Adaptimmune Therapeutics PLC: Form 10-Q for the period ended Sep 30, 2024

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 and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023, included in our Annual Report on Form 10-K that was filed with the SEC on March 6, 2024. 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. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2023, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.

Overview

We are a commercial-stage biopharmaceutical company working to redefine the treatment of solid tumor cancers with cell therapies. With the approval by the U.S. Food and Drug Administration (“FDA”) of our first biologics license application (“BLA”) for Tecelra® (afamitresgene autoleucel) (“Tecelra”), which is the first engineered cell therapy for a solid tumor cancer approved in the U.S., we are now focused on its launch and commercialization. Tecelra is a genetically modified autologous T-cell immunotherapy indicated for the treatment of adults with unresectable or metastatic synovial sarcoma who have received prior chemotherapy, are HLA-A*02:01P, -A*02:02P, -A*02:03P, or -A*02:06P positive and whose tumor expresses the MAGE-A4 antigen as determined by FDA-approved or cleared companion diagnostic devices. This indication is approved under the FDA’s accelerated approval based on overall response rate (“ORR”) and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefits from a confirmatory trial.

We are focussing on a strategic business plan and restructuring to prioritize our commercial sarcoma franchise and pre-clinical programs (PRAME and CD-70 programs) which we believe have the highest potential for return on invested capital and transformational benefit to patients. We remain commited to our collaboration with Galapagos for uza-cel. We are ceasing further investment in all non-core programs, including the SURPASS-3 trial in ovarian cancer. As a result of this re-focussing we are undertaking a reduction of headcount and expenses. We anticipate a reduction in headcount of approximately 33% with the majority of the headcount restructuring to be completed by the end of the first quarter of 2025.

Tecelra

We are focused on the launch and commercialization of Tecelra for the treatment of advanced synovial sarcoma and for which we received FDA approval on August 1, 2024. Nine Authorized Treatment Centers (“ATCs”) are available to initiate the treatment journey for our patients. The first patient has been apheresed and manufacture of Tecelra is underway. We are confident that the full network of approximately 30 ATCs will be active by the end of 2025, covering an estimated 80% of patients treated in sarcoma centers of excellence.

The approval of Tecelra was based on results of the SPEARHEAD-1 (Cohort 1) trial, which included 44 patients. The major efficacy outcome was ORR determined by independent review and supported by duration of response. Tecelra treatment resulted in an ORR of 43% with a complete response rate of 4.5%. The median duration of response was six months (95% CI: 4.6, not reached). Among patients who were responsive to the treatment, 39% had a duration of response of twelve months or longer.

Lete-cel

Lete-cel targets the NY-ESO antigen and has been in clinical trials (the IGNYTE-ESO trial) for people with synovial sarcoma and myxoid round cell liposarcoma (MRCLS). Final data for the IGNYTE-ESO trial were reported at the Connective Tissue Oncology Society Annual Meeting (“CTOS”) in November 2024 with an ORR of 42% across both synovial sarcoma and myxoid round cell liposarcoma (MRCLS) patients and with six patients having a complete response (6/64) as their best overall response. The median duration of response was just over a year. These data will form part of our planned rolling BLA submission for lete-cel, starting in 2025.

Clinical and Pre-clinical Pipeline

*Synovial sarcoma, Malignant Peripheral Nerve Sheath Tumor (MPNST), Neuroblastoma, Osteosarcoma, Temporary suspension of enrolment as per protocol in SPEARHEAD-3 trial

** uzatresgene autoleucel, formerly ADP-A2M4CD8; SURPASS Ph 1 and SURPASS-3 trials are no longer enrolling. Adaptimmune and Galapagos to conduct a clinical proof-of- concept trial to evaluate the safety and efficacy of uza-cel produced on Galapagos’ decentralized manufacturing platform in patients with

head & neck cancer

We have a pediatric trial ongoing in the US in tumors expressing the MAGE-A4 antigen. Enrollment in this trial has been temporarily suspended as per protocol. Enrollment in our other ongoing clinical trials has ceased or been closed including the SURPASS-3 Phase 2 Trial in ovarian cancer.

We are currently focusing our preclinical pipeline on the development of T-cell therapies directed to PRAME (ADP-600) and CD70 (ADP-520).

• PRAME is highly expressed across a broad range of solid tumors including ovarian, endometrial, lung and breast cancers. We are developing TCR T-cells directed to PRAME, with the initial candidate (ADP-600) currently in preclinical testing and next-generation candidates being developed over the longer term.
• The CD70 program targets the CD70 antigen which is expressed across a range of hematological malignancies (acute myeloid leukemia and lymphoma) and solid tumors (renal cell carcinoma). We are using TRuC technology to develop a T-cell therapy (ADP-520) against CD70, with membrane bound IL-15 to enhance persistence. ADP-520 is currently in pre-clinical testing.

Corporate News

On September 23, 2024, we announced the entry into the Mutual Release Agreement between Adaptimmune and Genentech Inc and F. Hoffmann-La Roche Ltd. This Agreement amongst other things resolves and releases each party from any and all past, present and future disputes, claims, demands and causes of action, whether known or unknown, related to the Genentech Collaboration Agreement in any way. Under the terms of the Mutual Release Agreement the Collaboration Agreement is terminated and Genentech will pay $12.5 million.

On May 14, 2024, we entered into the Loan Agreement with several banks and other financial institutions or entities and Hercules Capital for a Term Loan of up to $125.0 million. The Tranche 1 advance of $25.0 million was drawn on the closing date of the Loan Agreement. The Tranche 2 advance was received on August 13, 2024 following the receipt of FDA approval for Tecelra.

We are focussed on the prioritization of our commercial sarcoma franchise and certain research and development programs. As a result the Company is planning a 33% reduction in workforce. The planned reduction in workforce is subject to consultation with employee representatives in the UK regarding the plan. The Company anticipates that the majority of the reduction in workforce will be completed during the first quarter of 2025. The Company estimates that the pre-tax costs of such reduction in workforce relating to employee severance and other employee-related costs may be in the region of $9-11 million with the majority of such costs being incurred in the first quarter of 2025. It will provide further updates as it progresses through the restructuring process and once the costs and expenses of such restructuring are known.

Financial Operations Overview

Revenue

The Company had three customers in the three and nine months ended September 30, 2024, two customers in the three months ended September 30, 2023, and three customers in the nine months ended September 30, 2023: the Astellas Collaboration Agreement (until March 6, 2023), the Galapagos Collaboration Agreement (from May 30, 2024), the Genentech Collaboration Agreement and the GSK Termination and Transfer Agreement (from April 11, 2023).

The Astellas Collaboration Agreement

In January 2020, the Company entered into the Astellas Collaboration Agreement. The Company received $50.0 million as an upfront payment after entering into the Astellas Collaboration Agreement. Under the Astellas Collaboration Agreement the parties would agree on up to three targets and would co-develop T-cell therapies directed to those targets pursuant to an agreed research plan. For each target, Astellas would fund co-development up until completion of a Phase 1 trial for products directed to such target. In addition, Astellas was also granted the right to develop, independently of the Company, allogeneic T-cell therapy candidates directed to two targets selected by Astellas. Astellas would have sole rights to develop and commercialize products resulting from these two targets.

The Astellas Collaboration Agreement consisted of the following performance obligations: (i) research services and rights granted under the co-exclusive license for each of the three co-development targets and (ii) the rights granted for each of the two independent Astellas targets. The revenue allocated to the co-development targets was recognized as the development of products directed to the targets progressed up until completion of a Phase 1 trial. The revenue allocated to each of the research licenses for the targets being independently developed by Astellas was to be recognized when the associated license commenced, which was upon designation of a target by Astellas.

The Company and Universal Cells mutually agreed to terminate the Astellas Collaboration Agreement as of the Termination Date. In connection with the termination, all licenses and sublicenses granted to either party pursuant to the Collaboration Agreement ceased as of the Termination Date. There were no termination penalties in connection with the termination, however the Company was still entitled to receive reimbursement for research and development work performed up to and including a period of 30 days after the Termination Date.

The termination was accounted for as a contract modification and the modification resulted in the remaining unsatisfied and partially satisfied performance obligations under the collaboration becoming fully satisfied. The aggregate transaction price of the contract modification was $42.4 million, which was primarily comprised of deferred income relating to the third co-development target and the two independent targets, and was recognized in full in March 2023. No revenue was recognized for Astellas in 2024.

The Genentech Collaboration Agreement

On September 3, 2021, Adaptimmune Limited, a wholly-owned subsidiary of the Company, entered into the Genentech Collaboration Agreement. The collaboration has two components:

1) development of allogeneic T-cell therapies for up to five shared cancer targets; and

2) development of personalized allogeneic T-cell therapies utilizing αβ T-cell receptors (TCRs) isolated from a patient, with such therapies being administered to the same patient.

The parties would collaborate to perform a research program, initially during an eight-year period (which may be extended for up to two additional two-year terms at Genentech’s election upon payment of an extension fee for each two-year term), to develop the cell therapies, following which Genentech would determine whether to further develop and commercialize such therapies. The Company received an upfront payment of $150 million in October 2021 and milestone payments of $20 million and $15 million in December 2022 and 2023, respectively.

The Company identified the following performance obligations under the Genentech Collaboration Agreement: (i) research services and rights granted under the licenses for each of the initial “off-the-shelf” collaboration targets, (ii) research services and rights granted under the licenses for the personalized therapies, (iii) material rights relating to the option to designate additional “off-the-shelf” collaboration targets and (iv) material rights relating to the two options to extend the research term. The revenue allocated to the initial “off-the-shelf” collaboration targets and the personalized therapies was recognized as development progressed. The revenue allocated to the material rights to designate additional ‘off-the-shelf’ collaboration targets would have been recognized from the point that the options were exercised and then as development progressed, in line with the initial “off-the-shelf” collaboration targets, or at the point in time that the rights expired. The revenue from the material rights to extend the research term would have been recognized from the point that the options were exercised and then over the period of the extension, or at the point in time that the options expired.

On April 12, 2024, we announced the termination of the Genentech Collaboration Agreement. The termination was accounted for as a contract modification on a cumulative catch-up basis. The termination did not change the nature the performance obligations identified but resulted in a reduction of the transaction price as the additional payments and variable consideration that would have been due in periods after October 7, 2024 will now never be received. The termination resulted in a cumulative catch-up adjustment to revenue recognized at the date of the termination of $101.3 million.

On September 23, 2024, Adaptimmune Limited entered into a Mutual Release Agreement with Genentech. The Mutual Release Agreement, among other things, resolved and released each party from any and all past, present and future disputes, claims, demands and causes of action, whether known or unknown, related to the Genentech Collaboration Agreement in any way. Under the terms of the Mutual Release Agreement, Genentech will pay $12.5 million, upon which the Genentech Collaboration Agreement will be terminated. The Mutual Release Agreement was effective immediately as of September 23, 2024. The Mutual Release Agreement resulted in all remaining performance obligations being fully satisfied and the remaining deferred revenue and the additional payment were both recognized as total revenue of $37.8 million in the third quarter of 2024.

The GSK Termination and Transfer Agreement

On April 11, 2023, the Company announced its entry into the Termination and Transfer Agreement with GSK regarding the return to the Company of rights and materials comprised within the PRAME and NY-ESO cell therapy programs. The parties will work collaboratively to ensure continuity for patients in ongoing lete-cel clinical trials forming part of the NY-ESO cell therapy program.

As part of the Termination and Transfer Agreement, sponsorship of the ongoing IGNYTE and LTFU trials relating to the NY-ESO cell therapy program will transfer to the Company. In return for this, the Company received an upfront payment of £7.5 million in June 2023 following the execution of the Termination and Transfer Agreement and further milestone payments of £3 million, £12 million, £6 million and £1.5 million to the Company in September and December 2023 and June and August 2024, respectively. No further payments are due from GSK under the Termination and Transfer Agreement.

The Company has identified the following performance obligations under the Termination and Transfer Agreement: (i) to take over sponsorship and complete the IGNYTE trial and (ii) to take over sponsorship and complete the LTFU trial. The revenue allocated to both obligations is recognized over time from the point that sponsorship of the active trials that make up the trial transfer, based on the number of patients transferred and still actively enrolled to date on the trial at a given period-end relative to the total estimated periods of active patient enrollment over the estimated duration of the trial.

The Galapagos Collaboration and Exclusive License Agreement

On May 30, 2024, the Company entered into a the Galapagos Collaboration Agreement. The Galapagos Collaboration Agreement includes an option for Galapagos to exclusively license the TCR T-cell therapy candidate uza-cel, manufactured on Galapagos’s decentralized manufacturing platform, in head and neck cancer and potential future solid tumor indications. Under the Galapagos Collaboration Agreement, we will conduct a clinical proof-of-concept trial to evaluate the safety and efficacy of uza-cel produced on Galapagos’ decentralized manufacturing platform in patients with head and neck cancer.

The Company will receive initial payments of $100 million, comprising $70 million upfront and $30 million of research and development funding, option exercise fees of up to $100 million (the amount depending on the number of indications in relation to which the option is exercised), additional development and sales milestone payments of up to a maximum of $465 million, plus tiered royalties on net sales. The $70 million upfront payment and $15 million of upfront research and development funding was received in June 2024.

The Company has identified a performance obligation relating to the various activities required to complete the POC trial and a material right associated with the exclusive license option. The Company expects to satisfy the POC Trial obligation over time over the period that the trial is completed, based on an estimate of the percentage of completion of the trial determined based on the costs incurred on the trial as a percentage of the total expected costs. The revenue allocated to the material right associated with the exclusive licence option will be recognized from the point that the option is either exercised and control of the license has passed to Galapagos or the option lapses.

Research and Development Expenses

Research and development expenditures are expensed as incurred. Research and development expenses consist principally of the following:

• salaries for research and development staff and related expenses, including benefits;
• costs for production of preclinical compounds and drug substances by contract manufacturers;
• fees and other costs paid to contract research organizations in connection with additional preclinical testing and the performance of clinical trials;
• costs associated with the development of a process to manufacture and supply our lentiviral vector and cell therapies for use in clinical trials;
• costs to develop manufacturing capability at our U.S. facility for manufacture of cell therapies for use in clinical trials;
• costs relating to facilities, materials and equipment used in research and development;
• costs of acquired or in-licensed research and development which does not have alternative future use;
• costs of developing assays and diagnostics;
• an allocation of indirect costs clearly related to research and development;
• amortization and depreciation of property, plant and equipment and intangible assets used to develop our cells therapies; and
• share-based compensation expenses.

These expenses are partially offset by:

• reimbursable tax and expenditure credits from the U.K. government.

Research and development expenditure is presented net of reimbursements from reimbursable tax and expenditure credits from the U.K. government.

As a company that carries out extensive research and development activities, we benefit from the U.K. research and development tax credit regime for small and medium sized companies (“SME R&D Tax Credit Scheme”), whereby our principal research subsidiary company, Adaptimmune Limited, is able to surrender the trading losses that arise from its research and development activities for a payable tax credit of up to approximately 18.6% of eligible research and development expenditures. Qualifying expenditures largely comprise employment costs for research staff, consumables and certain internal overhead costs incurred as part of research projects for which we do not receive income. Subcontracted research expenditures are eligible for a cash rebate of up to approximately 12.1%. A large proportion of costs in relation to our pipeline research, clinical trials management and manufacturing development activities, all of which are being carried out by Adaptimmune Limited, are eligible for inclusion within these tax credit cash rebate claims.

Expenditures incurred in conjunction with our collaboration agreements are not qualifying expenditures under the SME R&D Tax Credit Scheme but certain of these expenditures can be reimbursed through the U.K. research and development expenditure credit scheme (the “RDEC Scheme”). Under the RDEC Scheme tax relief is given at 20% of allowable research and development costs, which may result in a payable tax credit at an effective rate of approximately 15% of qualifying expenditure for the year ended December 31, 2024.

On July 18, 2023, the U.K. Government released draft legislation on proposed changes to the U.K. research and development regimes which was subsequently enacted on February 22, 2024. These changes include combining the current SME R&D Tax Credit Scheme and RDEC Schemes with a single 20% gross rate applying to all claims with an exception for R&D Intensive SMEs. For entities which qualify as R&D Intensive SMEs, a higher effective cash tax benefit of 27% will be available. The legislation also includes changes to other rules and types of qualifying expenditure, such as the treatment of subcontracted and overseas costs.

Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, which depends upon the timing of initiation of clinical trials and the rate of enrollment of patients in clinical trials. The duration, costs, and timing of clinical trials and development of our cell therapies will depend on a variety of factors, including:

• the scope, rate of progress, and expense of our ongoing as well as any additional clinical trials and other research and development activities;
• uncertainties in clinical trial enrollment rates;
• future clinical trial results;
• significant and changing government regulation;
• the timing and receipt of any regulatory approvals; and
• supply and manufacture of lentiviral vector and cell therapies for clinical trials.

A change in the outcome of any of these variables may significantly change the costs and timing associated with the development of that cell therapy. For example, if the FDA, or another regulatory authority, requires us to conduct clinical trials beyond those that we currently anticipate will be required for regulatory approval, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

Selling, General and Administrative Expenses

Our general and administrative expenses consist principally of:

• salaries for employees other than research and development staff, including benefits;
• business development expenses, including travel expenses;
• professional fees for auditors, lawyers and other consulting expenses;
• selling and other costs relating to our commercial product;
• costs of facilities, communication, and office expenses;
• cost of establishing commercial operations;
• information technology expenses;
• amortization and depreciation of property, plant and equipment and intangible assets not related to research and development activities; and
• share-based compensation expenses.

Interest Income

Interest income primarily comprises interest on cash, cash equivalents and marketable securities.

Interest Expense

Interest expense primarily comprises loan interest on the Hercules Capital loan facility.

Other Income (Expense), Net

Other income (expense), net primarily comprises foreign exchange gains (losses). We are exposed to foreign exchange rate risk because we currently operate facilities in the United Kingdom and United States. Our expenses are generally denominated in the currency in which our operations are located, which are the United Kingdom and United States. However, our U.K.-based subsidiary incurs significant research and development costs in U.S. dollars and, to a lesser extent, Euros. Our U.K. subsidiary has an intercompany loan balance in U.S. dollars payable to the Comapny. Since July 1, 2019, the intercompany loan has been considered as being a long-term investment as repayment is not planned or anticipated in the foreseeable future. It is the Company’s intent not to request payment of the intercompany loan for the foreseeable future. The foreign exchange gains or losses arising on the revaluation of intercompany loans of a long-term investment nature are reported within other comprehensive (loss) income, net of tax.

Our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. We seek to minimize this exposure by maintaining currency cash balances at levels appropriate to meet forthcoming expenditure in U.S. dollars and pounds sterling. To date, we have not used hedging contracts to manage exchange rate exposure, although we may do so in the future.

In addition to currency fluctuations, adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, tighter credit, and higher interest rates, could materially adversely affect the Company by, for example, driving higher input costs and/or impacting the Company’s ability to raise future financing.

Taxation

We are subject to corporate taxation in the United Kingdom and the United States. We typically incur tax losses and tax credit carryforwards in the United Kingdom on an annual basis. No net deferred tax assets are recognized on our U.K. losses and tax credit carryforwards because there is currently no indication that we will make sufficient taxable profits to utilize these tax losses and tax credit carryforwards. The rate of U.K. corporation tax is 25% for the year ended December 31, 2024.

We benefit from reimbursable tax credits in the United Kingdom through the SME R&D Tax Credit Scheme as well as the RDEC Scheme which are presented as a deduction to research and development expenditure.

Our pre-existing subsidiary in the United States, Adaptimmune LLC, has generated taxable profits due to a Service Agreement between our U.S. and U.K. operating subsidiaries and is subject to U.S. federal corporate income tax of 21%. Due to its activity in the United States, and the sourcing of its revenue, the Adaptimmune LLC is not currently subject to any state or local income taxes. The Company also benefits from the U.S Research Tax Credit and Orphan Drug Credit.

TCR2 has incurred net losses since acquisition and generates research and development tax credits. TCR2’s operating loss and tax credit carryforwards and other tax attributes are reduced by a valuation allowance to the amount supported by reversing taxable temporary differences because there is currently no indication that we will make sufficient taxable profits to utilize these deferred tax assets.

In the future, if we generate taxable income in the United Kingdom, we may benefit from the United Kingdom’s “patent box” regime, which would allow certain profits attributable to revenues from patented products to be taxed at a rate of 10%. As we have many different patents covering our products, future upfront fees, milestone fees, product revenues, and royalties may be taxed at this favorably low tax rate.

U.K. Value Added Tax (“VAT”) is charged on all qualifying goods and services by VAT-registered businesses. An amount of 20% of the value of the goods or services is added to all relevant sales invoices and is payable to the U.K. tax authorities. Similarly, VAT paid on purchase invoices paid by Adaptimmune Limited and the Company is reclaimable from the U.K. tax authorities.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the revenues and expenses incurred during the reported periods. We base our estimates on historical experience and on various other factors that we believe are relevant under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies considered to be critical to the judgments and estimates used in the preparation of our financial statements are disclosed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Annual Report.

In addition, the following estimate was considered to be critical to the judgements and estimates used in the preparation of our financial statements for the nine months ending September 30, 2024.

Allocation of transaction price using the relative standalone selling price

Upfront and other payments included in the transaction price of a contract are allocated between performance obligations using the Company’s best estimate of the relative standalone selling price of the performance obligation. The relative standalone selling price is estimated by determining the market values of development and license obligations. As these inputs are not directly observable, the estimate is determined considering all reasonably available information including internal pricing objectives used in negotiating the contract, together with internal data regarding the cost and margin of providing services for each deliverable, taking into account the different stage of development of each development program and consideration of adjusted-market data from comparable arrangements, where applicable and available. This assessment involves significant judgment and could have a significant impact on the amount and timing of revenue recognition.

An assessment of the allocation of transaction price using the relative standalone selling price was required in the nine months ending September 30, 2024 and 2023 for the Galapagos Collaboration Agreement and the GSK Termination and Transfer Agreement, respectively, although the assessment for the GSK Termination and Transfer Agreement in 2023 was not considered to be a significant estimate.

Results of Operations

Comparison of three months ended September 30, 2024 and 2023

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

Revenue

Revenue increased by $33.6 million to $40.9 million for the three months ended September 30, 2024 compared to $7.3 million for the three months ended September 30, 2023. The increase is primarily due to the termination of the Genentech Collaboration Agreement in April 2024 and subsequent Mutual Release Agreement, resulting in the remaining deferred revenue of $25 million, representing deferred revenue at June 30, 2024, and $12.5 million payment, being recognized as revenue in the current quarter. The remaining revenue in the three months ended September 30, 2024 relates to the GSK and Galapagos agreements, whereas the revenue in the three months ended September 30, 2023 related to Genentech.

Research and Development Expenses

Research and development expenses decreased by 9% to $34.3 million for the three months ended September 30, 2024 from $37.8 million for the three months ended September 30, 2023.

Our research and development expenses comprise the following (in thousands):

(1) These costs are not analyzed by project since employees may be engaged in multiple projects simultaneously.

The net decrease in our research and development expenses of $3.5 million for the three months ended September 30, 2024 compared to the same period in 2023 was primarily due to the following:

• a decrease of $6.1 million in subcontracted expenditure due primarily to a decrease in clinical trial expenses relating to TCR2 as the TCR2 programs wind down, offset by an increase in vector manufacturing; offset by
• a decrease of $1.5 million in offsetting reimbursements receivable for research and development tax and expenditure credits due to decreases in the associated research and development costs for which the credits may be claimed.

Our subcontracted costs for the three months ended September 30, 2024 were $10.6 million, compared to $16.6 million in the same period in 2023. This includes $8.7 million of costs directly associated with our afami-cel, lete-cel and uza-cel T-cells and $1.9 million of other development costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by 32% to $21.3 million for the three months ended September 30, 2024 from $16.2 million in the same period in 2023. Our selling, general and administrative expenses consist of the following (in thousands):

The net increase in our selling, general and administrative expenses of $5.1 million for the three months ended September 30, 2024 compared to the same period in 2023 was largely due to an increase of:

• $1.7 million in salaries, depreciation of property, plant and equipment and other employee-related costs, due primarily to increased travel and training costs, primarily due to commercialization-related activities; and
• $3.6 million in other corporate costs due to an increase in accounting, legal and professional fees, due to a combination of fees relating to business development work and fees relating to preparation for commercialization.

Income Taxes

Income taxes arise in the United States due to Adaptimmune LLC generating taxable profits. We typically incur taxable losses in the United Kingdom on an annual basis and have incurred losses in TCR2 since the acquisition.

Comparison of nine months ended September 30, 2024 and 2023

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

Revenue

The revenue recognized in the nine months ended September 30, 2024 relates to development revenue under the Genentech Collaboration Agreement, the Galapagos Collaboration Agreement and the GSK Termination and Transfer Agreement whereas the revenue in the nine months ended September 30, 2024 relates to development revenue under the Genentech Collaboration Agreement and the Astellas Collaboration Agreement.

Revenue increased by $114.8 million to $174.8 million in the nine months ended September 30, 2024 compared to $60.1 million for the nine months ended September 30, 2023 primarily due to the termination of the Genentech Collaboration Agreement in April 2024, resulting in a cumulative catch-up adjustment of $101.3 million and the subsequent Mutual Release Agreement, resulting in the remaining deferred revenue and additional payment, being recognized as $37.8 million of revenue in the third quarter of 2024, compared to the termination of the Astellas Collaboration Agreement in the first quarter of 2023, which resulted in the remaining deferred revenue for the collaboration of $42.4 million being recognized as revenue in March 2023.

Total revenue from Genentech and GSK in the nine months ended September 30, 2024 was $163.9 million and $10.7 million respectively, compared to $16.1 million from Genentech and $44.0 million from Astellas in the nine months ended September 30, 2023. The revenue recognized in 2024 and 2023 for Genentech and Astellas, respectively, includes the impact of the events noted above, as well as revenue recognized as research and development work for the collaborations was performed.

Research and Development Expenses

Research and development expenses increased by 18% to $110.0 million for the nine months ended September 30, 2024 from $93.3 million for the nine months ended September 30, 2023.

Our research and development expenses comprise the following (in thousands):

(1) These costs are not analyzed by project since employees may be engaged in multiple projects simultaneously.

The net increase in our research and development expenses of $16.7 million for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to the following:

• an increase of $10.2 million in salaries, materials, equipment, depreciation of property, plant and equipment and other employee-related costs, which is driven primarily by an increase in the average number of employees engaged in research

and development following the acquisition of TCR2 in June 2023 and annual salary increases, and increased costs relating to property due to additional lease properties acquired following the acquisition of TCR2;

• an increase of $1.8 million in manufacturing facility expenditure due to the consumption of batches of clinical materials that had not previously been impaired, compared to 2023 where clinical materials consumed were primarily those that had been impaired to nil in previous years and therefore no corresponding expense was recognised;
• an increase of $1.9 million in in-process research and development costs due to a credit of $1.9 million in 2023 that was not repeated in 2024; and
• a decrease of $3.4 million in reimbursements receivable for research and development tax and expenditure credits due to decreases in the associated research and development costs for which the credits may be claimed and a reduction in the effective rate at which the tax credits can be claimed which was effective from April 1, 2023; offset by
• a decrease of $1.3 million on subcontracted expenditure primarily due to a reduction in outsourced research costs.

Our subcontracted costs for the nine months ended September 30, 2024 were $36.0 million, compared to $37.2 million in the same period of 2023. This includes $26.7 million of costs directly associated with our afami-cel, lete-cel and uza-cel T-cells and $9.3 million of other development costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by 6% to $60.1 million for the nine months ended September 30, 2024 from $56.6 million in the same period in 2023. Our selling, general and administrative expenses consist of the following (in thousands):

The net decrease in our selling, general and administrative expenses of $3.5 million for the nine months ended September 30, 2024 compared to the same period in 2023 was largely due to:

• a reduction in restructuring charges of $1.7 million, which related to the restructuring programme completed in the first quarter of 2023; offset by
• an increase of $5.4 million in other corporate costs due to an increase in accounting, legal and professional fees, due primarily to a combination of fees relating to business development work and fees relating to preparation for commercialization.

Gain on Bargain Purchase

The gain on bargain purchase arose in June 2023 from the strategic combination with TCR2 on June 1, 2023.

Liquidity and Capital Resources

Sources of Funds

Since our inception, we have incurred significant net losses and negative cash flows from operations. We financed our operations primarily through sales of equity securities, cash receipts under our collaboration arrangements and research and development tax and expenditure credits. From inception through to September 30, 2024, we have raised:

• $900.2 million, net of issuance costs, through the issuance of shares;
• $49.5 million, net of discount, drawn from the Hercules Capital loan facility;
• $533.3 million through collaborative arrangements with Galapagos, Genentech, GSK and Astellas;
• $141.3 million in the form of reimbursable U.K. research and development tax credits and receipts from the U.K. RDEC Scheme; and
• $45.3 million in cash and cash equivalents and restricted cash and $39.5 million of marketable securities acquired as part of the strategic combination with TCR2.

We use a non-GAAP measure, Total Liquidity, which is defined as the total of cash and cash equivalents and marketable securities, to evaluate the funds available to us in the near-term. A description of Total Liquidity and reconciliation to cash and cash equivalents, the most directly comparable U.S. GAAP measure, are provided below under “Non-GAAP measures”.

As of September 30, 2024, we had cash and cash equivalents of $116.7 million and Total Liquidity of $186.1 million.

Cash Flows

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

Operating Activities

Net cash used in operating activities was $39.0 million for the nine months ended September 30, 2024 compared to net cash used in operating activities of $126.2 million for the nine months ended September 30, 2023. Our activities typically result in net use of cash in operating activities. The net cash used in operating activities for the nine months ended September 30, 2024 decreased primarily due to the receipt of research and development credits of $30.8 million, an $85 million upfront payment from Galapagos and $9.7 million milestone payments from GSK which was offset by an increase in operating expenditures.

Net cash used in operating activities of $39.0 million for the nine months ended September 30, 2024 comprised a net profit of $3.4 million and a net cash outflow of $62.5 million from changes in operating assets and liabilities, offset by non-cash items of $20.1 million. The changes in operating assets and liabilities include the impact of a $21.5 million decrease in reimbursements receivable for research and development tax credits and the recognition of deferred revenue following the termination of the Genentech Collaboration

Agreement. The non-cash items consisted primarily of depreciation expense on plant and equipment of $8.2 million, share-based compensation expense of $9.2 million, unrealized foreign exchange losses of $3.2 million and other items of $0.4 million.

Investing Activities

Net cash used in investing activities was $67.1 million for the nine months ended September 30, 2024 compared to $108.3 million provided investing activities for the nine months ended September 30, 2023. The net cash used in or provided by investing activities for the respective periods consisted primarily of:

• purchases of property, plant and equipment of $0.7 million and $3.9 million for the nine months ended September 30, 2024 and 2023, respectively. Purchases of property, plant and equipment were higher in 2023 compared to 2024 due to the expansion of our manufacturing facilities, which was largely completed in 2022 and finalized in 2023;
• purchases of intangible assets of $0.9 million and $0.2 million for the nine months ended September 30, 2024 and 2023, respectively;
• investments in marketable securities of $65.7 million in the nine months ended September 30, 2024 compared to $73.0 million in the nine months ended September 30, 2023; and
• there were no cash inflows from maturity or redemption of marketable securities in the nine months ended September 30, 2024 compared to $139.2 million for the nine months ended September 30, 2023.

The Company invests surplus cash and cash equivalents in marketable securities.

Financing Activities

Net cash provided by financing activities was $78.7 million and $0.8 million for the nine months ended September 30, 2024 and 2023, respectively. The net cash provided by financing activities in the nine months ended September 30, 2024 consisted of net proceeds of $29.2 million from shares issued in an ATM offering, net of commissions and issuance costs, and $49.5 million proceeds from the issuance of borrowings, net of discount. The net cash provided by financing activities in the nine months ended September 30, 2023 consisted primarily of net proceeds of $0.6 million from shares issued in an ATM offering, net of commissions and issuance costs.

Non-GAAP Measures

Total Liquidity

Total Liquidity (a non-GAAP financial measure) is the total of cash and cash equivalents and marketable securities. Each of these components appears in the condensed consolidated balance sheet. The U.S. GAAP financial measure most directly comparable to Total Liquidity is cash and cash equivalents as reported in the condensed consolidated financial statements, which reconciles to Total Liquidity as follows (in thousands):

We believe that the presentation of Total Liquidity provides useful information to investors because management reviews Total Liquidity as part of its management of overall solvency and liquidity, financial flexibility, capital position and leverage. The definition of Total Liquidity includes marketable securities, which are highly-liquid and available to use in our current operations.

Safe Harbor

See the section titled “Information Regarding Forward-Looking Statements” at the beginning of this Quarterly Report.

There have been no material changes to the Company’s market risk during the three and nine months ended September 30, 2024. For a discussion of the Company’s exposure to market risk, please refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our 2023 Annual Report.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”) as of September 30, 2024.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at September 30, 2024.

Changes in Internal Control over Financial Reporting

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

Our business has significant risks. You should carefully consider the risk factors set out in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 and the disclosures and risk factors set out in this Quarterly Report, including our condensed consolidated financial statements and the related notes, before making an investment decision regarding our securities. The risks and uncertainties described are those material risk factors currently known and specific to us that we believe are relevant to our business, results of operations and financial condition. Additional risks and uncertainties not currently known to us or that we now deem immaterial may also impair our business, results of operations and financial condition.

As of and for the period ended September 30, 2024, save as provided below there have been no material changes from the risk factors previously disclosed by us in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023.

We may not be able to maintain compliance with the continued listing requirements of Nasdaq.

Our Americal Depository Shares (ADSs) are listed on Nasdaq. In order to maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price must not fall below $1.00 per ADS for 30 consecutive business days. On November 1, 2024, we received a notice from The Nasdaq Stock Market (“Nasdaq”) that the Company is not in compliance with Nasdaq’s Listing Rule 5450(a)(1), because the minimum bid price of the Company’s American Depositary Shares (“ADSs”) has been below $1.00 per share for 30 consecutive business days (the “Notice”). The Notice has no immediate effect on the listing or trading of the Company’s ADSs on The Nasdaq Global Select Market.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days, or until April 30, 2025, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s ADSs must be at least

$1.00 per ADS for a minimum of ten consecutive business days during this 180 calendar day grace period, unless Nasdaq exercises its discretion to extend this ten-day period. In the event the Company does not regain compliance with the minimum bid price requirement by April 30, 2025, the Company may be eligible for an additional 180 calendar day compliance period if it elects to ransfer to The Nasdaq Capital Market. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and would need to provide written notice of its intention to cure the bid price deficiency during the second compliance period. However, if it appears to Nasdaq’s staff that the Company will not be able to cure the deficiency or if the Company is otherwise not eligible, Nasdaq would notify the Company that its securities would be subject to delisting. The Company may appeal any such determination to delist its securities, but there can be no assurance that any such appeal would be successful.

The Company intends to monitor the closing bid price of its ADSs and assess potential actions to regain compliance with Nasdaq’s Listing Rule 5450(a)(1). However, there can be no assurance that we will be able to regain compliance with the minimum bid price requirement or that we will otherwise maintain compliance with other Nasdaq listing requirements. If we fail to regain and maintain compliance with the minimum bid price requirement or to meet the other applicable continued listing requirements in the future and Nasdaq decides to delist our ADSs, the delisting could adversely affect the market price and liquidity of our ADSs, reduce our ability to raise additional capital and result in operational challenges and damage to investor relations and market reputation.

Although our financial statements have been prepared on a going concern basis, if we fail to obtain additional financing in the future, this may raise substantial doubt about our ability to continue as a going concern in future reporting periods

As of September 30, 2024, the Company had cash and cash equivalents of $116.7 million, marketable securities of $69.3 million, and stockholders’ equity of $80.0 million. During the nine months ended September 30, 2024, the Company incurred a net profit of $3.4 million, used cash of $39.0 million from its operating activities, and generated revenues of $174.8 million. The Company has incurred net losses in most periods since inception and it expects to incur operating losses in future periods.

We believe that our Total Liquidity will be sufficient to fund our operations for at least 12 months, based upon our currently anticipated research and development activities and planned restructuring of the company to reduce headcount and expenses. This belief is based on estimates that are subject to risks and uncertainties and may change if actual results, revenue from commercialisation of Tecelra or the currently anticipated costs and cost reductions (including those associated with the restructuring) differ from management’s estimates or do not occur within anticipated timeframes.

We must obtain additional capital to continue funding planned operations. There is no assurance that the Company will be able to obtain sufficient additional capital to continue funding its operations or, if we do, that it will be on terms that are favourable to our shareholders. Any future fundraising, if possible, is likely to be highly dilutive to our existing shareholders and may also divert our management from its day-to-day activities.

If the Company fails to obtain additional funding, it may be required to:

• significantly reduce certain activities and operations of the business in order to reduce ongoing expenditure. Any such reduction could significantly delay the timelines under which we can bring new products to the market (including lete-cel) or our ability to commercialize Tecelra.
• conduct a restructuring of the company to further reduce headcount and expenditure which will in turn reduce the activities and operations of the business.
• repay all or part of the loan advances received under the Loan Agreement in accordance with the terms of the Loan Agreement (including any applicable repayment charges or costs).
• seek further third party alliances for existing assets, including Tecelra, on terms that are less favorable than might otherwise be available;
• seek an acquirer for all or part of the business on terms that are less favorable than might otherwise be available
• relinquish or license on unfavorable terms or rights to technologies, intellectual property or product candidates we would otherwise seek to develop or commercialize ourselves.

If we fail to obtain additional funding, or in the event that we significantly reduce our ongoing expenditures and operations (including the current restructuring), this may result in an inability to retain key individuals required for our ongoing business and may result in a need to delay or halt ongoing programs or change the nature and scope of such programs. As a result, our business financial condition and results of operations could be materially affected.

Our business is, in part, dependent on the successful commercialization of Tecelra in the United States.

Tecelra received FDA approval in August 2024. Tecelra is a genetically modified autologous T-cell immunotherapy indicated for the treatment of adult patients with unresectable or metastatic synovial sarcoma who have received prior systemic therapy, are positive for HLA-A*02:01P, -A*02:02P, -A*02:03P, or -A*02:06P, and negative for HLA-A*02:05P, and whose tumor expresses the MAGE-A4 antigen as detected by an FDA-approved test. The success of our business, including our ability to finance our company and generate any revenue in the future, will, at this point, depend on the successful commercialization of Tecelra in the U.S. Any failure to successfully commercialize Tecelra in the U.S. would have a material and adverse impact on our business.

The commercial success of Tecelra will depend on a number of factors, including the following:

• our ability to obtain any additional required capital or equivalent sources of finance to support the commercialization on acceptable terms, or at all;
• our ability to consistently manufacture Tecelra on a timely basis and sufficient to meet demand;
• our ability to activate authorized treatment centres (ATC) capable of administering Tecelra and the timing of activation of those authorized treatment centres;
• the ability of our authorized treatment centres to facilitate treatments with Tecelra given Tecelra is a novel T-cell therapy requiring patient specific administration;
• the availability of the tests required to assess for the required HLA types and antigen presentation ahead of treatment with Tecelra and the ability of third party suppliers of such tests to make those tests available when required;
• the prevalence, duration and severity of potential side effects or other safety issues that patients may experience with Tecelra;
• achieving and maintaining, and, where applicable, ensuring that our third-party contractors (including those responsible for supply of Tecelra or any raw or intermediate materials required for such supply) achieve and maintain, compliance with our contractual obligations and with all regulatory requirements applicable to Tecelra;
• the willingness of physicians, operators of hospitals and clinics and patients to adopt and administer Tecelra;
• the availability of coverage and adequate reimbursement from managed care plans, private insurers, government payors (such as Medicare and Medicaid and similar foreign authorities) and other third-party payors for Tecelra;
• patients’ ability and willingness to pay out-of-pocket for Tecelra in the absence of coverage and/or adequate reimbursement from third-party payors;
• patient demand for Tecelra;
• the identification of patients eligible for treatment by the authorized treatment centres (including by referral from other hospitals and treatment centres) and the ability of the authorized treatment centres to progress such patients through to treatment;
• prevalence of the required HLA types and antigen within the synovial sarcoma population and the ability of the tests for HLA and antigen to function as expected;
• our ability to avoid third-party patent interference, intellectual property challenges or intellectual property infringement claims; and
• our ability to comply with any post marketing requirements and obligations including those imposed by the FDA as part of the authorization for Tecelra.

These factors, many of which are beyond our control, could cause us to experience significant delays or an inability to obtain regulatory approvals or commercialize Tecelra. While we have obtained regulatory approval of Tecelra in the United States, we may never be able to successfully commercialize Tecelra in the United States or receive regulatory approval of Tecelra outside the United States. Accordingly, we cannot provide assurances as to the revenue obtainable through the sale of Tecelra.

Tecelra is approved under accelerated approval in the United States, and additional confirmatory work is required in order to maintain that approval. Inability to maintain approval or to otherwise meet the requirements imposed by the FDA will have a significant impact on our ability to commercialize Tecelra.

Tecelra is approved under accelerated approval in the U.S. based on overall response rate and duration of response. Continued approval for this indication is contingent upon verification and description of clinical benefit in a confirmatory trial. Our ability to obtain traditional approval for Tecelra may require the conduction of additional studies and will require ongoing discussions with the FDA. Any additional work required to satisfy the conditions of accelerated approval will require additional finances, and any ability to obtain any additional required capital or equivalent sources of finance may delay or prevent our ability to maintain approval for Tecelra.

As part of the approval of Tecelra, certain post approval requirements apply which, if not satisfied, could impact continued approval of Tecelra.

Tecelra is subject to continuing regulation by the FDA Failure to meet any of these requirements may result in negative consequences including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties.

These requirements include submissions of safety and other postmarketing information and reports, registration and listing, as well as continued compliance with cGMPs and cGCPs for any clinical trials that we conduct post-approval. In addition, the FDA and other regulatory authorities may impose additional restrictions or require amendments to our product label after marketing approval in the event of additional adverse events with our cell therapy or of other adverse events seen with similar cell therapy products.

As part of the approval of Teclera, the FDA has imposed certain Postmarketing Commitments (“PMCs”) and Postmarketing Requirements (“PMRs”), including certain requirements to conduct additional studies under proscribed timelines. Failure to conduct these PMCs and PMRs in a timely manner could result in enforcement action from the FDA.

We and our contract manufacturers will be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs. We must also comply with requirements concerning advertising and promotion for any cell therapies for which we obtain marketing approval. Promotional communications with respect to prescription drugs, including biologics, are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we will not be able to promote any cell therapies we develop for indications or uses for which they are not approved.

The approval of Tecelra is limited to adult patients with unresectable or metastatic synovial sarcoma who have received prior chemotherapy, are positive for HLA-A*02:01P, -A*02:02P, -A*02:03P, or -A*02:06P, and negative for HLA-A*02:05P, and whose tumor expresses the MAGE-A4 antigen.

As is common for initial approval of cancer therapies, Tecelra has been approved by the FDA for use in a limited patient population, who have unresectable or metastatic synovial sarcoma and who have already received prior systemic therapy. As a result, our ability to market Tecelra is generally limited to that patient population.

The use of prior therapies or treatment for synovial sarcoma may reduce the effectiveness of our cell therapies.

This is the first time we as an organization are marketing a product and we have limited experience as a commercial company and have never generated revenue from product sales.

Tecelra is the first product for which we have obtained FDA approval. As a company we have not yet launched any approved products for commercial sale and have not previously generated any revenue from product sales. Accordingly, we will need to continue to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition. We have recruited experienced commercial and medical affairs teams and we will need to continue to develop those teams and the associated support network in order to supply Tecelra on a commercial basis.

We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train, and retain suitably skilled and experienced marketing and sales personnel. This process may result in additional delays in bringing our cell therapies to market or in certain cases require us to enter into alliances with third parties in order to do so. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or even if we are able to do so, that they will result in effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the efforts of such third parties, and our revenue from cell therapy sales may be lower than if we had commercialized our cell therapies ourselves.

For Tecelra, we are using certain third parties to supplement the internal commercial facing teams. We are also using a third party distributor to supply Tecelra and third parties to provide some of the systems required to supply Tecelra and support patients prescribed with Tecelra. We are reliant on those third parties to provide the services we require in accordance with our planned timelines. If any critical third party supplier fails to provide the services as required that may result in a delay to the commercialization of Tecelra. Any inability on our part to develop inhouse sales and commercial distribution capabilities or to establish and maintain relationships with third-party collaborators that can successfully commercialize any cell therapy in the U.S. or elsewhere will have a materially adverse effect on our business and results of operations.

As a novel cell therapy, Tecelra may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers and others in the medical community, including referral centers.

The use of engineered T-cells and cell therapies more generally as a potential cancer treatment is a recent development and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers and others in the medical community. For example, the product labelling and prescribing information for Tecelra describe certain limitations of use, adverse events, and warnings and precautions, including a boxed warning related to Cytokine Release Syndrome (CRS), which may be severe or life threatening and which occurred in patients receiving Tecelra in clinical trials. Additional factors will influence whether Tecelra is accepted in the market, including:

• physicians, hospitals, cancer treatment centers and patients considering Tecelra as a safe and effective treatment;
• the potential and perceived advantages of Tecelra over alternative treatments;
• the prevalence and severity of any side effects;
• willingness of treating centers to test for the required HLA types and MAGE A4 antigen using the FDA approved tests;
• our product labeling and prescribing information describe certain limitations of use, adverse events, and warnings and precautions;
• the cost of Tecelra in relation to alternative treatments;
• the willingness of referral centers and awareness of referral centers to refer patients to our authorized treatment centers;
• the availability of coverage, adequate reimbursement and pricing by third-party payors and government authorities;
• the willingness of patients to pay for Tecelra on an out-of-pocket basis in the absence of coverage by third-party payors and government authorities;
• relative convenience and ease of administration as compared to alternative treatments and competitive therapies; and
• the effectiveness of our sales and marketing efforts.

The product labelling and prescribing information for Tecelra includes a boxed warning for CRS as well as other warnings and precautions. As Tecelra is used commercially, the rate and nature of adverse reactions may increase and as afamitresgene autoleucel (afami-cel) is studied in additional indications and populations, toxicities may further limit its development and use.

Coverage, price flexibility, and reimbursement may be limited or unavailable in certain market segments for Tecelra.

Successful sales of Tecelra may depend on the availability of coverage and adequate reimbursement from third-party payors. In addition, because Tecelra represents a new approach to the treatment of synovial sarcoma, we cannot accurately estimate the potential revenue from Tecelra.

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Obtaining coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s determination that use of a product is:

• a covered benefit under its health plan;
• safe, effective and medically necessary;
• appropriate for the specific patient; and
• cost-effective.

Obtaining coverage and reimbursement approval of Tecelra from a government or other third-party payor is a time consuming and costly process which could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. Even if we obtain coverage for Tecelra, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Patients are unlikely to use Tecelra unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of Tecelra.

In the U.S., no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our cell therapies to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, national and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare, including the Affordable Care Act (“ACA”) or provisions of the Inflation Reduction Act (“IRA”). Such regulatory changes may bring prescription drug pricing reform or healthcare affordability programs that, for example, seek to lower prescription drug costs by allowing governmental healthcare programs to negotiate prices with drug companies, put an inflation cap on drug prices, and lower out-of-pocket expenses for recipients of governmental healthcare programs. We cannot predict the initiatives that may be adopted in the future.

Tecelra represents a novel approach to treatment of synovial sarcoma that could result in heightened regulatory scrutiny.

Use of Tecelra to treat a patient involves genetically engineering a patient’s T-cells. This is a relatively novel treatment approach that carries inherent development risks including the following, any of which can result in delays to our ability to provide confirmatory evidence of Tecelra’s effectiveness:

• Further development, characterization and evaluation may be required if post-marketing or clinical data suggest any potential safety risk for patients. The need to develop further assays, or to modify in any way the protocols related to Tecelra to improve safety or effectiveness, may delay the commercialization and further clinical development;
• End users and medical personnel require a substantial amount of education and training in their administration of Tecelra either to engage in confirmatory clinical trials and recruit patients or ultimately to provide Tecelra to patients.
• Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future.
• There is the potential for delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material. In part for this reason, the FDA recommends a 15-year follow-up observation period for all surviving patients who receive treatment using gene therapies in clinical trials.
• Negative results seen in third party clinical trials utilizing gene therapy products may result in regulators halting development and commercialization of our cell therapies, including Tecelra, or in requiring additional data or requirements prior to our cell therapies progressing to the next stage of development.

Manufacturing and supply of cell therapies is complex, and if we encounter any difficulties in manufacture or supply of Tecelra or our ability to provide supply for confirmatory clinical trials commercial supply of Tecelra could be delayed or stopped.

The process of manufacturing and administering Tecelra is complex and highly regulated. Manufacture requires the harvesting of white blood cells from the patient, isolating certain T-cells from these white blood cells, combining patient T-cells with our lentiviral delivery vector through a process known as transduction, expanding the transduced T-cells to obtain the desired dose, and ultimately infusing the modified T-cells back into the patient. As a result of the complexities, our manufacturing and supply costs are likely to be higher than those at more traditional manufacturing processes and the manufacturing process is less reliable and more difficult to reproduce.

Delays or failures in the manufacture of Tecelra (whether by us, any collaborator or our third party contract manufacturers) may result in a patient being unable to receive Tecelra or a requirement to re-manufacture which itself then causes delays in manufacture for other patients. Any delay or failure or inability to manufacture on a timely basis can adversely affect a patient’s outcomes and delay the timelines for our confirmatory clinical trials and commercialization. With a commercial product delays or failure to manufacture could additionally lead to claims by patients for reimbursement or damages. Such delays or failure or inability to manufacture can result from:

• a failure in the manufacturing process itself for example, by an error in manufacturing process (whether by us or our third party contract manufacturing organization), equipment or reagent failure, failure in any step of the manufacturing process, failure to maintain a GMP environment, failure in quality systems applicable to manufacture, sterility failures, contamination during process;
• variations in patient starting material or apheresis product resulting in less product than expected or product which is not viable, or which cannot be used to successfully manufacture a cell therapy;
• product loss or failure due to logistical issues including issues associated with the differences between patients’ white blood cells or characteristics, interruptions to process, contamination, failure to supply patient apheresis material within required timescales (for example, as a result of an import or export hold-up) or supplier error;
• inability to have enough manufacturing slots to manufacture cell therapies for patients as and when those patients require manufacture;
• inability to procure components, consumables, ingredients, or starting materials, or to manufacture starting materials (including at our U.K. vector facility), as a result of supply chain issues;
• loss of or close-down of any manufacturing facility used in the manufacture of our cell therapies. For example, we will be manufacturing Tecelra at our Navy Yard manufacturing facility. Should there be a contamination event at the facility resulting in the close-down of that facility, it would not be possible to find alternative manufacturing capability for Tecelra within the timescales required for patient supply including for commercial supply.
• loss or contamination of patient starting material, requiring the starting material to be obtained again from the patient or the manufacturing process to be re-started. In the context of commercial supply, this could result in cancellation of order for the commercial cell therapy or a claim from the patient;
• a requirement to modify or make changes to any manufacturing process. Such changes may additionally require comparability testing which then may reduce the amount of manufacturing slots available for manufacture of Tecelra. Delays in our ability to make the required modifications or perform any required comparability testing within currently anticipated timeframes or that such modifications or comparability testing, when made, will obtain regulatory approval or that the new processes or modified processes will successfully be transferred to the third party contract suppliers within currently anticipated timeframes can also impact timelines for manufacture;
• reduction or loss of the staff resources required to manufacture our cell therapies at our facilities or those of our CMOs;
• allocation of the resources, materials, and services of any collaborator or our third party contract manufacturers away from our cell therapy programs;
• reduction in available workforce to perform manufacturing processes, for example, as a result of a COVID-19 outbreak or workforce exhibiting potential COVID-19 symptoms, and pending receipt of test results for COVID-19 infection;
• changes in the manufacturing and supply process. Any changes to the manufacturing process may require amendments to be made to regulatory applications or comparability tests to be conducted which can further delay timeframes. If Tecelra

manufactured under the new process has a worse safety or efficacy profile than the prior product or the process is less reproducible than the previous process, we may need to re-evaluate the use of that manufacturing process, which could significantly delay or even result in the halting of our confirmatory clinical trials and commercialization.

We will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense as well as significant penalties if we fail to comply with regulatory requirements or experience unanticipated problems with Tecelra.

FDA approval is accompanied by requirements to conduct surveillance to monitor the safety and efficacy of Tecelra.

Later discovery of previously unknown problems with Tecelra, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

• restrictions on our ability to conduct further clinical trials, including full or partial clinical holds on ongoing or planned trials;
• restrictions on Tecelra’s manufacturing processes;
• restrictions on the marketing of Tecelra;
• restrictions on product distribution;
• requirements to conduct additional post-marketing clinical trials;
• untitled or warning letters;
• withdrawal of Tecelra from the market;
• refusal to approve pending supplements to the Tecelra that we submit;
• recall of products;
• fines, restitution or disgorgement of profits or revenue;
• suspension or withdrawal of regulatory approvals;
• refusal to permit the import or export of our products;
• product seizure;
• injunctions;
• imposition of civil penalties; or
• criminal prosecution

The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could adversely impact the approval of Tecelra. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose marketing approval and we may not achieve or sustain profitability.

In addition, FDA has required us to conduct a confirmatory trial to verify the clinical benefit of Tecelra. The results from the confirmatory trial or trials may not support the clinical benefit, which could result in the approval being withdrawn.