# Autolus Therapeutics plc: Form 10-Q for the period ended Jun 30, 2024

- Company: [Autolus Therapeutics plc](/companies/autl.md) (CIK 1730463)
- Form: 10-Q
- Filed: 2024-08-08
- Accepted by EDGAR: Aug 8, 2024, 16:21 ET
- Period: 2024-06-30
- Accession: 0001730463-24-000093
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1730463/000173046324000093/autl-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1730463/000173046324000093/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $36.6m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $67.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$58.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | −$97.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $10.2m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $29.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $51.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $43.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$58.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$111.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.22 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.43 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.22 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.43 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 266,025,783 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 255,131,873 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$91.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $1.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-06-30 | $705.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $758.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $853.6m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $40.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $325.8m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $527.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 58,308 characters.

*The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and the related notes to those statements included in this Quarterly Report on Form 10-Q. We also recommend that you read our discussion and analysis of financial condition and results of operations together with our audited financial statements and the notes thereto, which appear in our Annual Report as filed with the SEC.*

*We maintain our books and records in pounds sterling, our results are subsequently converted to U.S. dollars, and we prepare our consolidated financial statements in accordance with U.S. GAAP, as issued by the FASB. All references in this Quarterly Report on Form 10-Q to “$” are to U.S. dollars and all references to “£” are to pounds sterling. Our unaudited condensed Consolidated Statements of Operations and Comprehensive Loss and Cash Flows for the three months ended June 30, 2024 and 2023 have been translated from pounds sterling into U.S. dollars at the rate of £1.00 to $1.2616 and £1.00 to $1.2516, respectively. Our unaudited condensed Consolidated statements of Operations and Comprehensive Loss and Cash Flows for the six months ended June 30, 2024 and 2023 have been translated from pounds sterling into U.S. dollars at the rate of £1.00 to $1.2648 and £1.00 to $1.2330, respectively. Our unaudited condensed Consolidated Balance Sheet as of June 30, 2024 and audited Consolidated Balance Sheet as of December 31, 2023 have been translated from pounds sterling into U.S. dollars at the rate of £1.00 to $1.2645 and £1.00 to $1.2662, respectively. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at those or any other exchange rate as of those or any other dates.*

*The statements in this discussion and analysis of our financial condition and results of operations regarding our expectations regarding our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the risks and uncertainties set forth in the “Risk Factors” section of our Annual Report, this Quarterly Report and any subsequent reports that we file with the SEC.*

### Overview

We are a biopharmaceutical company developing next-generation programmed T cell therapies for the treatment of cancer and autoimmune diseases. Using our broad suite of proprietary and modular T cell programming technologies, we are engineering precisely targeted, controlled and highly active T cell therapies that are designed to better recognize target cells, break down their defense mechanisms and attack and kill these cells. We believe our programmed T cell therapies have the potential to be best-in-class and to offer patients substantial benefits over the existing standard of care, including the potential for cure in some patients.

Since our inception, we have incurred significant operating losses. For the three months ended June 30, 2024 and 2023, we incurred net losses of $58.3 million and $45.6 million, respectively, and net losses of $111.0 million and $85.4 million for the six months ended June 30, 2024 and 2023, respectively, and had an accumulated deficit of $989.5 million and $878.6 million as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024, we had cash and cash equivalents of $705.9 million. Based on our current clinical development plans, we believe our existing cash and cash equivalents will be sufficient to fund our current and planned operating expenses and capital expenditure requirements through at least the next twelve months from the date of issuance of our unaudited condensed consolidated financial statements included in this report.

### Recent Developments

### Obe-cel in r/r adult B-ALL - The Felix Study:

#### Obe-cel in relapsed / refractory (“r/r”) adult B-cell Acute Lymphoblastic Leukemia (“B-ALL”) – The FELIX Study

- Our obe-cel BLA for r/r B-ALL remains on track for FDA target action date of November 16, 2024.
- In April 2024, the EMA accepted our obe-cel marketing authorization application (“MAA”) for r/r B-ALL. In the U.K. an MAA was submitted to the U.K. Medicines and Healthcare products Regulatory Agency (“MHRA”) at the end of July 2024.
- The pooled analysis of the FELIX Phase 1b/2 study was presented at the American Society of Oncology (“ASCO”) and at the European Hematology Association (“EHA”) annual meetings in June 2024, with a median follow-up of 21 months. The data showed stabilization of event-free survival and overall survival, with 40% of patients in ongoing remission. 99 responders following treatment with obe-cel, 18 received a subsequent stem cell transplant (“SCT”) while in minimal residual (“MRD”)-negative response and did not show improved survival compared to patients without subsequent SCT. Patients with prolonged obe-cel persistence showed improved event-free survival and data indicated the bridging of high tumor burden patients with inotuzumab appears effective at reducing tumor burden, cytokine release syndrome (“CRS”) and immune effector cell-associated neurotoxicity syndrome (“ICANS”) without increasing liver toxicity.

#### Obe-cel in B-cell mediated autoimmune diseases

- The Phase 1 dose confirmation study (“CARLYSLE”) in refractory systemic lupus erythematosus (“SLE”) patients is ongoing. We continue to expect initial clinical data in late 2024.

#### Pipeline programs in collaboration with University College London

- Clinical programs AUTO8, AUTO6NG and AUTO1/22 are progressing well and we are planning data updates for all programs in 2025.

### Key Operational Updates during the three months ended June 30, 2024

- In April 2024, Autolus entered into a distribution services agreement with a subsidiary of Cardinal Health to support the ordering and distribution of obe-cel in the United States, if it receives regulatory approval.

### Components of Our Results of Operations

### Revenue

We account for our revenue pursuant to the provisions of ASC 606*, Revenue from Contracts with Customers.* We have no products approved for commercial sale and have not generated any revenue from commercial product sales. The total revenue to date has been generated principally from license agreements. As of June 30, 2024, we had entered into various license agreements which included non-refundable upfront license fees, options for future commercial licenses, payments based upon achievement of clinical development and regulatory objectives, payments based upon achievement of certain levels of product sales, and royalties on licensed product sales.

In determining the appropriate amount of revenue to be recognized in relation to each license agreement, we perform the following steps: (i) identify the promised goods or services in the contract; (ii) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measure of the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations based on estimated selling prices; and (v) recognize of revenue when (or as) we satisfy each performance obligation.

#### License Fees and Multiple Element Arrangements

If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, upfront fees allocated to the license at such time as the license is transferred to the licensee and the licensee is able to use, and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligations to determine whether the combined performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress at each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Appropriate methods of measuring progress include output methods and input methods. In determining the appropriate method for measuring progress, we consider the nature of service that we promise to transfer to the customer. When we decide on a method of measurement, we will apply that single method of measuring progress for each performance obligation satisfied over time and will apply that method consistently to similar performance obligations and in similar circumstances.

#### Customer Options

If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options that are not determined to be material rights are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. We evaluate the customer options for material rights, or options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. We allocate the transaction price to material rights based on the relative standalone selling price, which is determined based on any identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised.

#### Contingent Research Milestone Payments

ASC 606 constrains the amount of variable consideration included in the transaction price in that either all, or a portion, of an amount of variable consideration should be included in the transaction price. The variable consideration amount should be included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The assessment of whether variable consideration should be constrained is largely a qualitative one that has two elements: the likelihood of a change in estimate, and the magnitude thereof. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized is not significant, for example.

If the consideration in a contract includes a variable amount, we will estimate the amount of consideration in exchange for transfer of promised goods or services. The consideration also can vary if our entitlement to the consideration is contingent on the occurrence or non-occurrence of a future event. We consider contingent research milestone payments to fall under the scope of variable consideration, which should be estimated for revenue recognition purposes at the inception of the contract and reassessed ongoing at the end of each reporting period.

We assess whether contingent research milestones should be considered variable consideration that should be constrained and thus not part of the transaction price. This includes an assessment of the probability that all or some of the milestone revenue could be reversed when the uncertainty around whether or not the achievement of each milestone is resolved, and the amount of reversal could be significant.

U.S. GAAP provides factors to consider when assessing whether variable consideration should be constrained. All of the factors should be considered, and no factor is determinate. We consider all relevant factors.

#### Royalty Revenue

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

### Research and Development Expenses

Research and development expenses (“R&D”) consist of costs incurred in connection with the research and development of our product candidates, which are partially offset by research and development tax credits, including tax credits arising from the U.K. small and medium enterprise (“SME”) regime and research and development expenditure credit (“RDEC”) regime provided by HMRC. We expense research and development costs as incurred. These expenses include:

- expenses incurred under agreements with CROs, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
- manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials;
- employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in research and development functions;
- expenses incurred for outsourced professional scientific development services;
- costs for laboratory materials and supplies used to support our research activities;
- allocated facilities costs, depreciation and other expenses, which include rent and utilities; and
- upfront, milestone and management fees for maintaining licenses under our third-party licensing agreements.

We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.

Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants and CROs in connection with our preclinical development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under license agreements. We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to oversee research and development as well as for managing our preclinical development, process development, manufacturing and clinical development activities.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next few years as we increase personnel costs, initiate and conduct additional clinical trials and prepare regulatory filings related to our product candidates. We also expect to incur additional expenses related to milestone, royalty payments and maintenance fees payable to third parties with whom we have entered into license agreements to acquire the rights related to our product candidates.

The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from sales of any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with development and commercialization activities, including the uncertainty of:

- the scope, progress, outcome and costs of our clinical trials and other research and development activities, including establishing an appropriate safety profile with IND-directed studies;
- successful patient enrollment in, and the initiation and completion of, clinical trials;
- the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
- establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
- development and timely delivery of commercial-grade drug formulations that can be used in our clinical trials and for commercial manufacturing;
- obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
- significant and changing government regulation;
- launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;
- maintaining a continued acceptable safety profile of the product candidates following approval; and
- significant competition and rapidly changing technologies within the biopharmaceutical industry.

We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. Any changes in the outcome of any of these variables with respect to the development of our product candidates in clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the European Medicines Agency (“EMA”), the FDA, or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. Commercialization of our product candidates will take several years and millions of dollars in development costs.

#### U.K. Research and Development Tax Credits

The U.K. operates R&D tax incentive regimes. Under these regimes qualifying R&D expenditure incurred by U.K. companies can be included within R&D claims via the corporate tax return, resulting in reimbursable tax credits from the U.K. government.

As a company that carries out extensive R&D activities, we make claims under the U.K. R&D tax credit regime. This regime provides companies with tax relief at an effective rate of between 15% and 16.2% (subject to the rate of corporation tax we pay, if any) of qualifying R&D expenditure in an accounting period. The regime’s rules are complex, and if a tax authority were to challenge or seek to disallow our claims (in whole or in part), for example by asserting that the relevant expenditure does not meet the technical conditions to be granted tax credits, then such challenge or disallowance could have a material impact on our cash-flow and financial performance. In addition, future changes to the U.K. R&D tax credit regime may mean that we no longer qualify for it or have a material impact on the extent to which we can make claims (or benefit from them).

The SME program has been particularly beneficial to us, as under this program the trading losses that arise from our qualifying R&D activities can be surrendered for a cash rebate of up to 18.6% of qualifying expenditure incurred after April 1, 2023. Additionally, the U.K. Government enacted further changes to the SME regime on February 22, 2024 which include the introduction of a new rate for R&D intensive companies of 27% (which we may not qualify for) and came into effect for expenditures incurred after April 1, 2023. Qualifying expenditures largely comprise employment costs for research staff, consumables, outsourced contract research organization costs and utilities costs incurred as part of research projects for which we do not receive income. 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 our subsidiary Autolus Limited, are eligible for inclusion within these tax credit cash rebate claims.

On April 1, 2023, the headline rate under the RDEC program increased from 13% to 20% and can generate cash rebates of up to 15% (increased from 10.5%) on qualifying R&D expenditure incurred from this date.

The benefit from U.K. RDEC and U.K. SME programs is recognized as income in the Consolidated Statement of Operations and Comprehensive Loss and is subject to tax at the prevailing rate.

Amendments to the current SME and RDEC programs that are contained in the Finance Act 2024 which was enacted on February 22, 2024 will take effect from periods on or after April 1, 2024 and will (i) (unless limited exceptions apply) introduce restrictions on the tax relief that can be claimed for expenditure incurred on subcontracted R&D activities or externally provided workers, where such sub-contracted activities are not carried out in the U.K. or such workers are not subject to U.K. payroll taxes, and (ii) merge the SME and RDEC programs into a single scheme which would generate net cash benefit of up to 15% of the qualifying expenditure for profit making companies and up to 16.2% for loss making companies. Nevertheless, the higher rate of 27% for R&D intensive SME companies will still be in effect from periods on or after April 1, 2024.

We currently meet the conditions of the SME regime, but we also can make claims under the RDEC regime to the extent that our projects are grant funded. We may not be able to continue in the future to qualify as a small or medium-sized enterprise under the SME program, based on size criteria concerning employee headcount, turnover and gross assets. If we cease to qualify under the SME regime, we may make a claim under the RDEC regime for periods ending December 31, 2024, or the merged R&D regime from the period ending December 31, 2025. It should be noted, however, that the types of qualifying expenditure in respect of which we may make claims under the RDEC regime are more restricted than under the SME regime (for example, it may be the case that certain subcontracted costs in respect of which claims may be made under the SME regime do not qualify for relief under the current RDEC regime).The subcontracted rules under the merged regime are more aligned to the current SME regime.

### General and Administrative Expenses

General and administrative expenses consist primarily of salaries, related benefits, travel and share-based compensation expense for personnel in executive, finance, legal and other administrative functions. General and administrative expenses also include allocated facility-related costs, patent filing and prosecution costs and professional fees for marketing, insurance, legal, consulting, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the planned development of our product candidates. Additionally, if we believe a regulatory approval of one of our product candidates appears likely, we would anticipate an increase in salaries and related benefits as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidate.

We have experienced, and expect to continue to experience, increased expense with being a public company, including increased accounting, audit, legal, regulatory and compliance costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer insurance premiums, as well as higher investor and public relations costs. Additionally, should we fail to maintain our status as a foreign private issuer, we would expect to incur increased expenses to remain compliant with applicable SEC and Nasdaq requirements.

### Loss on disposal of property and equipment

Loss on disposal of property and equipment primarily consists of losses arising from the disposal of all categories of property and equipment.

### Impairment of operating lease right-of-use assets and related property and equipment

Impairment of operating lease right-of-use assets and related property and equipment consists primarily of impairment losses arising from the impairment of leased properties and leasehold improvements that are currently not be utilized by us.

### Other income (expense), net

Other income (expense), net consists primarily of foreign currency transaction gains and losses, sublease income and gains or losses arising from the termination of leases.

### Interest Income

Interest income consists primarily of interest received from banks and money market funds on our cash and cash equivalents balances. We invest funds in a variety of short-term interest-bearing instruments.

### Interest Expense

Interest expense consists primarily of interest expense arising from amortization of the liability related to future royalties and milestones, pursuant to our collaboration agreements with Blackstone and BioNTech, using the effective interest rate method. On a quarterly basis, we assess the expected present value of the future Blackstone and BioNTech payments under the Blackstone Collaboration Agreement and BioNTech Agreements which may be received by us and future royalties and sales milestone payments to Blackstone and BioNTech which may be paid by us. To the extent the amount or timing of such receipts or payments is materially different than our previous estimates we record a cumulative catch-up adjustment to the liability related to future royalties and milestones. The adjustment to the carrying amount is recognized as an adjustment to interest expense in the period in which the change in estimate occurred.

### Income Tax Benefit (Expense)

We are subject to corporate taxation in the United Kingdom, United States, Germany and Switzerland. Due to the nature of our business, we have generated losses since inception. Our income tax benefit (expense) recognized represents the sum of the research and development tax credits recoverable in the U.K. and offset by income tax payable in the United States.

Un-surrendered U.K. losses may be carried forward indefinitely to be offset against future taxable profits, subject to numerous utilization criteria and restrictions. The amount that can be offset each year is limited to £5.0 million plus an incremental 50% of U.K. taxable profits. After accounting for tax credits receivable, we had accumulated tax losses for carry forward in the U.K. of $418.1 million at December 31, 2023. A valuation allowance has been recognized against our deferred tax asset relating to our U.K. losses. We carried a $3.2 million deferred tax asset balance related to the U.S. entity at June 30, 2024 for which there are no valuation allowance. At June 30, 2024, we recorded a full valuation allowance against the net deferred tax asset in the U.K., as the recoverability due to future taxable profits was unknown. On April 1, 2023 the main rate of the U.K. corporation tax was increased to 25% for companies with profits in excess of £250,000, or the small profits rate of 19% for companies with profits of £50,000 or less (with marginal relief from the main rate available to companies with profits between £50,000 and £250,000).

In the event we generate revenues in the future, we may benefit from the U.K. “patent box” regime that allows profits attributable to revenues from patents or patented products to be taxed at an effective rate of 10%.

### Results of Operations

### Comparison of Three Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024, and 2023 (in thousands):

*(in thousands)*

|  | Three Months Ended June 30, 2024 | 2023 | Change | Change (in percentage) |
| --- | ---: | ---: | ---: | ---: |
| License revenue | $— | $— | $— | —% |
| **Operating expenses:** |  |  |  |  |
| Research and development | (36,612) | (33,232) | (3,380) | 10% |
| General and administrative | (21,903) | (11,122) | (10,781) | 97% |
| Loss on disposal of property and equipment | — | (23) | 23 | (100)% |
| Impairment of operating lease right-of-use assets and related property and equipment | (414) | — | (414) | 100% |
| **Total operating expenses, net** | **(58,929)** | **(44,377)** | **(14,552)** | **33%** |
| Other income, net | 1,226 | 482 | 744 | 154% |
| Interest income | 9,656 | 3,403 | 6,253 | 184% |
| Interest expense | (10,174) | (5,020) | (5,154) | 103% |
| **Total other income (expense), net** | **708** | **(1,135)** | **1,843** | **(162)%** |
| **Net loss before income tax** | **(58,221)** | **(45,512)** | **(12,709)** | **28%** |
| Income tax expense | (51) | (40) | (11) | 28% |
| **Net loss** | **$(58,272)** | **$(45,552)** | **$(12,720)** | **28%** |

35

### Research and Development Expenses

The following tables provide additional detail on our research and development expenses (in thousands):

| Direct research and development expenses | Three Months Ended June 30, 2024 | 2023 | Change (in thousands) | Change (in percentage) |
| --- | ---: | ---: | ---: | ---: |
| B cell malignancies (Obe-cel, AUTO1/22 & AUTO3) | $7,713 | $4,147 | $3,566 | 86% |
| Other projects (AUTO4, AUTO5, AUTO6, AUTO7 & AUTO8) | 876 | 701 | 175 | 25% |
| **Total direct research and development expense** | **$8,589** | **$4,848** | **$3,741** | **77%** |
| **Indirect research and development expenses and unallocated costs:** |  |  |  |  |
| Personnel related (including share-based compensation) | $18,073 | $16,659 | 1,414 | 8% |
| Indirect research and development expense\* | 9,950 | 11,725 | (1,775) | (15)% |
| **Total research and development expenses** | **$36,612** | **$33,232** | **$3,380** | **10%** |
| \* Indirect research and development expense is net of U.K. research and development tax credits |  |  |  |  |

Research and development expenses increased by $3.4 million to $36.6 million for the three months ended June 30, 2024 from $33.2 million for the three months ended June 30, 2023 primarily due to:

- an increase of $4.3 million in clinical trial costs primarily relating to our research and development activities including transport costs of manufacturing consumables,
- an increase of $1.4 million in salaries and other employment related costs including share-based compensation expense, which was mainly driven by an increase in the number of employees engaged in research and development activities,
- an increase of $0.6 million in facilities costs related primarily to our new manufacturing facility, The Nucleus, in Stevenage, U.K. as well as increases in costs related to maintaining our current leased properties, and
- an increase of $0.4 million in depreciation and amortization related to property and equipment, offset in part by:
- an increase of $1.8 million in U.K. R&D tax credits (decrease in R&D expense) due primarily to an increase in qualifying research and development expenditures related to the Small and Medium Enterprise (“SME”) scheme,
- a decrease of $0.7 million in professional consulting and legal fees in relation to our research and development activities,
- a decrease of $0.7 million in information technology infrastructure maintenance costs, and
- a decrease of $0.1 million in general office expenses.

### General and Administrative Expenses

General and administrative expenses increased by $10.8 million to $21.9 million for the three months ended June 30, 2024 from $11.1 million for the three months ended June 30, 2023 primarily due to:

- an increase of $6.7 million in salaries and other employment related costs including share-based compensation expense, which was mainly driven by an increase in the number of employees engaged in general and administrative activities,
- an increase of $2.5 million in costs related to commercial-stage readiness activities,
- an increase of $1.7 million in legal and professional fees related to our general and administrative activities, and
- an increase of $0.2 million in facility costs due to the increase in space utilized for general and administrative activities and related to general office expenses, offset in part by:
- a decrease of $0.3 million related to information technology infrastructure and support for information systems related to corporate and commercial operations.

### Impairment of Operating Lease Right-of-use Assets and Related Property and Equipment

For the three months ended June 30, 2024, we recognized an impairment loss on operating lease right-of-use assets and related property and equipment of $0.4 million related to a leased property in Enfield, United Kingdom. There was no similar impairment recognized for the three months ended June 30, 2023.

### Other income (expense), net

Other income (expense), net increased to $1.2 million for the three months ended June 30, 2024 from $0.5 million for the three months ended June 30, 2023. The increase of $0.7 million was primarily due to the strengthening of the pound sterling exchange rate relative to the U.S. dollar between the two periods.

### Interest income

Interest income increased to $9.7 million for the three months ended June 30, 2024, as compared to $3.4 million for the three months ended June 30, 2023. The increase in interest income of $6.3 million primarily related to increase in yield and also higher account balances associated with our cash and cash equivalents during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

### Interest expense

Interest expense increased to $10.2 million for the three months ended June 30, 2024 as compared to $5.0 million for the three months ended June 30, 2023. Interest expense increased by $5.2 million primarily due to an increase in the balance of the liabilities for future royalties and milestones, net associated with our Collaboration Agreement with Blackstone and the BioNTech License and Option Agreement.

### Comparison of Six Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024, and 2023 (in thousands):

|  | Six Months Ended June 30, 2024 | 2023 | Change (in thousands) | Change (in percentage) |
| --- | ---: | ---: | ---: | ---: |
| License revenue | $10,091 | $1,292 | $8,799 | 681% |
| **Operating expenses:** |  |  |  |  |
| Research and development | (67,283) | (60,620) | (6,663) | 11% |
| General and administrative | (40,080) | (20,406) | (19,674) | 96% |
| Loss on disposal of property and equipment | — | (3,791) | 3,791 | (100)% |
| Impairment of operating lease right-of-use assets and related property and equipment | (414) | — | (414) | 100% |
| **Total operating expenses, net** | **(97,686)** | **(83,525)** | **(14,161)** | **17%** |
| Other (expense) income, net | (379) | 1,264 | (1,643) | (130)% |
| Interest income | 16,589 | 6,849 | 9,740 | 142% |
| Interest expense | (29,443) | (9,925) | (19,518) | 197% |
| **Total other expense, net** | **(13,233)** | **(1,812)** | **(11,421)** | **630%** |
| **Net loss before income tax** | **(110,919)** | **(85,337)** | **(25,582)** | **30%** |
| Income tax expense | (43) | (26) | (17) | 65% |
| **Net loss** | **$(110,962)** | **$(85,363)** | **$(25,599)** | **30%** |

### License Revenue

License revenue amounting to $10.1 million for the six months ended June 30, 2024 related to license revenue recognized pursuant to the License and Option Agreement with BioNTech. License revenue of $1.3 million for the six months ended June 30, 2023 primarily related to the execution of the Cabaletta Bio Inc. (“Cabaletta”) Option and License Agreement, which included recognition of a non-refundable license fee payable to us.

### Research and Development Expenses

The following tables provide additional detail on our research and development expenses (in thousands):

| Direct research and development expenses | Six Months Ended June 30, 2024 | 2023 | Change (in thousands) | Change (in percentage) |
| --- | ---: | ---: | ---: | ---: |
| B cell malignancies (Obe-cel, AUTO1/22 & AUTO3) | $12,021 | $9,277 | $2,744 | 30% |
| Other projects (AUTO4, AUTO5, AUTO6, AUTO7 & AUTO8) | 1,044 | 1,543 | (499) | (32)% |
| **Total direct research and development expense** | **$13,065** | **$10,820** | **$2,245** | **21%** |
| **Indirect research and development expenses and unallocated costs:** |  |  |  |  |
| Personnel related (including share-based compensation) | 33,475 | 30,881 | 2,594 | 8% |
| Indirect research and development expense | 20,743 | 18,919 | 1,824 | 10% |
| **Total research and development expenses** | **$67,283** | **$60,620** | **$6,663** | **11%** |

Research and development expenses increased by $6.7 million to $67.3 million for the six months ended June 30, 2024 from $60.6 million for the six months ended June 30, 2023 primarily due to:

- an increase of $5.2 million in clinical trial costs primarily relating to our research and development activities including transport costs of manufacturing consumables,
- an increase of $2.6 million in salaries and other employment related costs, including share-based compensation expense, which was mainly driven by an increase in the number of employees engaged in research and development activities,
- an increase of $2.4 million in facilities costs related primarily to our new manufacturing facility, The Nucleus, in Stevenage, U.K. as well as increases in costs related to maintaining our current leased properties, and
- an increase of $0.2 million in depreciation and amortization related to property and equipment, offset in part by:
- an increase of $1.3 million in U.K. R&D tax credits (decrease in R&D expense) due primarily to an increase in qualifying research and development expenditures related to the SME scheme,
- a decrease of $1.5 million in professional consulting and legal fees in relation to our research and development activities,
- a decrease of $0.6 million in information technology infrastructure maintenance costs, and
- a decrease of $0.3 million in general office expenses.

### General and Administrative Expenses

General and administrative expenses increased by $19.7 million to $40.1 million for the six months ended June 30, 2024 from $20.4 million for the six months ended June 30, 2023 primarily due to:

- an increase of $11.2 million in salaries and other employment related costs, including share-based compensation expense, which was mainly driven by an increase in the number of employees engaged in general and administrative activities,
- an increase of $4.8 million in costs related to commercial-stage readiness activities,
- an increase of $2.7 million in legal and professional fees related to our general and administrative activities,
- an increase of $0.6 million related to information technology infrastructure and support for information systems related to the conduct of corporate and commercial operations,
- an increase of $0.3 million in facility costs due to the increase in space utilized for general and administrative activities and related to general office expense, and
- an increase of $0.1 million in depreciation and amortization related to property and equipment.

### Loss on disposal of property and equipment

For the six months ended June 30, 2023, we recognized a loss on disposal of property and equipment of $3.8 million related to fixed assets no longer being utilized in the manufacturing facility exited in Stevenage, United Kingdom. There were no such disposals for the six months ended June 30, 2024.

### Impairment of Operating Lease Right-of-use Assets and Related Property and Equipment

For the six months ended June 30, 2024, we recognized an impairment loss on operating lease right-of-use assets and related property and equipment of $0.4 million related to a leased property in Enfield, United Kingdom. There was no similar impairment recognized for the six months ended June 30, 2023.

### Other (expense) income, net

Other (expense) income, net decreased to an expense of $0.4 million for the six months ended June 30, 2024 from an income of $1.3 million for the six months ended June 30, 2023. The decrease of $1.7 million was primarily due to the strengthening of the pound sterling exchange rate relative to the U.S. dollar resulting in a net foreign exchange loss of $1.8 million, offset by a lease termination gain of $0.1 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

### Interest Income

Interest income increased to $16.6 million for the six months ended June 30, 2024, as compared to $6.8 million for the six months ended June 30, 2023. The increase in interest income of $9.7 million primarily related to increase in yield and also higher account balances associated with our cash and cash equivalents during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

### Interest expense

Interest expense increased to $29.4 million for the six months ended June 30, 2024 as compared to $9.9 million for the six months ended June 30, 2023. Interest expense increased by $19.5 million primarily due to an increase in the balance of the liabilities for future royalties and milestones, net associated with our Collaboration Agreement with Blackstone and the BioNTech License and Option Agreement.

### Liquidity and Capital Resources

Since our inception, we have not generated any commercial product revenue and have incurred operating losses and negative cash flows from our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development and seek regulatory approval and pursue commercialization of any approved product candidates. We expect that our research and development and general and administrative expenses may increase in connection with our planned research, clinical development and potential commercialization activities. As a result, we will need significant additional capital to fund our operations until such time as we can generate significant revenue from product sales.

We do not currently have any approved products and have never generated any commercial revenue from product sales. We have funded our operations to date primarily with proceeds from government grants, sales of our equity securities, through public offerings and pursuant to our at-the-equity market facility, through U.K. research and development tax credits and receipts from the SME and RDEC schemes, out-licensing arrangements and strategic collaboration and financing agreements. From our inception in 2014 through June 30, 2024, we have raised an aggregate of $1.7 billion from these capital sources.

As of June 30, 2024, we had cash and cash equivalents of $705.9 million.

### Cash Flows

The following table summarizes our cash flows for each of the periods presented (in thousands):

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(91,597) | $(80,566) |
| Net cash used in investing activities | (1,374) | (8,011) |
| Net cash provided by (used in) financing activities | 559,362 | (910) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 233 | 14,558 |
| **Net increase (decrease) in cash, cash equivalents and restricted cash** | **$466,624** | **$(74,929)** |

### Net Cash Used in Operating Activities

During the six months ended June 30, 2024, operating activities used $91.6 million of cash, resulting from our net loss of $111.0 million and net cash used resulting from changes in our operating assets and liabilities of $22.6 million, partially offset by non-cash charges of $42.0 million. The non-cash charges related to interest expense accrued and cumulative catch-up adjustment of $29.4 million, share-based compensation of $5.2 million, depreciation and amortization of $3.7 million, non-cash operating lease expense of $2.3 million, foreign exchange differences of $1.2 million, and impairment of operating lease right-of-use assets and related property and equipment of $0.4 million, which was offset by deferred income tax movement of $0.2 million. Net cash used in operating activities resulting from changes in our operating assets and liabilities for the six months ended June 30, 2024 consisted primarily of a net increase of $16.7 million in prepaid expenses and other current and non-current assets, a decrease in accrued expenses and other liabilities of $4.3 million, and a decrease of $2.6 million in our operating lease liability, offset by an increase in accounts payable of $1.0 million.

During the six months ended June 30, 2023, operating activities used $80.6 million of cash, resulting from our net loss of $85.4 million and net cash used resulting from changes in our operating assets and liabilities of $12.8 million, partially offset by non-cash charges of $17.6 million. The non-cash charges related to interest expense accrued and cumulative catch-up adjustment of $9.9 million, share-based compensation of $5.1 million, loss on disposal of property and equipment of $3.8 million, depreciation and amortization of $3.4 million, non-cash operating lease expense of $1.9 million, and loss on termination of operating lease of $0.1 million, offset by foreign exchange differences of $6.3 million and deferred income tax movement of $0.3 million. Net cash used in operating activities resulting from changes in our operating assets and liabilities for the six months ended June 30, 2023 consisted primarily of decreases in accrued expenses and other liabilities of $9.6 million, a $6.8 million decrease in right of use assets from amortization and operating lease liabilities, net, offset by an increase in accounts payable of $3.3 million, and a net decrease of $0.2 million in prepaid expenses and other current and non-current assets, and an increase in long-term deposits of $0.1 million.

### Net Cash Used in Investing Activities

During the six months ended June 30, 2024 and 2023, we used $1.4 million and $8.0 million, respectively, of cash in investing activities, all of which consisted of purchases of property and equipment.

### Net Cash Provided by (Used in) Financing Activities

During the six months ended June 30, 2024, net cash provided by financing activities of $559.4 million related to net aggregate proceeds raised from the BioNTech Agreements and our underwritten offering of ADSs. During the six months ended June 30, 2023, net cash used in financing activities of $0.9 million was primarily for payments of issuance costs relating to a prior equity financing.

### Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we continue pre-commercial readiness activities for obe-cel, operate our new commercial manufacturing facility and advance the preclinical activities and clinical trials of our product candidates. Our expenses will increase as we:

- seek regulatory approvals for obe-cel or any other product candidates that successfully complete preclinical and clinical trials;
- establish a sales, marketing and distribution infrastructure in anticipation of commercializing of any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly;
- hire additional clinical, medical and development personnel;
- expand our infrastructure and facilities to accommodate our growing employee base; and
- maintain, expand and protect our intellectual property portfolio.

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, clinical costs, external research and development services, laboratory and related supplies, legal and other regulatory expenses, and administrative and overhead costs. Our future funding requirements will be heavily determined by the resources needed to support the development of our product candidates.

Based on our current clinical development plans, we believe our current cash and cash equivalents will be sufficient to fund our current and planned operating expenses and capital expenditure requirements for at least the next twelve months from the date of the issuance of these unaudited condensed consolidated financial statements. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If we receive regulatory approval for obe-cel or any of our other product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. We may also require additional capital to pursue in-licenses or acquisitions of other product candidates.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

- the scope, progress, outcome and costs of our clinical trials and other research and development activities;
- the costs, timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
- the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;
- the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;
- the costs and timing of hiring new employees to support our continued growth;
- the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and
- the extent to which we in-license or acquire additional product candidates or technologies.

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity offerings, reimbursable U.K. research and development tax credits and receipts from the SME and RDEC schemes, out-licensing arrangements, or strategic collaboration agreements. To the extent that we raise additional capital through the sale of equity, the ownership interest of existing shareholders will be diluted. If we raise additional funds through other third-party funding, collaborations agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

### Critical Accounting Policies and Significant Judgments and Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which we have prepared in accordance with U.S. GAAP. The preparation of our unaudited condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our unaudited condensed consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Below we have included an update to our significant judgments and accounting estimates from those included in our Annual Report.

#### Allocation of transaction price using the relative standalone selling price

Upfront payments are allocated between performance obligations using our 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, taking into account the different stage of development of each development program and consideration of adjusted-market data from comparable arrangements. Where performance obligations have been identified relating to material rights, the determination of the relative standalone selling price of these performance obligations also includes an assessment of the likelihood that the options will be exercised and any payments by the customer that are triggered upon exercising the right. 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 for the six months ended June 30, 2024 and 2023 for the BioNTech License and Option Agreement and Research, Option and License Agreement with Cabaletta, respectively.

#### Liability related to future royalties and milestones, net and cumulative catch-up adjustments

We accounted for the Blackstone Collaboration Agreement and the BioNTech Obe-cel Product Revenue Interest, (“BioNTech Liability”) as liabilities measured at amortized cost based on an effective interest rate determined at the outset of the arrangement. The Blackstone Collaboration Agreement Liability related to future royalties and sales milestones, net is measured based on our current estimates of the timing and amount of expected future royalty and milestone payments to be paid and the Blackstone Development Payments expected to be received over the estimated term of the agreement. Similarly, the BioNTech Liability related to future royalties is measured based on our current estimates of the timing and amount of expected future royalty expected to be paid over the estimated term of the agreement. Milestone payments (“BioNTech Milestone Payments”) pursuant to the BioNTech License and Option Agreement are payable upon BioNTech's election, and therefore have not been included in the determination of the effective interest rate or in the measurement of the liability.

The liabilities are amortized using the effective interest rate, resulting in recognition of interest expense over the estimated term of the agreement. Each reporting period we assess the estimated probability, timing and amount of the future expected royalty, milestone payments, the Blackstone Development Payment over the estimated term. If there are changes to the estimates, we recognize the impact to the liability’s amortization schedule and the related interest expense using the catch-up method.

Our estimate of the probability, timing and amount of expected future royalties and milestones to be paid by us and the expected Blackstone Development Payment to be paid to us, considers significant unobservable inputs. These inputs include regulatory approval, the estimated patient population, estimated selling price, estimated sales, estimated peak sales and sales ramp, timing of the expected launch and its impact on the royalties as well as the overall probability of a success. Additionally, the transaction costs associated with the liability will be amortized to interest expense over the estimated term of the agreements.

The carrying amount of the Blackstone Collaboration Agreement Liability and BioNTech Liability is based on our estimate of the future royalties, milestones to be paid to Blackstone by us and the expected Blackstone Development Payment to be received over the life of the arrangement as discounted using the initial effective interest rate. The excess or deficit of estimated present value of future royalty, milestone payments and the future Blackstone Development Payment received over the carrying amount is recognized as a cumulative catch-up adjustment within interest expense using the effective interest rate.

### Contractual Obligations

As of June 30, 2024, other than disclosed within Notes 12 to 14 to our unaudited condensed consolidated financial statements included in this report, there have been no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.

### Recent Accounting Pronouncements Not Yet Adopted

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, “Summary of Significant Accounting Policies,” to our unaudited condensed consolidated financial statements included in in this Quarterly Report.

## Market risk

As filed, 5,177 characters.

We are exposed to market risks in the ordinary course of our business, which are principally limited to interest rate fluctuations and foreign currency exchange rate fluctuations. We maintain significant amounts of cash that are in excess of federally insured limits in various currencies, placed with one or more financial institutions for varying periods according to expected liquidity requirements.

#### Interest Rate Risk

Our exposure to interest rate sensitivity is primarily impacted by changes in the underlying U.S. and U.K. bank interest rates. As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $705.9 million and $239.6 million, respectively. Our surplus cash has been invested in interest-bearing savings and money market funds. We have not entered into investments for trading or speculative purposes. An immediate hypothetical one percentage point change in interest rates would have resulted in a $2.1 million increase in interest income on our unaudited condensed Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023.

As of June 30, 2024 the Blackstone Collaboration Agreement Liability has a fixed effective interest rate and is not subject to any fluctuations due to interest rates. However, the effective interest rate for the BioNTech Liability may be subject to fluctuations due to the discretionary nature of certain contractual payments to us. We have no other debt outstanding that is subject to interest rate variability.

#### Foreign Currency Exchange Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to fluctuations in value of foreign currency cash and cash equivalent balances held by our main operating subsidiary in the United Kingdom, our operating activities in the United States, and outsourced supplier agreements denominated in currencies other than pound sterling. We minimize foreign currency risk by maintaining cash and cash equivalents of each currency at levels sufficient to meet foreseeable expenditure to the extent practical.

As of June 30, 2024, substantially of our cash and cash equivalents were held by one of our U.K. subsidiaries, of which approximately 30% were denominated in pound sterling and approximately 70% were denominated in U.S. dollars, with immaterial amounts denominated in euros and Swiss francs. The significant remainder of our cash and cash equivalents are held by our U.S. subsidiary and denominated in U.S. dollars.

Changes in exchange rates had a material impact on U.S. dollar balances held by our main operating subsidiary in the U.K., which resulted in material foreign exchange gains and losses in the Consolidated Statements of Operations and Comprehensive Loss due to the appreciation and depreciation of the subsidiary’s U.S. dollars in pounds sterling terms. Further movements in exchange rates or returns to previous exchange rate levels have caused, and may continue to cause, material fluctuations or equivalent losses in the Consolidated Statements of Operations and Comprehensive Loss.

We maintain our accounting records in pounds sterling, our functional currency, and present our consolidated financial statements in U.S. dollars for financial reporting purposes. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods. We recorded foreign exchange gains of $1.2 million for the three months ended June 30, 2024 and $0.4 million for the three months ended June 30, 2023, respectively, and foreign exchange losses of $0.5 million for the six months ended June 30, 2024 and foreign exchange gains of $1.3 million for the six months ended June 30, 2023, which are included in other income (expense), net in the unaudited condensed Consolidated Statements of Operations and Comprehensive Loss.

Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and shareholders’ equity is translated based on historical exchange rates. Translation adjustments are not included in determining net income (loss) but are included in foreign exchange adjustment to accumulated other comprehensive income (loss), a component of shareholders’ equity.

We do not currently engage in currency hedging activities in order to reduce our currency exposure, but we may begin to do so in the future. These instruments may be used to selectively manage risks, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.

## Controls and procedures

As filed, 5,048 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports that we file or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management applied judgement in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

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 Exchange Act as of June 30, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2024, our disclosure controls and procedures were not effective due to control deficiencies in our internal control over financial reporting which constituted one material weakness. The first material weakness was identified as part of the audit of our consolidated financial statements for the fiscal year ended December 31, 2023. This is described below in “Changes in Internal Control Over Financial Reporting.”

In connection with the review of our unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, we identified a second material weakness in relation to accounting for complex transactions. The material weakness did not allow us to identify, understand and evaluate the impact of certain key aspects of the accounting for the BioNTech Agreements. Our process as designed was inadequate to deal with the complexity of the accounting for the transaction and did not allow for an effective and timely evaluation of key aspects of the agreements and their impact on the financial statements.

Our remediation plan includes a redesign of the process for dealing with complex accounting transactions which will allow us to identify, understand and evaluate the impact of any key judgements, estimates or other factors which might have a material impact on the financial statements. Our plan for remediation will encompass: (i) structured project plans allowing us to manage multiple stakeholders, including any specialists we use in our work on complex accounting transactions; (ii) the use of summary outputs allowing for earlier review of key judgements, estimates and other factors which impact the financial statements; and (iii) enhancing our review process, and controls including building in more time to allow for their effective operation.

### Changes in Internal Control over Financial Reporting

In connection with the audit of our financial statements for the fiscal year ended December 31, 2023, we identified a material weakness related to our misinterpretation and application of ASC 740 - *Income Taxes (“*ASC 740”), in relation to our U.K. SME tax credits, which we historically presented in income tax benefit (expense) rather than as a reduction of research and development expense.

We have taken steps to remediate the material weakness by (i) enhancing the training provided to the individuals operating the income taxation controls and related financial reporting controls and (ii) improving the design of our controls related to the use of taxation subject matter experts in the determination of our U.K. SME tax credits balances. As a result, we believe this material weakness was remediated at June 30, 2024.

Except for the remediation processes described above, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 5,622 characters.

Information regarding risks and uncertainties related to our business appears in Part I, Item 1A. “Risk Factors” of our Annual Report. As of the date of this Quarterly Report, there have been no material changes from the risk factors previously disclosed in the Annual Report, except as follows:

***We have identified material weaknesses in our internal control over financial reporting, which could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.***

As a public company, we are subject to the reporting requirements of the Exchange Act, as well as the requirements of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and the listing standards of the Nasdaq Stock Market.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. It also requires management to perform an annual assessment of the effectiveness of our internal control over financial reporting and disclosure of any material weaknesses in such controls. In connection with the audit of our financial statements for the year ended December 31, 2023, we identified a material weakness in our internal control over financial reporting in connection with the historic misinterpretation and application of ASC 740, resulting in our UK SME tax credits being incorrectly presented in income tax benefit (expense). Refer to Note 3, Restatement of Previously Issued Consolidated Financial Statements, in the Consolidated Financial Statements in Part II, Item 8 of our Annual Report for additional information. We have taken steps to remediate the material weakness by (i) enhancing the training provided to the individuals operating the income taxation controls and related financial reporting controls and (ii) improving the design of our controls related to the use of taxation subject matter experts in the determination of our U.K. SME tax credits balances. We believe this material weakness was remediated at June 30, 2024, but there can be no assurance that we will not identify further control deficiencies in this area.

In addition, in connection with our review procedures for the three months ended March 31, 2024, we identified an additional material weakness due to an insufficiency of controls over complex accounting transactions. The lack of controls did not allow us to identify, understand and evaluate the impact of certain key judgments that arose during the three months ended March 31, 2024 related to the BioNTech Agreements. Our process, as designed, was inadequate to deal with the complexity of the accounting for the transaction and did not allow for an effective and timely evaluation of these matters and their impact on our financial statements.

Any failure to remediate the identified material weakness, or to develop or maintain effective controls, or any difficulties encountered in the implementation or improvement of such controls, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods, such as the restatement of our previously issued consolidated financial statements described in more detail in our most recent Annual Report on Form 10-K.

Any failure to remediate the identified material weakness, or to implement and maintain effective internal control over financial reporting also could adversely affect the results of management evaluations and, to the extent they are required in the future, attestations of our independent registered public accounting firm with respect to our internal control over financial reporting. We can provide no assurance that the measures we are taking and plan to take in the future will remediate the material weaknesses described above, or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements. We continue to evaluate steps to remediate the material weakness identified. Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations.

Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the Nasdaq, the SEC or other regulatory authorities, or other potential claims or litigation. Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ADSs.

Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which may have a negative effect on the trading price of our ADSs. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq Global Select Market.

Filed Aug 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001730463-24-000093. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.