The following information should be read in conjunction with our unaudited condensed financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K, which was filed with theSecurities and Exchange Commission , or theSEC , onMarch 30, 2022 , or the Annual Report. Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as "may," "expect," "anticipate," "estimate," "intend," "plan," and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A. Risk Factors.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of theSEC , to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
Overview
We are a clinical-stage oncology-focused cell therapy company developing adoptive TCR-T cell therapy, designed to treat multiple solid tumor types in large cancer patient populations with unmet clinical needs. We are leveraging our cancer hotspot mutation TCR library and our proprietary, non-viral Sleeping Beauty gene transfer platform to design and manufacture patient-specific cell therapies that target neoantigens arising from shared tumor-specific mutations in key oncogenic genes, including KRAS, TP53, and EGFR. In collaboration with theMD Anderson Cancer Center , or MDAnderson , we are currently enrolling patients for a Phase 1/2 clinical trial evaluating ten TCRs reactive to mutated KRAS, TP53, and EGFR from our TCR library for the investigational treatment of non-small cell lung, colorectal, endometrial, pancreatic, ovarian, and bile duct, which we refer to as our TCR-T Library Phase 1/2 Trial. OnMay 2, 2022 , we announced that we treated our first patient in this trial; we anticipate reporting interim data in the second half of 2022. We have not generated any product revenue and have incurred significant net losses in each year since our inception. For the three months endedMarch 31, 2022 , we had a net loss of$9.8 million , and as ofMarch 31, 2022 , we have incurred approximately$852.6 million of accumulated deficit since our inception in 2003. We expect to continue to incur significant operating expenditures and net losses. Further development of our product candidates will likely require substantial increases in our expenses as we:
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continue to undertake clinical trials for product candidates;
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seek regulatory approvals for product candidates;
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work with regulatory authorities to identify and address program-related inquiries;
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implement additional internal systems and infrastructure;
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hire additional personnel; and
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scale-up the formulation and manufacturing of our product candidates.
We continue to seek additional financial resources to fund the further development of our product candidates. If we are unable to obtain sufficient additional capital, one or more of these programs could be delayed, and we may be unable to continue our operations at planned levels and be forced to reduce our operations. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. 17 --------------------------------------------------------------------------------
Recent Developments
OnSeptember 27, 2021 , we announced a restructuring designed to enable us to focus on and advance our TCR program. As a result of the restructuring, approximately 60 positions were eliminated, and we were able to extend our anticipated cash runway. Given our current development plans and cash management efforts, we anticipate cash resources will be sufficient to fund operations into the second quarter of 2023. The ongoing COVID-19 global pandemic has presented a significant health and economic challenge around the world and may affect our employees, partners and business operations. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. Supply chain disruptions caused by the pandemic may negatively impact productivity, disrupt our business and delay our clinical programs and timelines. The severity of negative impacts will depend, in part, on the length and magnitude of the disruptions. These and perhaps more severe disruptions in our operations could negatively impact our business, operating results and financial condition. We continue to work with our partners to mitigate the impact the COVID-19 pandemic is having on our business.
On
OnMay 16, 2022 , we presented preclinical data in poster M-234 on Stem-cell memory TCR-T cells targeting hotspot EGFR, KRAS and TP53 neoantigens generated through co-expression of membrane-bound Interleukin-15, or mbIL-15, at the 25th Annual Meeting of theAmerican Society of Gene andCell Therapy . Our mbIL-15 program is designed to augment the function of TCR-T cells by co-expression of a proprietary potentially more potent mbIL-15. In this preclinical study, we observed that mbIL-15 TCR-T cells specifically targeted and killed tumors expressing matching neoantigen and HLAs with negligible off-target effects. Importantly, mbIL-15 seems to enhance the survival and persistence of TCR-T cells cultured in the absence of exogenous cytokine support. The persisting mbIL-15 TCR-T cells were observed to exhibit a preponderance of long-lived T stem-cell memory cells that were capable to giving rise to effector T cell subsets upon in vitro restimulation. These preclinical observations suggest that our proprietary mbIL-15 technology has the potential to establish long-lived tumor-specific TCR-T cells that may have the potential to survive in circulation and in the suppressive tumor microenvironment.
Financial Overview
Collaboration Revenue
We recognize research and development funding revenue over the estimated period of performance. To date we have not generated product revenue. Unless and until we receive approval from the FDA and/or other regulatory authorities for our product candidates, we cannot sell our products and will not have product revenue.
Research and Development Expenses
Our research and development expenses consist primarily of salaries and related expenses for personnel, costs of contract manufacturing services, costs of facilities, reagents, and equipment, fees paid to professional service providers in conjunction with our clinical trials, fees paid to contract research organizations in conjunction with clinical trials, fees paid to contract research organizations in conjunction with costs of materials used in research and development, consulting, license and milestone payments and sponsored research fees paid to third parties. Our future research and development expenses in support of our current and future programs will be subject to numerous uncertainties in timing and cost to completion. We test potential products in numerous preclinical studies for safety, toxicology and efficacy. We may conduct multiple clinical trials for each product. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus our resources on more promising products or indications. Completion of clinical trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product. It is not unusual for preclinical and clinical development of each of these types of products to require the expenditure of substantial resources.
The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others, the following:
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The number of clinical sites included in the trials;
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The length of time required to enroll suitable patients;
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The number of patients that ultimately participate in the trials;
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The length of time and cost to develop and optimize manufacturing processes;
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The cost to manufacture the clinical products for patients;
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The duration of patient follow-up to ensure the absence of long-term product-related adverse events; and
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The efficacy and safety profile of the product.
As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our programs or when and to what extent we will receive cash inflows from the commercialization and sale of a product. Our inability to complete our programs in a timely manner or our failure to enter into appropriate collaborative agreements could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to reduce or eliminate our activities in one or more of our programs or seek additional, external sources of financing from time-to-time in order to continue with our product development strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, benefits and stock-based compensation, consulting and professional fees, including patent related costs, general corporate costs and facility costs not otherwise included in research and development expenses or cost of product revenue.
Other Income (Expense)
Other income (expense) consists primarily of interest expense associated with our Amended Loan and Security Agreement, as defined below.
Overview of Results of Operations
Three Months Ended
Research and Development Expenses
Research and development expenses during the three months endedMarch 31, 2022 and 2021 were as follows: Three Months Ended March 31, 2022 2021 Change
($ in thousands)
Research and development expenses
Research and development expenses for the three months endedMarch 31, 2022 decreased by$7.8 million , or 58%, when compared to the three months endedMarch 31, 2021 primarily due to a decrease in program-related costs of$2.8 million as a result of the winding down of our IL-12 and CAR-T programs, a$4.7 million decrease in employee related expenses due to our reduced headcount following our restructuring in the third quarter of 2021, and a$0.3 million decrease in consulting expenses due to a decreased reliance on consultants.
For the three months ended
General and administrative expenses
General and administrative expenses during the three months endedMarch 31, 2022 and 2021 were as follows: Three Months Ended March 31, 2022 2021 Change ($ in thousands) General and administrative expenses$ 3,505 $ 8,227
General and administrative expenses for the three months endedMarch 31, 2022 decreased by$4.7 million as compared to the three months endedMarch 31, 2021 , primarily due to a$3.6 million decrease in employee related expenses due to our reduced headcount following our restructuring in the third quarter of 2021, a$0.8 million decrease in consulting and professional services expenses due to lower legal costs and a decreased use of consultants, and a$0.2 million decrease in facilities and other expenses. 19 --------------------------------------------------------------------------------
Other income (expense), net
Other income (expense), net during the three months endedMarch 31, 2022 and 2021 was as follows: Three Months Ended March 31, 2022 2021 Change ($ in thousands) Interest expense $ (683 ) $ -$ (683 ) 100 % Other income (expense), net (20 ) 9 (29 ) (322 )% Total $ (703 )$ 9 $ (712 ) (7911 )% Other expense, net for the three months endedMarch 31, 2022 increased by$0.7 million as compared to the three months endedMarch 31, 2021 , primarily due to$0.7 million of interest expense associated with our Amended Loan and Security Agreement, as defined below.
Liquidity and Capital Resources
Sources of Liquidity
We have not generated any revenue from product sales. Since inception, we have incurred net losses and negative cash flows from our operations.
To date, we have financed our operations primarily through public offerings of our common stock, private placements of our convertible equity securities, term debt and collaborations. ThroughMarch 31, 2022 , we have received an aggregate of$714.1 million from issuances of equity and$25.0 million from our Amended Loan and Security Agreement, as defined below. We follow the guidance of Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements - Going Concern, in order to determine whether there is substantial doubt about our ability to continue as a going concern for one year after the date our financial statements are issued. Given our current development plans and cash management efforts, we anticipate that our cash resources will be sufficient to fund operations into the second quarter of 2023. Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in our focus and direction of our research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, management may need to curtail its development efforts and planned operations to conserve cash. Based on the current cash forecast, management has determined that our present capital resources will not be sufficient to fund our planned operations for at least one year from the issuance date of the financial statements, which raises substantial doubt as to our ability to continue as a going concern. This forecast of cash resources and planned operations is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors.
2021 Loan and Security Agreement
OnAugust 6, 2021 , we entered into a Loan and Security Agreement withSilicon Valley Bank and affiliates ofSilicon Valley Bank (collectively, "SVB") (the "Loan and Security Agreement"). The Loan and Security Agreement provided for an initial term loan of$25.0 million funded at the closing ("Term A Tranche"), with an additional tranche of$25.0 million available if certain funding and clinical milestones were met byAugust 31, 2022 ("Term B Tranche").
Effective
The Amended Loan and Security Agreement extends the interest-only period throughAugust 31, 2022 , and provides for an automatic extension throughAugust 31, 2023 , if the Amended Milestones (as defined below) are met byAugust 31, 2022 . The Amendment eliminated the Term B Tranche, which remained unfunded, leaving only the Term A Tranche (the "SVB Facility"). Under the Amended Loan and Security Agreement, the SVB Facility will mature onAugust 1, 2023 ; however, if we achieve the Amended Milestones on or prior toAugust 31, 2022 , then the maturity will automatically extend toAugust 1, 2024 . As ofMarch 31, 2022 , the SVB Facility was fully drawn in the amount of$25.0 million . The SVB Facility bears interest at a floating rate per annum on the outstanding loans, payable monthly, at the greater of (a) 7.75% and (b) the current publishedU.S. prime rate, plus a margin of 4.5%. The Amended Loan and Security Agreement provides for an interest-only period which extends throughAugust 31, 2022 , as compared toMarch 31, 2022 in the Loan and Security Agreement, and may be automatically extended throughAugust 31, 2023 , if, on or prior toAugust 31, 2022 , SVB receives evidence, satisfactory to it, confirming that we have (i) received at least$50.0 million in net cash proceeds from the sale of our equity securities after the date of the Amended Loan and Security Agreement, on terms and 20 -------------------------------------------------------------------------------- conditions acceptable to SVB, and (ii) achieved positive data in the first cohort of the TCR-T Library Phase 1/2 Trial endorsed by an independent safety monitoring committee as a safe dose to proceed (together, the "Amended Milestones"). After the interest-only payment period, aggregate outstanding borrowings are repayable in twelve consecutive, equal monthly installments of principal plus accrued interest. All outstanding principal and accrued and unpaid interest under the SVB Facility and all other outstanding obligations under the Amended Loan and Security Agreement are due and payable onAugust 1, 2023 ; however, if we achieve the Amended Milestones on or prior toAugust 31, 2022 , then the maturity will be automatically extended toAugust 1, 2024 . In addition to the payment of the outstanding principal plus accrued interest due, we will also owe SVB 5.75% of the original principal amounts borrowed as a final payment (the "Final Payment"). We are permitted to make up to two prepayments, each payment of at least$5.0 million , subject to the prepayment premium of the SVB Facility. Such prepayment premium would be 3.00% of the principal amount of the SVB Facility if prepaid prior to the first anniversary of the effective date, 2.00% of the principal amount of the SVB Facility if prepaid on or after the first anniversary of the effective date but prior to the second anniversary of the effective date and 1.00% of the principal amount of the SVB Facility if prepaid on or after the second anniversary of the effective date but prior to maturity date. No amount that has been repaid may be reborrowed. The Amended Loan and Security Agreement requires us to cash collateralize half of the sum of the then-outstanding principal amount of the SVB Facility, plus an amount equal to 5.75% of the original principal amount of the SVB Facility if we do not achieve the Amended Milestones on or prior toAugust 31, 2022 . In the event a cash collateralization were to occur, so long as no event of default has occurred,$2.5 million will be released from the collateral account following the eighth scheduled payment of principal and interest, and a further$4.0 million will be released following the tenth scheduled payment of principal and interest on the SVB facility, in each case, so long as (i) after subtracting such scheduled payment, the sum of (a) the aggregate outstanding principal, (b) accrued and unpaid interest and (c) the Final Payment is less than$9,770,933 and$5,604,167 , respectively and (ii) the balance in the collateral account after the release would equal or exceed$10.0 million and$6.0 million , respectively. The SVB Facility and related obligations under the Amended Loan and Security Agreement are secured by substantially all of our properties, rights and assets, except for its intellectual property (which is subject to a negative pledge under the Amended Loan and Security Agreement). In addition, the Amended Loan and Security Agreement contains customary representations, warranties, events of default and covenants. In connection with our entry into the Loan and Security Agreement, we issued to SVB warrants to purchase (i) up to 432,844 shares of our common stock, in the aggregate, and (ii) up to an additional 432,842 shares of Common Stock, in the aggregate, in the event we achieve certain clinical milestones, in each case at an exercise price per share of$2.22 . In connection with our entry into the Amendment, we amended and restated the warrants issued to SVB. As amended and restated, the warrants are for up to 649,615 shares of our common stock, in the aggregate, at an exercise price per share of$1.16 , or the SVB Warrants. The SVB Warrants expire onAugust 6, 2031 . The issuance costs for the Loan and Security Agreement, including the Amended Loan and Security Agreement, were approximately$1.2 million and primarily related to the SVB Warrants, which will be amortized into interest expense over the period toAugust 1, 2023 . Interest expense was$0.7 million for the three months endedMarch 31, 2022 .
The fair value of the Amended Loan and Security Agreement as of
Cash Flows
The following table summarizes our net decrease in cash and cash equivalents for
the three months ended
Three Months Ended March 31, 2022 2021 ($ in thousands) Net cash provided by (used in): Operating activities$ (7,770 ) $ (15,313 ) Investing activities (29 ) (717 ) Financing activities - 1,017
Net decrease in cash and cash equivalents
Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating activities is derived by adjusting our net loss for:
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Non-cash operating items such as depreciation and stock-based compensation; and
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Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations. 21 -------------------------------------------------------------------------------- Net cash used in operating activities for the three months endedMarch 31, 2022 was$7.8 million , as compared to net cash used in operating activities of$15.3 million for the three months endedMarch 31, 2021 . The net cash used in operating activities for the three months endedMarch 31, 2022 was primarily due to our net loss of$9.8 million , adjusted for$1.7 million of non-cash items such as depreciation and stock-based compensation, and a decrease in accounts payable of$0.8 million and a$0.2 million decrease in accrued expenses, offset by a decrease in receivables of$1.1 million due to cash receipts and a decrease to prepaid expenses and other assets of$0.2 million . Net cash used in investing activities was$29 thousand for the three months endedMarch 31, 2022 , compared to$0.7 million for the three months endedMarch 31, 2021 . The decrease of$0.7 million in net cash used in investing activities was primarily a result of the decision to use available cash to expand our internal cell therapy capabilities in ourHouston, Texas facilities during the first quarter of 2021. There were no financing activities for the three months endedMarch 31, 2022 . Net cash provided by financing activities during the three months endedMarch 31, 2021 was$1.0 million , related primarily to proceeds from the exercise of stock options.
Operating Capital and Capital Expenditure Requirements
We anticipate that losses will continue for the foreseeable future. As ofMarch 31, 2022 , our accumulated deficit was approximately$852.6 million . Our actual cash requirements may vary materially from those planned because of a number of factors, including:
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changes in the focus, direction and pace of our development programs;
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the effect of competing technologies and market developments;
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the scope, progress, timing, costs and results of our TCR-T Library Phase 1/2 Trial for the treatment of certain solid tumors and costs associated with the development of our product candidates;
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our headcount growth focused on our TCR program and scaling our manufacturing capabilities;
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our ability to secure partnering arrangements; and
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costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights, or other developments.
As ofMarch 31, 2022 , we had approximately$68.3 million of cash and cash equivalents. Given our current development plans, we anticipate our cash resources will be sufficient to fund our operations into the second quarter of 2023. In order to continue our operations beyond our forecasted runway we will need to raise additional capital, and we have no committed sources of additional capital at this time. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate. Management does not know whether additional financing will be on terms favorable or acceptable to us when needed, if at all. If adequate additional funds are not available when required, management may need to curtail its development efforts and planned operations.
Working capital as of
Operating Leases
Our commitments for operating leases relate to laboratory and office space inHouston, Texas and office space inBoston, Massachusetts . OnDecember 21, 2015 andApril 15, 2016 , we renewed the sublease for our office space inBoston throughAugust 31, 2021 . OnApril 22, 2021 , we extended our lease for a portion of office space currently held at our office inBoston . The renewal of the portion of our office space was originally set to expire onAugust 31, 2021 but was extended throughAugust 31, 2026 . OnMarch 12, 2019 , we entered into a lease agreement for office space inHouston at MDAnderson throughApril 2021 . OnOctober 15, 2019 , we entered into another lease agreement for additional office and laboratory space inHouston throughFebruary 2027 . OnApril 7, 2020 , we entered into amendments to our existing lease to lease additional office and laboratory space inHouston throughFebruary 2027 . In June andSeptember 2020 , we entered into short-term leases inHouston for additional office and laboratory space. OnDecember 15, 2020 , we entered into a second lease inHouston with MDAnderson which provided us additional office and laboratory space throughApril 2028 . 22 --------------------------------------------------------------------------------
Royalty and License Fees
OnMay 28, 2019 , we entered into a patent license agreement, or the Patent License, with theNational Cancer Institute , or the NCI. The terms of the Patent License require us to pay the NCI minimum annual royalties in the amount of$0.3 million , which will be reduced to$0.1 million once the aggregate minimum annual royalties paid by us equals$1.5 million . For the three months endedMarch 31, 2022 and 2021, we recognized$0.3 million related to royalty payments under this agreement. As ofMarch 31, 2022 , we have paid a total of$0.8 million in minimum annual royalty payments under this agreement. Pursuant to the Patent License, we are also required to make performance-based payments contingent upon the successful completion of clinical and regulatory benchmarks relating to the licensed products. Of such payments, the aggregate potential benchmark payments are$4.3 million , of which aggregate payments of$3.0 million are due only after marketing approval inthe United States or inEurope ,Japan ,Australia ,China orIndia . The first benchmark payment of$0.1 million will be due upon the initiation of our first sponsored Phase 1 clinical trial of a licensed product or licensed process in the field of use licensed under the Patent License. In addition, we are required to pay the NCI one-time benchmark payments following aggregate net sales of licensed products at certain aggregate net sales ranging from$250.0 million to$1.0 billion . The aggregate potential amount of these benchmark payments is$12.0 million . No payments were made during the three months endedMarch 31, 2022 andMarch 31, 2021 . OnOctober 5, 2018 , we entered into an exclusive license agreement, or the License Agreement, withPGEN Therapeutics, Inc. , or PGEN, a wholly owned subsidiary of Precigen Inc., or Precigen. Under the License Agreement, we are obligated to pay PGEN an annual licensing fee of$0.1 million expected to be paid through the term of the agreement and we have also agreed to reimburse certain historical costs of PGEN up to$1.0 million . For the three months endedMarch 31, 2022 andMarch 31, 2021 , we have made licensing fee payments in accordance with the terms of the agreement. Pursuant to the terms of the License Agreement, we are responsible for contingent milestone payments totaling up to an additional$52.5 million for each exclusively licensed program upon the initiation of later stage clinical trials and upon the approval of exclusively licensed products in various jurisdictions. In addition, we will pay PGEN tiered royalties ranging from low-single digit to high-single digit on the net sales derived from the sales of any approved IL-12 products and CAR products. We will also pay PGEN royalties ranging from low-single digit to mid-single digit on the net sales derived from the sales of any approved TCR products, up to a maximum royalty amount of$100.0 million in the aggregate. We will also pay PGEN twenty percent of any sublicensing income received by us relating to the licensed products. We are responsible for all development costs associated with each of the licensed products. PGEN will pay us royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of PGEN's CAR products, up to a maximum royalty amount of$100.0 million .
Critical Accounting Policies and Estimates
In our Annual Report on Form 10-K for the year endedDecember 31, 2021 , our most critical accounting policies and estimates upon which our financial status depends were identified as those relating to clinical trial expenses and other research and development expenses; collaboration agreements; fair value measurements for stock-based compensation; and income taxes. We reviewed our policies and determined that those policies remain our most critical accounting policies for the three months endedMarch 31, 2022 .
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