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What changed in FATE THERAPEUTICS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FATE THERAPEUTICS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+703 added−690 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-28)

Top changes in FATE THERAPEUTICS INC's 2023 10-K

703 paragraphs added · 690 removed · 471 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

183 edited+88 added−83 removed245 unchanged
Biggest changeThis includes aggregate reductions of Medicare payments to providers of 2% per fiscal year. • On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which further reduced Medicare payments to several types of providers. • On April 13, 2017, CMS published a final rule that gives states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. • On May 23, 2019, CMS published a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020. 28 Table of Contents • The Inflation Reduction Act (the IRA) includes several provisions that may impact our business to varying degrees, including provisions that create a $2,000 out-of-pocket cap for Medicare Part D beneficiaries, impose new manufacturer financial liability on certain drugs under Medicare Part D, allow the U.S. government to negotiate Medicare Part B and Part D pricing for certain high-cost drugs without generic or biosimilar competition, require companies to pay rebates to Medicare for drug prices that increase faster than inflation, and delay the rebate rule that would require pass through of pharmacy benefit manager rebates to beneficiaries.
Biggest changeDue to the Statutory Pay-As-You-Go Act of 2010, estimated budget deficit increases resulting from the American Rescue Plan Act of 2021, and subsequent legislation, Medicare payments to providers will be further reduced starting in 2025 absent further legislation. • On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which further reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. 29 Table of Contents • On April 13, 2017, CMS published a final rule that gives states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. • On May 23, 2019, CMS published a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020. • On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. • The Inflation Reduction Act of 2022 (IRA) includes several provisions that may impact our business to varying degrees, including provisions that reduce the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating the coverage gap; impose new manufacturer financial liability on certain drugs under Medicare Part D, allow the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delay until January 1, 2032 the implementation of the HHS rebate rule that would have limited the fees that pharmacy benefit managers can charge.
In addition, Ono terminated all further research and development with respect to Candidate 1, and we retained all rights to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono. In June 2022, we entered into an amendment with Ono to the Ono Agreement (the Ono Amendment).
In addition, Ono terminated all further research and development with respect to Candidate 1, and we retained all rights to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono. In June 2022, we entered into an amendment with Ono to the Ono Agreement (the 2022 Ono Amendment).
In addition, in those territories where Ono has exclusive rights of commercialization, we are eligible to receive tiered royalties (Royalties) ranging from the mid-single digits to the low-double digits based on annual net sales by Ono for each Candidate in such territories, with such royalties subject to certain reductions.
In addition, in those territories where Ono has exclusive rights of commercialization, we are eligible to receive tiered royalties (Royalties) ranging from the mid-single digits to the low-double digits based on annual net sales by Ono for each Candidate in such territories, with the Royalties subject to certain reductions.
If commercial sales of a licensed product commence, we will also be required to pay royalties at percentage rates in the low-single digits on net sales of licensed products. Our royalty payments are subject to reduction for any third-party payments required to be made until a minimum royalty percentage has been reached.
If commercial sales of a licensed product commence, we will also be required to pay royalties at percentage rates in the low-single digits on net sales of licensed products. Our royalty payments are subject to reduction for any third-party payments required to be made until a minimum royalty percentage has been reached.
Dana-Farber Cancer Institute In April 2020, we entered into a license agreement with the Dana-Farber Cancer Institute (DFCI) for rights relating to novel antibody fragments that uniquely and specifically bind the alpha-3 domain of MICA/B.
Dana-Farber Cancer Institute (DFCI) In April 2020, we entered into a license agreement with the DFCI for rights relating to novel antibody fragments that uniquely and specifically bind the alpha-3 domain of MICA/B.
Our obligation to pay royalties continues on a country-by-country basis until the expiration of all licensed patent rights covering licensed products in such country, and our royalty payments will be reduced by other payments we are required to make to third parties in certain circumstances until a minimum royalty percentage has been reached.
Our obligation to pay royalties continues on a country-by-country basis until the expiration of all licensed patent rights covering licensed products in such country, and our royalty payments will be reduced by other payments we are required to make to third parties in certain circumstances until a minimum royalty percentage has been reached.
We expect that we will continue to contract with third parties, including medical center cell therapy facilities and CMOs, for the conduct of certain of the activities required to manufacture our iPSC-derived cell product candidates. Marketing, Market Access, & Sales We currently intend to commercialize any products that we may successfully develop.
We expect that we will continue to contract with third parties, including medical center cell therapy facilities and CMOs, for the conduct of certain of the activities required to manufacture our iPSC-derived cell product candidates. Marketing, Market Access and Sales We currently intend to commercialize any products that we may successfully develop.
The intent of PREA is to compel sponsors whose products have pediatric applicability to study those products in pediatric populations.
The intent of the PREA is to compel sponsors whose products have pediatric applicability to study those products in pediatric populations.
The FDA may grant deferrals for submission of data or full or partial waivers. Generally, PREA does not apply to any biological product or drug for an indication for which orphan designation has been granted.
The FDA may grant deferrals for submission of data or full or partial waivers. Generally, the PREA does not apply to any biological product or drug for an indication for which orphan designation has been granted.
Arrangements with third-party payors and customers can expose pharmaceutical manufactures to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, or the FCA, which may constrain the business or financial arrangements and relationships through which companies research, sell, market and distribute pharmaceutical products.
Arrangements with third-party payors and customers can expose pharmaceutical manufactures to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act (FCA) which may constrain the business or financial arrangements and relationships through which companies research, sell, market and distribute pharmaceutical products.
HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; • The federal legislation commonly referred to as the Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS, information related to payments or other transfers of value made to physicians, other licensed care professionals and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • Federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs; • Federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and • Analogous state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including, but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and local laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require the reporting of information related to drug pricing; state and local laws requiring the registration of pharmaceutical sales representatives; and state laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; • The federal legislation commonly referred to as the Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS, information related to payments or other transfers of value made to physicians, other licensed care professionals and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • Federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs; • Federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and • Analogous state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including, but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and local laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require the reporting of information related to drug pricing; state and local laws requiring the registration of pharmaceutical sales representatives; and state laws governing the privacy and security of 31 Table of Contents health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Under the Ono Agreement entered into in September 2018, we and Ono intended to research and preclinically develop two iPSC-derived CAR T-cell product candidates, one of which was designated to target an antigen expressed on certain lymphoblastic leukemias (Candidate 1) and the second of which was designated to target an antigen expressed on certain solid tumors (Candidate 2) (each a Candidate and, collectively, the Candidates).
Under the original Ono Agreement entered into in September 2018, we and Ono intended to research and preclinically develop two iPSC-derived CAR T-cell product candidates, one of which was designated to target an antigen expressed on certain lymphoblastic leukemias (Candidate 1) and the second of which was designated to target an antigen expressed on certain solid tumors (Candidate 2) (each a Candidate and, collectively, the Candidates).
Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one rare disease designation and for which the only approved indication is for that disease or condition. If a product receives multiple rare disease designations or has multiple approved indications, it may not qualify for the orphan drug exemption.
Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one orphan designation and for which the only approved indication is for that disease or condition. If a product receives multiple orphan designations or has multiple approved indications, it may not qualify for the orphan drug exemption.
We may terminate the agreement for any reason upon prior written notice to the University of Minnesota and payment of all amounts due to the University of Minnesota through the date of termination. Memorial Sloan Kettering Cancer Center In May 2018, we entered into an amended and restated license agreement with Memorial Sloan Kettering Cancer Center.
We may terminate the agreement for any reason upon prior written notice to the University of Minnesota and payment of all amounts due to the University of Minnesota through the date of termination. Memorial Sloan-Kettering Cancer Center (MSKCC) In May 2018, we entered into an amended and restated license agreement with MSKCC.
In preclinical studies, FT576 demonstrated that the high-avidity binding of the BCMA-targeted CAR construct enabled sustained tumor control against various multiple myeloma cell lines, including in long-term in vivo xenograft mouse models.
In preclinical studies, FT576 demonstrated that the high-avidity binding of its BCMA-targeted CAR construct enabled sustained tumor control against various multiple myeloma cell lines, including in long-term in vivo xenograft mouse models.
In particular, we are required to conduct activities toward specific development milestones of licensed products on an annual basis. The agreement will continue until the abandonment of all patent rights or expiration of the last to expire licensed patent.
In particular, we are required to conduct activities toward specific development milestones of licensed products on an annual basis. The license agreement will continue until the abandonment of all patent rights or expiration of the last to expire licensed patent.
Pursuant to the Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute to us proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3).
Pursuant to the 2022 Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute to us proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3).
With the extension of manufacturing to our new corporate headquarters in 2022, we are positioned to support manufacturing and production of our product candidates for all phases of clinical development as well as initial commercialization.
With the extension of manufacturing to our corporate headquarters in 2022, we are positioned to support manufacturing and production of our product candidates for all phases of clinical development as well as initial commercialization.
Interchangeability requires that a biological product is biosimilar to the reference biological product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the product and the reference product may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product. 26 Table of Contents A reference biological product is granted twelve years of exclusivity from the time of first licensure of the reference product.
Interchangeability requires that a biological product is biosimilar to the reference biological product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the product and the reference product may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product. 27 Table of Contents A reference biological product is granted twelve years of exclusivity from the time of first licensure of the reference product.
Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies, including antibody-based therapies such as bi-specific antibodies, and combinations thereof, that may become available in the future. Cellular immunotherapies for the treatment of cancer have recently been an area of significant research and development by academic institutions and biopharmaceutical companies.
Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies, including antibody-based therapies such as bi-specific antibodies, and combinations thereof, that may become available in the future. Cellular immunotherapies for the treatment of cancer and autoimmune diseases have recently been an area of significant research and development by academic institutions and biopharmaceutical companies.
Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant penalties, 30 Table of Contents including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, possible exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.
Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, possible exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.
During 2022, Janssen exercised a commercial option for two collaboration candidates: an iPSC-derived, CAR-targeted NK cell product candidate for the treatment of B-cell lymphoma, for which the FDA allowed an IND application in December 2022; and an iPSC-derived, CAR-targeted NK cell product candidate for the treatment of multiple myeloma, for which the companies were preparing to submit an IND application to the FDA in early 2023.
(Janssen) exercised a commercial option for two collaboration candidates: an iPSC-derived CAR NK cell product candidate for the treatment of B-cell lymphoma, for which the FDA allowed an IND application in December 2022; and an iPSC-derived CAR NK cell product candidate for the treatment of multiple myeloma, for which the companies were preparing to submit an IND application to the FDA in early 2023.
Under the terms of the Ono Agreement, for Candidate 2 and for Candidate 3 (subject to exercise by Ono of its preclinical option to Candidate 3), we are eligible to receive additional payments upon the achievement of certain clinical, regulatory and commercial milestones (the Ono Milestones) with respect to each Candidate in an amount up to $843.0 million in aggregate, with the applicable milestone payments for the United States and Europe subject to reduction by 50% if we elect to co-develop and co-commercialize the Candidate in the United States and Europe as described above.
Under the terms of the Ono Agreement (as amended by the 2022 Ono Amendment), for Candidate 2 and for Candidate 3 (subject to exercise by Ono of its preclinical option to Candidate 3), we are eligible to receive additional payments upon the achievement of certain clinical, regulatory and commercial milestones (the Ono Milestones) with respect to each Candidate in an amount up to $843.0 million in aggregate, with the applicable milestone payments for the United States and Europe subject to reduction by 50% if we elect to co-develop and co-commercialize the Candidate in the United States and Europe as described above.
U.S. Review and Approval Processes In order to obtain approval to market a biological product in the United States, a BLA must be submitted to the FDA that provides data establishing to the FDA’s satisfaction the safety, purity and potency of the investigational product for the proposed indication.
Review and Approval Processes In order to obtain approval to market a biological product in the United States, a BLA must be submitted to the FDA that provides data establishing to the FDA’s satisfaction the safety, purity and potency of the investigational product for the proposed indication.
To create better cell therapies, we have pioneered a therapeutic approach that we generally refer to as cell programming: we create and engineer human induced pluripotent stem cells (iPSCs) to incorporate novel synthetic controls of cell function; we generate a clonal master iPSC line for use as a renewable source of cell manufacture; and we direct the fate of the clonal master iPSC line to produce our first-in-class cell therapy product candidate.
To create better cell therapies, we have pioneered a therapeutic approach that we generally refer to as cell programming: we create and engineer human induced pluripotent stem cells (iPSCs) to incorporate novel synthetic controls of cell function; we generate a clonal master iPSC line for use as a renewable source of cell manufacture; and we direct the fate of the clonal master iPSC line to produce our cell therapy product candidate.
The companies are also currently conducting preclinical development of a second off-the-shelf, iPSC-derived, CAR-targeted effector cell product candidate for the treatment of solid tumors (referred to as Candidate 3 below) under the Ono Agreement.
The companies are also currently conducting preclinical development of a second iPSC-derived CAR-targeted effector cell product candidate for the treatment of solid tumors (referred to as Candidate 3 below) under the Ono Agreement.
Any issued U.S. patents and any U.S. patents that may issue from patent applications pending in this portfolio are expected to have statutory expiration dates ranging from 2026 to 2031. We also have exclusively licensed from the J. David Gladstone Institutes (Gladstone) intellectual property covering the generation of iPSCs using CRISPR-mediated gene activation.
Any issued U.S. 15 Table of Contents patents and any U.S. patents that may issue from patent applications pending in this portfolio are expected to have statutory expiration dates ranging from 2026 to 2031. We also have exclusively licensed from the J. David Gladstone Institutes (Gladstone) intellectual property covering the generation of iPSCs using CRISPR-mediated gene activation.
As a result, coverage determination is often a 27 Table of Contents time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained. Further, coverage policies and third-party payor reimbursement rates may change at any time.
As a result, coverage determination is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained. Further, coverage policies and third-party payor reimbursement rates may change at any time.
In addition, either party may terminate the Ono Agreement in the event of breach, insolvency or patent challenges by the other party; provided, that Ono may terminate the Ono Agreement in its sole discretion (x) on a Candidate-by-Candidate basis at any time after the second anniversary of the effective date of the Ono Agreement or (y) on a Candidate-by-Candidate or country-by-country basis at any time after the expiration of the option period, subject to certain limitations.
In addition, either party may terminate the Ono Agreement in the event of breach, insolvency or patent challenges by the other party; provided, that Ono may terminate the Ono Agreement in its sole discretion (x) on a Candidate-by-Candidate basis at any time after the second anniversary of the effective date of the Ono Agreement or (y) on a Candidate-by-Candidate or country-by-country basis at any 14 Table of Contents time after the expiration of the option period, subject to certain limitations.
FT819 incorporates two novel synthetic controls of cell function: a novel 1XX CAR construct inserted directly into the T-cell receptor alpha constant (TRAC) locus that targets CD19; and the complete disruption of T-cell receptor (TCR) expression for the prevention of graft-versus-host disease (GvHD), a potentially life-threatening complication associated with allogeneic T-cell therapy.
FT819 incorporates two novel synthetic controls of cell function: a novel 1XX CAR construct inserted directly into the TRAC locus that targets CD19; and the complete disruption of TCR expression for the prevention of graft-versus-host disease (GvHD), a potentially life-threatening complication associated with allogeneic T-cell therapy.
A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. Violations are subject to civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs.
A person or entity can be found guilty of 30 Table of Contents violating the statute without actual knowledge of the statute or specific intent to violate it. Violations are subject to civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs.
In addition, we may not be able to obtain commercially reasonable product liability insurance for any products approved for marketing. 32 Table of Contents Human Capital Our success as a company depends upon the innovation, drive, and dedication of our employees, and we seek to attract, incentivize, and reward creative and performance-driven employees.
In addition, we may not be able to obtain commercially reasonable product liability insurance for any products approved for marketing. Human Capital Our success as a company depends upon the innovation, drive, and dedication of our employees, and we seek to attract, incentivize, and reward creative and performance-driven employees.
In addition, we have exclusively licensed from MSKCC foundational intellectual property covering iPSC-derived cellular immunotherapy, including T cells and NK cells derived from iPSCs engineered with CARs, for human therapeutic use.
We have exclusively licensed from MSKCC foundational intellectual property covering iPSC-derived cellular immunotherapy, including T-cells and NK cells derived from iPSCs engineered with CARs, for human therapeutic use.
We plan to further evaluate these alternatives as we approach approval for the first of our product candidates. 20 Table of Contents Government Regulation In the United States, the FDA regulates biological products under the Federal Food, Drug, and Cosmetic Act (the FDCA) and the Public Health Service Act (the PHS Act) and related regulations.
We plan to further evaluate these alternatives as we approach approval for the first of our product candidates. Government Regulation In the United States, the FDA regulates biological products under the Federal Food, Drug, and Cosmetic Act (the FDCA) and the Public Health Service Act (the PHS Act) and related regulations.
Employees are incentivized for key contributions through awards programs that recognize their commitment and dedication by demonstrating our Fate Pathways to Success . 33 Table of Contents We focus on identifying, recruiting, developing and retaining a team of highly talented and motivated employees. We believe that our relationship with our employees is good.
Employees are incentivized for key contributions through awards programs that recognize their commitment and dedication by demonstrating our Fate Pathways to Success . We focus on identifying, recruiting, developing and retaining a team of highly talented and motivated employees. We believe that our relationship with our employees is good.
Three patients were treated with a single dose of FT576 in combination with a CD38-targeted mAb therapy in the first dose cohort at 100 million cells, with one patient achieving a partial response (PR) and one patient achieving a minor response (MR). All three patients showed a substantial treatment-induced decrease in soluble BCMA.
Three patients were treated with a single dose of FT576 in combination with a CD38-targeted monoclonal antibody therapy in the first dose cohort at 100 million cells, with one patient achieving a partial response (PR) and one patient achieving a minor response (MR). All three patients showed a substantial treatment-induced decrease in soluble BCMA.
Patents and patent applications in this portfolio include claims covering (i) therapeutic compositions of hematopoietic and immune cells, including T cells, NK cells, and CD34 + cells, that have been programmed ex vivo with one or more agents to optimize their therapeutic function for application in oncology and immune disorders and (ii) methods of programming cells including by the activation or inhibition of therapeutically-relevant genes and cell-surface proteins, such as those involved in the homing, proliferation and survival of hematopoietic cells or those involved in the persistence, proliferation and reactivity of immune cells.
Patents and patent applications in this portfolio include claims covering (i) therapeutic compositions of hematopoietic and immune cells, including T-cells, NK cells, and CD34 + cells, that 16 Table of Contents have been programmed ex vivo with one or more agents to optimize their therapeutic function for application in oncology and immune diseases and (ii) methods of programming cells including by the activation or inhibition of therapeutically-relevant genes and cell-surface proteins, such as those involved in the homing, proliferation and survival of hematopoietic cells or those involved in the persistence, proliferation and reactivity of immune cells.
FT522 incorporates five novel synthetic controls of cell function: a proprietary CAR that targets CD19; a novel high-affinity 158V, non-cleavable CD16 (hnCD16) Fc receptor that has been modified to prevent its down-regulation and to enhance ADCC; an IL-15/IL-15 receptor fusion (IL-15RF), a potent cytokine complex that is intended to augment NK cell activity; the complete elimination of CD38 expression to promote persistence and function in high oxidative stress environments; and a novel alloimmune defense receptor (ADR) that targets the cell surface receptor 4-1BB (CD137), a member of the tumor necrosis factor receptor superfamily that is upregulated on activated CD4+, CD8+, and regulatory T cells as well as activated NK cells of the host immune system.
FT522 incorporates five novel synthetic controls of cell function: a proprietary CAR that targets CD19; a novel high-affinity 158V, non-cleavable CD16 (hnCD16) Fc receptor that has been modified to prevent its down-regulation and to enhance ADCC in combination with a monoclonal antibody; an IL-15/IL-15 receptor fusion (IL-15RF), a potent cytokine complex that is intended to augment NK cell activity; the complete elimination of CD38 expression to promote persistence and function in high oxidative stress environments; and a novel synthetic ADR targeting the cell surface receptor 4-1BB (CD137), a member of the tumor necrosis factor receptor superfamily that is upregulated on activated CD4+, CD8+, and regulatory T-cells as well as activated NK cells of the host immune system.
This approach for inducing pluripotency uses CRISPR to directly target 15 Table of Contents a specific location of the genome and activate endogenous gene expression, and does not rely on established methods of cellular reprogramming that require the transduction of multiple transcription factors.
This approach for inducing pluripotency uses CRISPR to directly target a specific location of the genome and activate endogenous gene expression, and does not rely on established methods of cellular reprogramming that require the transduction of multiple transcription factors.
In addition, in a disseminated Nalm6 leukemia model comprised of allo-reactive T cells and tumor cells resistant to T-cell killing (MHC class 1-null), ADR-armed, CD19-targeted, iPSC-derived CAR NK cells exhibited uncompromised effector function in vivo compared to ADR-null, CD19-targeted, iPSC-derived CAR NK cells, suggesting that ADR-armed NK cells functionally persist, proliferate, and durably kill tumor cells while resisting rejection by allo-reactive T cells.
In addition, in a disseminated Nalm6 leukemia model comprised of alloreactive T-cells and CD19+ tumor cells resistant to T-cell killing (MHC class 1-null), ADR-armed, CD19-targeted, iPSC-derived CAR NK cells exhibited uncompromised effector function in vivo compared to ADR-null, CD19-targeted, iPSC-derived CAR NK cells, suggesting that ADR-armed NK cells functionally persist, proliferate, and kill tumor cells while resisting rejection by alloreactive T-cells.
Intellectual Property Relating to iPSC Technology and Platform As of February 18, 2023, we own over 25 patent families directed to programming the fate of somatic cells ex vivo , including patent applications pending in the U.S. and internationally related to our platform for industrial-scale iPSC generation and applications related to differentiation of iPSCs into specialized cells with therapeutic potential.
Intellectual Property Relating to iPSC Technology and Platform As of February 15, 2024, we own over 25 patent families directed to programming the fate of somatic cells ex vivo , including patent applications pending in the U.S. and internationally related to our platform for industrial-scale iPSC generation and applications related to differentiation of iPSCs into specialized cells with therapeutic potential.
Notably, recent findings suggest that long-lived plasma cells often accumulate later in the course of disease and are refractory to immunosuppressants and B-cell depletion therapies, leading to the persistent secretion of autoantibodies despite B-cell targeted intervention strategies.
Notably, recent findings suggest that long-lived plasma cells often accumulate later in the course of disease and are refractory to immunosuppressants and B-cell depletion therapies, leading to the persistent secretion of auto-antibodies despite B-cell targeted intervention strategies.
If commercial sales of a licensed product commence, we will pay DFCI royalties at percentage rates ranging in the low single digits on net sales of licensed products in countries where such product is protected by licensed patent rights.
If commercial sales of a licensed product commence, we will pay DFCI royalties at percentage rates 19 Table of Contents ranging in the low single digits on net sales of licensed products in countries where such product is protected by licensed patent rights.
In 2022, we formed Senescea Therapeutics, Inc., a majority-owned subsidiary of the Company, with Memorial Sloan Kettering Cancer Center to research and develop iPSC-derived cell therapies for the treatment of diseases associated with cell senescence.
In addition, we formed Senescea Therapeutics, Inc., a majority-owned subsidiary of the Company, with Memorial Sloan Kettering Cancer Center (MSKCC) to research and develop iPSC-derived cell therapies for the treatment of diseases associated with cell senescence.
Sadelain demonstrating that directing a CD19-specific CAR to the TRAC locus resulted in uniform CAR expression in human peripheral blood T cells, enhanced T-cell potency, and delayed effector T-cell differentiation and exhaustion (Eyquem et al.
Sadelain demonstrating that directing a CD19-specific CAR to the T-cell receptor alpha chain (TRAC) locus resulted in uniform CAR expression in human peripheral blood T-cells, enhanced T-cell potency, and delayed effector T-cell differentiation and exhaustion (Eyquem et al.
While we believe that our technology, scientific knowledge and experience in the field of cellular immunotherapy provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions, as well as standard-of-care treatments, new products undergoing development and combinations of existing and new therapies.
While we believe that our proprietary iPSC product platform, scientific knowledge and experience in the field of cellular immunotherapy provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions, as well as standard-of-care treatments, new products undergoing development and combinations of existing and new therapies.
Each protocol and any amendments to the protocol must be submitted to the FDA and to the IRB. Information about certain clinical studies must be submitted with specific timeframes to the National Institutes of Health for public dissemination at www.clinicaltrials.gov.
Each protocol and any amendments to the protocol must be submitted to the FDA and to the IRB. Information about 22 Table of Contents certain clinical studies must be submitted with specific timeframes to the National Institutes of Health for public dissemination at www.clinicaltrials.gov.
Under our agreement with the University of Minnesota, we acquired an 16 Table of Contents exclusive royalty-bearing, sublicensable, worldwide license to make, use and sell licensed products in all fields for commercial purposes.
Under our agreement with the University of Minnesota, we acquired an exclusive royalty-bearing, sublicensable, worldwide license to make, use and sell licensed products in all fields for commercial purposes.
Marketing Approval The process required by the FDA before biological products may be marketed in the United States generally involves the following: • completion of nonclinical laboratory and animal tests according to good laboratory practices (GLPs) and applicable requirements for the humane use of laboratory animals or other applicable regulations; • submission to the FDA of an IND application which must become effective before human clinical trials may begin; • approval of the protocol and related documentation by an independent institutional review board, or IRB, or ethics committee at each clinical trial site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinical practices (GCPs) and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use or uses; • submission to the FDA of a Biologics License Application (BLA) for marketing approval that includes substantive evidence of safety, purity, and potency from results of nonclinical testing and clinical trials; • satisfactory completion of an FDA pre-approval inspection of manufacturing facilities where the product is produced to assess compliance with the FDA’s cGMPs to assure that the facilities, methods and controls are adequate, and, if applicable, current good tissue practices (cGTPs) for the use of human cellular and tissue products to prevent the introduction, transmission or spread of communicable diseases; • potential FDA audit of the nonclinical study sites and clinical trial sites that generated the data in support of the BLA; • review of the product candidate by an FDA advisory committee, where appropriate if applicable; • payment of user fees for FDA review of the BLA (unless fee waiver applies); and • FDA review and approval, or licensure, of the BLA which must occur before a biological product can be marketed or sold.
In addition, government regulation may delay or prevent marketing of product candidates for a considerable period of time and impose costly procedures upon our activities. 21 Table of Contents Marketing Approval The process required by the FDA before biological products may be marketed in the United States generally involves the following: • completion of nonclinical laboratory and animal tests according to good laboratory practices (GLPs) and applicable requirements for the humane use of laboratory animals or other applicable regulations; • submission to the FDA of an IND application which must become effective before human clinical trials may begin; • approval of the protocol and related documentation by an independent institutional review board (IRB), or ethics committee at each clinical trial site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinical practices (GCPs) and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use or uses; • submission to the FDA of a Biologics License Application (BLA) for marketing approval that includes substantive evidence of safety, purity, and potency from results of nonclinical testing and clinical trials; • satisfactory completion of an FDA pre-approval inspection of manufacturing facilities where the product is produced to assess compliance with the FDA’s cGMPs to assure that the facilities, methods and controls are adequate, and, if applicable, current good tissue practices (cGTPs) for the use of human cellular and tissue products to prevent the introduction, transmission or spread of communicable diseases; • potential FDA audit of the nonclinical study sites and clinical trial sites that generated the data in support of the BLA; • review of the product candidate by an FDA advisory committee where appropriate, if applicable; • payment of user fees for FDA review of the BLA (unless fee waiver applies); and • FDA review and approval, or licensure, of the BLA which must occur before a biological product can be marketed or sold.
As a result of a 29 Table of Contents modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the federal government.
As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the federal government.
Further, the Right to Try Act of 2017 among other things, provides a federal framework for certain patients to request access to certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval.
Further, the Right to Try Act of 2017 among other things, provides a federal framework for certain patients to request access to certain IND products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval.
ITEM 1. Business Overview We are a clinical-stage biopharmaceutical company dedicated to bringing a first-in-class pipeline of programmed cellular immunotherapies to patients with cancer and autoimmune disorders. Our development of first-in-class cell therapy product candidates is based on a simple notion: we believe that better cell therapies start with better cells.
ITEM 1. Business Overview We are a clinical-stage biopharmaceutical company dedicated to bringing a first-in-class pipeline of programmed cellular immunotherapies to patients with cancer and autoimmune diseases. Our development of programmed cellular immunotherapies is based on a simple notion: we believe that better cell therapies start with better cells.
We expect U.S. patents related to this work to have statutory expiration dates starting in 2037. Intellectual Property Relating to the Programming of Hematopoietic Cells As of February 18, 2023, we own 18 families of U.S. and foreign patents and pending patent applications covering our cell programming technology and compositions of programmed cellular immunotherapies.
We expect U.S. patents related to this work to have statutory expiration dates starting in 2037. Intellectual Property Relating to the Programming of Hematopoietic Cells As of February 15, 2024, we own 16 families of U.S. and foreign patents and pending patent applications covering our cell programming technology and compositions of programmed cellular immunotherapies.
Analogous to master cell lines used to manufacture biopharmaceutical drug products such as monoclonal antibodies, we believe clonal master iPSC lines can be used to mass produce multiplexed-engineered cellular immunotherapies which are well-defined and uniform in composition, can be stored in inventory for off-the-shelf availability, can be combined and administered with other therapies, and can have broader patient reach.
Analogous to master cell lines used to manufacture biopharmaceutical drug products such as monoclonal antibodies, we believe clonal master iPSC lines can be used to mass produce multiplexed-engineered, cellular immunotherapies which are well-defined and uniform in composition, can be stored in inventory for off-the-shelf availability, can be combined and administered with standard-of-care therapies, and can have significant patient reach.
In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process, or if the designated drug development program is no longer being pursued. Priority Review.
In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process, or if the designated drug development program is no longer being pursued. 25 Table of Contents Priority Review.
Clinical investigation of cellular immunotherapy has been rapidly expanding. One particular form of cell-based cancer immunotherapy, CAR T-cell therapy, has emerged as a revolutionary and potentially curative therapy for patients with certain hematologic malignancies, including refractory cancers.
Clinical investigation of cellular immunotherapy has been rapidly expanding. One particular form of cell-based cancer immunotherapy, CAR T-cell therapy, has emerged as a revolutionary and potentially curative treatment for patients with certain hematologic malignancies.
Benefits of such designation also include 25 Table of Contents early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval.
Benefits of such designation also include early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval.
We have a deep pipeline of iPSC-derived, chimeric antigen receptor (CAR)-targeted NK and T-cell product candidates currently under development with multiple clinical trials ongoing: Program Indication CAR Target(s) # of Synthetic Controls Development Stage Partner CAR NK Cell Programs FT576 Multiple Myeloma BCMA 4 Phase 1 FT522 B-cell Lymphoma CD19; 41BB 5 Preclinical Autoimmune Disorders CD19; 41BB 5 Preclinical CAR T-cell Programs FT819 B-cell Lymphoma CD19 2 Phase 1 Chronic Lymphocytic Leukemia CD19 2 Phase 1 FT825 Solid Tumors HER2 7 Preclinical Ono Other CAR-targeted Programs Undisclosed Solid Tumors Not disclosed Not disclosed Preclinical Ono Our Approach The use of human cells as therapeutic entities has disease-transforming potential, and compelling evidence of medical benefit for cell therapy exists across a broad spectrum of severe, life-threatening diseases.
We have a deep pipeline of iPSC-derived, chimeric antigen receptor (CAR)-targeted NK cell and T-cell product candidates currently under development with multiple clinical trials ongoing: Program Indication CAR Target(s) # of Synthetic Controls Development Stage Partner Oncology - Hematologic Malignancies FT819 B-cell Malignancies CD19 2 Phase 1 FT522 B-cell Lymphoma CD19; 41BB 5 Phase 1 FT576 Multiple Myeloma BCMA 4 Phase 1 Oncology - Solid Tumors FT825 Solid Tumors HER2 7 Phase 1 Ono Undisclosed Solid Tumors Not disclosed Not disclosed Preclinical Ono Autoimmune Diseases FT819 Systemic Lupus Erythematosus CD19 2 Phase 1 FT522 Undisclosed CD19; 41BB 5 Preclinical Our Approach The use of human cells as therapeutic entities has disease-transforming potential, and compelling evidence of medical benefit for cell therapy exists across a broad spectrum of severe, life-threatening diseases.
A sponsor may also voluntarily propose a REMS as part of the BLA submission. The need for a REMS is determined as part of the review of the BLA. Based on statutory standards, elements of a REMS may include “dear doctor letters,” a medication guide, more elaborate targeted educational programs, and in some cases restrictions on distribution.
The need for a REMS is determined as part of the review of the BLA. Based on statutory standards, elements of a REMS may include “dear doctor letters,” a medication guide, more elaborate targeted educational programs, and in some cases restrictions on distribution.
In November 2022, we announced that Ono had exercised its preclinical option to FT825/ONO-8250, a multiplexed-engineered, iPSC-derived CAR T-cell product candidate targeting HER2-expressing solid 13 Table of Contents tumors (also referred to as Candidate 2 below), and that we exercised our preclinical option to co-develop and co-commercialize FT825/ONO-8250 in the United States and Europe under a joint arrangement with Ono.
In November 2022, we announced that Ono had exercised its preclinical option to FT825 / ONO-8250, an off-the-shelf, multiplexed-engineered, iPSC-derived CAR T-cell product candidate targeting HER2-expressing solid tumors (also referred to as Candidate 2 below), and that we exercised our preclinical option to co-develop and co-commercialize FT825 / ONO-8250 in the United States and Europe under a joint arrangement with Ono.
Under the amended and restated agreement with Memorial Sloan Kettering Cancer Center, we are obligated to use commercially reasonable efforts to develop and make commercially available licensed products. In particular, we are required to conduct activities and commit a minimum amount of funding toward specific development milestones of licensed products on an annual basis.
Under the amended and restated agreement with MSKCC, we are obligated to use commercially reasonable efforts to develop and make commercially available licensed products. In particular, we are required to conduct activities and commit a minimum amount of funding toward specific development milestones of licensed products on an annual basis.
Additionally, in in vivo proof-of-concept studies, MDC scientists demonstrated that anti-BCMA CAR T cells mediated anti-tumor activity in xenotransplant mouse models of multiple myeloma and of mature B-cell non-Hodgkin lymphoma, where BCMA surface expression is up to 4-fold lower as compared to mouse models of multiple myeloma.
Additionally, in in vivo proof-of-concept studies, MDC scientists demonstrated that BCMA-targeted CAR T-cells mediated anti-tumor activity in xenotransplant mouse models of B-cell lymphoma, where BCMA surface expression is typically up to 4-fold lower as compared to mouse models of multiple myeloma.
The licensed patent rights are described in more detail above under “Intellectual Property Relating to iPSC Technology.” For those patent families where our rights are exclusive, Memorial Sloan Kettering Cancer Center retains the right to practice the patent rights for research, teaching and non-clinical research purposes, and to license other academic and non-profit research institutes to practice the patent rights for research, teaching and non-clinical research purposes.
The licensed patent rights are described in more detail above under “Intellectual Property Relating to iPSC Technology.” For those patent families where our rights are exclusive, MSKCC retains the right to practice the patent rights for research, teaching and non-clinical research purposes, and to license other academic and non-profit research institutes to practice the patent rights for research, teaching and non-clinical research purposes.
Under the terms of the amended and restated agreement, we are required to pay Memorial Sloan Kettering Cancer Center an annual license maintenance fee during the term of the agreement, and are also required to make payments of up to $12.5 million for development, regulatory and commercial milestones achieved with respect to each licensed products.
Under the terms of the amended and restated agreement, we are required to pay MSKCC an annual license maintenance fee during the term of the agreement, and are also required to make payments of up to $12.5 million for development, regulatory and commercial milestones achieved with respect to each licensed products.
As a result of our NK cell program prioritization, our FT516, FT596, FT538, and FT536 NK cell programs are being discontinued. Workforce Reduction. As a result of the termination of the Janssen collaboration and the NK cell program prioritization, during the first quarter of 2023 we are reducing our workforce to approximately 220 employees.
As a result of our NK cell program prioritization, our FT516, FT596, FT538, and FT536 NK cell programs were discontinued. Workforce Reduction. As a result of the termination of the Janssen collaboration and the NK cell program prioritization, during the first quarter of 2023 we reduced our workforce to approximately 220 employees.
As of February 18, 2023 this portfolio includes over 70 issued patents or pending patent applications in the United States and foreign jurisdictions directed to compositions of NK cells, including adaptive memory NK cells and genetically-engineered NK cells, and therapeutic strategies for the treatment of cancer using these NK cells.
As of February 15, 2024 this portfolio includes over 80 issued patents or pending patent applications in the United States and foreign jurisdictions directed to compositions of NK cells, including adaptive memory NK cells and genetically-engineered NK cells, and therapeutic strategies for the treatment of cancer using these NK cells.
We also have exclusively licensed from The Memorial Sloan-Kettering Cancer Center (MSK) intellectual property covering the production and composition of iPSC-derived T cells and their use in cellular immunotherapy, and have a license from MSK to two patent families covering novel CAR constructs as well as off-the-shelf CAR T cells, including the use of CRISPR and other innovative technologies for their production.
We also have exclusively licensed from MSKCC intellectual property covering the production and composition of iPSC-derived T-cells and their use in cellular immunotherapy, and have a license from MSKCC to two patent families covering novel CAR constructs as well as off-the-shelf CAR T-cells, including the use of CRISPR and other innovative technologies for their production.
Any U.S. patents within this portfolio that have issued or may yet issue from pending patent applications will have statutory expiration dates between 2030 and 2043.
Any U.S. patents within this portfolio that have issued or may yet issue from pending patent applications will have statutory expiration dates between 2032 and 2044.
Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU member states, which may deviate slightly from the GDPR, may result in warning letters, mandatory audits and financial penalties, including fines of up to 4% of global revenues, or €20,000,000, whichever is greater.
Failure to comply with the requirements of the GDPR and the related national data protection laws of the EEA Member States and the UK, which may deviate slightly from the GDPR, may result in warning letters, mandatory audits and financial penalties, including fines of up to 4% of global revenues, or €20,000,000, (£17.5 million for the UK GDPR), whichever is greater.
The agreement amends and restates the exclusive license agreement we entered into with Memorial Sloan Kettering Cancer Center in August 2016, under which we obtained rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T cells and NK cells derived from iPSCs engineered with CARs.
The agreement amends and restates the exclusive license agreement we entered into with MSKCC in August 2016, under which we obtained rights relating to compositions and methods covering iPSC-derived cellular immunotherapy, including T-cells and NK cells derived from iPSCs engineered with CARs.
Additionally, in the event a licensed product achieves a specified clinical milestone, Memorial Sloan Kettering Cancer Center is then eligible to receive additional milestone payments, where the amount of such payments owed to Memorial Sloan Kettering Cancer Center are contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.
Additionally, in the event a licensed product achieves a specified clinical milestone, MSKCC is then eligible to receive additional milestone payments, where the amount of such payments owed to MSKCC are contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.
Together, these features of FT819 are designed to induce antigen-specific cytotoxicity, enhance CAR activity through TRAC-regulated expression, and completely eliminate TCR expression to mitigate GvHD.
Together, these features of FT819 are designed to induce antigen-specific cytotoxicity, enhance CAR activity through TRAC-regulated expression, and mitigate risk of GvHD.
As of February 18, 2023, our intellectual property portfolio is composed of over 450 issued patents and 150 patent applications that we license from academic and research institutions, and over 400 issued patents or pending patent applications that we own.
As of February 15, 2024, our intellectual property portfolio is composed of over 450 issued patents and 150 patent applications that we license from academic and research institutions, and over 450 issued patents or pending patent applications that we own.
Our license is exclusive in commercial fields, including for drug discovery and therapeutic purposes. This portfolio covers the generation of human iPSCs from somatic cells and, as of February 18, 2023, includes 17 issued U.S. patents (including U.S.
Our license is exclusive in commercial fields, including for drug discovery and therapeutic purposes. This portfolio covers the generation of human iPSCs from somatic cells and, as of February 15, 2024, includes 21 issued U.S. patents (including U.S.
If a clinical hold is imposed, a trial may not recommence without 21 Table of Contents FDA authorization and then only under terms authorized by the FDA.
If a clinical hold is imposed, a trial may not recommence without FDA authorization and then only under terms authorized by the FDA.
Effective as of January 2020, the CCPA requires covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt out of certain sales or transfers of personal information, and also regulates employee information.
The CCPA requires covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt out of certain sales or transfers of personal information.
This technology is designed to (a) selectively recognize and destroy allo-reactive host immune cells that would otherwise be capable of rejecting the product candidate, (b) maintain other components of the host immune system to preserve hematopoietic function, and (c) activate the product candidate to enhance its potency and persistence.
The ADR receptor is designed to (a) selectively recognize and destroy alloreactive host immune cells that would otherwise be capable of rejecting the product candidate, (b) maintain other components of the host immune system to preserve hematopoietic cell function, and (c) activate the product candidate to enhance its potency and persistence.
In fact, multiple CAR T-cell therapies have now been approved by the United States Food and Drug Administration (FDA) for the treatment of relapsed / refractory B-cell precursor acute lymphoblastic leukemia (ALL), relapsed / refractory diffuse large B-cell lymphoma, relapsed / refractory follicular lymphoma, relapsed / refractory mantle cell lymphoma, and relapsed / refractory multiple myeloma. 5 Table of Contents Cell-based cancer immunotherapies undergoing clinical investigation today most often rely on the use of autologous, or a patient’s own, cells.
In fact, multiple CAR T-cell therapies have now been approved by the United States Food and Drug Administration (FDA) for the treatment of relapsed / refractory B-cell malignancies and relapsed / refractory multiple myeloma. 5 Table of Contents Cell-based cancer immunotherapies undergoing clinical investigation today most often rely on the use of autologous, or a patient’s own, cells.
As a result, we believe our platform is uniquely designed to overcome numerous limitations associated with the production of cell therapies using patient- or donor-sourced cells. Our iPSC product platform is supported by an intellectual property portfolio of over 400 issued patents and 450 pending patent applications.
We believe our therapeutic approach is uniquely designed to overcome numerous limitations associated with the production of cell therapies using patient- or donor-sourced cells. Our proprietary iPSC product platform is supported by an intellectual property portfolio of over 500 issued patents and 500 pending patent applications.
Under our amended and restated agreement with Memorial Sloan Kettering Cancer Center, we have royalty-bearing worldwide licenses to make, use and sell licensed products in all fields for human therapeutic uses.
Under our amended and restated agreement with MSKCC, we have royalty-bearing worldwide licenses to make, use and sell licensed products in all fields for human therapeutic uses.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCurrent and future clinical trials of our product candidates may be delayed, unsuccessful or terminated, or not initiated at all, as a result of many factors, including factors related to: • difficulties in identifying eligible patients for participation in clinical trials of our product candidates, due in part to our focus on the development of certain of our product candidates for the treatment of rare diseases; • difficulties enrolling a sufficient number of suitable patients to conduct clinical trials of our product candidates, including difficulties resulting from patients enrolling in studies of therapeutic product candidates sponsored by us or our competitors and difficulties resulting from patient availability as a result of mandated travel restrictions, prioritization of hospital and other medical resources toward pandemic efforts, policies and procedures implemented at clinical sites with respect to the conduct of clinical trials, and other precautionary measures taken in treating patients or in practicing medicine in response to the ongoing COVID-19 pandemic; • difficulties determining suitable doses and schedules of our novel cell product candidates for evaluation in clinical trials; • difficulties in obtaining agreement from regulatory authorities on study endpoints and/or study duration, achieving study endpoints, the amount and sufficiency of data demonstrating efficacy and safety, and completing data analysis in clinical trials for any of our product candidates; • difficulties in obtaining agreement from regulatory authorities on the preclinical safety and efficacy data, the manufacturing requirements, and the clinical trial design and parameters necessary for an IND application to go into effect to initiate and conduct clinical trials for any of our current product candidates and any other product candidates that we may identify; • the occurrence of unexpected safety issues or adverse events in any ongoing or future clinical trials of our product candidates, including in trials of our product candidates conducted by investigator-sponsors; • securing and maintaining the support of clinical investigators and investigational sites, including investigators and sites who may conduct clinical trials under an investigator-sponsored IND with our financial support, and obtaining institutional review board (IRB) approval at each site for the conduct of our clinical trials; • reaching agreement on acceptable terms with third-party service providers and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different service providers and clinical trial sites; • failure, by us or third parties that we contract with, to manufacture certain of our product candidates consistently, and in sufficient quantities, in accordance with our protocol-specified manufacturing requirements and applicable regulatory requirements; • failure or delays in obtaining sufficient quantities of suitable raw materials, components, and equipment necessary for the conduct of our clinical trials or the manufacture of any product candidate, including any inability to obtain materials as a result of supply chain issues related to the COVID-19 pandemic and the ongoing conflict in Ukraine; • failure or delays by us or by our clinical sites to obtain sufficient quantities of components and supplies necessary for the conduct of our clinical trials, including any inability to obtain agents such as cyclophosphamide or fludarabine which are often required to condition patients for treatment with our product candidates, or certain monoclonal antibodies which are intended for administration to patients in combination with many of our product candidates in certain of our clinical trials; • challenges in distributing our product candidates to clinical trial sites, or failure to establish effective protocols for the supply and transport of our product candidates; • the costs of conducting clinical trials or manufacturing of our product candidates being greater than we anticipate, including due to rising inflation rates, or the timelines for these activities being longer than we anticipate; • our failure, or the failure of investigators, third-party service providers, or clinical trial sites, to ensure the proper and timely conduct of and analysis of data from clinical trials of our product candidates; • inability to reach agreement on clinical trial design and parameters with regulatory authorities, investigators, and IRBs; 36 Table of Contents • regulatory authorities or data monitoring committees requiring or recommending suspension, termination or a clinical hold for various reasons, including concerns about patient safety or the safety of novel therapeutics derived from pluripotent or genome edited therapies; • the serious, life-threatening diseases of the patients enrolled in our clinical trials, who may die or suffer adverse medical events during the course of the trials for reasons that may not be related to our product candidates; • failure of patients to complete clinical trials or adhere to study protocols due to safety issues, side effects, disruptions in study conduct, including study monitoring, data collection and analysis, restrictions on hospital visits or travel relating to the COVID-19 pandemic, or other reasons; • approval of competitive agents that may materially alter the standard of care on which a clinical development plan was based, which may require new or additional trials, or render our product candidates or clinical trial designs obsolete; • governmental or regulatory delays, including any delays due to limitations on the availability of governmental and regulatory agency personnel to review regulatory filings, conduct site inspections or engage in discussions with us as a result of the ongoing COVID-19 pandemic, failure to obtain regulatory approval, or uncertainty or changes in U.S. or foreign regulatory requirements, policy or guidelines; and • limitations on clinical trial conduct at our clinical trial sites resulting from prioritization of hospital and other medical resources toward other efforts, such as the COVID-19 pandemic or other public health concerns, policies and procedures implemented at clinical sites with respect to the conduct of clinical trials including those relating to site initiation, study monitoring, and data collection and analysis, and other precautionary measures taken in treating patients or in practicing medicine in response to various public health concerns.
Biggest changeCurrent and future clinical trials of our product candidates may be delayed, unsuccessful or terminated, or not initiated at all, as a result of many factors, including factors related to: • difficulties in identifying eligible patients for participation in clinical trials of our product candidates, due in part to our focus on the development of certain of our product candidates for the treatment of rare diseases; • difficulties enrolling a sufficient number of suitable patients to conduct clinical trials of our product candidates, including difficulties resulting from patients enrolling in studies of therapeutic product candidates sponsored by us or our competitors and difficulties resulting from patient availability as a result of any measures taken by governmental authorities, hospitals, or clinical trial sites in response to any future public health crises or other serious disasters or similar events; • difficulties determining suitable doses and schedules of our novel cell product candidates for evaluation in clinical trials; • difficulties in obtaining agreement from regulatory authorities on study endpoints and/or study duration, achieving study endpoints, the amount and sufficiency of data demonstrating efficacy and safety, and completing data analysis in clinical trials for any of our product candidates; • delays in filing an IND application or IND amendment with the FDA to initiate or amend clinical trials of our current product candidates and any other product candidates that we may identify; • difficulties in obtaining agreement from regulatory authorities on the preclinical safety and efficacy data, the manufacturing requirements, and the clinical trial design and parameters necessary for an IND application to go into effect to initiate and conduct clinical trials for any of our current product candidates and any other product candidates that we may develop; • the occurrence of unexpected safety issues or adverse events in any ongoing or future clinical trials of our product candidates, including in trials of our product candidates conducted by investigator-sponsors; • securing and maintaining the support of clinical investigators and investigational sites, including investigators and sites who may conduct clinical trials under an investigator-sponsored IND with our financial support, and obtaining institutional review board (IRB) approval at each site for the conduct of our clinical trials; • reaching agreement on acceptable terms with third-party service providers and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different service providers and clinical trial sites; 39 Table of Contents • failure to manufacture certain of our product candidates consistently, and at acceptable quality levels and costs, in accordance with our protocol-specified manufacturing requirements and applicable regulatory requirements; • failure or delays in obtaining sufficient quantities of suitable raw materials, components, and equipment necessary for the conduct of our clinical trials or the manufacture of any product candidate, including any inability to obtain materials as a result of supply chain issues related to any future public health crises or other serious disasters or the ongoing wars between Russia and Ukraine and between Israel and Hamas, or other factors; • failure or delays by us or by our clinical sites to obtain sufficient quantities of components and supplies necessary for the conduct of our clinical trials, including any inability to obtain agents such as cyclophosphamide or fludarabine which are often required to condition patients for treatment with our product candidates, or certain monoclonal antibodies which are intended for administration to patients in combination with many of our product candidates in certain of our clinical trials; • challenges in distributing our product candidates to clinical trial sites, or failure to establish effective protocols for the supply and transport of our product candidates; • the costs of conducting clinical trials or manufacturing of our product candidates being greater than we anticipate, including due to rising inflation rates, or the timelines for these activities being longer than we anticipate; • our failure, or the failure of investigators, third-party service providers, or clinical trial sites, to ensure the proper and timely conduct of and analysis of data from clinical trials of our product candidates; • inability to reach agreement on clinical trial design and parameters with regulatory authorities, investigators, and IRBs; • regulatory authorities or data monitoring committees requiring or recommending suspension, termination or a clinical hold for various reasons, including concerns about patient safety or the safety of novel therapeutics derived from pluripotent or genome edited therapies; • the serious, life-threatening diseases of the patients in our oncology clinical trials, who may die or suffer adverse medical events during the course of the trials for reasons that may not be related to our product candidates; • failure of patients to complete clinical trials or adhere to study protocols due to safety issues, side effects, disruptions in study conduct, or other reasons; • approval of competitive agents that may materially alter the standard of care on which a clinical development plan was based, which may require new or additional trials, or render our product candidates or clinical trial designs obsolete; • governmental or regulatory delays, including any delays due to limitations on the availability of governmental and regulatory agency personnel to review regulatory filings, conduct site inspections or engage in discussions with us as a result of any future public health crisis or other serious disaster or similar events, failure to obtain regulatory approval, or uncertainty or changes in U.S. or foreign regulatory requirements, policy or guidelines; and • limitations on clinical trial conduct at our clinical trial sites resulting from prioritization of hospital and other medical resources toward other efforts, such as any future public health crisis or other serious disaster or similar events, policies and procedures implemented at clinical sites with respect to the conduct of clinical trials including those relating to site initiation, study monitoring, and data collection and analysis, and other precautionary measures taken in treating patients or in practicing medicine in response to various public health concerns.
Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs or other third-party manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities and on the requisite timelines to meet the requirements for the potential launch of the product, or to meet potential future demand.
Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or any CMOs or other third-party manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities and on the requisite timelines to meet the requirements for the potential launch of the product, or to meet potential future demand.
Additionally, changes in regulatory requirements may require us or our third-party manufacturers to perform additional studies or to modify protocols, processes, materials or facilities for the manufacture of our product candidates or any components thereof.
Additionally, changes in regulatory requirements may require us or any third-party manufacturers to perform additional studies or to modify protocols, processes, materials or facilities for the manufacture of our product candidates or any components thereof.
We may seek regenerative medicine advanced therapy, or RMAT, designation for certain of our product candidates, but such designation may not actually lead to a faster development or regulatory review or approval process and we may be unable to obtain or maintain the benefits associated with such designation.
We may seek regenerative medicine advanced therapy (RMAT) designation for certain of our product candidates, but such designation may not actually lead to a faster development or regulatory review or approval process and we may be unable to obtain or maintain the benefits associated with such designation.
There can be no assurance that any product candidates developed from or related to our iPSC platform or any of our research programs will not cause severe or undesirable side effects or result in significant delays or unanticipated costs, or that such development problems can be solved.
There can be no assurance that any product candidates developed from or related to our iPSC product platform or any of our research programs will not cause severe or undesirable side effects or result in significant delays or unanticipated costs, or that such development problems can be solved.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service, or IRS, and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service (IRS) and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock.
For example: • others may be able to make product candidates that are similar to ours but that are not covered by the claims of the patents that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our pending patent applications will not lead to issued patents; • issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • we cannot predict the scope of protection of any patent issuing based on our patent applications, including whether the patent applications that we own or in-license will result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries; 54 Table of Contents • the claims of any patent issuing based on our patent applications may not provide protection against competitors or any competitive advantages, or may be challenged by third parties; • if enforced, a court may not hold that our patents are valid, enforceable and infringed; • we may from time to time initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose; • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property; • we may fail to adequately protect and police our trademarks and trade secrets; and • the patents of others may have an adverse effect on our business, including if others obtain patents claiming subject matter similar to or improving that covered by our patents and patent applications.
For example: 58 Table of Contents • others may be able to make product candidates that are similar to ours but that are not covered by the claims of the patents that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our pending patent applications will not lead to issued patents; • issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • we cannot predict the scope of protection of any patent issuing based on our patent applications, including whether the patent applications that we own or in-license will result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries; • the claims of any patent issuing based on our patent applications may not provide protection against competitors or any competitive advantages, or may be challenged by third parties; • if enforced, a court may not hold that our patents are valid, enforceable and infringed; • we may from time to time initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose; • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property; • we may fail to adequately protect and police our trademarks and trade secrets; and • the patents of others may have an adverse effect on our business, including if others obtain patents claiming subject matter similar to or improving that covered by our patents and patent applications.
While we currently manufacture our iPSC-derived cell product candidates at our cGMP facilities located in San Diego, California, we also rely, on third parties to manufacture certain components required for the manufacture of our product candidates, and we may rely on third parties to conduct some or all aspects of manufacturing of our product candidates for use in conducting later stage clinical trials and for commercial sale upon approval of any of our product candidates.
While we currently manufacture clinical supplies of our iPSC-derived cell product candidates at our cGMP facilities located in San Diego, California, we also rely on third parties to manufacture certain components required for the manufacture of our product candidates, and we may rely on third parties to conduct some or all aspects of manufacturing of our product candidates for use in conducting later stage clinical trials and for commercial sale upon approval of any of our product candidates.
Because we expect to continue to rely on our current collaborator and to enter into new collaborations in the future, the development and commercialization of any of our product candidates could be substantially delayed, and our ability to receive future funding could be substantially impaired if one or more of our current or future collaborators: • shifts its priorities and resources away from our collaborations due to a change in business strategies, or a merger, acquisition, sale or downsizing of its company or business unit; • ceases development in therapeutic areas which are the subject of our collaboration; • fails to select a product candidate for advancement into preclinical development, clinical development, or subsequent clinical development into a marketed product; • changes the success criteria for a particular product candidate, thereby delaying or ceasing development of such product candidate; • significantly delays the initiation or conduct of certain activities which could delay our receipt of milestone payments tied to such activities, thereby impacting our ability to fund our own activities; • develops a product candidate that competes, either directly or indirectly, with our product candidates; • does not obtain the requisite regulatory approval of a product candidate; • does not successfully commercialize a product candidate; • encounters regulatory, resource or quality issues and be unable to meet demand requirements; • exercises its rights under the agreement to terminate the collaboration, as Janssen did in January 2023, or otherwise withdraws support for, or otherwise impairs development under the collaboration; • disagrees on the research, development or commercialization of a product candidate resulting in a delay in milestones, royalty payments or termination of such product candidate; and • uses our proprietary information or intellectual property in such a way as to jeopardize our rights in such property.
Because we expect to continue to rely on our current collaborator and to enter into new collaborations in the future, the development and commercialization of any of our product candidates could be substantially delayed, and our ability to receive future funding could be substantially impaired, if one or more of our current or future collaborators: • shifts its priorities and resources away from our collaborations due to a change in business strategies, or a merger, acquisition, sale or downsizing of its company or business unit; • ceases development in therapeutic areas which are the subject of our collaboration; • fails to select a product candidate for advancement into preclinical development, clinical development, or subsequent clinical development into a marketed product; • changes the success criteria for a particular product candidate, thereby delaying or ceasing development of such product candidate; • significantly delays the initiation or conduct of certain activities which could delay our receipt of milestone payments tied to such activities, thereby impacting our ability to fund our own activities; • develops a product candidate that competes, either directly or indirectly, with our product candidates; • does not obtain the requisite regulatory approval of a product candidate; • does not successfully commercialize a product candidate; • encounters regulatory, resource or quality issues and be unable to meet demand requirements; 53 Table of Contents • exercises its rights under the agreement to terminate the collaboration, as Janssen did in January 2023, or otherwise withdraws support for, or otherwise impairs development under the collaboration; • disagrees on the research, development or commercialization of a product candidate resulting in a delay in milestones, royalty payments or termination of such product candidate; and • uses our proprietary information or intellectual property in such a way as to jeopardize our rights in such property.
If these companies develop product candidates or platform technologies more rapidly than we do, if their commercialized products or product candidates are more effective or have fewer side effects, or if they compete in various other aspects of our business, our ability to develop and successfully commercialize product candidates and to execute on our business plans will be adversely affected.
If these companies develop product candidates or platform technologies more rapidly than we do, if their commercialized products or product candidates are more effective, more cost effective, or have fewer side effects, or if they compete in various other aspects of our business, our ability to develop and successfully commercialize product candidates and to execute on our business plans will be adversely affected.
For example, laws in all 50 U.S. states and the District of Columbia require businesses to provide notice to consumers whose sensitive personal information has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly.
For example, laws in all 50 U.S. states and the District of Columbia require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly.
We depend on strategic partnerships and collaboration arrangements for the development and commercialization of certain of our product candidates in certain indications or geographic territories, and if these arrangements are unsuccessful, this could result in delays and other obstacles in the development, manufacture or commercialization of any of our product candidates and materially harm our results of operations.
We depend on strategic partnerships and collaboration arrangements for the development and commercialization of certain of our product candidates in certain indications or geographic territories, and if these arrangements are terminated or are unsuccessful, this could result in delays and other obstacles in the development, manufacture or commercialization of any of our product candidates and materially harm our results of operations.
In addition, certain of our executive officers, employees and affiliates have established or may in the future establish programmed selling plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, for the purpose of effecting sales of our common stock.
In addition, certain of our executive officers, employees and affiliates have established and may in the future establish programmed selling plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, for the purpose of effecting sales of our common stock.
In addition, if contaminants are discovered in our supply of product candidates or in our manufacturing facilities or those of our third-party suppliers and manufacturers, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.
In addition, if contaminants are discovered in our supply of product candidates or in our manufacturing facilities or those of our third-party suppliers and manufacturers, such manufacturing facilities may be closed for an extended period of time to investigate and remedy the contamination.
The FDA will generally not consider the data from a foreign clinical trial not conducted under an IND unless (i) the trial was well-designed and well-conducted in accordance with GCP requirements, including requirements for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials in a way that provides assurance that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects are protected, and (ii) the FDA is able to validate the data from the trial through an onsite inspection, if necessary.
The FDA will generally not consider the data from a foreign clinical trial not conducted under an IND unless (i) the trial was well-designed and well-conducted in accordance with Good Clinical Practice (GCP) requirements, including requirements for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials in a way that provides assurance that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects are protected, and (ii) the FDA is able to validate the data from the trial through an onsite inspection, if necessary.
These requirements include submissions of safety and other post-marketing information, reports, registration and listing requirements, requirements relating to current cGMP, applicable product tracking and tracing requirements, quality control, quality assurance and corresponding maintenance of records and documents, and recordkeeping.
These requirements include submissions of safety and other post-marketing information, reports, registration and listing requirements, requirements relating to cGMP, applicable product tracking and tracing requirements, quality control, quality assurance and corresponding maintenance of records and documents, and recordkeeping.
We rely upon third parties, including medical institutions, clinical investigators, and CROs for the conduct of certain research and preclinical development activities, process development and manufacturing activities, and for the conduct, management, and supervision of clinical trials of our product candidates.
We rely upon third parties, including medical institutions, clinical investigators, and clinical research organizations (CROs) for the conduct of certain research and preclinical development activities, process development and manufacturing activities, and for the conduct, management, and supervision of clinical trials of our product candidates.
Our future capital requirements will depend on many factors, including, but not limited to: • the progress, results, size, timing and costs of our ongoing and planned clinical trials, and any additional clinical trials we may initiate, conduct or support for our product candidates; • the progress, results, size, timing and costs of our preclinical, process development and manufacturing studies, and activities necessary to initiate and conduct clinical trials for our product candidates and to establish and maintain manufacturing capabilities necessary to support such trials; • continued progress in our research and development programs, including preclinical studies, process development, manufacturing and other research activities that may be necessary in order for an IND application to go into effect for a prospective clinical development candidate, as well as potential future clinical trials of any additional product candidates we may identify for development; • the extent to which we are required to pay milestone or other payments under our existing in-license agreements and any in-license agreements that we may enter into in the future, and the timing of such payments, including payments owed to MSK in connection with the stock price appreciation milestones; • our ability and the ability of our investigators to initiate and conduct, and the progress, results, size, timing and costs of, clinical trials of our product candidates that will be necessary to support any application for regulatory approval; • our ability to manufacture, or enter into arrangements with third parties for the manufacture of our existing product candidates, as well as potential future clinical development candidates, both for clinical development and commercialization, and the timing and costs associated with such manufacture; • our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, or other costs we may incur, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; • the cost of manufacturing, distribution, and commercialization activities and arrangements, including the manufacturing of our product candidates, establishment of effective protocols for the supply and transport of our product candidates, and the establishment of a sales and marketing organization either internally or in partnership with a third party; and • our ability to establish and maintain strategic arrangements and alliances with third-party collaborators including our existing collaborations with Ono, the University of Minnesota, and MSK, to advance the research, development and commercialization of therapeutic products.
Our future capital requirements will depend on many factors, including, but not limited to: • the progress, results, size, timing and costs of our ongoing and planned clinical trials, and any additional clinical trials we may initiate, conduct or support for our product candidates; • the progress, results, size, timing and costs of our preclinical, process development and manufacturing studies, and activities necessary to initiate and conduct clinical trials for our product candidates and to establish and maintain manufacturing capabilities necessary to support such trials; • continued progress in our research and development programs, including preclinical studies, process development, manufacturing and other research activities that may be necessary in order for an IND application to go into effect for a prospective clinical development candidate, as well as potential future clinical trials of any additional product candidates we may identify for development; • the extent to which we are required to pay milestone or other payments under our existing in-license agreements and any in-license agreements that we may enter into in the future, and the timing of such payments, including payments owed to MSKCC in connection with the stock price appreciation milestones; 36 Table of Contents • our ability and the ability of our investigators to initiate and conduct, and the progress, results, size, timing and costs of, clinical trials of our product candidates that will be necessary to support any application for regulatory approval; • our ability to manufacture, or enter into arrangements with third parties for the manufacture of our existing product candidates, as well as potential future clinical development candidates, both for clinical development and commercialization, and the timing and costs associated with such manufacture; • our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, or other costs we may incur, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; • the cost of manufacturing, distribution, and commercialization activities and arrangements, including the manufacturing of our product candidates, establishment of effective protocols for the supply and transport of our product candidates, and the establishment of a sales and marketing organization either internally or in partnership with a third party; and • our ability to establish and maintain strategic arrangements and alliances with third-party collaborators including our existing collaborations with Ono, the University of Minnesota, and MSKCC, to advance the research, development and commercialization of therapeutic products.
If our operations, including our arrangements with physicians and other healthcare providers are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs (such as Medicare and Medicaid), and imprisonment, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our financial results.
If our operations, including our arrangements with physicians and other healthcare providers are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, 50 Table of Contents without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs (such as Medicare and Medicaid), and imprisonment, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our financial results.
Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, or employees to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any action asserting a claim governed by the internal affairs doctrine.
Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, or employees to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our 72 Table of Contents amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any action asserting a claim governed by the internal affairs doctrine.
Cyber threats, both on premises and in the cloud, are evolving and include, but are not limited to: malicious software, destructive malware, ransomware, attempts to gain unauthorized access to systems or data, disruption to operations, critical systems or denial of service attacks; unauthorized release of confidential, personal or otherwise protected information; corruption of data, networks or systems; harm to individuals; and loss of assets.
Cybersecurity threats, both on premises and in the cloud, are evolving and include, but are not limited to: malicious software, destructive malware, ransomware, attempts to gain unauthorized access to systems or data, disruption to operations, critical systems or denial of service attacks; unauthorized release of confidential, personal or otherwise protected information; corruption of data, networks or systems; harm to individuals; and loss of assets.
In addition, we could be impacted by cyber threats or other disruptions or vulnerabilities found in products or services we use that are provided to us by third-parties. The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world.
In addition, we could be impacted by cybersecurity threats or other disruptions or vulnerabilities found in products or services we use that are provided to us by third-parties. The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world.
Accordingly, we will be required to make significant investments to maintain and expand our existing GMP manufacturing capabilities and facilities, establish additional GMP manufacturing facilities, conduct GMP production, and process and scale up development and technology transfer activities for the manufacture of our product candidates, and our efforts to scale our own manufacturing operations may not succeed.
Accordingly, we will be required to make significant investments to maintain and expand our existing Good Manufacturing Practice (GMP) manufacturing capabilities and facilities, establish additional GMP manufacturing facilities, conduct GMP production, and process and scale up development and technology transfer activities for the manufacture of our product candidates, and our efforts to scale our own manufacturing operations may not succeed.
Any such failure could be the basis for the FDA to issue a warning letter, withdraw approvals for product candidates previously granted to us, or take other regulatory or legal action, including recall or seizure of outside supplies of the product candidate, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention of product, refusal to permit the import or export of products, injunction or imposing civil and criminal penalties.
Any such failure could be the basis for the FDA to issue a warning letter, withdraw approvals for product candidates previously granted to us, or take other regulatory or legal action, including recall or seizure of outside supplies of the product candidate, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending 42 Table of Contents applications or supplemental applications, detention of product, refusal to permit the import or export of products, injunction or imposing civil and criminal penalties.
We do not carry insurance for all categories of risk to which our business is or may be exposed. Some of the policies we maintain include general liability, product liability, property, employee benefits liability, employment practices, workers’ compensation, cyber, directors’ and officers’ insurance, and umbrella.
We do not carry insurance for all categories of risk to which our business is or may be exposed. Some of the policies we maintain include general liability, product liability, property, employee benefits liability, employment practices, workers’ compensation, cybersecurity, directors’ and officers’ insurance, and umbrella.
Because our product candidates are based on novel technologies, it is difficult to predict the regulatory approval process and the time, the cost and our ability to successfully initiate, conduct and complete clinical development, and obtain the necessary regulatory and reimbursement approvals, required for commercialization of our product candidates.
Because our product candidates are based on novel technologies, it is difficult to predict the regulatory approval process and the time, the cost and our ability to successfully initiate, conduct and complete clinical development, and obtain the necessary regulatory and reimbursement approvals, required for commercialization of our product candidates, if approved.
Certain state laws may be more stringent or broader in scope than the CPRA, or offer greater individual rights, with respect to confidential, sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts.
Certain state laws may be more stringent or broader in scope than the CCPA, or offer greater individual rights, with respect to confidential, sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts.
We are currently advancing multiple product candidates through clinical development, and conducting preclinical research and development activities in our other programs.
We are currently advancing multiple product candidates through clinical development, and conducting preclinical research and development activities in other programs.
The manufacture and supply of our cell product candidates involve novel processes that are more complex than those required for most small molecule drugs and other cellular immunotherapies, and accordingly present significant challenges and are subject to multiple risks.
The manufacture and supply of our cell product candidates involves novel processes that are more complex than those required for most small molecule drugs and other cellular immunotherapies, and accordingly present significant challenges and are subject to multiple risks.
We are substantially dependent on our own internal manufacturing facilities in San Diego, California for the production of our product candidates, and we rely, and expect to continue to rely, on third parties for the manufacture of certain components to manufacture our product candidates for use in conducting clinical trials.
We are substantially dependent on our own internal manufacturing facilities in San Diego, California for the production of our product candidates, and we rely, and may continue to rely, on third parties for the manufacture of certain components to manufacture our product candidates for use in conducting clinical trials.
We have determined that we do not believe there were any ownership changes from May 2015 through December 2022. We have not analyzed periods subsequent to December 2022. We may experience additional ownership changes as a result of shifts in our stock ownership in the future.
We have determined that we do not believe there were any ownership changes from May 2015 through December 2023. We have not analyzed periods subsequent to December 2023. We may experience additional ownership changes as a result of shifts in our stock ownership in the future.
The amount of NOLs generated in taxable periods beginning after December 31, 2022, that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself.
The amount of NOLs generated in taxable periods beginning after December 31, 2023, that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself.
This program is intended to facilitate efficient development and expedite review of RMATs. A BLA for a product candidate with RMAT designation may be eligible for priority review or accelerated approval through (1) surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or (2) reliance upon data obtained from a meaningful number of sites.
This program is intended to facilitate efficient development and expedite review of RMATs. A Biologics License Application (BLA) for a product candidate with RMAT designation may be eligible for priority review or accelerated approval through (1) surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit or (2) reliance upon data obtained from a meaningful number of sites.
We depend on these third parties to implement adequate controls and safeguards to protect against and report cyber incidents. If they fail to do so, we may suffer financial and other harm, including to our information, operations, performance, and reputation.
We depend on these third parties to implement adequate controls and safeguards to protect against and report cybersecurity incidents. If they fail to do so, we may suffer financial and other harm, including to our information, operations, performance, and reputation.
Additionally, we have registered the shares of common stock issued to Johnson & Johnson Innovation – JJDC, Inc. under a stock purchase agreement entered into in connection with the Janssen Agreement pursuant to a registration statement on Form S-3.
Additionally, we have registered the shares of common stock issued to Johnson & Johnson Innovation – JJDC, Inc. under the stock purchase agreement entered into in June 2020 in connection with the Janssen Agreement pursuant to a registration statement on Form S-3.
The incurrence of indebtedness would result in increased fixed payment and interest obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to 65 Table of Contents acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
The incurrence of indebtedness would result in increased fixed payment and interest obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
Accordingly, MSK received the first milestone payment of $20.0 million in November 2021; however, uncertainty of the price of our common stock results in an inability to ascertain the precise timing of any remaining future milestone payments in advance.
Accordingly, MSKCC received the first milestone payment of $20.0 million in November 2021; however, uncertainty of the price of our common stock results in an inability to ascertain the precise timing of any remaining future milestone payments in advance.
Moreover, increasing efforts by 57 Table of Contents governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates.
Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates.
If we are unable to develop adequate marketing and sales capabilities on our own or effectively partner with third parties, our ability to generate product revenues will suffer. 56 Table of Contents The commercial success of our product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payers and others in the medical community.
If we are unable to develop adequate marketing and sales capabilities on our own or effectively partner with third parties, our ability to generate product revenues will suffer. The commercial success of our product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payers and others in the medical community.
We focus on the development of programmed cellular immunotherapies for patients with cancer, including off-the-shelf NK- and T-cell product candidates derived from clonal master engineered iPSC lines.
We focus on the development of programmed cellular immunotherapies for patients with cancer and autoimmune diseases, including off-the-shelf NK- and T-cell product candidates derived from clonal master engineered iPSC lines.
In addition, regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development. If our product candidates are ultimately not approved for any reason, our business, prospects, results of operations and financial condition would be adversely affected.
In addition, regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development. 48 Table of Contents If our product candidates are ultimately not approved for any reason, our business, prospects, results of operations and financial condition would be adversely affected.
Further, we may not be aware of all third-party intellectual property rights potentially relating to our product candidates or their intended uses, and as a result the impact of such third-party intellectual property rights upon the patentability of our own patents and patent applications, as well as the impact of such third-party intellectual property upon our freedom to operate, is highly uncertain.
Further, we may not be aware of all third-party intellectual property rights potentially relating to our product candidates or their intended uses, and as a result the impact of such third-party intellectual property rights upon the patentability of our own patents and patent applications, as well as the impact of such third-party intellectual 55 Table of Contents property upon our freedom to operate, is highly uncertain.
For more information regarding the risks related to insurance coverage and reimbursement please see "Business - Government Regulation - Coverage and Reimbursement." In addition, reimbursement agencies in foreign jurisdictions may be more conservative than those in the United States.
For more information regarding the risks related to insurance coverage and reimbursement, see “ Business - Government Regulation - Coverage and Reimbursement.” In addition, reimbursement agencies in foreign jurisdictions may be more conservative than those in the United States.
Furthermore, additional equity or debt financing might not be available to us on reasonable terms, if at all. A significant portion of our total outstanding shares may be sold into the market in the near future, which could cause the market price of our common stock to drop significantly.
Furthermore, additional equity or debt financing might not be available to us on reasonable terms, if at all. 71 Table of Contents A significant portion of our total outstanding shares may be sold into the market in the near future, which could cause the market price of our common stock to drop significantly.
Because we rely on our own manufacturing facilities to produce our product candidates and on third parties for the manufacture of certain components, we are required to transfer certain manufacturing process know-how and certain intermediates to third parties, including larger-scale facilities operated by a CMO or by us, to facilitate manufacture of our product candidates for clinical trials and 39 Table of Contents commercialization.
Because we rely on our own manufacturing facilities to produce our product candidates and on third parties for the manufacture of certain components, we are required to transfer certain manufacturing process know-how and certain intermediates to third parties, including larger-scale facilities operated by a CMO or by us, to facilitate manufacture of our product candidates for clinical trials and commercialization.
As such, it is difficult to accurately predict the type and scope of challenges we may incur during development of our product candidates, and we face uncertainties associated with the preclinical and clinical development, manufacture and regulatory requirements for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of these product candidates.
As such, it is difficult to accurately predict the type and scope of challenges we may incur during development of our product 46 Table of Contents candidates, and we face uncertainties associated with the preclinical and clinical development, manufacture and regulatory requirements for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of these product candidates.
We plan to conduct clinical trials for our product candidates outside the United States, and the FDA may not accept data from trials conducted in such locations. To date, we have only conducted clinical trials in the United States.
We may decide to conduct clinical trials for our product candidates outside the United States, and the FDA may not accept data from trials conducted in such locations. To date, we have only conducted clinical trials in the United States.
Our product candidates are designed and are being developed as therapeutic entities for use as cellular immunotherapies, and all of our current product candidates are based on our novel iPSC platform. Additionally, some of our product candidates utilize novel genome editing technologies. To date, there is limited clinical trial experience testing iPSC-derived therapeutic product candidates and genome edited therapeutics.
Our product candidates are designed and are being developed as therapeutic entities for use as cellular immunotherapies, and all of our current product candidates are based on our novel iPSC product platform. Additionally, some of our product candidates utilize novel genome editing technologies. To date, there is limited clinical trial experience testing iPSC-derived therapeutic product candidates using genome edited cells.
Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.
Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has 60 Table of Contents created uncertainty with respect to the value of patents, once obtained.
Such events, whether or not resulting from our product candidates, could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively 61 Table of Contents affect or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts.
Such events, whether or not resulting from our product candidates, could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively affect or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts.
For example, in January 2023, we announced the discontinuation of our FT516, FT596, FT538, and FT536 NK cell programs to focus our resources on advancing our most innovative and differentiated programs. We also announced the termination of our Collaboration and Option Agreement with Janssen, which will take effect on April 3, 2023.
For example, in January 2023, we announced the discontinuation of our FT516, FT596, FT538, and FT536 NK cell programs to focus our resources on advancing our most innovative and differentiated programs. We also announced the termination of our Collaboration and Option Agreement with Janssen, which took effect on April 3, 2023.
In September 2022, the FDA announced retitling of OTAT to the Office of Therapeutic Products (OTP) and elevation of OTP to a "Super Office" to meet its growing cell and gene therapy workload and new commitments under the Prescription Drug User Fee Act agreement for fiscal years 2023-2027.
In September 2022, the FDA announced retitling of OTAT to the Office of Therapeutic Products (OTP) and elevation of OTP to a “Super Office” to meet its growing cell and gene therapy workload and new commitments under the Prescription Drug User Fee Act agreement for fiscal years 2023-2027.
There may be third-party patents or patent applications with claims to materials, cell compositions, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Our competitors may have filed, and may in the future file, patent applications covering products and technologies similar to ours.
There may be third-party patents or patent applications with claims to materials, cell compositions, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Our competitors may have filed, and may in the future file, patent applications covering 57 Table of Contents products and technologies similar to ours.
We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and other countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and third parties with whom we conduct business.
We continue to monitor any adverse impact that the outbreak of war and the subsequent institution of sanctions by the United States and other countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and third parties with whom we conduct business.
It is not possible to predict the broader or longer-term consequences of this conflict, although a prolonged conflict may result in adverse effects on microeconomic conditions including inflation; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively impact our business, financial performance and financial condition.
It is not possible to predict the broader or longer-term consequences of these conflicts, although a prolonged conflict may result in adverse effects on microeconomic conditions including inflation; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cybersecurity-intrusion; adverse changes in international trade policies and relations; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively impact our business, financial performance and financial condition.
If we fail to comply with our obligations under our license agreements, including any payment obligations, we could lose some or all of our rights to develop, market and sell products covered by these licenses, and our ability to form collaborations or partnerships may be impaired.
If we fail to comply with our obligations under our license agreements, including any payment obligations, we could lose some or all of our rights to develop, market and sell products covered by these licenses, and our ability to form collaborations or 56 Table of Contents partnerships may be impaired.
Additionally, because we have limited financial and personnel resources, we may elect or be required to abandon or delay the pursuit of opportunities with existing or future product candidates, including those that may be more advanced 42 Table of Contents in development than those we ultimately elect to pursue.
Additionally, because we have limited financial and personnel resources, we may elect or be required to abandon or delay the pursuit of opportunities with existing or future product candidates, including those that may be more advanced in development than those we ultimately elect to pursue.
Additionally, any such change or modification may adversely affect the safety, efficacy, stability, or potency of our product candidates, and could adversely affect our clinical development of our product candidates and harm our business. We currently rely on third parties to conduct certain research and development activities and clinical trials of our product candidates.
Additionally, any such change or modification may adversely affect the safety, efficacy, stability, or potency of our product candidates, and could adversely affect our clinical development of our product candidates and harm our business. 54 Table of Contents We currently rely on third parties to conduct certain research and development activities and clinical trials of our product candidates.
Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in 55 Table of Contents protecting and defending our intellectual property both in the United States and abroad.
Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad.
Our strategy for fully developing and commercializing our product candidates is dependent upon maintaining our current arrangements and establishing new arrangements with research collaborators, corporate collaborators and other third parties. We currently have a corporate collaboration agreement with Ono; our collaboration with Janssen will terminate effective April 2023.
Our strategy for fully developing and commercializing our product candidates is dependent upon maintaining our current arrangements and establishing new arrangements with research collaborators, corporate collaborators and other third parties. We currently have a corporate collaboration agreement with Ono; our collaboration with Janssen terminated effective April 2023.
Continued implementation of the ACA and the passage of additional laws and regulations may result in the expansion of new programs such as Medicare payment for performance initiatives, and may impact existing government healthcare programs, such as by improving the physician quality reporting system and feedback program.
Continued implementation of the Affordable Care Act (ACA) and the passage of additional laws and regulations may result in the expansion of new programs such as Medicare payment for performance initiatives, and may impact existing government healthcare programs, such as by improving the physician quality reporting system and feedback program.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge 68 Table of Contents or combine with us.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.
Furthermore, other pharmaceutical or biotechnology companies and academic institutions may also have filed or are planning to file patent applications 53 Table of Contents potentially relevant to our business. From time to time, in order to avoid infringing these third-party patents, we may be required to license technology from additional third parties to further develop or commercialize our product candidates.
Furthermore, other pharmaceutical or biotechnology companies and academic institutions may also have filed or are planning to file patent applications potentially relevant to our business. From time to time, in order to avoid infringing these third-party patents, we may be required to license technology from additional third parties to further develop or commercialize our product candidates.
Although such breaches have been immaterial to our business to date, investigations into and remedial efforts in connection with any breaches, even those with immaterial impact, can be costly and time-consuming, and any future breaches could be material, or cause significant disruption, to our business.
Although such incidents have been immaterial to our business to date, investigations into and remedial efforts in connection with any security incidents, even those with immaterial impact, can be costly and time-consuming, and any future incidents could be material, or cause significant disruption, to our business.
Such results from preclinical testing, process development and manufacturing activities, and clinical studies, including interim clinical trial results as of specified data cutoff dates and results of earlier clinical studies with similar product candidates, are not necessarily predictive of future results, including later clinical trial results.
Such results from preclinical testing, process development and manufacturing activities, and clinical studies, 47 Table of Contents including interim clinical trial results as of specified data cutoff dates and results of earlier clinical studies with similar product candidates, are not necessarily predictive of future results, including later clinical trial results.
Any sale or issuance 67 Table of Contents of securities pursuant to a registration statement or otherwise may result in dilution to our stockholders and may cause the market price of our stock to decline, and new investors could gain rights superior to our existing stockholders.
Any sale or issuance of securities pursuant to a registration statement or otherwise may result in dilution to our stockholders and may cause the market price of our stock to decline, and new investors could gain rights superior to our existing stockholders.
We may be involved in litigation or other proceedings from time to time relating to the enforcement or defense of patent and other intellectual property rights, which could cause us to divert our resources and could put our intellectual property at risk.
We are and may become involved in litigation or other proceedings from time to time relating to the enforcement or defense of patent and other intellectual property rights, which could cause us to divert our resources and could put our intellectual property at risk.
Any debt 70 Table of Contents financing secured by us in the future could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
Any debt financing secured by us in the future could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
Further, we intend to develop certain of our product candidates as a combination therapy with other cancer therapies, such as monoclonal antibodies, requiring availability and use of these monoclonal antibodies in certain of our clinical trial protocols.
For example, we intend to develop certain of our product candidates as a combination therapy with other cancer therapies, such as monoclonal antibodies, requiring availability and use of these monoclonal antibodies in certain of our clinical trial protocols.
We have not yet obtained regulatory approval for any of our product candidates or generated any revenues from therapeutic product sales. Since inception, we have incurred significant net losses in each year and, as of December 31, 2022, we had an accumulated deficit of $1.05 billion.
We have not yet obtained regulatory approval for any of our product candidates or generated any revenues from therapeutic product sales. Since inception, we have incurred significant net losses in each year and, as of December 31, 2023, we had an accumulated deficit of $1.2 billion.
Misconduct by employees could include intentional failures to comply with the regulations of the FDA or foreign regulators, to provide accurate information to the FDA or foreign regulators, to comply with healthcare fraud and abuse laws and regulations in the United States and abroad, to report financial information or data accurately or to disclose unauthorized activities to us.
Misconduct by employees or third party service providers could include intentional failures to comply with the regulations of the FDA or foreign regulators, to provide accurate information to the FDA or foreign regulators, to comply with healthcare fraud and abuse laws and regulations in the United States and abroad, to report financial information or data accurately or to disclose unauthorized activities to us.
Additionally, under FDORA, sponsors of approved drugs and biologics must provide 6 months' notice to the FDA of any changes in marketing status, such as the withdrawal of a drug, and failure to do so could result in the FDA placing the product on a list of discontinued products, which would revoke the product's ability to be marketed.
Additionally, under the Food and Drug Omnibus Reform Act of 2022 (FDORA), sponsors of approved drugs and biologics must provide 6 months’ notice to the FDA of any changes in marketing status, such as the withdrawal of a drug, and failure to do so could result in the FDA placing the product on a list of discontinued products, which would revoke the product’s ability to be marketed.
Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors, vendors, and consultants may be vulnerable to damage from cyber risks, including attempts to gain unauthorized access to and to harm sensitive information and networks, insider threats, and ransomware.
Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors, vendors, and consultants may be vulnerable to damage from cybersecurity risks, including attempts to gain unauthorized access to and to harm sensitive or confidential information and networks, insider threats, and ransomware.
Company responsibilities required by the Sarbanes-Oxley Act include establishing and maintaining 71 Table of Contents corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.
Company responsibilities required by the Sarbanes-Oxley Act include establishing and maintaining corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.
It cannot be predicted whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or issued, which could result in an increase in our or our stockholders’ tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax law.
It cannot be predicted whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or issued, which could result in an increase in our or our stockholders’ tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax law. 77 Table of Contents ITEM 1B.
We compete with a variety of large pharmaceutical companies, multinational biopharmaceutical companies, other biopharmaceutical companies and specialized biotechnology companies, as well as technology and/or therapeutics being developed at universities and other research 59 Table of Contents institutions.
We compete with a variety of large pharmaceutical companies, multinational biopharmaceutical companies, other biopharmaceutical companies and specialized biotechnology companies, as well as technology and/or therapeutics being developed at universities and other research institutions.
For example, pursuant to the terms of our license agreement with MSK, MSK is eligible to receive from us certain milestone payments totaling up to $75.0 million based on the price of our common stock, where the amount of such payments owed to MSK is contingent upon certain increases in the price of our common stock following the date of achievement of a specified clinical milestone.
For example, pursuant to the terms of the Amended MSKCC License, MSKCC is eligible to receive from us certain milestone payments totaling up to $75.0 million based on the price of our common stock, where the amount of such payments owed to MSKCC is contingent upon certain increases in the price of our common stock following the date of achievement of a specified clinical milestone.
As a result of the ongoing COVID-19 pandemic or other public health crises, the business and operations of our suppliers and other third parties which produce agents and materials used in our clinical trials or manufacturing of our product candidates may be disrupted or delayed, and we in turn may experience disruptions or delays in our supply chain.
As a result of any public health crises, the business and operations of our suppliers and other third parties which produce agents and materials used in our clinical trials or manufacturing of our product candidates may be disrupted or delayed, and we in turn may experience disruptions or delays in our supply chain.
Although we may have contractual protections with our third-party service providers, contractors and consultants, any actual or perceived security breach could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach.
Although we may have contractual protections with our third-party service providers, contractors and consultants, any actual or perceived security breach could harm our reputation and brand, expose us to potential 68 Table of Contents liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach or security incident.
We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product candidate according to the specifications previously submitted to the FDA or another regulatory authority.
We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product candidate according to the specifications previously submitted to 52 Table of Contents the FDA or another regulatory authority.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, we have additional operating leases for office and laboratory space in San Diego, California, San Francisco, California, and New York, New York. We believe that these facilities are adequate for our current needs.
Biggest changeWe believe that these facilities are adequate for our current needs.
ITEM 2. Pr operties Facilities As of December 31, 2022, we occupied approximately 200,000 square feet of office, laboratory and Good Manufacturing Practice (GMP) manufacturing space in San Diego, California under a non-cancelable operating lease through May 2036.
ITEM 2. Pr operties Facilities As of December 31, 2023, we occupied approximately 200,000 square feet of office, laboratory and Good Manufacturing Practice (GMP) manufacturing space in San Diego, California under a non-cancelable operating lease through May 2036. In addition, we have additional operating leases for office and laboratory space in San Diego, California.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Shoreline litigations are in the discovery stage and remain pending. On January 20, 2023, a purported stockholder of the Company filed a lawsuit against the Company and certain of its officers captioned Hadian v. Fate Therapeutics, Inc. et al. in the U.S. District Court for the Southern District of California.
Biggest changeWe intend to continue to vigorously defend against this action. On June 2, 2023, a derivative complaint, captioned Guarino v. Wolchko, et al., was filed by a purported stockholder of the Company in the U.S. District Court for the Southern District of California. The derivative lawsuit names members of our board of directors and certain officers as defendants.
Xanthopoulos, and Steven Holtzman. Our claims stem from Kaufman’s founding of and participation in Shoreline’s business, in breach of his exclusivity obligations to us as our scientific advisor pursuant to a Scientific Advisor Agreement between Kaufman and the Company.
Kaufman (Kaufman), Kleanthis G. Xanthopoulos, Steven Holtzman, and William Sandborn. Our claims stem from Kaufman’s founding of and participation in Shoreline’s business, in breach of his exclusivity obligations to us as our scientific advisor pursuant to a Scientific Advisor Agreement between Kaufman and the Company.
ITEM 3. Legal Proceedings We are currently pursuing claims in two lawsuits that we filed in 2022 against Shoreline Biosciences, Inc. (Shoreline) and certain of its founders and officers (collectively referred to as the Shoreline litigations). The first suit is pending in San Diego Superior Court against Shoreline and three of its founders, Drs. Dan S. Kaufman (Kaufman), Kleanthis G.
ITEM 3. Legal Proceedings We are currently pursuing claims in two lawsuits that we filed in 2022 against Shoreline Biosciences, Inc. (Shoreline) and certain of its founders and officers (collectively, the Shoreline litigations). The first suit, filed on May 13, 2022, is pending in San Diego Superior Court against Shoreline and four of its founders, Drs. Dan S.
The complaint alleges that the Company violated the federal securities laws by making allegedly false and/or misleading statements and/or omissions in its public disclosures dating back to April 2020 relating to the Company’s collaboration agreement with Janssen Biotech, Inc. (the Janssen Agreement), potential future revenue sources for the Company from the Janssen Agreement, and the termination of the Janssen Agreement.
The amended complaint alleges that the Company violated the federal securities laws by making allegedly false and/or misleading statements and/or omissions in its public disclosures dating back to August 2020 relating to our collaboration agreement with Janssen Biotech, Inc. (the Janssen Agreement), potential product candidates subject to the Janssen Agreement, and the termination of the Janssen Agreement.
Our claims include actions for breach of contract, breach of implied covenant of good faith and fair dealing, fraud and deceit, tortious interference, restitution and unfair competition. We are seeking monetary damages. In the second of the Shoreline litigations, we and Whitehead Institute for Biomedical Research (Whitehead) filed a lawsuit in the U.S.
Our claims include actions for breach of contract, breach of implied covenant of good faith and fair dealing, fraud and deceit, tortious interference, restitution and unfair competition. Fact and expert discovery is ongoing, and we are seeking monetary damages. Trial is presently scheduled to begin on July 19, 2024.
The Whitehead Patents, which we exclusively license from Whitehead, relate to key compositions and methods for reprogramming human somatic cells to a pluripotent state in the generation of induced pluripotent stem cells (iPSCs). Shoreline and Kaufman have each filed answers to our complaint denying infringement and alleging invalidity of the Whitehead Patents.
Patent Nos. 8,071,369, 8,932,856, 8,951,797, 8,940,536, 9,169,490, 10,457,917, and 10,017,744 (the Whitehead Patents). The Whitehead Patents, which we exclusively license from Whitehead, relate to key compositions and methods for reprogramming human somatic cells to a pluripotent state in the generation of iPSCs.
We believe that there is no merit to this case and we intend to vigorously defend against it. From time to time, we may be subject to various other legal proceedings and claims that arise in the ordinary course of our business activities. ITEM 4. Mine Saf ety Disclosures Not applicable. 73 Table of Contents PART II
On August 14, 2023, the court stayed the derivative lawsuit pending the court’s decision on our motion to dismiss in the Securities Action filed September 22, 2023. We intend to vigorously defend against this action. From time to time, we may be subject to various other legal proceedings and claims that arise in the ordinary course of our business activities.
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District Court for the Southern District of California against Shoreline and Kaufman seeking damages for the defendants’ infringement of U.S. Patent Nos. 8,071,369, 8,932,856, 8,951,797, 8,940,536, 9,169,490, 10,457,917, and 10,017,744 (the Whitehead Patents).
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In the second of the Shoreline litigations, also filed on May 13, 2022, we and Whitehead Institute for Biomedical Research (Whitehead) filed a lawsuit in the U.S. District Court for the Southern District of California against Shoreline and Kaufman seeking monetary damages for the defendants’ infringement of U.S.
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On June 7, 78 Table of Contents 2023, we and Whitehead filed a motion to dismiss our patent infringement claims against Kaufman in his personal capacity; that motion was granted on June 9, 2023. On July 14, 2023 each party filed motions for summary judgment.
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On August 30, 2023, the court granted Shoreline’s motion for summary judgment and denied our motion for partial summary judgment as moot. Judgment in favor of Shoreline was entered on August 31, 2023. On October 16, 2023, the district court denied Shoreline’s motion for an award of costs and attorney’s fees.
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On September 27, 2023, we and Whitehead filed a Notice of Appeal with the Court of Appeals for the Federal Circuit challenging the trial court’s claim construction and grant of summary judgment in favor of the defendants; the defendants cross-appealed challenging the district court’s earlier denial of a motion to dismiss and partial motion for summary judgment on other grounds.
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The Federal Circuit docketed the case on October 5, 2023. There can be no assurance that we will prevail on any such appeal. We filed our opening appeal brief on February 2, 2024. On January 20, 2023, a purported stockholder of the Company filed a securities class action lawsuit against the Company and certain of its officers captioned Hadian v.
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Fate Therapeutics, Inc. et al. in the U.S. District Court for the Southern District of California (the Securities Action). On May 4, 2023, the court appointed a different purported stockholder of the Company to serve as lead plaintiff in the Securities Action. On July 24, 2023, the lead plaintiff filed an amended complaint.
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On September 22, 2023, we filed a motion to dismiss the amended complaint in its entirety. Briefing on our motion to dismiss was completed on December 6, 2023. The court may, in its discretion, either hold oral argument on the motion to dismiss or issue a ruling on the motion based upon the parties’ briefing.
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The Company is named as a nominal defendant. The plaintiff asserts derivative claims arising out of substantially the same alleged facts and circumstances as the Securities Action. The complaint asserts claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violation of federal securities laws.
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ITEM 4. Mine Saf ety Disclosures Not applicable. 79 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 73 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 74 Item 6. [Reserved] 75 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 76 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 90 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 79 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 80 Item 6. [Reserved] 80 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 81 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 92 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination to pay dividends will be made at the discretion of our board of directors. 74 Table of Contents Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.
Recent Sales of Unregistered Securities During the year ended December 31, 2022, we did not issue or sell any unregistered securities not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K. Issuer Purchases of Equity Securities We did not repurchase any securities during the year ended December 31, 2022.
Recent Sales of Unregistered Securities During the year ended December 31, 2023, we did not issue or sell any unregistered securities not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K. Issuer Purchases of Equity Securities We did not repurchase any securities during the year ended December 31, 2023.
ITEM 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our ticker symbol is “FATE”, as traded and reported by The NASDAQ Global Market. Holders of Common Stock As of February 22, 2023, there were approximately 22 stockholders of record of our common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our ticker symbol is “FATE”, as traded and reported by The NASDAQ Global Market. Holders of Common Stock As of February 20, 2024, there were approximately 19 stockholders of record of our common stock.
The approximate number of holders is based upon the actual number of holders registered in our records at such date and excludes holders in “street name” or persons, partnerships, associations, corporations, or other entities identified in security positions listings maintained by depository trust companies.
The approximate number of holders is based upon the actual number of holders registered in our records at such date and excludes holders in “street name” or persons, partnerships, associations, corporations, or other entities identified in security positions listings maintained by depository trust companies. Dividends We have never declared or paid any dividends on our capital or common stock.
We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future.
We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be made at the discretion of our board of directors.
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Performance Graph Set forth below is a graph comparing the cumulative total return on our common stock, the NASDAQ Composite ® (US) Index and the NASDAQ Biotechnology Index over the five-year period ending December 31, 2022.
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The graph assumes that $100 was invested in our common stock and in each of the comparative indices as of the market close on December 31, 2017. The past performance of our common stock is no indication of future performance. Dividends We have never declared or paid any dividends on our capital or common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn addition, while the full impact of the COVID-19 pandemic, inflation rates, and the ongoing conflict in Ukraine on our business, operations, financial condition and prospects, and on the global economy, are currently unknown and difficult to predict, the pandemic has caused significant disruptions and created uncertainties in the global financial markets, and the economic impacts of the pandemic, rising inflation rates and global economic conditions, or the Ukrainian conflict could materially and adversely affect our ability to raise capital through equity or debt financings in the future.
Biggest changeIn addition, the full impact of inflation rates, global political and economic instability, a continued and prolonged public health emergency such as the COVID-19 pandemic, and wars and other armed conflicts, on our business, operations, financial condition and prospects, and on the global economy, are currently unknown and difficult to predict, and these events could materially and adversely affect our ability to raise capital through equity or debt financings in the future. 89 Table of Contents Our forecast of the period of time through which our existing cash and cash equivalents and investments will be adequate to support our operations is a forward-looking statement and involves significant risks and uncertainties.
The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits.
The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits.
The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits.
The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits.
If we do raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and interest payment obligations and the existence of securities with rights that may be senior to those of our common stock.
If we do raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock.
These costs are expensed as incurred and include: • salaries and employee-related costs, including stock-based compensation; • costs incurred under clinical trial agreements with investigative sites; • costs to acquire, develop and manufacture preclinical study and clinical trial materials, including our product candidates; 79 Table of Contents • costs associated with conducting our preclinical, process and scale-up development, manufacturing, clinical and regulatory activities, including fees paid to third-party professional consultants, service providers and suppliers; • costs incurred for our research, development and manufacturing activities, including under our collaboration agreements; • costs for laboratory equipment, materials and supplies for the manufacture of our product candidates and the conduct of our research activities; • costs incurred to license and maintain intellectual property; and • facilities, depreciation and other expenses including allocated expenses for rent and maintenance of facilities.
These costs are expensed as incurred and include: • salaries and employee-related costs, including stock-based compensation; • costs incurred under clinical trial agreements with investigative sites; • costs to acquire, develop and manufacture preclinical study and clinical trial materials, including our product candidates; • costs associated with conducting our preclinical, process and scale-up development, manufacturing, clinical and regulatory activities, including fees paid to third-party professional consultants, service providers and suppliers; • costs incurred for our research, development and manufacturing activities, including under our collaboration agreements; • costs for laboratory equipment, materials and supplies for the manufacture of our product candidates and the conduct of our research activities; • costs incurred to license and maintain intellectual property; and 83 Table of Contents • facilities, depreciation and other expenses including allocated expenses for rent and maintenance of facilities.
Food and Drug Administration (the FDA) allowed an Investigational New Drug (IND) application in December 2022; and an iPSC-derived, CAR-targeted NK cell product candidate for the treatment of multiple myeloma, for which the companies were preparing to submit an IND application to the FDA in early 2023.
Food and Drug Administration (FDA) allowed an Investigational New Drug (IND) application in December 2022; and an iPSC-derived, CAR NK cell product candidate for the treatment of multiple myeloma, for which the companies were preparing to submit an IND application to the FDA in early 2023.
Pursuant to the Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3).
Pursuant to the 2022 Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3).
The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to: • the initiation, timing, progress, size, duration, costs and results of our clinical trials and preclinical studies for our product candidates; • the number and the nature of product candidates that we pursue; • the time to and cost of establishing internal GMP production capabilities to support the clinical and potential commercial manufacture of our product candidates at our new corporate headquarters; • the cost of GMP production, process and scale-up development and technology transfer activities for the manufacture of our product candidates, including the cost of laboratory equipment, materials and supplies to support these activities; • the time, cost and outcome of seeking and obtaining regulatory approvals; • the extent to which we are required to pay milestone or other payments under our existing in-license agreements and any in-license agreements that we may enter into in the future, and the timing of such payments, including payments owed to MSK in connection with the stock price appreciation milestones; • the extent to which milestones are achieved under our collaboration agreement with Ono, and any other strategic partnership or collaboration agreements that we may enter into in the future, and the time to achievement of such milestones and our receipt of any associated milestone payments; • the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, including in our ongoing lawsuits against Shoreline Biosciences, Inc.
The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to: • the initiation, timing, progress, size, duration, costs and results of our clinical trials and preclinical studies for our product candidates, including the timing and costs of manufacturing activities to support such clinical trials and preclinical studies; • the number and the nature of product candidates that we pursue; • the time to and cost of establishing and maintaining internal GMP production capabilities to support the clinical and potential commercial manufacture of our product candidates at our corporate headquarters; • the cost of GMP production, process and scale-up development and technology transfer activities for the manufacture of our product candidates, including the cost of laboratory equipment, materials and supplies to support these activities; • the time, cost and outcome of seeking and obtaining regulatory approvals; • the extent to which we are required to pay milestone or other payments under our existing in-license agreements and any in-license agreements that we may enter into in the future, and the timing of such payments, including payments owed to MSKCC in connection with the stock price appreciation milestones; • the extent to which milestones are achieved under our collaboration agreement with Ono, and any other strategic partnership or collaboration agreements that we may enter into in the future, and the time to achievement of such milestones and our receipt of any associated milestone payments; • the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, including in our ongoing lawsuits against Shoreline Biosciences, Inc.
Stock Price Appreciation Milestones We estimate the fair value of the stock price appreciation milestones under the Amended MSK License using a Monte Carlo simulation model, which relies on our current stock price at the end of each quarter as well as significant estimates and assumptions to determine the estimated liability associated with the contingent milestone payments.
Stock Price Appreciation Milestones We estimate the fair value of the stock price appreciation milestones under the Amended MSKCC License using a Monte Carlo simulation model, which relies on our current stock price at the end of each quarter as well as significant estimates and assumptions to determine the estimated liability associated with the contingent milestone payments.
We have the right to sublicense our rights under these agreements, and we will be required to pay a percentage of any sublicense income. 89 Table of Contents • Under a license agreement with the Regents of the University of Minnesota, pursuant to which we license certain patents relating to compositions and uses of NK cells and to compositions of engineered receptors and immune cells expressing such receptors, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.
We have the right to sublicense our rights under these agreements, and we will be required to pay a percentage of any sublicense income. • Under a license agreement with the Regents of the University of Minnesota, pursuant to which we license certain patents relating to compositions and uses of NK cells and to compositions of engineered receptors and immune cells expressing such receptors, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.
In the event a licensed product achieves a specified clinical milestone, MSK is then eligible to receive certain milestone payments totaling up to $75.0 million based on the price of our common stock, where the amount of such payments owed to MSK is contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.
In the event a licensed product achieves a specified clinical milestone, MSKCC is then eligible to receive certain milestone payments totaling up to $75.0 million based on the price of our common stock, where the amount of such payments owed to MSKCC is contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.
Kaufman (Kaufman), and the cost of enforcing any of our other contractual rights; 88 Table of Contents • the cost of our research and development activities, including our need and ability to hire additional employees and procure additional equipment, materials and supplies; • the establishment and continuation of collaborations and strategic alliances; • the timing and terms of future in-licensing and out-licensing transactions; and • the cost of establishing sales, marketing, manufacturing and distribution capabilities for, and the pricing and reimbursement of, any products for which we may receive regulatory approval.
Kaufman (Kaufman), and the cost of enforcing any of our other contractual rights; • the cost of our research and development activities, including our need and ability to hire additional employees and procure additional equipment, materials and supplies; • the establishment and continuation of collaborations and strategic alliances; • the timing and terms of future in-licensing and out-licensing transactions; and • the cost of establishing sales, marketing, manufacturing and distribution capabilities for, and the pricing and reimbursement of, any products for which we may receive regulatory approval.
To create better cell therapies, we have pioneered a therapeutic approach that we generally refer to as cell programming: we create and engineer human induced pluripotent stem cells (iPSCs) to incorporate novel synthetic controls of cell function; we generate a clonal master iPSC line for use as a renewable source of cell manufacture; and we direct the fate of the clonal master iPSC line to produce our first-in-class cell therapy product candidate.
To create better cell therapies, we have pioneered a therapeutic approach that we generally refer to as cell programming: we create and engineer human induced pluripotent stem cells (iPSCs) to incorporate novel synthetic controls of cell function; we generate a clonal master iPSC line for use as a renewable source of cell manufacture; and we direct the fate of the clonal master iPSC line to produce our cell therapy product candidate.
Therefore, if we conclude a counterparty to a transaction is not a customer or otherwise not within the scope of ASC 606, we considers the guidance in other accounting literature as applicable or by analogy to account for such transaction.
Therefore, if we conclude a counterparty to a transaction is not a customer or otherwise not within the scope of ASC 606, we consider the guidance in other accounting literature as applicable or by analogy to account for such transaction.
In addition, Ono terminated all further research and development with respect to Candidate 1, and we retained all rights to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono. In June 2022, we entered into an amendment with Ono to the Ono Agreement (the Ono Amendment).
In addition, Ono terminated all further research and development with respect to Candidate 1, and we retained all rights to research, develop and commercialize Candidate 1 throughout the world without any obligation to Ono. In June 2022, we entered into the 2022 Ono Amendment.
To date, there have been no material differences from our estimates to the amounts actually incurred. Stock-Based Compensation Stock-based compensation expense represents the grant date fair value of employee stock option and restricted stock unit grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis.
To date, there have been no material differences from our estimates to the amounts actually incurred. 86 Table of Contents Stock-Based Compensation Stock-based compensation expense represents the grant date fair value of employee stock option and restricted stock unit grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis.
We achieved the specified clinical milestone in July 2021 and met the first milestone during fiscal 2021. Accordingly, we remitted a payment to MSK of $20.0 million in the year ended December 31, 2021.
We achieved the specified clinical milestone in July 2021 and met the first milestone during fiscal 2021. Accordingly, we remitted a payment to MSKCC of $20.0 million in the year ended December 31, 2021.
Although we do not expect our estimates to be materially different from expenses actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too 82 Table of Contents high or too low in any particular period.
Although we do not expect our estimates to be materially different from expenses actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period.
Operating Capital Requirements We anticipate that we will continue to incur losses for the foreseeable future, and we expect the losses to increase as we continue the research, manufacture and development of, and seek regulatory approvals for, our product candidates and conduct additional research, manufacturing and development activities pursuant to our collaboration agreement with Ono.
Operating Capital Requirements We anticipate that we will continue to incur losses for the foreseeable future, and we expect the losses to remain significant as we continue the research, manufacture and development of, and seek regulatory approvals for, our product candidates and conduct additional research, manufacturing and development activities pursuant to our collaboration agreement with Ono.
Since our inception in 2007, we have devoted substantially all of our resources to our cell programming approach and the research and development of our product 76 Table of Contents candidates, the creation, licensing and protection of related intellectual property, and the provision of general and administrative support for these activities.
Since our inception in 2007, we have devoted substantially all of our resources to our cell programming approach and the research and development of our product candidates, the creation, licensing and protection of related intellectual property, and the provision of general and administrative support for these activities.
We expect to finance our capital requirements in the foreseeable future through the sale of public or private equity or debt securities. However, additional capital may not be available to us on reasonable terms, if at all.
We expect to finance our capital requirements in the foreseeable future through the sale of public or private equity, debt securities, or through existing or future potential collaborations. However, additional capital may not be available to us on reasonable terms, if at all.
We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of any sublicense income. • Under a license agreement with Memorial Sloan Kettering Cancer Center, pursuant to which we license certain patents relating to compositions and uses of T cells derived from iPSCs, CARs and genetic modifications using CRISPR, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.
We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of any sublicense income. • Under a license agreement with MSKCC, pursuant to which we license certain patents relating to compositions and uses of T-cells derived from iPSCs, CARs and genetic modifications using CRISPR, we are required to make annual maintenance payments and payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property.
From our inception through December 31, 2022 we have funded our consolidated operations primarily through the public and private sale of common stock, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants. As of December 31, 2022, we had aggregate cash and cash equivalents and investments of $441.2 million.
From our inception through December 31, 2023 we have funded our consolidated operations primarily through the public and private sale of common stock, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants. As of December 31, 2023, we had aggregate cash and cash equivalents and investments of $316.2 million.
Other income (expense), net for the year ended December 31, 2021 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums). Liquidity and Capital Resources We have incurred losses and negative cash flows from operations since inception.
Other income for the year ended December 31, 2022 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums). Liquidity and Capital Resources We have incurred losses and negative cash flows from operations since inception.
The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under these agreements, and we will be required to pay a percentage of any sublicense income.
The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of any sublicense income.
On an ongoing basis, we evaluate our estimates and judgments, including those related to the fair value of the stock price appreciation milestones for the Amended MSK License, accrued expenses, stock-based compensation, and the estimated total costs expected to be incurred under our collaboration agreements.
On an ongoing basis, we evaluate our estimates and judgments, including those related to the fair value of the stock price appreciation milestones for the Amended MSKCC License, contracts containing leases, accrued expenses, stock-based compensation, and the estimated total costs expected to be incurred under our collaboration agreements.
On September 14, 2018, we entered into a Collaboration and Option Agreement (the Ono Agreement) with Ono for the joint development and commercialization of two off-the-shelf iPSC-derived CAR T-cell product candidates (Candidate 1 and Candidate 2). Pursuant to the terms of the Ono Agreement, we received an upfront, non-refundable and non-creditable payment of $10.0 million.
On September 14, 2018, we entered into the Ono Agreement for the joint development and commercialization of two iPSC-derived CAR T-cell product candidates (Candidate 1 and Candidate 2). Pursuant to the terms of the Ono Agreement, we received an upfront, non-refundable and non-creditable payment of $10.0 million.
These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments. Inflation Inflation has increased during the periods covered by this Annual Report on Form 10-K, and is expected to continue to increase for the near future.
These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments. Inflation Inflation has increased during the periods covered by this Annual Report on Form 10-K, and may continue to increase or remain elevated for the near future.
As of December 31, 2022, we had an accumulated deficit of $1.05 billion and anticipate that we will continue to incur net losses for the foreseeable future.
As of December 31, 2023, we had an accumulated deficit of $1.2 billion and anticipate that we will continue to incur net losses for the foreseeable future.
Additionally, in the event a licensed product achieves a specified clinical milestone, Memorial Sloan Kettering Cancer Center is then eligible to receive additional milestone payments, where the amount of such payments owed to Memorial Sloan Kettering Cancer Center are contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.
Additionally, in the event a licensed product achieves a specified clinical milestone, MSKCC is then eligible to receive additional milestone payments, where the amount of such payments owed to MSKCC are contingent upon certain increases in the price of our common stock following the date of achievement of such clinical milestone.
During the year ended December 31, 2022 we purchased $404.8 million of investments, which were partially offset by $607.1 million in maturities of investments. During the year ended December 31, 2021, we purchased $968.2 million of investments, offset by $694.8 million in maturities of investments.
During the year ended December 31, 2022 we purchased $404.8 million of investments, which were partially offset by $607.1 million in maturities of investments.
To the extent the arrangement is within the scope of ASC 808, we assess whether aspects of the arrangement with our collaboration partners are within the scope of other accounting literature, including ASC Topic 606, Revenue from Contracts with Customers ("ASC 606").
To the extent the arrangement is within the scope of ASC 808, we assess whether aspects of the arrangement between us and our collaboration partner are within the scope of other accounting literature, including ASC Topic 606, Revenue from Contracts with Customers (ASC 606).
We anticipate that our general and administrative expenses will increase in the future as we increase our research and development activities, maintain compliance with exchange listing and SEC requirements, protect and enforce our intellectual property, and continue to operate as a public company.
We anticipate that our general and administrative expenses will remain significant in the future as we maintain our focus on innovation, and research and development activities, maintain compliance with exchange listing and SEC requirements, protect and enforce our intellectual property, and continue to operate as a public company.
Additionally, we entered into a sales agreement with Jefferies Group LLC (Jefferies) with respect to an at-the-market offering program, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $350.0 million through Jefferies as the sales agent, pursuant to this automatic shelf registration statement.
Additionally, we entered into a sales agreement with Jefferies Group LLC (Jefferies) with respect to an at-the-market offering program, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $100.0 million (which is included in the $300.0 million registered under the shelf registration statement) through Jefferies as the sales agent.
We plan to increase our current level of research and development expenses for the foreseeable future as we continue the clinical and preclinical development and the manufacture of our product candidates, research and develop our iPSC product platform, and perform our obligations under collaboration agreements including under our agreements with Ono, University of Minnesota, and MSK.
We plan to continue to significantly invest in our current level of research and development activities for the foreseeable future as we continue the clinical and preclinical development and manufacture of our product candidates, research and develop our iPSC product platform, and perform our obligations under collaboration agreements including under our agreements with Ono, University of Minnesota and MSKCC.
The remaining investing activities for the periods presented were primarily attributable to the purchase of property and equipment. Financing Activities Financing activities provided cash of $9.2 million for the year ended December 31, 2022, which primarily consisted of $9.2 million received from the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.
The remaining investing activities for the periods presented were primarily attributable to the purchase of property and equipment. 88 Table of Contents Financing Activities Financing activities provided cash of $0.1 million for the year ended December 31, 2023, which consisted of $0.1 million received from the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.
We expect our expenses will increase substantially in connection with our ongoing and planned activities as we: • conduct our ongoing and planned clinical trials of our product candidates, which may include higher clinical trial expenses associated with arrangements we may into with clinical research organizations (CROs) for the execution and management of certain clinical trials, including trials outside of the United States; • conduct Good Manufacturing Practice (GMP) production, including through the use of contract manufacturing organizations (CMOs) for the conduct of some or all of the activities required for manufacturing our iPSC-derived cell product candidates, process and scale-up development and technology transfer activities for the manufacture of our product candidates, including those undergoing clinical investigation and IND-enabling preclinical development; • procure laboratory equipment, materials and supplies for the manufacture of our product candidates and the conduct of our research activities; • conduct preclinical and clinical research to investigate the therapeutic activity of our product candidates; • continue our research, development and manufacturing activities, including under our sponsored research and collaboration agreement with Ono; • maintain, prosecute, protect, expand and enforce our intellectual property portfolio; • engage with regulatory authorities for the development of, and seek regulatory approvals for, our product candidates; • build out business operations at our corporate headquarters, including internal GMP production capabilities; • continue to implement the corporate restructuring and reduction in force that we announced in January 2023; and • continue operating as a public company and support our operations and develop commercial infrastructure for potential commercialization of our product candidates.
We expect our expenses will remain significant in connection with our ongoing and planned activities as we: • conduct our ongoing and planned preclinical studies and clinical trials of our product candidates, which may include higher clinical trial expenses associated with arrangements we may enter into with clinical research organizations (CROs) for the execution and management of certain clinical trials, including trials outside of the United States; • conduct Good Manufacturing Practice (GMP) production, including through the use of contract manufacturing organizations (CMOs) for the conduct of some or all of the activities required for manufacturing our iPSC-derived cell product candidates, process and scale-up development and technology transfer activities for the manufacture of our product candidates, including those undergoing clinical investigation and IND application-enabling preclinical development; 81 Table of Contents • procure laboratory equipment, materials and supplies for the manufacture of our product candidates and the conduct of our research activities; • conduct preclinical and clinical research to investigate the therapeutic activity of our product candidates; • continue our research, development and manufacturing activities, including under our sponsored research and collaboration agreement with Ono; • maintain, prosecute, protect, expand and enforce our intellectual property portfolio; • engage with regulatory authorities for the development of, and seek regulatory approvals for, our product candidates; • continue our business operations at our corporate headquarters, including maintaining internal GMP production capabilities; and • continue operating as a public company and support our operations.
We cannot predict the effects of the impact of global economic and market conditions, the ongoing COVID-19 pandemic and the ongoing conflict in Ukraine on our business and operations, and our expenditures may be increased by delays or disruptions due to these or other factors, including as a result of actions we take in the near term to ensure business continuity and protect against possible supply chain shortages.
We cannot predict the effects of the impact of global economic and market conditions, a continued and prolonged public health emergency such as the COVID-19 pandemic, and wars and other armed conflicts, such as the ongoing wars between Russia and Ukraine and between Israel and Hamas, on our business and operations, and our expenditures may be increased by delays or disruptions due to these or other factors, including as a result of actions we take in the near term to ensure business continuity and protect against possible supply chain shortages.
Research and development expenses were $320.5 million for the year ended December 31, 2022, compared to $215.5 million for the year ended December 31, 2021.
Research and development expenses were $172.6 million for the year ended December 31, 2023, compared to $320.5 million for the year ended December 31, 2022.
Other income (expense), net for the year ended December 31, 2022 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).
Other income for the year ended December 31, 2023 also consisted of $17.2 million interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).
We will require additional capital for the research, manufacture and development of our product candidates and to perform our obligations under our existing collaboration agreements and any additional collaboration agreements that we may enter into, and we may need to seek additional funds sooner than expected due to any changes in our business, operations, financial condition or prospects, including any impacts of the COVID-19 pandemic or other global pandemics or epidemics, inflation rates and global economic conditions, and the ongoing conflict in Ukraine.
We will require additional capital for the research, manufacture and development of our product candidates and to perform our obligations under our collaboration agreements, and we may need to seek additional funds sooner than expected due to any changes in our business, operations, financial condition or prospects, including any impacts of inflation rates and global economic conditions, and wars or other armed conflicts.
During the year ended December 31, 2021, we recorded $3.5 million in other expense attributable to the fair value of the stock price appreciation milestones under the Amended MSK License.
During the year ended December 31, 2022, we recorded $20.3 million in other income attributable to the fair value of the stock price appreciation milestones under the Amended MSKCC License.
General and administrative expenses were $84.2 million for the year ended December 31, 2022, compared to $57.3 million for the year ended December 31, 2021.
General and administrative expenses. General and administrative expenses were $81.4 million for the year ended December 31, 2023, compared to $84.2 million for the year ended December 31, 2022.
We consider the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard. We apply the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.
We consider the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard. We apply the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances. A performance obligation is defined as a promise to transfer a product or a service to a customer.
The increase in general and administrative expenses was attributable primarily to the following: • $14.5 million increase in employee compensation and benefits expense, which includes a $8.4 million increase in employee stock-based compensation expense; • $5.9 million increase in patent and legal expense; and • $1.0 million increase in maintenance related expenses. Other income (expense), net.
The decrease in general and administrative expenses was attributable primarily to the following: • $10.6 million decrease in employee compensation and benefits expense, which includes a $5.0 million decrease in employee stock-based compensation expense; • $1.8 million decrease in office and computer supplies; and • $10.6 million increase in patent and legal expense. Other income.
Utilizing this therapeutic approach, we are advancing a cell therapy pipeline comprised of off-the-shelf, multiplexed-engineered, iPSC-derived natural killer (NK) and T-cell product candidates that are selectively designed, incorporate novel synthetic controls of cell function, and are intended to deliver multiple mechanisms of therapeutic importance to patients for the treatment of cancer and autoimmune disease.
Utilizing our proprietary iPSC product platform, we are advancing off-the-shelf, multiplexed-engineered natural killer (NK) and T-cell product candidates which are selectively designed to incorporate novel synthetic controls of cell function, and are intended to deliver multiple therapeutic mechanisms to patients for the treatment of cancer and autoimmune diseases.
The following table sets forth a summary of the net cash flow activity for each of the years ended December 31: 2022 2021 (in thousands) Net cash used in operating activities $ (248,208 ) $ (162,870 ) Net cash used in investing activities 166,751 (324,023 ) Net cash provided by financing activities 9,207 453,129 Net increase (decrease) in cash, cash equivalents and restricted cash $ (72,250 ) $ (33,764 ) Operating Activities Cash used in operating activities increased from $162.9 million for the year ended December 31, 2021 to $248.2 million for the year ended December 31, 2022.
The following table sets forth a summary of the net cash flow activity for each of the years ended December 31: 2023 2022 (in thousands) Net cash used in operating activities $ (132,263 ) $ (248,208 ) Net cash provided by investing activities 112,665 166,751 Net cash provided by financing activities 85 9,207 Net increase (decrease) in cash, cash equivalents and restricted cash $ (19,513 ) $ (72,250 ) Operating Activities Cash used in operating activities decreased from $248.2 million for the year ended December 31, 2022 to $132.3 million for the year ended December 31, 2023.
The increase in research and development expenses was attributable primarily to the following: • $38.3 million increase in employee compensation and benefits expense, which includes a $16.0 million increase in employee-stock based compensation expense; • $31.3 million increase in third-party professional consultant and clinical trial related expense; and • $17.6 million increase in expenditures for laboratory materials and supplies relating to the manufacture of our product candidates and the conduct of our research activities, including under our collaboration agreements. 83 Table of Contents General and administrative expenses.
The decrease in research and development expenses includes the impact of the termination of our collaboration with Janssen in April 2023 and was attributable primarily to the following: • $63.6 million decrease in employee compensation and benefits expense, which includes a $30.3 million decrease in employee-stock based compensation expense; • $48.4 million decrease in expenditures for laboratory materials and supplies relating to the manufacture of our product candidates and the conduct of our research activities, including under our collaboration agreements; and • $29.0 million decrease in third-party professional consultant and clinical trial related expense.
In addition, we are closely monitoring ongoing developments in connection with the COVID-19 pandemic, inflation rates and global economic conditions, and the ongoing conflict in Ukraine and evaluating adjustments to our business and operations, which may negatively impact our financial condition and prospects and our operating results.
In addition, we are closely monitoring inflation rates and global political and economic conditions, including the ongoing wars between Russia and Ukraine and between Israel and Hamas, and evaluating adjustments to our business and operations, which may negatively impact our financial condition and prospects and our operating results.
Registration Statements on Form S-3 In November 2021, we filed an automatic shelf registration statement (File No. 333-260772), which became effective upon filing. The shelf registration statement allows us to issue certain securities, including shares of our common stock, from time to time.
Registration Statements on Form S-3 In November 2023, the SEC declared effective a shelf registration statement on Form S-3 filed by us in November 2023 (File No. 333-275402). The shelf registration statement allows us to issue certain securities, including shares of our common stock, from time to time.
In addition, we identified our performance obligations under the Ono Agreement, including our grant to Ono of a license to certain of our intellectual property subject to certain conditions, our conduct of research services, and our participation in a joint steering committee.
We identified our promised goods and services under the Ono Agreement to include our grant to Ono of a license to certain of our intellectual property subject to certain conditions, our conduct of research services, and our participation in a joint steering committee. We determined that the promised goods and services should be accounted for as one combined performance obligation.
However, we are subject to all the risks and uncertainties incident in the research, manufacture and development of therapeutic products, and cell therapy product candidates in particular.
Our product candidates have not yet achieved regulatory approval and we may not be successful in achieving commercialization of our product candidates. We are also subject to all the risks and uncertainties incident in the research, manufacture and development of therapeutic products, and cell therapy product candidates in particular.
Under the Ono Amendment, aggregate estimated research and development fees have been increased by approximately $9.3 million, for a total estimated $29.3 million in aggregate research and development fees over the course of the joint development plan.
Under the 2023 Ono Amendment, aggregate estimated research and development fees have been increased by approximately $1.4 million, for a total estimated $30.7 million in aggregate research and development fees over the course of the joint development plan. We account for the Ono Agreement as a revenue contract under ASC 606.
In April 2020, we entered into a collaboration and option agreement with Janssen Biotech, Inc. (Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson (Janssen Agreement), for the development and commercialization of off-the-shelf, iPSC-derived CAR NK and CAR T-cell product candidates for the treatment of cancer.
(Ono), under which we are currently researching and developing iPSC-derived CAR NK and CAR T-cell product candidates for the treatment of solid tumors. In April 2020, we entered into a collaboration and option agreement (Janssen Agreement) with Janssen Biotech, Inc.
On January 3, 2023, we received notice of termination from Janssen of the Janssen Agreement. The termination will take effect on April 3, 2023 and, during the first quarter of 2023, we will wind down our activities with Janssen, including discontinuing development of all collaboration products.
On January 3, 2023, we received notice of termination from Janssen of the Janssen Agreement. The termination took effect on April 3, 2023, and during the three months ending March 31, 2023, we performed wind down activities, including discontinuing development of all collaboration product candidates under the Janssen Agreement.
During the year ended December 31, 2022, we recognized revenue of $96.3 million under our collaboration agreements with Janssen and Ono. During the year ended December 31, 2021, we recognized revenue of $55.8 million under our collaboration agreements with Janssen and Ono. Research and development expenses.
During the year ended December 31, 2023, we recognized revenue of $63.5 million under our collaboration agreements with Janssen and Ono. During the year ended December 31, 2022, we recognized revenue of $96.3 million under our collaboration agreements with Janssen and Ono. The decrease in revenue was attributable primarily to the termination of our collaboration with Janssen in April 2023.
If a promise to transfer a product or a service is not separately identifiable from other promises in the contract, such promises should be combined into a single performance obligation. 81 Table of Contents The transaction price is the amount of consideration we are entitled to receive in exchange for the transfer of control of a product or a service to a customer.
If a promise to transfer a product or a service is not separately identifiable from other promises in the contract, such promises should be combined into a single performance obligation. We determined that the promised goods and services for our collaboration agreements should be accounted 85 Table of Contents for as one combined performance obligation.
Financing activities provided cash of $453.1 million for the year ended December 31, 2021, which primarily consisted of $432.4 million of net proceeds from our January 2021 public offering of common stock and issuance of pre-funded warrants and $20.7 million received from the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.
Financing activities provided cash of $9.2 million for the year ended December 31, 2022, which consisted of $9.2 million received from the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.
Additionally, we have entered into a research collaboration and license agreement with Memorial Sloan Kettering Cancer Center (MSK) to develop off-the-shelf, engineered T-cell cancer immunotherapies derived from clonal master iPSC lines. In September 2018, we entered into a collaboration and option agreement with Ono Pharmaceutical Co. Ltd.
We have also entered into collaborations with pharmaceutical companies to research, develop and commercialize off-the-shelf, multiplexed-engineered, iPSC-derived NK and T-cell product candidates for the treatment of cancer. In September 2018, we entered into a collaboration and option agreement (Ono Agreement) with Ono Pharmaceutical Co., Ltd.
Results of Operations Comparison of Years Ended December 31, 2022 and 2021 The following table summarizes the results of our operations for the years ended December 31, 2022 and 2021: Years Ended December 31, Increase/ 2022 2021 (Decrease) (in thousands) Collaboration revenue $ 96,300 $ 55,846 $ 40,454 Research and development expenses 320,454 215,519 104,935 General and administrative expenses 84,232 57,321 26,911 Total other income, net 26,665 4,843 21,822 Revenue.
Results of Operations Comparison of Years Ended December 31, 2023 and 2022 The following table summarizes the results of our operations for the years ended December 31, 2023 and 2022: Years Ended December 31, Increase/ 2023 2022 (Decrease) (in thousands) Collaboration revenue $ 63,533 $ 96,300 $ (32,767 ) Research and development expenses 172,596 320,454 (147,858 ) General and administrative expenses 81,448 84,232 (2,784 ) Total other income, net 29,583 26,665 2,918 Revenue.
To date, the aggregate operations of our subsidiaries have not been significant and all intercompany transactions and balances have been eliminated in consolidation. Collaboration Revenue To date, we have not generated any revenues from therapeutic product sales or royalties. Our revenues have been derived from collaboration agreements and government grants. Agreement with Janssen Biotech, Inc.
Financial Operations Overview Collaboration Revenue To date, we have not generated any revenues from therapeutic product sales or royalties. Our revenues have been derived from collaboration agreements and government grants. Agreement with Ono Pharmaceutical Co., Ltd.
In addition to rent, our leases are subject to certain fixed amenities fees. These leases are also subject to additional variable charges for common area maintenance, property taxes, property insurance and other variable costs. See Note 8 of the consolidated financial statements for additional detail.
Contractual Obligations and Commitments We lease certain office, laboratory, and manufacturing space under non-cancelable operating leases. In addition to rent, our leases are subject to certain fixed amenities fees. These leases are also subject to additional variable charges for common area maintenance, property taxes, property insurance and other variable costs.
Total undiscounted aggregate future operating lease obligations under all of our operating leases as of December 31, 2022 are $177.7 million. We have no material contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to the financial statements.
We have no material contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to the financial statements.
Other income (expense), net was $26.7 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively. During the year ended December 31, 2022, we recorded $20.3 million in other income attributable to the change in fair value of the stock price appreciation milestone under the Amended MSK License.
During the year ended December 31, 2023, we recorded $4.0 million in income attributable to the CIRM Award, $5.1 million in income attributable to the ERC, and $2.5 million in other income attributable to the change in fair value of the stock price appreciation milestone under the Amended MSKCC License.
To determine the transaction price, we consider the existence of any significant financing component, the effects of any variable elements, noncash considerations and consideration payable to the customer. If a significant financing component exists, the transaction price is adjusted for the time value of money.
To determine the transaction price, we consider the existence of any significant financing component, the effects of any variable elements, noncash considerations and consideration payable to the customer. For our collaboration agreements, we calculate the transaction price as an estimate of the total research and development plan reimbursement.
On January 3, 2023, we received notice of termination from Janssen of the Janssen Agreement. During 2022, Janssen had exercised a commercial option for two collaboration candidates: an iPSC-derived, CAR-targeted NK cell product candidate for the treatment of B-cell lymphoma, for which the U.S.
Additionally, prior to termination of the Janssen Agreement, we received fees from Janssen for the conduct of all research, preclinical development and IND-enabling activities performed by us under the Janssen Agreement. In addition, Janssen had exercised a commercial option for two collaboration candidates: an iPSC-derived, CAR NK cell product candidate for the treatment of B-cell lymphoma, for which the U.S.
Under the Ono Amendment, aggregate estimated research and development fees have been increased by approximately $9.3 million, for a total estimated $29.3 million in aggregate research and development fees over the course of the joint development plan, subject to Ono exercising its option to continue the research term for a candidate targeting the second solid tumor antigen.
Under the 2022 Ono Amendment, aggregate estimated research and development fees have been increased by approximately $9.3 million, for a total estimated $29.3 million in aggregate research and development fees over the course of the joint development plan. 82 Table of Contents In November 2022, Ono exercised its preclinical option to Candidate 2, and we exercised our preclinical option to co-develop and co-commercialize (CDCC Option) in the United States and Europe under a joint arrangement with Ono.
The specific terms of any offering under the automatic shelf registration statement are established at the time of such offering.
The specific terms of any offering under the shelf registration statement would be established at the time of such offering. We are eligible to issue an aggregate of $300.0 million in securities under the shelf registration statement.
Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A. Risk Factors.” This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A. Risk Factors.” Overview We are a clinical-stage biopharmaceutical company dedicated to bringing a first-in-class pipeline of programmed cellular immunotherapies to patients with cancer and autoimmune diseases.
Overview We are a clinical-stage biopharmaceutical company dedicated to bringing a first-in-class pipeline of programmed cellular immunotherapies to patients with cancer and autoimmune disorders. Our development of first-in-class cell therapy product candidates is based on a simple notion: we believe that better cell therapies start with better cells.
Our development of programmed cellular immunotherapies is based on a simple notion: we believe that better cell therapies start with better cells.
Other Income (Expense) Other income (expense) consists of changes in the fair value of stock price appreciation milestones associated with the Amended and Restated Exclusive License Agreement dated May 15, 2018 (the Amended MSK License) with Memorial Sloan Kettering Cancer Center (MSK), interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums). 80 Table of Contents Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.
Other Income (Expense) Other income (expense) consists of changes in the fair value of stock price appreciation milestones associated with the Amended and Restated Exclusive License Agreement dated May 15, 2018 (Amended MSKCC License) with MSKCC, interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).
During the years ended December 31, 2022 and 2021, we recognized $16.6 million and $12.1 million, respectively, of collaboration revenue under the Ono Agreement. As of December 31, 2022, aggregate deferred revenue related to the Ono Agreement and Ono Letter Agreement was $1.1 million.
We recognize revenue for the combined performance obligation over time as the research services are performed. During the years ended December 31, 2023 and 2022, we recognized $11.2 million and $16.6 million, respectively, of collaboration revenue under the Ono Agreement.
We concluded that certain units of account within the Ono Agreement represented a customer relationship and in accordance with ASC 606, we determined that the initial transaction price under the Ono Agreement equals $30.0 million, consisting of the upfront, non-refundable and non-creditable payment of $10.0 million and the aggregate estimated research and development fees of $20.0 million.
The initial transaction price as amended under the 2023 Ono Amendment was determined to be $40.7 million, consisting of the upfront, non-refundable and non-creditable payment of $10.0 million and the aggregate estimated research and development fees of $30.7 million.
As of December 31, 2022, we have received all disbursements available under the Award in the amount of $4.0 million. The Award is subject to certain co-funding requirements by us. We, in our sole discretion, have the option to treat the Award either as a loan or as a grant.
Pursuant to the terms of the Award, we, in our sole discretion, have the option to treat the Award either as a loan or as a grant.
The restructuring is expected to extend our cash runway into the second half of 2025. We were incorporated in Delaware in 2007, and are headquartered in San Diego, CA.
We were incorporated in Delaware in 2007 and are headquartered in San Diego, California.
(Ono) for the joint development and commercialization of off-the-shelf, iPSC-derived CAR T-cell product candidates (Ono Agreement) for the treatment of cancer.
(Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson, for the research, development and commercialization of iPSC-derived CAR NK and CAR T-cell product candidates for the treatment of cancer. On January 3, 2023, we received notice of termination of the Janssen Agreement from Janssen, which took effect on April 3, 2023.
As a result, we remitted the first milestone payment of $20.0 million to MSK during the year ended December 31, 2021. Investing Activities During the years ended December 31, 2022 and 2021, investing activities provided cash of $166.8 million and used cash of $324.0 million, respectively.
Investing Activities During the years ended December 31, 2023 and 2022, investing activities provided cash of $112.7 million and $166.8 million, respectively. During the year ended December 31, 2023 we purchased $358.8 million of investments, which were partially offset by $477.6 million in maturities of investments.
On April 2, 2020 (the Janssen Agreement Effective Date), we entered into a Collaboration and Option Agreement (the Janssen Agreement) with Janssen Biotech, Inc. (Janssen), part of the Janssen Pharmaceutical Companies of Johnson & Johnson.
As of December 31, 2023, aggregate deferred revenue related to the Ono Agreement, Ono Letter Agreement, and Ono Amendments was $0.7 million. Agreement with Janssen Biotech, Inc. On April 2, 2020, we entered into the Janssen Agreement as well as a Stock Purchase Agreement (the Stock Purchase Agreement) with Johnson & Johnson Innovation - JJDC, Inc. (JJDC).
For each distinct performance obligation, revenue is recognized when (or as) we transfer control of the product or the service applicable to such performance obligation. In those instances where we first receive consideration in advance of satisfying its performance obligation, we classify such consideration as deferred revenue until (or as) we satisfy such performance obligation.
We recognize revenue for the combined performance obligation over time as the research services are performed. The transaction price is the amount of consideration we are entitled to receive in exchange for the transfer of control of a product or a service to a customer.
We have entered into a research collaboration and license agreement with the Regents of the University of Minnesota to develop off-the-shelf, engineered NK-cell cancer immunotherapies derived from clonal master iPSC lines.
In addition, we have entered into research collaborations and license agreements with academic institutes to support the development of our iPSC product platform and our off-the-shelf product candidates, including, among others, the Regents of the University of Minnesota and Memorial Sloan Kettering Cancer Center (MSKCC).

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