must be requested before submitting a BLA. Although we may seek orphan drug designation for some or all of our product candidates, we may never receive such designations.

In the United States, orphan drug designation entitles a party to financial incentives such as tax advantages and user fee waivers. Opportunities for grant funding toward clinical trial costs may also be available for clinical trials of drugs or biologics for rare diseases, regardless of whether the drugs or biologics are designated for the orphan use.

In addition, if a drug or biologic with an orphan drug designation subsequently receives the first marketing approval for a particular active ingredient or principal molecular structural features for the indication for which it has such designation, the product is entitled to a seven year period of marketing exclusivity, which precludes the FDA from approving another marketing application for the same drug and indication for that time period, except in limited circumstances such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can ensure the availability of sufficient quantities of the orphan product to meet the needs of patients with the disease or condition for which the drug was designated. Even if we obtain orphan drug designation for a product candidate, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing biological products. If we seek orphan drug designation, we may be unsuccessful in obtaining such orphan drug designation for our product candidates. Even if we obtain orphan drug exclusivity for any of our product candidates, we may be unable to maintain the benefits associated with orphan drug designation, or such orphan drug exclusivity may not effectively protect those product candidates from competition because different drugs can be approved for the same condition, and orphan drug exclusivity does not prevent the FDA from approving the same or a different drug in another indication. Even after an orphan drug is granted orphan drug exclusivity and approved, the FDA can subsequently approve a later application for the same drug for the same condition before the expiration of the seven-year exclusivity period if the FDA concludes that the later drug is clinically superior in that it is shown to be safer in a substantial portion of the target populations, more effective or makes a major contribution to patient care. In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan drug designation. Moreover, orphan drug-exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or that we are unable to manufacture sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

Breakthrough therapy designation by the FDA for any product candidate may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that the product candidate will receive marketing approval.

We may, in the future, apply for breakthrough therapy designation, or the equivalent thereof in foreign jurisdictions (where available), for our product candidates. A breakthrough therapy is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For produ

Instil Bio, Inc. [TIL] Filings
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