The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "Annual Report') filed with the Securities and Exchange Commission (the "SEC") on March 16, 2021. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward looking statements that involve risks and uncertainties. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those set forth in Item 1A, "Risk Factors" and elsewhere in our Annual Report and this Quarterly Report.





Overview


We are a clinical-stage cell therapy company developing a pipeline of novel T cell therapies for patients suffering from cancer by powering the T cell receptor (TCR) with our proprietary, first-in-class TCR Fusion Construct T cells (TRuC-T cells). Designed to overcome the limitations of current cell therapy modalities, our TRuC-T cells specifically recognize and kill cancer cells by harnessing the entire TCR signaling complex, which we believe is essential for T cell therapies to be effective in patients with solid tumors.

Since our inception in May 2015, we have focused significant efforts and financial resources on developing our TRuC platform, establishing and protecting our intellectual property portfolio, conducting research and development of our product candidates, manufacturing drug product material for use in preclinical studies, staffing our company and raising capital. We do not have any products approved for sale and have not generated any revenue from product sales.

To date, we have funded our operations with proceeds from the sale of our preferred and common stock. Through March 31, 2021, we have received gross proceeds of $540.4 million from the sale of our preferred and common stock.

Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. As of March 31, 2021, we had an accumulated deficit of $271.2 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:





  • conduct additional preclinical studies for our product candidates;


  • initiate and conduct clinical trials for our product candidates;


  • continue to discover and develop additional product candidates;


  • acquire or in-license other product candidates and technologies;


  • maintain, expand and protect our intellectual property portfolio;


  • hire additional clinical and scientific personnel;


     •   expand our manufacturing capabilities with third parties and establish
         manufacturing capabilities in-house;


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


     •   add operational, financial and management information systems and
         personnel, including personnel to support our product development and
         planned future commercialization efforts, as well as to support our
         transition to a public reporting company.



We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval



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for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Additionally, we expect to incur significant expenses if we acquire and establish our own commercial manufacturing facility, which will be a costly and time-consuming process, and in our operations as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.





Recent Developments



Equity Offering


On January 19, 2021, we entered into an underwriting agreement with Goldman Sachs & Co. LLC, Jefferies LLC, Piper Sandler & Co. and BMO Capital Markets Corp., related to the issuance and sale by us of 4,590,164 shares of the Company's common stock, at a price to the public of $30.50 per share, less underwriting discounts and commissions. The offering was made pursuant to the Company's shelf registration statement on Form S-3 (File No. 333-236965), filed with the SEC on March 6, 2020 and declared effective on April 28, 2020, as supplemented by a prospectus supplement dated January 19, 2021 that was filed with the SEC on January 21, 2021. The offering closed on January 22, 2021. The Company received net proceeds from the offering, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company, of approximately $131.3 million.

Rockville facility


In March 2021, we entered into a lease for a new manufacturing facility. The landlord built an approximately 85,000 square foot rental building in Rockville, Maryland and leased the facility to us as a manufacturing facility for an initial term of 15 years through June 2036.

Because we are involved in the construction project and are responsible for paying a significant portion of the costs of normal finish work and structural elements of the facility, we are deemed for accounting purposes to be the owner of the building during the construction period under build to suit lease accounting guidance under ASC 840, Leases. Therefore, we recorded project construction costs during the construction period incurred by the landlord as a construction-in-progress asset and a related construction financing obligation on our consolidated balance sheets in the amount of $41.2 million as a component of property and equipment and lease financing obligations.

Impact of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19. Efforts to contain the spread of COVID-19 have intensified and the United States, including the Commonwealth of Massachusetts where a majority of our operations are located, Europe and Asia, all of which to varying degrees have implemented severe travel restrictions, social distancing requirements, and stay-at-home orders, and such restrictions have had the effect of delaying the commencement of non-COVID-19-related clinical trials, among other restrictions. As a result, the COVID-19 pandemic has caused significant disruptions to the U.S., regional and global economies and has contributed to significant volatility and negative pressure in financial markets. Safety measures in response to the pandemic continue to evolve and vary by jurisdiction.



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We have been carefully monitoring the COVID-19 pandemic and its potential impact on our business and have taken important steps to help ensure the safety of employees and their families and to reduce the spread of COVID-19 in our communities while balancing our commitment to conduct our clinical trials. We have requested that our employees work from home if they are able to perform their duties remotely and limited the number of on-site employees to allow for proper social distancing in our offices and laboratories. For those employees on-site, we have implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic. We have also maintained efficient communication with our partners and clinical sites as the COVID-19 situation has progressed. We have taken these precautionary steps while maintaining business continuity so that we can continue to progress our programs. COVID-19 has significantly impacted the global healthcare system, including the conduct of clinical trials as medical institutions prioritize the treatment of those afflicted with COVID-19. We continue to closely monitor the adverse impact of the COVID-19 pandemic on our operations and ongoing clinical and preclinical development.

The effect of the COVID-19 pandemic on our development timelines for gavo-cel and TC-110, and its effect on our ability to manufacture for our clinical trials is uncertain. We believe that we have been able, as of the date of this Quarterly Report, to mitigate some of the impact from the COVID-19 pandemic on our ongoing clinical programs, however, we have been affected.

The future impact of the COVID-19 pandemic on our industry, the healthcare system, clinical trials and our current and future operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, as well as the prevalence of vaccination efforts, the effect of any relaxation of current restrictions within the Cambridge community or regions in which our partners and clinical sites are located, and the direct and indirect economic effects of the pandemic and containment measures, among others. See "Item 1A. Risk Factors" for a discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.

Components of Our Results of Operations





Operating Expenses


Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and the development of our product candidates, which include:





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


     •   expenses incurred in connection with the preclinical and clinical
         development of our product candidates, including under agreements with
         third parties, such as consultants, contractors and contract research
         organizations (CROs);


     •   the cost of acquiring and manufacturing preclinical and clinical trial
         materials, including under agreements with third parties, such as
         consultants, contractors and contract manufacturing organizations (CMOs);


     •   consultant fees and expenses associated with outsourced professional
         scientific development services;


     •   facilities, depreciation and other expenses, which include direct and
         allocated expenses for rent and maintenance of facilities and insurance;
         and


  • payments made under third-party licensing agreements.



We expense research and development costs as incurred. Any nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.



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We typically use our employee, consultant and infrastructure resources across our development programs. We track certain outsourced development costs by product candidate, but we do not allocate personnel costs or other internal costs to specific product candidates.

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 that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development and manufacturing activities in the near term and in the future. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:





     •   the timing and progress of our preclinical studies and clinical trials,
         which may be significantly slower or cost more than we currently
         anticipate and will depend substantially upon the performance of
         third-party contractors;


     •   the number and scope of preclinical and clinical programs we decide to
         pursue;


     •   the progress of the development efforts of parties with whom we may enter
         into collaboration arrangements;


     •   our ability to maintain our current research and development programs and
         to establish new ones;

• our ability to establish licensing or collaboration arrangements;




     •   our ability to complete investigational new drug application
         (IND)-enabling studies and successfully submit IND or comparable
         applications;


     •   whether we are required by the U.S. Food and Drug Administration (FDA) or
         similar foreign regulatory authorities to conduct additional clinical
         trials or other studies beyond those planned to support the approval and
         commercialization of our product candidates or any future product
         candidates;


     •   the timely receipt of necessary marketing approvals from the FDA and
         similar foreign regulatory authorities;


     •   our ability and the ability of third parties with whom we contract to
         manufacture adequate clinical and commercial supplies of our product
         candidates or any future product candidates, remain in good standing with
         regulatory agencies and develop, validate and maintain commercially
         viable manufacturing processes that are compliant with current good
         manufacturing practices (cGMP);


     •   our ability to demonstrate to the satisfaction of the FDA and similar
         foreign regulatory authorities the safety, potency, purity and acceptable
         risk to benefit profile of our product candidates or any future product
         candidates;


     •   the prevalence, duration and severity of potential side effects or other
         safety issues experienced with our product candidates or future product
         candidates, if any;


     •   our ability to establish and enforce intellectual property rights in and
         to our product candidates or any future product candidates;


     •   our ability to successfully develop a commercial strategy and thereafter
         commercialize our product candidates or any future product candidates in
         the United States and internationally, if licensed for marketing,
         reimbursement, sale and distribution in such countries and territories,
         whether alone or in collaboration with others;


     •   the willingness of physicians, operators of clinics and patients to
         utilize or adopt any of our product candidates or future product
         candidates to treat solid and hematologic cancers;


     •   patient demand for our product candidates and any future product
         candidates, if licensed;

• competition with other products; and




     •   continued acceptable safety profile of our product candidates following
         approval.



A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that



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product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services associated with operating as a public company.





Interest Income, net


Interest income, net consists of interest earned on our cash equivalents and investment balances, net of investment charges.

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