ALLOGENE THERAPEUTICS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

You should read the following discussion of our financial condition and results
of operations in conjunction with our unaudited condensed consolidated financial
statements and the related notes and other financial information included
elsewhere in this Quarterly Report on Form 10-Q and the audited financial
statements and notes thereto as of and for the year ended December 31, 2021 and
the related Management's Discussion and Analysis of Financial Condition and
Results of Operations, both of which are contained in our Annual Report on Form
10-K for the year ended December 31, 2021 (Annual Report), which was filed with
the Securities and Exchange Commission (SEC) on February 23, 2022. Unless the
context requires otherwise, references in this Quarterly Report on Form 10-Q to
the "Company", "Allogene," "we," "us" and "our" refer to Allogene Therapeutics,
Inc., and references to "Servier" collectively refer to Les Laboratoires Servier
SAS and Institut de Recherches Internationales Servier SAS.

In addition to historical financial information, this discussion contains
forward-looking statements based upon current expectations that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth in the section titled "Risk Factors" under Part II,
Item 1A below. In some cases, you can identify forward-looking statements by
terminology such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "plan," "potentially," "predict," "should," "will" or
the negative of these terms or other similar expressions.

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

Overview

We are a clinical-stage immuno-oncology company pioneering the development of
genetically engineered allogeneic T cell therapies for the treatment of cancer.
We are developing a pipeline of off-the-shelf T cell product candidates that are
designed to target and kill cancer cells. Our engineered T cells are allogeneic,
meaning they are derived from healthy donors for intended use in any patient,
rather than from an individual patient for that patient's use, as in the case of
autologous T cells. We believe this key difference will enable us to deliver
readily available treatments faster, more reliably, at greater scale, and to
more patients.
                                       22

--------------------------------------------------------------------------------

Table of Contents

We have a deep pipeline of allogeneic chimeric antigen receptor (CAR) T cell
product candidates targeting multiple promising antigens in a host of
hematological malignancies and solid tumors. Pursuant to our Exclusive
Collaboration and License Agreement with Servier (Servier Agreement), we have
exclusive rights to ALLO-501 and ALLO-501A, CAR T cell product candidates
targeting CD19, in the United States. ALLO-501 and ALLO-501A use Cellectis S.A.
(Cellectis) technologies under which Servier holds an exclusive worldwide
license from Cellectis.

On September 15, 2022, Servier sent a notice of discontinuation
(Discontinuation) of its involvement in the development of all licensed products
directed against CD19, including UCART19, ALLO-501 and ALLO-501A (collectively,
CD19 Products), pursuant to the Servier Agreement. Servier's Discontinuation
provides us with the right to elect a license to the CD19 Products outside of
the United States (Ex-US Option) and does not otherwise affect our current
exclusive license for the development and commercialization of CD19 Products in
the United States. Upon any exercise of the Ex-US Option by us, our potential
milestone payments with respect to ALLO-501A would increase for any first dosing
in Phase 2, first dosing in Phase 3 and regulatory approval by €46 million in
the aggregate. In addition, upon any such exercise of the Ex-US Option,
Servier's obligation to reimburse us for 40% of the development costs for CD19
Products would cease. See "Risk Factors-Servier's Discontinuation of its
involvement in the development of CD19 Products may have adverse consequences.*"

We are conducting long-term follow-up in our Phase 1 clinical trial (the ALPHA
trial) of ALLO-501 in patients with relapsed or refractory (R/R) non-Hodgkin
lymphoma (NHL). We are also progressing the development of the second-generation
version of ALLO-501, known as ALLO-501A. We have removed rituximab recognition
domains in ALLO-501A, which we believe will potentially facilitate treatment of
more patients, as rituximab is a typical part of a treatment regimen for a
patient with NHL.

We recently initiated a Phase 2 clinical trial for ALLO-501A (the ALPHA2 trial)
in R/R large B cell lymphoma (LBCL). We conducted an extensive Phase 1 program
designed to evaluate and optimize all aspects of our therapy, including multiple
doses and schedules of ALLO-501A and one of our lymphodepletion agents,
ALLO-647. In addition, we conducted a review of the Phase 1 program, which
determined a manufacturing process associated with robust clinical performance.
Our selected manufacturing process, named Alloy, will be deployed in the ALPHA2
trial and the EXPAND trial discussed below. The Phase 2 trial will begin with
previously manufactured material from our prior contract manufacturing
organization and we may transition to product from our manufacturing facility
during the course of the ALPHA2 and EXPAND trials.

The single-arm ALPHA2 trial will utilize a single dose of ALLO-501A at 120
million CAR+ cells with a lymphodepletion regimen comprised of fludarabine (30
mg/m2/day x 3 days) and cyclophosphamide (300 mg/m2/day x 3 days) plus ALLO-647
(90 mg). We plan to enroll approximately 100 patients who have received at least
two prior lines of therapy and have not received any prior anti-CD19 therapy,
including CAR T therapy. The primary endpoint is objective response rate (ORR)
and the key secondary endpoint is duration of response (DoR).

We are also in the process of initiating the EXPAND trial, which is expected to
enroll approximately 70 patients with R/R LBCL and is intended to demonstrate
the contribution of ALLO-647 to the overall benefit of the lymphodepletion
regimen. Patients will be randomized to receive the same single 120 million CAR+
cell dose of ALLO-501A as in the ALPHA2 trial and either lymphodepletion with
fludarabine and cyclophosphamide (control arm) or the lymphodepletion regimen of
the ALPHA2 trial (active arm). The primary endpoint of this trial is progression
free survival, and the key secondary endpoints are ORR, DoR, and the safety of
ALLO-647. Assuming favorable outcomes and subject to FDA discussions, we plan to
seek FDA approval of ALLO-501A and ALLO-647 on the basis of the ALPHA2 trial and
the EXPAND companion trial.

We are sponsoring two clinical trials in adult patients with R/R multiple
myeloma, a Phase 1 clinical trial (the UNIVERSAL trial) of ALLO-715 and a Phase
1 clinical trial (the IGNITE trial) of ALLO-605, our first product candidate to
incorporate our TurboCAR technology. TurboCAR technology allows cytokine
signaling to be engineered selectively into CAR T cells and has shown the
ability to improve the potency and persistence of the cells and to delay
exhaustion of the cells in preclinical models.

We also continue to advance the Phase 1 clinical trial (the TRAVERSE trial) of
ALLO-316, an allogeneic CAR T cell product candidate targeting CD70, in adult
patients with advanced or metastatic clear cell renal cell carcinoma (ccRCC).
Subject to results from the TRAVERSE trial, we may investigate the use of
ALLO-316 for other solid tumor and hematologic indications.

We are planning an Allogene R&D Showcase on November 29, 2022 to provide an update on certain of our research and development programs, including additional data from the ALPHA, ALPHA2 and UNIVERSAL trials.

Enrollment of patients and the ability to conduct patient follow-up has been
adversely impacted by the COVID-19 pandemic. The exact timing of delays and
overall impact of the COVID-19 pandemic to our business, preclinical studies and
clinical trials is currently unknown, and we are monitoring the pandemic as it
continues to evolve.
                                       23

--------------------------------------------------------------------------------

Table of Contents

Since inception, we have had significant operating losses. Our net losses were
$83.1 million and $237.8 million for the three and nine months ended
September 30, 2022, respectively. As of September 30, 2022, we had an
accumulated deficit of $1.1 billion. As of September 30, 2022, we had $637.3
million in cash and cash equivalents and investments. We expect to continue to
incur net losses for the foreseeable future, and we expect our research and
development expenses and general and administrative expenses will continue to
increase.
                                       24

--------------------------------------------------------------------------------

Table of Contents

Our Research and Development and License Agreements

Asset Contribution Agreement with Pfizer

In April 2018, we entered into an Asset Contribution Agreement (Pfizer
Agreement) with Pfizer pursuant to which we acquired certain assets and assumed
certain liabilities from Pfizer, including agreements with Cellectis and Servier
as described below, and other intellectual property for the development and
administration of CAR T cells for the treatment of cancer. See Note 6 to our
condensed consolidated financial statements included elsewhere in this report
for further description of the Pfizer Agreement.

Research Collaboration and License Agreement with Cellectis

In June 2014, Pfizer entered into a Research Collaboration and License Agreement
with Cellectis. In April 2018, Pfizer assigned the agreement to us pursuant to
the Pfizer Agreement. In March 2019, we terminated the agreement with Cellectis
and entered into a new license agreement with Cellectis. See Note 6 to our
condensed consolidated financial statements included elsewhere in this report
for further descriptions of the prior agreement with Cellectis and the new
license agreement with Cellectis.

Exclusive License and Collaboration Agreement with Servier

In October 2015, Pfizer entered into the Servier Agreement to develop,
manufacture and commercialize certain allogeneic anti-CD19 CAR products in the
United States with the option to obtain the rights over certain additional
allogeneic anti-CD19 CAR product candidates and for allogeneic CAR T cell
product candidates directed against one additional target. In April 2018, Pfizer
assigned the agreement to us pursuant to the Pfizer Agreement. In October 2019,
we agreed to waive our rights to the one additional target. See Note 6 to our
condensed consolidated financial statements included elsewhere in this report
for further description of the Servier Agreement.

Collaboration and License Agreement with Notch

On November 1, 2019, we entered into a Collaboration and License Agreement (the
Notch Agreement) with Notch Therapeutics Inc. (Notch), pursuant to which Notch
granted us an exclusive, worldwide, royalty-bearing, sublicensable license under
certain of Notch's intellectual property to develop, make, use, sell, import,
and otherwise commercialize therapeutic gene-edited T cell and/or natural killer
cell products from induced pluripotent stem cells directed at certain CAR
targets for initial application in NHL, ALL and multiple myeloma. In addition,
Notch has granted us an option to add certain specified targets to our exclusive
license in exchange for an agreed upon per-target option fee.

The Notch Agreement includes a research collaboration to conduct research and
pre-clinical development activities to generate engineered cells directed to our
exclusive targets, which will be conducted in accordance with an agreed research
plan and budget under the oversight of a joint development committee. In
connection with the execution of the Notch Agreement, we made an upfront payment
to Notch of $10.0 million. In addition, we made a $5.0 million investment in
Notch's series seed convertible preferred stock, resulting in us having a 25%
ownership interest in Notch's outstanding capital stock on a fully diluted basis
immediately following the investment. In February 2021, we made an additional
$15.9 million investment in Notch's Series A preferred stock. In October 2021,
we made an additional $1.8 million investment in Notch's common stock.
Immediately following this transaction, our share in Notch was 23.0% on a voting
interest basis. See Note 6 to our condensed consolidated financial statements
included elsewhere in this report for further description of the Notch
Agreement.

Strategic Alliance with The University of Texas MD Anderson Cancer Center

On October 6, 2020, we entered into a strategic five-year collaboration
agreement with The University of Texas MD Anderson Cancer Center (MD Anderson)
for the preclinical and clinical investigation of allogeneic CAR T cell product
candidates. See Note 6 to our consolidated financial statements included
elsewhere in this report for further description of the agreement with MD
Anderson.

License Agreement with Allogene Overland

On December 14, 2020, we entered into a License Agreement with Allogene Overland
Biopharm (CY) Limited (Allogene Overland), a joint venture established by us and
Overland Pharmaceuticals (CY) Inc. (Overland), pursuant to a Share Purchase
Agreement, dated December 14, 2020, for the purpose of developing, manufacturing
and commercializing certain allogeneic CAR T cell therapies for patients in
greater China, Taiwan, South Korea and Singapore (the JV Territory). Allogene
                                       25
--------------------------------------------------------------------------------
  Table of Contents
Overland subsequently assigned the Licensed Agreement to a wholly-owned
subsidiary, Allogene Overland BioPharm (HK) Limited (Allogene Overland HK). On
April 1, 2022, Allogene Overland HK assigned the License Agreement to Allogene
Overland Biopharm (PRC) Co., Limited. See Note 6 to our condensed consolidated
financial statements included elsewhere in this report for further description
of the License Agreement and Share Purchase Agreement with Allogene Overland.

Collaboration and License Agreement with Antion

On January 5, 2022, we entered into an exclusive collaboration and global
license agreement (Antion Agreement) with Antion Biosciences SA (Antion) for
Antion's miRNA technology (miCAR), to advance multiplex gene silencing as an
additional tool to develop next generation allogeneic CAR T products. Pursuant
to the agreement, Antion will exclusively collaborate with us on oncology
products for a defined period. We will also have exclusive worldwide rights to
commercialize products incorporating Antion technology developed during the
collaboration. See Note 6 to our condensed consolidated financial statements
included elsewhere in this report for further description of the Antion
Agreement.

Components of Results of Operations

Revenues

As of September 30, 2022, our revenue has been exclusively generated from our
collaboration and license agreement with Allogene Overland Biopharm (PRC) Co.,
Limited. See Note 6 to our financial statements appearing elsewhere in this
Quarterly Report for more information related to our recognition of revenue and
the Allogene Overland Biopharm (PRC) Co., Limited agreement.

In the future, we may generate revenue from a combination of product sales,
government or other third-party funding, marketing and distribution arrangements
and other collaborations, strategic alliances and licensing arrangements or a
combination of these approaches. We expect that any revenue we generate will
fluctuate from quarter to quarter as a result of the timing and amount of
license fees, milestones and other payments, and the amount and timing of
payments that we receive upon the sale of our products, to the extent any are
successfully commercialized. If we fail to complete the development of our
product candidates in a timely manner or obtain regulatory approval of them, our
ability to generate future revenue, and our results of operations and financial
position, will be materially adversely affected.

Operating Expenses

Research and Development

To date, our research and development expenses have related primarily to
discovery efforts, preclinical and clinical development, and manufacturing of
our product candidates. Research and development expenses for the three and nine
months ended September 30, 2022 included costs associated with our clinical and
preclinical stage pipeline candidates and research into newer technologies. The
most significant research and development expenses for the year to date relate
to costs incurred for the development of our most advanced product candidates
and include:

•expenses incurred under agreements with our collaboration partners and third-party contract organizations, investigative clinical trial sites that conduct research and development activities on our behalf, and consultants;

•costs related to production of clinical materials, including fees paid for raw materials and to contract manufacturers;

•laboratory and vendor expenses related to the execution of preclinical and clinical trials;

•employee-related expenses, which include salaries, benefits and stock-based compensation;

•facilities and other expenses, which include expenses for rent and maintenance of facilities, depreciation and amortization expense and supplies; and

•other significant research and development costs including overhead costs.

We expense all research and development costs in the periods in which they are
incurred. We accrue for costs incurred as the services are being provided by
monitoring the status of the project and the invoices received from our external
service providers. We adjust our accrual as actual costs become known. Where
contingent milestone payments are due to third parties under research and
development arrangements or license agreements, the milestone payment
obligations are expensed when the milestone results are achieved.

We are required to reimburse Servier for 60% of the costs associated with the
prior development of UCART19, including for the long-term follow-up of patients
in the CALM and PALL clinical trials of UCART19. We accrue for costs
                                       26

--------------------------------------------------------------------------------

Table of Contents

incurred by monitoring the status of clinical trials and the invoices received
from Servier. We adjust our accrual as actual costs become known. Pending any
exercise by us of the Ex-US Option, Servier is required to reimburse us for 40%
of the costs associated with the development of ALLO-501 and
ALLO-501A. Collaboration expenses and cost reimbursement are recorded on a net
basis as a research and development expense in our condensed consolidated
statements of operations and comprehensive loss.

Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect our research and development expenses to increase in the future as our
clinical programs progress and as we seek to initiate clinical trials of
additional product candidates. The cost of advancing our manufacturing process
as well as the cost of manufacturing product candidates for clinical trials are
included in our research and development expense. We also expect to incur
increased research and development expenses as we selectively identify and
develop additional product candidates. However, it is difficult to determine
with certainty the duration and completion costs of our current or future
preclinical programs and clinical trials of our product candidates.

The duration, costs and timing of clinical trials and development of our product
candidates will depend on a variety of factors that include, but are not limited
to, the following:

•per patient trial costs;

•biomarker analysis costs;

•the cost and timing of manufacturing for the trials;

•the number of patients that participate in the trials;

•the number of sites included in the trials;

•the countries in which the trials are conducted;

•the length of time required to enroll eligible patients;

•the total number of cells that patients receive;

•the drop-out or discontinuation rates of patients;

•potential additional safety monitoring or other studies requested by regulatory agencies, including to resolve any future clinical hold;

•the duration of patient follow-up; and

•the efficacy and safety profile of the product candidates.

In addition, the probability of success for each product candidate will depend
on numerous factors, including safety, efficacy, competition, manufacturing
capability and commercial viability. We will determine which programs to pursue
and how much to fund each program in response to the scientific and clinical
success of each product candidate, as well as an assessment of each product
candidate's commercial potential.

Because our product candidates are still in clinical and preclinical development
and the outcome of these efforts is uncertain, we cannot estimate the actual
amounts necessary to successfully complete the development and commercialization
of product candidates or whether, or when, we may achieve profitability.

General and Administrative

General and administrative expenses consist primarily of salaries and other
staff-related costs, including stock-based compensation for options and
restricted stock units granted. Other significant costs include costs relating
to facilities and overhead costs, legal fees relating to corporate and patent
matters, insurance, investor relations costs, fees for accounting and consulting
services, information technology, costs and support for our board of directors
and board committees, and other general and administrative costs. General and
administrative costs are expensed as incurred, and we accrue for services
provided by third parties related to the above expenses by monitoring the status
of services provided and receiving estimates from our service providers, and
adjusting our accruals as actual costs become known.

We expect our general and administrative expenses to increase over the next
several years to support our continued research and development activities,
manufacturing activities, potential commercialization of our product candidates
and the increased costs of operating as a public company, including additional
compliance-related expenses as a result of no longer
                                       27

--------------------------------------------------------------------------------

Table of Contents

being an emerging growth company. These increases are anticipated to include
increased costs related to the hiring of additional personnel, developing
commercial infrastructure, fees to outside consultants, lawyers and accountants,
and increased costs associated with being a public company such as expenses
related to services associated with maintaining compliance with Nasdaq listing
rules and SEC requirements, complying with and advancing environmental, social
and governance matters, and insurance and investor relations costs.

Interest and Other Income, Net

Interest and other income, net consists of interest earned on our cash and cash
equivalents and investments, as well as investment gains and losses recognized
during the period.

Other Expense

Other expense consists of non-operating expenses, including our share of equity investments' net losses for the period.

Results of Operations

Comparison of the Three Months Ended September 30, 2022 and 2021

The following sets forth our results of operations for the three months ended September 30, 2022 and 2021 (dollars in thousands):

                                                 Three Months Ended September 30,                   Change
                                                     2022                2021                $                  %
Collaboration revenue - related party            $       49          $      49          $      -                   -  %
Operating expenses:
Research and development                             63,641             58,720             4,921                   8  %
General and administrative                           18,897             18,999              (102)                 (1) %
Total operating expenses                             82,538             77,719             4,819                   6  %
Loss from operations                                (82,489)           (77,670)           (4,819)                  6  %
Other income (expense), net:
  Interest and other income, net                      1,002                393               609                 155  %
  Other expenses                                     (1,661)              (909)             (752)                 83  %
Total other income (expense), net                      (659)              (516)             (143)                 28  %
Net Loss                                         $  (83,148)         $ (78,186)         $ (4,962)                  6  %

Collaboration revenue - related party

Collaboration revenue was less than $0.1 million for the three months ended
September 30, 2022 and 2021. Revenue recognized in the three months ended
September 30, 2022 and 2021 was due to the delivery of the know-how performance
obligations related to the License Agreement entered into with Allogene Overland
on December 14, 2020.

Research and Development Expenses

Research and development expenses were $63.6 million and $58.7 million for the
three months ended September 30, 2022 and 2021, respectively. The increase of
$4.9 million was driven primarily by an increase in personnel related costs of
$5.9 million, of which $0.9 million was stock-based compensation expense, and an
increase in facilities costs and depreciation expense of $4.3 million, offset by
a $5.9 million decrease in external costs relating to the advancement of our
product candidates primarily due to the timing of development activities and
manufacturing runs.

General and Administrative Expenses

General and administrative expenses were $18.9 million and $19.0 million for the
three months ended September 30, 2022 and 2021, respectively. The decrease of
$0.1 million was primarily due to a decrease in business and consulting fees of
$1.4 million, offset by a $0.9 million increase in personnel related costs.
                                       28

--------------------------------------------------------------------------------

Table of Contents

Interest and Other Income, Net

Interest and other income, net was $1.0 million and $0.4 million for the three months ended September 30, 2022 and 2021, respectively.

Comparison of the Nine Months Ended September 30, 2022 and 2021

The following sets forth our results of operations for the nine months ended September 30, 2022 and 2021 (dollars in thousands):

                                                     Nine Months Ended September 30,                        Change
                                                        2022                   2021                 $                   %
Collaboration revenue - related party            $            196          $   38,438          $ (38,242)                     *
Operating expenses:
Research and development                                  180,968             166,193             14,775                   9  %
General and administrative                                 58,303              54,144              4,159                   8  %
Total operating expenses                                  239,271             220,337             18,934                   9  %
Loss from operations                                     (239,075)           (181,899)           (57,176)                 31  %

Other income (expense), net:

  Interest and other income, net                            1,809               1,528                281                  18  %
  Other expenses                                             (519)             (1,766)             1,247                 (71) %
Total other income (expense), net                           1,290                (238)             1,528                      *
Net Loss                                         $       (237,785)         $ (182,137)         $ (55,648)                 31  %

* - Percentage is not meaningful

Collaboration revenue - related party

Collaboration revenue was $0.2 million and $38.4 million for the nine months
ended September 30, 2022 and 2021, respectively. The decrease of $38.2 million
was due to the revenue recognized related to the license of intellectual
property and delivery of the know-how performance obligation, which was
delivered in the first quarter of 2021, under the License Agreement entered into
with Allogene Overland in December 2020.

Research and Development Expenses

Research and development expenses were $181.0 million and $166.2 million for the
nine months ended September 30, 2022 and 2021, respectively. The increase of
$14.8 million was driven primarily by an increase in personnel related costs of
$18.5 million, of which $6.6 million was stock-based compensation expense, and
an increase in facilities costs and depreciation expense of $14.0 million,
offset by a $20.3 million decrease in external costs relating to the advancement
of our product candidates due to the timing of development activities and
manufacturing runs.

General and Administrative Expenses

General and administrative expenses were $58.3 million and $54.1 million for the
nine months ended September 30, 2022 and 2021, respectively. The increase of
$4.2 million was primarily due to an increase in personnel related costs of $5.0
million, of which $1.0 million was stock-based compensation expense, and an
increase in expenses related to corporate communications of $1.2 million, offset
by a $2.0 million decrease in business and consulting fees.

Interest and Other Income, Net

Interest and other income, net was $1.8 million and $1.5 million for the nine months ended September 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

                                       29

--------------------------------------------------------------------------------

Table of Contents

To date, we have incurred significant net losses and negative cash flows from
operations. As of September 30, 2022, we had $637.3 million in cash and cash
equivalents and investments. We anticipate that the aggregate of our current
cash and cash equivalents and investments available for operations will enable
us to maintain our operations for a period of at least one year from the date
this Quarterly Report on Form 10-Q is filed with the SEC.

Our operations have been financed primarily by net proceeds from the sale and
issuance of our convertible preferred stock, the issuance of convertible
promissory notes, net proceeds from our IPO, our at-the-market (ATM) offerings,
our June 2020 underwritten public offering, and upfront cash payment of $40.0
million received in December 2020 pursuant to our License Agreement with
Allogene Overland. In connection with our IPO in 2018, we sold an aggregate of
20,700,000 shares of our common stock (inclusive of 2,700,000 shares of common
stock pursuant to the over-allotment option granted to the underwriters) at a
price of $18.00 per share and received approximately $343.3 million in net
proceeds. In November 2019, we entered into a sales agreement with Cowen and
Company, LLC (Cowen) under which we may from time to time issue and sell shares
of our common stock through Cowen in ATM offerings for an aggregate offering
price of up to $250.0 million. As of September 30, 2022, $167.3 million remains
available for sale under the sales agreement with Cowen.

In June 2020, we sold 13,457,447 shares of our common stock, which included
1,755,319 shares sold pursuant to the full exercise of the underwriters' option
to purchase additional shares, in an underwritten public offering at a price of
$47.00 per share, which resulted in net proceeds of approximately $595.7 million
after deducting the underwriting discounts and commissions and other expenses.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

                                                                      Nine Months Ended September 30,
                                                                         2022                   2021
                                                                              (In thousands)
Net cash (used in) provided by:
Operating activities                                              $       (158,423)         $ (139,376)
Investing activities                                                        56,562             134,405
Financing activities                                                         2,904              11,641
Net increase (decrease) in cash, cash equivalents and restricted
cash                                                              $        (98,957)         $    6,670


Operating Activities

During the nine months ended September 30, 2022, cash used in operating
activities of $158.4 million was attributable to a net loss of $237.8 million,
partially offset by non-cash charges of $86.5 million and an increase of $7.1
million in our net operating assets and liabilities. The non-cash charges
consisted primarily of stock-based compensation expense of $66.4 million,
depreciation of $11.2 million, our share of equity investments' net losses for
the period of $4.0 million, net amortization and accretion on investment
securities of $2.7 million, and non-cash rent expense of $2.2 million. The
change in operating assets and liabilities was primarily due to a $3.2 million
increase in other long-term assets, a $2.8 million increase in prepaid expenses
and other current assets, a $1.4 million decrease in accrued and other current
liabilities, and a $2.1 million decrease in other long-term liabilities, offset
by a $1.9 million increase in accounts payable and a $0.5 million increase in
deferred revenue.

Investing Activities

During the nine months ended September 30, 2022, net cash provided by investing
activities of $56.6 million was related to cash provided by investment
maturities of $260.4 million, offset by cash used in purchases of investments of
$200.3 million and cash used in the purchase of property and equipment of $3.5
million.

Financing Activities

During the nine months ended September 30, 2022, cash provided by financing
activities of $2.9 million was related to $2.5 million of cash provided by the
sale of common stock through our employee stock purchase plan and $0.4 million
of cash provided by the issuance of common stock upon exercise of stock options.
                                       30

--------------------------------------------------------------------------------

Table of Contents

Material Cash Commitments and Requirements

Our primary use of cash is for operating expenses, which consist primarily of
clinical manufacturing and research and development expenditures related to our
lead product candidates, other research efforts, and to a lesser extent, general
and administrative expenditures. Cash used to fund operating expenses is
impacted by the timing of when we pay these expenses, as reflected in the change
in our outstanding accounts payable and accrued expenses and other current
liabilities.

Our product candidates are still in the early stages of clinical and preclinical
development and the outcome of these efforts is uncertain. Accordingly, we
cannot estimate the actual amounts necessary to successfully complete the
development and commercialization of our product candidates or whether, or when,
we may achieve profitability. Until such time, if ever, as we can generate
substantial product revenue, we expect to finance our cash needs through a
combination of equity or debt financings and collaboration and license
arrangements. If, and when, we do raise additional capital through public or
private equity offerings, the ownership interest of our existing stockholders
will be diluted, and the terms of these securities may include liquidation or
other preferences that adversely affect our stockholders' rights. If we raise
additional capital through debt financing, we may be subject to covenants
limiting or restricting our ability to take specific actions, such as incurring
additional debt, making capital expenditures or declaring dividends. If we are
unable to raise capital when needed, we will need to delay, reduce or terminate
planned activities to reduce costs. Doing so will likely harm our ability to
execute our business plans.

Our commitments primarily consist of obligations under our agreements with
Pfizer, Cellectis, Servier and Notch. Under these agreements we are required to
make milestone payments upon successful completion of certain regulatory and
sales milestones on a target-by-target and country-by-country basis. The payment
obligations under the license agreements are contingent upon future events such
as our achievement of specified development, regulatory and commercial
milestones and we will be required to make development milestone payments and
royalty payments in connection with the sale of products developed under these
agreements. As of September 30, 2022, we were unable to estimate the timing or
likelihood of achieving the milestones or making future product sales. For
additional information regarding our agreements, see Note 6 to our condensed
consolidated financial statements included elsewhere in this report.

Additionally, we have entered into agreements with third-party contract
manufacturers for the manufacture and processing of certain of our product
candidates for clinical testing purposes, and we have entered and will enter
into other contracts in the normal course of business with contract research
organizations for clinical trials and other vendors for other services and
products for operating purposes. These agreements generally provide for
termination or cancellation, other than for costs already incurred. As of
September 30, 2022, the Company had non-cancellable purchase commitments of
$0.4 million.

On October 6, 2020, we announced we entered into a strategic five-year
collaboration agreement with MD Anderson for the preclinical and clinical
investigation of allogeneic CAR T cell product candidates. We and MD Anderson
are collaborating on the design and conduct of preclinical and clinical studies
with oversight from a joint steering committee. Under the terms of the
agreement, we have committed up to $15.0 million of funding for the duration of
the agreement. Payment of this funding is contingent on mutual agreement to
study orders in order for any study to be included under the alliance. We made
an upfront payment of $3.0 million to MD Anderson in the year ended December 31,
2020. We are obligated to make further payments to MD Anderson each year upon
the anniversary of the agreement effective date through the duration of the
agreement term. The agreement may be terminated by either party for material
breach by the other party. Individual studies may be terminated for, among other
things, material breach, health and safety concerns or where the institutional
review board, the review board at the clinical site with oversight of the
clinical study, requests termination of any study. Where any legal or regulatory
authorization is finally withdrawn or terminated, the relevant study will also
terminate automatically.

In July 2020, we entered into a Solar Power Purchase and Energy Services
Agreement for the installation and operation of a solar photovoltaic generating
system and battery energy storage system at our manufacturing facility in
Newark, California. The agreement has a term of 20 years and commenced in
September 2022. We are obligated to pay for electricity generated from the
system at an agreed rate for the duration of the agreement term. Termination of
the agreement by us will result in a termination payment due of approximately
$4.3 million. In connection with the agreement, we maintain a letter of credit
for the benefit of the service provider in the amount of $4.3 million.

We also have a Change in Control and Severance Plan that require the funding of
specific payments, if certain events occur, such as a change of control and the
termination of employment without cause.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed consolidated financial statements, which
have been prepared in accordance with United States generally accepted
                                       31

--------------------------------------------------------------------------------

Table of Contents

accounting principles. The preparation of these condensed consolidated financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the condensed consolidated financial
statements, as well as the reported expenses incurred during the reporting
periods. Our estimates are based on our historical experience and on various
other factors that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.

We believe that the assumptions and estimates associated with accrued research and development expenditures and stock-based compensation have the most significant impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled "Management's Discussion and Analysis of Financial Condition and Operations" included in our Annual Report.

Recent Accounting Pronouncements

There have been no new accounting pronouncements issued or effective that are expected to have a material impact on our unaudited condensed financial statements.

© Edgar Online, source Glimpses