SEC Filing - Lyell Immunopharma, Inc.

View:

lyel-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

__________________________

FORM 10-Q

__________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40502

__________________________

Lyell Immunopharma, Inc.

(Exact Name of Registrant as Specified in its Charter)

__________________________


Delaware			83-1300510
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
201 Haskins Way South San Francisco, California			94080
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (650) 695-0677

__________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

LYEL

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

Table of Contents

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2024, the registrant had 256,003,113 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

Lyell Immunopharma, Inc.

Table of Contents


		Page
Special Note Regarding Forward-Looking Statements		1
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibits	74
Signature		75

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned nonclinical studies and clinical trials, results of nonclinical studies and clinical trials, research and development costs, planned regulatory submissions, regulatory approvals and the timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and 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.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential” or “continue,” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the sufficiency of our existing cash to fund our future operating expenses and capital expenditure requirements;

•the accuracy and timing of our estimates regarding expenses, revenue opportunities, capital requirements and needs for additional financing;

•the scope, progress, results and costs of developing LYL797, LYL845, LYL119 or any other product candidates we may develop, and conducting nonclinical studies and clinical trials, including for LYL797, LYL845 and LYL119;

•the timing and costs involved in obtaining and maintaining regulatory approvals of LYL797, LYL845, LYL119 or any other product candidates we may develop, and the timing or likelihood of regulatory filings and approvals, including any expectations regarding seeking special designations for our product candidates for various diseases;

•our plans relating to the commercialization of LYL797, LYL845, LYL119 or any other product candidates we may develop, if approved, including the geographic areas of focus and our ability to grow a sales force;

•the size of the market opportunities for LYL797, LYL845, LYL119 or any other product candidates we may develop in each of the diseases we may target;

•our reliance on third parties to conduct research activities for LYL797, LYL845, LYL119 or any other product candidates we may develop;

•the characteristics, safety, efficacy and therapeutic effects of LYL797, LYL845, LYL119 or any other product candidates we may develop;

•the advancement of our technology platform and the effectiveness of any of our technologies;

•our estimates of the number of patients in the United States who suffer from the diseases we target and the number of patients that may enroll in our clinical trials;

•the benefits associated with the U.S. Food and Drug Administration’s (FDA) Orphan Drug designation (ODD), including potential tax credits for qualified clinical trials, prescription drug user-fee exemptions and potential seven-year marketing exclusivity upon FDA approval and comparable benefits associated with foreign ODDs in other countries, if we receive ODD outside the United States;

•the progress and focus of our current and planned clinical trials of our product candidates, and the reporting of data from those trials, including the timing thereof;

•the ability of our clinical trials to sufficiently demonstrate the safety and efficacy of LYL797, LYL845, LYL119 or any other product candidates we may develop, and other clinical trial results;

•the success of competing therapies that are, or may become, available;

•developments relating to our competitors and our industry, including any existing or future competing product candidates or therapies;

•our plans relating to the further development and manufacturing of LYL797, LYL845, LYL119 or any other product candidates we may develop, including additional indications that we may pursue;

•existing regulations and regulatory developments in the United States and other jurisdictions;

Table of Contents

•our potential and ability to successfully manufacture and supply or our ability to contract with third parties to manufacture and supply LYL797, LYL845, LYL119 or any other product candidates we may develop for clinical trials and for commercial use, if approved;

•the rate and degree of market acceptance, as well as the pricing and reimbursement, of LYL797, LYL845, LYL119 or any other product candidates we may develop, if approved;

•our continued reliance on third parties to assist us in conducting additional clinical trials of LYL797, LYL845, LYL119 or any other product candidates we may develop;

•the scope of protection we are able to establish and maintain for intellectual property rights, including covering our product candidates and technology platforms;

•our ability to retain the continued service of our key personnel and to identify, hire and then retain additional qualified personnel;

•our expectations regarding the impact of inflation, macroeconomic conditions and geopolitical conflicts on our business and operations, including on our manufacturing suppliers, collaborators, contract research organizations (CROs) and employees; and

•our anticipated use of our existing cash, cash equivalents and marketable securities.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described under “Risk Factors” in Part II, Item 1A, and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in these forward-looking statements. Except as required by applicable law, we undertake no obligation to update or supplement any forward-looking statements publicly, or to update or supplement the reasons that actual results could differ materially from those projected in these forward-looking statements, even if new information becomes available in the future.

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

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

Lyell Immunopharma, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

(unaudited)


	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	133,424	$	145,647
Marketable securities	357,695		400,576
Prepaid expenses and other current assets	8,705		8,463
Total current assets	499,824		554,686
Restricted cash	287		284
Marketable securities, non-current	—		16,506
Other investments	19,000		32,001
Property and equipment, net	93,096		102,654
Operating lease right-of-use assets	37,696		39,663
Other non-current assets	4,239		4,235
Total assets	$	654,142	$	750,029

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,199	$	4,817
Accrued liabilities and other current liabilities	25,670		28,126
Success payment liabilities	1,010		1,576
Total current liabilities	30,879		34,519
Operating lease liabilities, non-current	53,323		56,894
Other non-current liabilities	3,439		3,664
Total liabilities	87,641		95,077
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized at June 30, 2024 and December 31, 2023; no shares issued and outstanding at June 30, 2024 and December 31, 2023	—		—
Common stock, $0.0001 par value; 500,000 shares authorized at June 30, 2024 and December 31, 2023; 255,948 and 253,958 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	26		25
Additional paid-in capital	1,675,460		1,657,133
Accumulated other comprehensive loss	(397)		(94)
Accumulated deficit	(1,108,588)		(1,002,112)
Total stockholders’ equity	566,501		654,952
Total liabilities and stockholders’ equity	$	654,142	$	750,029

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

Lyell Immunopharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	13	$	27	$	16	$	92
Operating expenses:
Research and development	40,261		47,471		83,435		92,101
General and administrative	12,256		19,030		25,750		38,309
Other operating income, net	(976)		(569)		(2,066)		(1,857)
Total operating expenses	51,541		65,932		107,119		128,553
Loss from operations	(51,528)		(65,905)		(107,103)		(128,461)
Interest income, net	6,364		5,264		13,183		9,761
Other (expense) income, net	(645)		(326)		445		774
Impairment of other investments	—		(2,923)		(13,001)		(12,923)
Total other income (loss), net	5,719		2,015		627		(2,388)
Net loss	(45,809)		(63,890)		(106,476)		(130,849)
Other comprehensive loss:
Net unrealized gain (loss) on marketable securities	7		1,500		(303)		5,220
Comprehensive loss	$	(45,802)	$	(62,390)	$	(106,779)	$	(125,629)

Net loss per common share, basic and diluted	$	(0.18)	$	(0.26)	$	(0.42)	$	(0.52)
Weighted-average shares used to compute net loss per common share, basic and diluted	255,398		250,204		254,825		249,899

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

Lyell Immunopharma, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


		Three Months Ended June 30, 2024

	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
		Shares			Amount
Balance as of March 31, 2024		254,927	$	25		$	1,666,315	$	(404)	$	(1,062,779)	$	603,157
Issuance of common stock upon exercise of stock options		377	1			51		—		—		52
Issuance of common stock under employee stock purchase plan		491	—			810		—		—		810
Issuance of common stock in connection with restricted stock units, net of tax		153	—			—		—		—		—
Stock-based compensation		—	—			8,284		—		—		8,284
Other comprehensive income		—	—			—		7		—		7
Net loss		—	—			—		—		(45,809)		(45,809)
Balance as of June 30, 2024		255,948	$	26		$	1,675,460	$	(397)	$	(1,108,588)	$	566,501


	Six Months Ended June 30, 2024

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2023	253,958	$	25	$	1,657,133	$	(94)	$	(1,002,112)	$	654,952
Issuance of common stock upon exercise of stock options	1,246	1		154		—		—		155
Issuance of common stock under employee stock purchase plan	491	—		810		—		—		810
Issuance of common stock in connection with restricted stock units, net of tax	253	—		(76)		—		—		(76)
Stock-based compensation	—	—		17,439		—		—		17,439
Other comprehensive loss	—	—		—		(303)		—		(303)
Net loss	—	—		—		—		(106,476)		(106,476)
Balance as of June 30, 2024	255,948	$	26	$	1,675,460	$	(397)	$	(1,108,588)	$	566,501

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

Lyell Immunopharma, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


	Three Months Ended June 30, 2023

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of March 31, 2023	249,609	$	25	$	1,622,119	$	(3,879)	$	(834,439)	$	783,826
Issuance of common stock upon exercise of stock options	833	—		83		—		—		83
Issuance of common stock under employee stock purchase plan	543	—		1,163		—		—		1,163
Issuance of common stock in connection with restricted stock units, net of tax	42	—		(50)		—		—		(50)
Stock-based compensation	—	—		14,223		—		—		14,223
Other comprehensive income	—	—		—		1,500		—		1,500
Net loss	—	—		—		—		(63,890)		(63,890)
Balance as of June 30, 2023	251,027	$	25	$	1,637,538	$	(2,379)	$	(898,329)	$	736,855


	Six Months Ended June 30, 2023

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2022	249,567	$	25	$	1,608,306	$	(7,599)	$	(767,480)	$	833,252
Issuance of common stock upon exercise of stock options	833	—		83		—		—		83
Issuance of common stock under employee stock purchase plan	543	—		1,163		—		—		1,163
Issuance of common stock in connection with restricted stock units, net of tax	84	—		(119)		—		—		(119)
Stock-based compensation	—	—		28,105		—		—		28,105
Other comprehensive income	—	—		—		5,220		—		5,220
Net loss	—	—		—		—		(130,849)		(130,849)
Balance as of June 30, 2023	251,027	$	25	$	1,637,538	$	(2,379)	$	(898,329)	$	736,855

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

Lyell Immunopharma, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(106,476)	$	(130,849)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	17,439		28,105
Impairment of other investments	13,001		12,923
Depreciation and amortization expense	9,925		10,089
Net amortization and accretion on marketable securities	(8,129)		(3,925)
Non-cash lease income	(979)		(816)
Change in fair value of success payment liabilities	(566)		(603)
Gain on marketable equity security	(149)		—
Loss on property and equipment disposals, net	15		430
Changes in operating assets and liabilities:
Prepaid expenses, other current assets and other assets	(246)		641
Accounts payable	(630)		2,449
Accrued liabilities and other current liabilities	(3,090)		(3,592)
Other non-current liabilities	(225)		(225)
Net cash used in operating activities	(80,110)		(85,373)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(361)		(2,466)
Purchases of marketable securities	(224,475)		(141,815)
Maturities of marketable securities	291,837		329,347
Net cash provided by investing activities	67,001		185,066
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options	155		83
Proceeds from employee stock purchase plan	810		1,163
Taxes paid related to net share settlement of equity awards	(76)		(119)
Net cash provided by financing activities	889		1,127
Net (decrease) increase in cash, cash equivalents and restricted cash	(12,220)		100,820
Cash, cash equivalents and restricted cash at beginning of period	145,931		123,834
Cash, cash equivalents and restricted cash at end of period	$	133,711	$	224,654
Represented by:
Cash and cash equivalents	$	133,424	$	224,372
Restricted cash	287		282
Total	$	133,711	$	224,654
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for amounts included in the measurement of lease liabilities	$	5,551	$	5,215
Non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities	$	50	$	33

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

Lyell Immunopharma, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization

Lyell Immunopharma, Inc. (the “Company”) was incorporated in Delaware in June 2018. The Company is a clinical-stage cell therapy company advancing a pipeline of product candidates enhanced with proprietary anti-exhaustion T-cell reprogramming technologies for patients with solid tumors or hematologic malignancies. The Company’s primary activities since incorporation have been to develop T‑cell therapies, conduct research and development, acquire technology, enter into strategic collaboration and license arrangements, enable and execute manufacturing activities in support of its product candidate development efforts, organize and staff the Company, conduct business planning, establish its intellectual property portfolio, submit regulatory submissions, execute clinical trials, raise capital and provide general and administrative support for these activities.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.

The Condensed Consolidated Balance Sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date. Certain information and footnote disclosures typically included in the Company’s audited consolidated financial statements have been condensed or omitted. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented, but are not necessarily indicative of results to be expected for any future annual or interim period.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Liquidity and Management’s Plan

The Company discovers and develops product candidates that involve experimental technologies. The product candidates may require several years and substantial expenditures to complete and ultimately may be unsuccessful. The Company plans to finance operations with available cash resources or from the issuance of equity or debt securities. The Company believes that its available cash, cash equivalents and marketable securities as of June 30, 2024 will be adequate to fund its operations at least through the next 12 months from the date these unaudited Condensed Consolidated Financial Statements are issued.

Use of Estimates

The preparation of the unaudited Company’s Condensed Consolidated Financial Statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect reported amounts and related disclosures. Specific accounts that require management estimates include, but are not limited to, stock-based compensation, valuation of success payments, valuation of other investments and accrued expenses. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.

Concentrations of Credit Risk and Off-balance Sheet Risk

The Company maintains its cash, cash equivalents and restricted cash with high quality, accredited financial institutions. Restricted cash is cash held in a bank account and is used as collateral associated with the Company’s corporate credit card program. Cash, cash equivalents and restricted cash amounts, at times, may exceed federally insured limits. The Company also makes short-term investments in money market funds, U.S. Treasury securities, U.S. government agency securities and corporate debt securities, which can be subject to certain credit risk. The Company mitigates the risks by investing in high‑grade instruments, limiting exposure to any one issuer or type of investment and monitoring the

Table of Contents

ongoing creditworthiness of the financial institutions and issuers. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to significant risk on these funds. The Company has no off‑balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Significant Accounting Policies

There have been no material changes to the significant accounting policies from the Annual Report on Form 10-K for the year ended December 31, 2023, except as set forth below regarding the Company’s stock-based compensation policy for performance-based restricted stock units (“PSUs”).

Stock-based Compensation

Under ASC 718, the Company measures and recognizes expense for PSUs that settle in stock. The Company granted PSUs that vest upon the achievement of certain performance conditions to certain key employees. For awards with performance conditions that do not vest unless a performance condition is met, the Company recognizes expense if, and to the extent that, the Company estimates that the achievement of the performance condition is probable. At each reporting date, the Company is required to evaluate whether achievement of a performance condition is probable. Compensation expense is recorded over the appropriate service period based upon the Company’s assessment of accomplishing each performance condition.

The fair values of the Company’s PSUs that have market-based metrics are estimated using Monte Carlo simulations. The Company applies an accelerated attribution method to recognize stock-based compensation expense over the applicable service period for these awards. The number of shares expected to be earned is considered in the grant date valuation; therefore, the expense is not subsequently adjusted to reflect the actual shares ultimately earned.

The fair values of PSUs that do not have market-based metrics are based upon the grant date stock price. Compensation expense is recognized for the number of shares expected to be earned after assessing the probability that a certain performance condition will be met and the targeted payout level associated with the performance condition expected to be achieved. Cumulative adjustments are recorded each quarter to reflect the estimated outcome of the performance-related conditions until the date results are determined and settled. If performance conditions are not met or not expected to be met, any compensation expense previously recognized associated with the awards will be reversed.

Recent Accounting Pronouncements

Recently Adopted

None.

Not Yet Adopted

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands required disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. Entities with a single reportable segment are required to provide all the updated and existing segment disclosures required by Topic 280. The amendments are effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is assessing the effect of the new disclosure requirements and does not anticipate the adoption will have a material impact to the Company’s financial statements.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024 and may be applied either prospectively or retrospectively. The Company is assessing the effect of the new disclosure requirements and does not anticipate the adoption will have a material impact to the Company’s financial statements.

Table of Contents

3. License, Collaboration and Success Payment Agreements

Fred Hutch

License Agreement - In 2018, the Company entered into a license agreement with Fred Hutchinson Cancer Center (“Fred Hutch”) that grants the Company a worldwide, sublicensable license under certain patent rights (exclusive) and certain technology (non-exclusive) to research, develop and commercialize products and processes for all fields of use utilizing chimeric antigen receptors (“CARs”) and/or T-cell receptors (“TCRs”), subject to certain exceptions.

The Company is required to pay Fred Hutch annual license maintenance payments of $50,000 on the second anniversary of the effective date, and each anniversary of the effective date thereafter until the first commercial sale of a licensed product.

Collaboration - In 2018, the Company entered into a research and collaboration agreement with Fred Hutch (“Fred Hutch Collaboration Agreement”) focused on research and development of cancer immunotherapy products. The Company funded aggregate research performed by Fred Hutch of $12.0 million under the Fred Hutch Collaboration Agreement, with the research conducted in accordance with a research plan and budget approved by the parties. The Fred Hutch Collaboration Agreement has a six-year term. The Company incurred $0.1 million in expense in connection with the Fred Hutch Collaboration Agreement for both the three months ended June 30, 2024 and 2023, and $0.2 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

Success Payments - In 2018, the Company granted Fred Hutch rights to certain success payments, pursuant to the terms of the Fred Hutch Collaboration Agreement. The potential payments for the Fred Hutch success payments are based on multiples of increased value ranging from 10 times to 50 times based on a comparison of the per share fair market value of the Company’s common stock relative to the original $1.83 per share issuance price of the Company’s Series A convertible preferred stock, which converted into an equal number of shares of the Company’s common stock in connection with the closing of the Company’s initial public offering (“IPO”). The aggregate success payments to Fred Hutch are not to exceed $200.0 million, which would only occur upon a 50 times increase in value. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to $200.0 million at $91.44 per share, payable if such threshold is reached during the measurement period. Any previous success payments made are credited against the success payment owed as of any valuation date, such that Fred Hutch does not receive multiple success payments in connection with the same threshold. The term of the success payment agreement ends on the earlier to occur of (i) the nine-year anniversary of the date of the agreement and (ii) a change in control transaction.

The following table summarizes the aggregate potential success payments, which are payable to Fred Hutch in cash or cash equivalents, or at the Company’s discretion, publicly-tradeable shares of the Company’s common stock:


Multiple of initial equity value at issuance	10x		20x		30x		40x		50x
Per share common stock price required for payment	$	18.29	$	36.58	$	54.86	$	73.15	$	91.44
Aggregate success payment(s) (in millions)	$	10	$	40	$	90	$	140	$	200

The success payments will be owed if the per share fair value of the Company’s common stock on the contractually specified valuation measurement dates during the term of the success payment agreement equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by the following events: the one-year anniversary of the Company’s IPO and each two-year anniversary of the Company’s IPO thereafter, the closing of a change in control transaction and the last day of the term of the success payment agreement, unless the term has ended due to the closing of a change of control transaction. As of June 30, 2024, no success payments have been incurred as the per share fair value of the Company’s common stock was below the price required for payment.

The success payment liability was $0.3 million and $0.7 million as of June 30, 2024 and December 31, 2023, respectively. With respect to the Fred Hutch Collaboration Agreement success payment obligations, the Company recognized a success payment expense reversal of $0.7 million and an expense of $0.5 million for the three months ended June 30, 2024 and 2023, respectively, and expense reversals of $0.3 million and $0.6 million for the six months ended June 30, 2024 and 2023, respectively, which are recognized in other (expense) income, net.

Stanford

License Agreement - In 2019, the Company entered into a license agreement with The Board of Trustees of the Leland Stanford Junior University (“Stanford”) to license specified patent rights. The Company is required to pay Stanford annual license maintenance payments of $50,000 on the second anniversary of the effective date, and each anniversary of the effective date thereafter until the date of the first commercial sale of a licensed product.

Table of Contents

Milestone payments to Stanford of up to a maximum of $3.7 million per target are payable upon achievement of certain specified clinical and regulatory milestones. The Company is also obligated to pay Stanford $2.5 million collectively for all licensed products upon the achievement of a certain commercial milestone. Additionally, low single‑digit tiered royalties based on annual net sales of the licensed products are payable to Stanford.

Collaboration Agreement - In October 2020, the Company entered into a research and collaboration agreement with Stanford (“Stanford Collaboration Agreement”), focused on research and development of cellular immunotherapy products. The Stanford Collaboration Agreement has a four-year term. The Company is committed to fund aggregate research performed by Stanford of $12.0 million under the Stanford Collaboration Agreement, and the research will be conducted in accordance with a research plan and budget approved by the parties. The Company incurred $0.7 million in expense in connection with the Stanford Collaboration Agreement for both the three months ended June 30, 2024 and 2023, and $1.5 million for both the six months ended June 30, 2024 and 2023.

Success Payments - In October 2020, the Company granted Stanford rights to certain success payments, pursuant to the terms of the Stanford Collaboration Agreement. The potential payments for the Stanford Collaboration Agreement success payments are based on multiples of increased value ranging from 10 times to 50 times based on a comparison of the per share fair market value of the Company’s common stock relative to the original $1.83 per share issuance price of the Company’s Series A convertible preferred stock, which converted into an equal number of shares of the Company’s common stock in connection with the closing of the Company’s IPO. The aggregate success payments to Stanford are not to exceed $200.0 million, which would only occur upon a 50 times increase in value. Each threshold is associated with a success payment, ascending from $10.0 million at $18.29 per share to $200.0 million at $91.44 per share, payable if such threshold is reached during the measurement period. Any previous success payments made are credited against the success payment owed as of any valuation date, so that Stanford does not receive multiple success payments in connection with the same threshold. The term of each success payment agreement ends on the earlier to occur of (i) the nine-year anniversary of the date of the agreement and (ii) a change in control transaction.

The following table summarizes the aggregate potential success payments, which are payable to Stanford in cash or cash equivalents, or at the Company’s discretion, publicly-tradeable shares of the Company’s common stock:


Multiple of initial equity value at issuance	10x		20x		30x		40x		50x
Per share common stock price required for payment	$	18.29	$	36.58	$	54.86	$	73.15	$	91.44
Aggregate success payment(s) (in millions)	$	10	$	40	$	90	$	140	$	200

The estimated fair values of the success payments to Stanford as of June 30, 2024 and December 31, 2023 were $0.7 million and $1.1 million, respectively. The success payment liability is estimated at the fair value at inception and at each subsequent reporting period and the expense is accreted over the service period of the Stanford Collaboration Agreement as research and development expense. The success payment liability was $0.7 million and $0.9 million as of June 30, 2024 and December 31, 2023, respectively. With respect to the Stanford Collaboration Agreement success payment obligations, the Company recognized a success payment expense reversal of $0.8 million and an expense of $0.6 million for the three months ended June 30, 2024 and 2023, respectively, and an expense reversal of $0.3 million and an expense of approximately zero for the six months ended June 30, 2024 and 2023, respectively.

Table of Contents

4. Cash Equivalents and Marketable Securities

The fair value and amortized cost of cash equivalents and fixed income marketable securities by major security type are as follows (in thousands):


	June 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Money market funds	$	66,942	$	—	$	—	$	66,942
U.S. Treasury securities	291,040		4		(251)		290,793
U.S. government agency securities	38,651		1		(77)		38,575
Corporate debt securities	81,010		—		(74)		80,936
Total cash equivalents and fixed income marketable securities	$	477,643	$	5	$	(402)	$	477,246


Classified as:	Fair Value
Cash equivalents	$	119,701
Marketable securities	357,545
Marketable securities, non-current	—
Total cash equivalents and fixed income marketable securities	$	477,246


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Money market funds	$	62,075	$	—	$	—	$	62,075
U.S. Treasury securities	374,214		237		(95)		374,356
U.S. government agency securities	48,924		3		(177)		48,750
Corporate debt securities	59,668		—		(62)		59,606
Total cash equivalents and fixed income marketable securities	$	544,881	$	240	$	(334)	$	544,787


Classified as:	Fair Value
Cash equivalents	$	127,705
Marketable securities	400,576
Marketable securities, non-current	16,506
Total cash equivalents and fixed income marketable securities	$	544,787

The fair values of money market and fixed income marketable securities held by the Company in an unrealized loss position for less than 12 months were $338.2 million and $117.8 million as of June 30, 2024 and December 31, 2023, respectively. The fair values of money market and fixed income marketable securities held by the Company in an unrealized loss position for greater than 12 months were $31.1 million and $43.6 million as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, all of the Company’s money market and fixed income marketable securities had a maturity date of two years or less, were available for use and were classified as available‑for‑sale. The Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before recovery of their amortized cost basis. The Company determined that there was no material change in the credit risk of the above investments as of both June 30, 2024 and December 31, 2023. As such, an allowance for credit losses has not been recognized. Gross realized gains and losses were de minimis for the three and six months ended June 30, 2024 and 2023 and as a result, amounts reclassified out of accumulated other comprehensive loss for the three and six months ended June 30, 2024 and 2023 were also de minimis. See Note 6, Fair Value Measurements, for additional information regarding cash equivalents and fixed income marketable securities.

Table of Contents

5. Other Investments

In prior years the Company made minority ownership strategic investments. As of June 30, 2024 and December 31, 2023, the aggregate carrying amount of the Company’s strategic investments in non-publicly traded companies was $19.0 million and $32.0 million, respectively. These investments are measured at initial cost, minus impairment, if any, and plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Cumulative impairments of strategic investments in equity investments without readily determinable fair values still held as of June 30, 2024 and December 31, 2023 were $23.0 million and $15.0 million, respectively.

As a part of the acquisition of each of the Company’s other investments, the Company determines whether an investment or other interest is considered a variable interest. As of both June 30, 2024 and December 31, 2023, the Company held an interest in one entity that was concluded to be a variable interest for which the Company was not the primary beneficiary as the Company did not have the power to direct the activities that most significantly impact the economic performance of the variable interest entity. As of June 30, 2024 and December 31, 2023, the carrying value and maximum exposure to loss of the Company’s variable interests were zero and $13.0 million, respectively, which are recorded in other investments in the Company’s Condensed Consolidated Balance Sheets.

In connection with the preparation of the financial statements for the three and six months ended June 30, 2024 and 2023, the Company performed a qualitative assessment of potential indicators of impairment and determined that indicators existed for certain of its other investments with carrying amounts of zero and $2.9 million for the three months ended June 30, 2024 and 2023, respectively, and $13.0 million and $12.9 million for the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, the anticipated funding for one of its other investments was not secured within the expected timeframe. The Company considered all of the underlying companies’ operating cash flow requirements over the next year, liquid asset balances to fund those requirements and the underlying companies’ inability to raise funds as indicators of impairment. Due to these indicators, the Company assessed the valuation of these investments and determined the fair values to be negligible and the impairments to be other-than-temporary in nature. As a result, the Company recorded impairment expenses of zero and $2.9 million for one investment for the three months ended June 30, 2024 and 2023, respectively. Additionally, the Company recorded impairment expenses of $13.0 million for one investment and $12.9 million for two investments for the six months ended June 30, 2024 and 2023, respectively. The impairment expenses were recorded within impairment of other investments on the Condensed Consolidated Statements of Operations and Comprehensive Loss and as a reduction to the investment balances within other investments on the Condensed Consolidated Balance Sheets.

6. Fair Value Measurements

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):


	June 30, 2024
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	66,942	$	—	$	—	$	66,942
U.S. Treasury securities	—		290,793		—		290,793
U.S. government agency securities	—		38,575		—		38,575
Corporate debt securities	—		80,936		—		80,936
Marketable equity security	149		—		—		149
Total financial assets	$	67,091	$	410,304	$	—	$	477,395
Financial liabilities:
Success payment liabilities	$	—	$	—	$	1,010	$	1,010
Total financial liabilities	$	—	$	—	$	1,010	$	1,010

Table of Contents


	December 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds	$	62,075	$	—	$	—	$	62,075
U.S. Treasury securities	—		374,356		—		374,356
U.S. government agency securities	—		48,750		—		48,750
Corporate debt securities	—		59,606		—		59,606
Total financial assets	$	62,075	$	482,712	$	—	$	544,787
Financial liabilities:
Success payment liabilities	$	—	$	—	$	1,576	$	1,576
Total financial liabilities	$	—	$	—	$	1,576	$	1,576

The Company measures the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities. The Company measures the fair value of marketable equity securities traded in active markets based on quoted prices of identical assets. The Level 2 marketable securities include U.S. Treasury securities, U.S. government agency securities and corporate debt securities, which are valued using third-party pricing sources. The pricing services applied industry standard valuation models. Inputs utilized include market pricing based on real-time trade data for the same or similar securities and other significant inputs derived from or corroborated by observable market data.

The Company’s marketable equity security relates to a company that began being publicly traded on the Nasdaq Global Market in February 2024 and had a fair value of $0.1 million as of June 30, 2024. The Company recorded unrealized losses of $1.4 million and zero for the three months ended June 30, 2024 and 2023, respectively, and unrealized gains of $0.1 million and zero for the six months ended June 30, 2024 and 2023, respectively, within other (expense) income, net in the Company’s Condensed Consolidated Statement of Operations and Comprehensive Loss. Prior to being publicly traded, as of December 31, 2023, the investment was fully impaired and classified in the Company’s Condensed Consolidated Balance Sheet as other investments.

The Company’s success payment liabilities are Level 3 financial instruments, which were estimated using Monte Carlo simulations through December 31, 2023. Monte Carlo simulations model the future movement of stock prices based on several key variables combined with empirical knowledge of the process governing the behavior of the stock price. The following variables were incorporated in the Monte Carlo simulation to determine the estimated fair value of the success payment liabilities: fair value of the Company’s common stock, expected volatility, the risk-free interest rate and the estimated number and timing of valuation measurement dates on the basis of which payments may be triggered. The computation of expected volatility was estimated based on available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption. As of June 30, 2024, success payment liabilities were estimated by management using its historical experience of the correlation of success payment fair values relative to the Company’s stock price.

The following assumptions were incorporated into the calculation of the estimated fair value of the Fred Hutch and Stanford success payment liabilities as of December 31, 2023:


	Fred Hutch			Stanford
Fair value of common stock	$	1.94		$	1.94
Risk-free interest rate	3.51% - 5.19%			3.51% - 5.19%
Expected volatility	80.0		%	80.0		%
Expected term (in years)	0.46 - 3.97			0.46 - 5.75

The Company utilizes estimates and assumptions in determining the estimated success payment liabilities and associated changes in fair value. A small change in the valuation of the Company’s common stock may have a relatively large change in the estimated fair value of the success payment liability and associated changes in fair value.

Table of Contents

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands):


	Success Payment Liabilities
Balance at December 31, 2023	$	1,576
Change in fair value (1)	(566)
Balance at June 30, 2024	$	1,010

(1)The change in the fair value associated with the Fred Hutch success payment liabilities is recorded in other (expense) income, net. The change in the fair value associated with the Stanford success payment liabilities is recorded as research and development expenses. (See Note 3, License, Collaboration and Success Payment Agreements).

7. Leases

The Company’s lease portfolio is comprised of operating leases for laboratory, office and manufacturing facilities located in South San Francisco, California, and Seattle and Bothell, Washington with contractual periods expiring between December 2028 and March 2031. In addition to minimum rent, the leases require payment of real estate taxes, insurance, common area maintenance charges and other executory costs. These additional charges are considered variable lease costs and are recognized in the period in which the costs are incurred.

The following table summarizes the Company’s future minimum operating lease commitments as of June 30, 2024 (in thousands):


Year Ending December 31:
2024 (remaining six months)	$	5,796
2025	11,859
2026	12,209
2027	12,569
2028	12,940
Thereafter	22,585
Total undiscounted lease payments	77,958
Less: imputed interest	(17,737)
Total operating lease liabilities	$	60,221

Reported as of June 30, 2024:
Short-term portion of lease liabilities (included in accrued liabilities and other current liabilities)	$	6,898
Operating lease liabilities, non-current	53,323
Total	$	60,221

The operating lease costs for all operating leases were $2.3 million for both the three months ended June 30, 2024 and 2023, and $4.6 million and $4.4 million for the six months ended June 30, 2024 and 2023, respectively. The operating lease costs and total commitments for short-term leases were de minimis for the three and six months ended June 30, 2024 and 2023. Variable lease costs for operating leases were $1.6 million and $1.4 million for the three months ended June 30, 2024 and 2023, respectively, and $3.9 million and $2.8 million for the six months ended June 30, 2024 and 2023, respectively. The weighted-average remaining lease terms for operating leases were 6.3 and 6.8 years as of June 30, 2024 and December 31, 2023, respectively. The weighted‑average discount rate for operating leases was 8.5% as of both June 30, 2024 and December 31, 2023.

In May 2021, the Company entered into a sublease, whereby the Company agreed to sublease approximately 11,000 square feet of its space in South San Francisco, California currently leased by the Company. The sublease is classified as an operating lease and will expire in March 2031. The Company recognized sublease income for this sublease of $0.2 million for both the three months ended June 30, 2024 and 2023, and $0.4 million for both the six months ended June 30, 2024 and 2023.

In September 2021, the Company entered into a sublease with Sonoma Biotherapeutics, Inc. (“Sonoma”), a related party, whereby the Company agreed to sublease approximately 18,000 square feet of space in South San Francisco,

Table of Contents

California currently leased by the Company. See Note 12, Related-Party Transactions. As a part of the sublease, in September 2021, the Company received a $4.6 million tenant improvement contribution payment, which is recognized over the term of the sublease. The sublease is classified as an operating lease and will expire in March 2031. The Company recognized Sonoma sublease income of $0.5 million for both the three months ended June 30, 2024 and 2023, and $0.9 million for both the six months ended June 30, 2024 and 2023.

The Company's sublease income is recognized within other operating income, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

8. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10.0 million shares of preferred stock with a par value of $0.0001 per share. As of June 30, 2024 and December 31, 2023, no shares of preferred stock were outstanding.

Common Stock

The Company is authorized to issue 500.0 million shares of common stock with a par value of $0.0001 per share. As of June 30, 2024 and December 31, 2023, there were 255,948,333 shares and 253,957,709 shares of the Company’s common stock outstanding, respectively.

On February 28, 2024, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) acting as the Company’s sales agent (the “Sales Agreement”), pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to $150.0 million from time to time in a series of one or more at‑the‑market equity offerings. The Company will pay Cowen commissions of up to 3.0% of the gross proceeds of the sale, and reimbursement of certain expenses, under this agreement. Neither the Company nor Cowen is obligated to sell any shares and, to date, the Company has not made any sales under the Sales Agreement.

9. Stock-based Compensation

2021 Equity Incentive Plan

In June 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”), which on the date of the underwriting agreement related to the Company’s IPO became effective with an initial reserve of 26,662,087 shares, plus any shares subject to outstanding awards granted under the 2018 Equity Incentive Plan (“2018 Plan”) that, on or after the effectiveness of the 2021 Plan, terminate or expire before exercise or settlement, are not issued because the award is settled in cash, are forfeited because of the failure to vest, or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares reserved for issuance under the 2021 Plan automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, in an amount equal to (1) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors no later than December 31 of the immediately preceding year. On January 1, 2024, the Company reserved an additional 12,697,885 shares of common stock for issuance under the 2021 Plan representing 5% of the total common shares outstanding as of December 31, 2023. Under the 2021 Plan, the Company may grant incentive stock options, non-statutory stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), PSUs, stock appreciation rights, performance awards and other stock-based awards. Terms of stock awards, including vesting requirements, are determined by the Company’s board of directors or by a committee authorized by the Company’s board of directors, subject to provisions of the 2021 Plan. The term of any stock option granted under the 2021 Plan cannot exceed ten years. Generally, option and RSU awards granted by the Company vest over four years but may be granted with different vesting terms. PSUs generally vest over three years, subject to the achievement of the associated performance conditions. In conjunction with adopting the 2021 Plan, the Company discontinued the 2018 Plan with respect to new equity awards.

As of June 30, 2024, 41,668,968 shares were available for future issuance pursuant to the 2021 Plan.

2021 Employee Stock Purchase Plan

In June 2021, the Company adopted the 2021 Employee Stock Purchase Plan (“2021 ESPP”), which became effective immediately prior to the execution of the underwriting agreement related to the Company’s IPO with an initial reserve of 2,470,000 shares. The 2021 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their earnings, subject to plan limitations. Unless otherwise determined by the Company’s board of directors, employees are able to purchase shares at 85% of the lower of the fair

Table of Contents

market value of the Company’s common stock on the first date of an offering or on the purchase date. The number of shares of the Company’s common stock reserved for issuance under the 2021 ESPP automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (1) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, and (2) 4,940,000 shares; provided, however, that the Company’s board of directors may act to provide a lesser increase in number of shares. On January 1, 2024, the Company reserved an additional 2,539,577 shares of common stock for issuance under the 2021 ESPP representing 1% of the total common shares outstanding as of December 31, 2023. The Company may specify offerings with durations not more than 27 months and may specify shorter purchase periods within each offering. Under the 2021 ESPP, 491,303 shares were issued for the three and six months ended June 30, 2024 and 542,921 shares for the three and six months ended June 30, 2023.

As of June 30, 2024, 5,509,903 shares were available for future issuance pursuant to the 2021 ESPP.

2018 Equity Incentive Plan

In 2018, the Company established the 2018 Plan that provided for the grant of incentive stock options, non‑statutory stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards. Terms of stock awards, including vesting requirements, were determined by the board of directors or by a committee authorized by the Company’s board of directors, subject to provisions of the 2018 Plan. The term of any stock option granted under the 2018 Plan cannot exceed ten years. Generally, awards granted by the Company vest over four years, but could have been granted with different vesting terms. Pursuant to the terms of the 2021 Plan, any shares subject to outstanding options originally granted under the 2018 Plan that terminate, expire or lapse for any reason without the delivery of shares to the holder thereof become available for issuance pursuant to awards granted under the 2021 Plan. While no shares are available for future issuance under the 2018 Plan, it continues to govern outstanding equity awards granted thereunder.

Stock-based Compensation Expense

Stock-based compensation expense by classification included within the Condensed Consolidated Statements of Operations and Comprehensive Loss was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Research and development	$	3,865	$	5,279	$	7,657	$	9,891
General and administrative	4,419		8,944		9,782		18,214
Total stock-based compensation expense	$	8,284	$	14,223	$	17,439	$	28,105

At June 30, 2024, total stock-based compensation cost related to unvested awards not yet recognized was $59.0 million, which is expected to be recognized over a remaining weighted-average period of 2.6 years.

Stock Options Repricing

In November 2023, the Board of Directors of the Company approved, effective November 16, 2023, a one-time repricing of certain stock option awards that had been granted to date under the 2021 Plan and 2018 Plan. The repricing impacted stock options with exercise prices greater than $2.37 held by employees who remained employed as of November 16, 2023 and were not impacted by the Company’s November 2023 reduction in workforce. The original exercise prices of the repriced stock options ranged from $2.61 to $17.95 per share for 200 total grantees with 23,416,860 shares repriced. Each stock option was repriced to have a per share exercise price of $1.87, which was the closing price of the Company’s common stock on November 16, 2023. To receive the new exercise price, option holders must remain employed with the Company through November 15, 2024. Additionally, the vesting schedule for the unvested shares underlying repriced stock options held by executives at the level of senior vice president and above was extended for an additional year. There were no changes to the vesting schedules for employees below the level of senior vice president. No changes were made to the expiration dates of, or the number of shares underlying, the repriced stock options. Incremental stock-based compensation expense resulting from the repricing was $8.9 million in the aggregate. Expense for vested awards will be recognized through November 15, 2024 and expense for unvested awards will be recognized over the remaining service life of the option.

Performance-Based Restricted Stock Units

During the six months ended June 30, 2024, the Company granted PSU awards to certain key employees. PSUs awarded to employees have a three-year performance period and vest based upon the Company’s performance against a two and three-year relative total shareholder return (“rTSR”) metric, as well as upon the achievement of certain clinical development milestones. None of the clinical development milestones were probable of achievement as of June 30, 2024.

Table of Contents

For the portion of PSUs subject to certain clinical development milestones (other than the bonus clinical development milestone), 50% vest upon the achievement of the applicable milestone, and the remaining 50% vest upon the earlier of (a) one year of service from the date of such achievement and (b) the end of the three-year performance period. The vesting of all PSU awards granted is also subject to the respective employee’s continued employment. The Company valued the portion of PSUs subject to the rTSR metric using a Monte Carlo simulation. The number of PSUs granted subject to the rTSR metrics represents the target number of units that are eligible to be earned based on the achievement of the metrics established at the beginning of the performance period, which ends on December 31st of the three year performance period. For the portion of PSUs subject to the rTSR metrics, employees may ultimately earn between zero and 200% of the target number of PSUs granted based on the degree of achievement of the applicable rTSR metric. Accordingly, additional PSUs may be issued or currently outstanding PSUs may be cancelled upon final determination of the number of units earned.

A summary of the Company’s PSU activity was as follows:


	Performance-Based Restricted Stock Units Outstanding	Weighted-Average Value at Grant Date Per Share
Unvested PSUs as of December 31, 2023	—	$	—
PSUs granted(1)	2,703,400	$	1.88
PSUs vested	—	$	—
PSUs forfeited or canceled	—	$	—
Unvested PSUs as of June 30, 2024	2,703,400	$	1.88

(1) PSU grants reflect the target number of shares eligible to be earned at the time of grant.

Restricted Stock Units

A summary of the Company’s RSU activity was as follows:


	Restricted Stock Units Outstanding	Weighted-Average Value at Grant Date Per Share
Unvested RSUs as of December 31, 2023	2,072,855	$	2.96
RSUs granted	3,622,426	$	1.84
RSUs vested	(295,570)	$	3.41
RSUs forfeited or canceled	(225,914)	$	2.07
Unvested RSUs as of June 30, 2024	5,173,797	$	2.19

Stock Options

A summary of the Company’s stock option activity was as follows:


	Number of Stock Options	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Options outstanding as of December 31, 2023	55,596,831	$	4.75	6.89	$	7,368
Granted	3,405,500	$	1.97
Exercised	(1,245,836)	$	0.12
Canceled or forfeited	(12,044,059)	$	6.74
Options outstanding as of June 30, 2024	45,712,436	$	4.14	7.33	$	3,696
Options exercisable as of June 30, 2024	26,720,167	$	4.71	6.42	$	3,696

Table of Contents

The fair value of stock options granted to employees and directors was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted-average assumptions:


	Six Months Ended June 30,
	2024		2023
Risk-free interest rate	4.17	%	4.09	%
Expected volatility	76.0	%	92.4	%
Expected term (in years)	5.90		5.99
Expected dividend yield	0	%	0	%

The weighted-average grant date fair value of options granted for the six months ended June 30, 2024 and 2023 were $1.35 per share and $1.72 per share, respectively.

10. Net Loss Per Share

Basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include unvested RSUs, unvested PSUs and options to purchase common stock, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. Shares subject to options to purchase common stock, unvested RSUs and unvested PSUs were all excluded from consideration in the calculation of diluted net loss per share in all periods presented due to their anti-dilutive effects.

11. Commitments and Contingencies

License and Collaboration Agreements

The Company has entered into certain license and collaboration agreements, including those identified in Note 3, License, Collaboration and Success Payment Agreements above, with third parties that include the funding of certain development, manufacturing and commercialization efforts with the potential for future milestone and royalty payments upon the achievement of pre-established developmental, regulatory and/or commercial milestones. The Company’s obligation to fund these efforts is contingent upon continued involvement in the programs and/or the lack of any adverse events that could cause the discontinuance of the programs, including termination of such agreements. Due to the nature of these agreements, the future potential payments are inherently uncertain, and accordingly no amounts had been recorded for the potential future achievement of these targets as of both June 30, 2024 and December 31, 2023.

12. Related-party Transactions

In September 2021, the Company entered into a sublease with Sonoma (“Sonoma Sublease”), with whom the Company has common stockholders with board seats, whereby the Company agreed to sublease approximately 18,000 square feet of space in South San Francisco, California currently leased by the Company. Dr. Klausner, the Chair of the Company’s board of directors, also serves as Board Chair of Sonoma’s board of directors. As a part of the Sonoma Sublease, a $4.6 million tenant improvement contribution payment was made by Sonoma, which is recognized over the term of the Sonoma Sublease. As of both June 30, 2024 and December 31, 2023, there were accrued liabilities and other current liabilities of $0.5 million and as of June 30, 2024 and December 31, 2023, other non-current liabilities of $2.8 million and $3.0 million, respectively, in connection with the Sonoma Sublease. Total operating income from Sonoma and income solely attributable to the Sonoma Sublease are shown in the table below (in thousands). Total operating income includes income attributable to the sublease, as well as additional operating fees recognized in “other operating income, net” such as common area maintenance charges. See Note 7, Leases, for more detail on the Sonoma Sublease.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Sonoma other operating income, net	$	677	$	648	$	1,484	$	1,317
Sonoma sublease income	$	465	$	464	$	930	$	930

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. See also the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage cell therapy company advancing a pipeline of product candidates enhanced with our proprietary anti-exhaustion technologies for patients with solid tumors or hematologic malignancies. Our investigational therapies use the patient’s own cells as the starting point to generate highly tumor-reactive, longer-lasting functional T cells with enhanced ability to resist exhaustion and kill cancer cells. Our innovative genetic and epigenetic reprogramming technologies address what we believe are the primary barriers that limit consistent and long-lasting responses to T‑cell therapy in solid tumors: T‑cell exhaustion and lack of durable stemness. Our technologies are designed to generate T cells with the ability to persist and self‑renew while driving durable tumor cytotoxicity, even in the setting of an immunosuppressive tumor microenvironment. We apply our technologies with the aim of developing T‑cell therapies with improved and durable antitumor responses for patients. Our technologies can be applied in a target agnostic manner to multiple T‑cell modalities, including chimeric antigen receptor (CAR), tumor-infiltrating lymphocytes (TIL) and T‑cell receptor (TCR) therapies.

Our growing pipeline of promising cell product candidates target indications with large unmet needs that are collectively responsible for approximately 224,000 deaths in the United States annually. Our programs provide opportunities to expand into additional indications beyond the patient populations we are targeting. Our lead product candidates are summarized in Table 1 below:

https://cdn.kscope.io/972db57e998c14bc936f9d65e1c40415-Pipeline_v2.jpg

Table of Contents

We were incorporated in June 2018. Our primary activities to date have included clinical development of T‑cell therapies, conducting research and development, acquiring technology, entering into strategic collaboration and license agreements, enabling and executing manufacturing activities in support of our product candidate development efforts, organizing and staffing our company, business planning, establishing our intellectual property portfolio, making regulatory submissions, executing clinical trials, raising capital and providing general and administrative support for these activities. We are early in our research and development efforts. LYL797, our ROR1‑targeted CAR T‑cell product candidate, is in Phase 1 clinical development for multiple solid tumor indications, and we expect to initiate a second Phase 1 clinical trial of LYL797 for hematologic indications in the second half of 2024. LYL119, our next generation ROR1‑targeted CAR T‑cell product candidate, is entering Phase 1 clinical trial in patients with solid tumors in the second half of 2024; and LYL845, our TIL product candidate, is in Phase 1 clinical development. A second generation TIL product candidate enhanced with novel genetic and epigenetic reprogramming technologies is in preclinical development. We do not have any products approved for sale.

Pipeline Programs

We are advancing four wholly-owned product candidates. Two product candidates, LYL797 and LYL845, are in Phase 1 clinical development, and an additional product candidate, LYL119, is entering Phase 1 clinical development. A second-generation TIL product candidate is in preclinical development. Research stage programs include our proprietary T‑cell rejuvenation technology and other undisclosed T‑cell enhancing technologies.

LYL797 - A ROR1 CAR T-cell product candidate enhanced with anti-exhaustion technology designed for improved tumor infiltration and tumor cell killing

We are applying our c-Jun and Epi‑R technologies to our lead CAR T‑cell product candidate, LYL797, which is an intravenously‑administered autologous CAR T‑cell investigational product targeting the receptor tyrosine kinase-like orphan receptor 1 (ROR1) protein. ROR1 is a fetal protein expressed during embryogenesis and is believed to be important in cell migration, polarity and survival. It is expressed in several cancer types, including triple-negative breast cancer (TNBC), non-small cell lung cancer (NSCLC), ovarian cancer, endometrial cancer, multiple myeloma and chronic lymphocytic leukemia (CLL), and is generally associated with a poor prognosis. LYL797 contains a CAR with a 4‑1BB/CD3ζ intracellular domain, a transmembrane domain, an optimized spacer domain and a single-chain variable fragment (scFv) derived from an R12 rabbit monoclonal antibody that recognizes and binds with high specificity to human ROR1. LYL797 also incorporates c-Jun and a proprietary optimized truncated version of human EGFR (EGFRopt) used for tracking the CAR T cells in the peripheral blood post treatment and can also be used as a safety measure with the administration of cetuximab, if needed. LYL797 is manufactured utilizing Epi‑R, our proprietary ex vivo manufacturing protocol that is designed to generate populations of T cells with stem-like qualities, reduced exhaustion and improved proliferation and antitumor activity.

Significant subsets of patients with common cancers express ROR1. We initiated development of LYL797 for the treatment of ROR1-positive TNBC and NSCLC, two of the highest ROR1‑expressing solid tumor indications. Results from our own ROR1 screening program are consistent with what is reported in the literature. Using our immunohistochemistry assay in the screening for our Phase 1 trial, as of June 2024, we have found that approximately 50% of patients with TNBC and approximately 35% of patients with NSCLC have tumors that express ROR1.

Our hypothesis that T-cell exhaustion is a key barrier in the treatment of solid tumors is informed by a clinical study previously conducted at the Fred Hutchinson Cancer Center. In this study, autologous ROR1-targeted CAR T cells infused into patients with CLL underwent rapid expansion and retained T-cell effector function, leading to tumor cell clearance and clinical responses. However, when CAR T cells generated with the same method were infused into patients with solid tumors such as TNBC or NSCLC, these T cells often failed to expand adequately, rapidly upregulated cell surface markers of T-cell exhaustion and adopted a dysfunctional state.

We recently reported initial clinical and translational data from our ongoing Phase 1 trial, detailed below. We believe these initial clinical and translational data (1) demonstrated that T-cell exhaustion is a key barrier to cell therapy in solid tumors as elucidated by the Fred Hutch Cancer Center study, and (2) provided early validation of our in vivo preclinical models demonstrating that LYL797 ROR-1 CAR T cells reprogrammed with our c-Jun overexpression and Epi‑R anti-exhaustion technology enhanced tumor control resulting in prolonged survival as compared to control ROR1 CAR T cells without our technologies.

Based on initial clinical data that demonstrated dose-dependent anti-tumor activity, we expanded the Phase 1 trial to include patients with platinum-resistant ovarian and endometrial cancers, where it is estimated in the literature that approximately 50% of patients have tumors in both indications that express ROR1. Ovarian cancer is one of the leading causes of cancer deaths among women. In the United States, approximately 20,000 women will be newly diagnosed with ovarian cancer in 2024. Only about 20% of ovarian cancers are diagnosed at an early stage. Late‑stage diagnosis is due in part to the largely asymptomatic nature of early‑stage disease and a lack of effective screening methods, coupled with the

Table of Contents

tumor’s inherent aggressive biology. Only 30% of advanced stage ovarian cancer patients survive for five years after initial diagnosis. Endometrial cancer (cancer of the lining of the uterus) is the most prevalent gynecological cancer and the sixth most common malignancy worldwide. Its incidence has been increasing over the last decade and it is one of the few cancers with increasing mortality. In 2024 in the United States, approximately 68,000 women will be newly diagnosed with uterine cancer, which includes patients with endometrial cancers and uterine sarcomas that together account for approximately 10% of uterine cancers. Only 19% of advanced stage endometrial cancer patients survive for five years after initial diagnosis.

We also plan to submit an investigational new drug (IND) application to initiate a second Phase 1 clinical trial of LYL797 in relapsed/refractory multiple myeloma and CLL, where it is estimated in the literature that 60% and 95% of patients’ malignancies, respectively, express ROR1. While recent advances in the treatment of multiple myeloma, including CAR T-cell therapy, have improved the survival outcomes in patients, the disease is not curable, and the vast majority of patients with multiple myeloma eventually relapse or become resistant to treatment. Thus, new treatments with different targets and modalities are needed. In the United States, it is estimated that approximately 36,000 people will be newly diagnosed with multiple myeloma in 2024. CLL is a less common hematologic malignancy, with approximately 21,000 new cases in the United States annually. Although current treatments are effective in achieving remission, CLL remains incurable and similar to multiple myeloma, CLL is likely to relapse and require further line(s) of therapy.

We recently reported initial clinical and translational data from our ongoing Phase 1 trial:

•Enrollment in the Phase 1 clinical trial of LYL797 is ongoing. The study was initiated in patients with relapsed/refractory TNBC or NSCLC and expanded to include patients with platinum-resistant ovarian or endometrial cancers.

•The Phase 1 clinical trial is designed as an open-label, dose-escalation and -expansion trial in patients with relapsed/refractory TNBC or NSCLC and has been expanded to include patients with platinum-resistant ovarian or endometrial cancer. All patients enrolled have tumor specimens positive for ROR1 protein expression by immunohistochemistry. The expansion phase of the trial will enroll at least 15 patients with at least two tumor types.

•Initial data from the Phase 1 clinical trial of LYL797 were reported in June 2024:

◦The initial dataset of 20 treated patients included 16 patients with TNBC and four patients with NSCLC. All patients enrolled had relapsed/refractory metastatic disease with an average of six lines of prior therapies. Four dose levels, including two interim dose levels, have been explored to date: 50 x 106 cells, 100 x 106 cells, 150 x 106 cells and 300 x 106 cells. The efficacy evaluable subset included 16 patients, and the safety evaluable subset included 18 patients. The manufacturing success rate was 100%.

◦Of the five patients with TNBC treated with LYL797 at the 150 x 106 cell dose level, the highest dose level cleared when the data were reported, two patients had confirmed partial responses to Day 90, resulting in an objective response rate (ORR) of 40% (Figure 1). The clinical benefit rate (CBR), defined as a best response of stable disease, partial response or complete response, was dose-dependent with a 60% CBR at the 150 x 106 cell dose level and a 38% CBR across all four dose levels evaluated (Figure 2).

Table of Contents

Figure 1: Best response of the target lesions for the 16 efficacy evaluable patients. The dark purple bars represent the target lesion tumor size reduction from baseline observed in patients treated at the 150 million cell dose level. Of the five patients with TNBC treated with LYL797 at this dose level, two patients had confirmed partial responses to Day 90, resulting in an ORR of 40%.

https://cdn.kscope.io/972db57e998c14bc936f9d65e1c40415-Figure_1.jpg

Figure 2: A pattern of dose-dependent clinical activity emerged when the data were plotted by dose and clinical benefit rate, defined as stable disease, partial response or complete response. In addition to having stable disease by imaging, several patients had additional observations of clinical benefit including weight gain, decreased pain and improved liver function tests.

https://cdn.kscope.io/972db57e998c14bc936f9d65e1c40415-Figure_2_v2.jpg

◦The most frequently reported related adverse events of any grade were cytokine release syndrome (CRS) (61%), pneumonitis (22%) and headache (17%), as well as the expected cytopenia from lymphodepletion in all patients. The CRS was generally mild (Grade 1 or 2 only), characterized by fever and treated with tocilizumab and steroids. There were no reports of immune effector cell-associated neurotoxicity

Table of Contents

syndrome (ICANS) attributed to LYL797. The most frequently reported Grade > 3 related adverse events were pneumonitis (17%) and hypoxia (11%), as well as the expected cytopenia from lymphodepletion in 78% of patients. The index patient with pneumonitis had Grade 5 respiratory failure on Day 41. Subsequently, patients were treated aggressively at the first sign or symptom of pneumonitis with high‑dose steroids with good result. Each case of pneumonitis has occurred between days 4 and 10. The adverse event of Grade > 3 pneumonitis occurred only in patients with TNBC and lung metastases, resulting in the separation of dose escalation into two cohorts based upon lung involvement (lung primary, lung metastatic disease or pleural effusion). No dose-limiting toxicities occurred in patients without lung involvement. All patients are now receiving prophylactic therapy with dexamethasone to mitigate pneumonitis.

◦Translational data were reported on a subset of patients and include CAR T-cell expansion in peripheral blood, phenotypic analysis of T-cell exhaustion and stem-like markers, and on-study tumor biopsies to assess for CAR T-cell tumor infiltration. LYL797 CAR T-cell expansion was observed in peripheral blood samples at Day 60 in all patients assessed when the data were reported (n = 11), with peak expansion occurring between Days 8 and 11. Peak expansion was on average three-fold higher in patients receiving 150 x 106 cells compared to those receiving 50 x 106 cells. The exhaustion marker, TIGIT, was found only in a low proportion of LYL797 CAR T cells at Day 11 (n = 4) providing support for the role of c-Jun overexpression as an anti-exhaustion technology. A significant proportion of cells with stem-like and effector memory phenotypes were demonstrated at Days 11 and 22 following RNAseq transcriptomic analysis, supporting the role of Epi-R to preserve a stem-like phenotype. Nine evaluable on-treatment tumor biopsies collected between Days 21 and 30 after LYL797 infusion were assessed. LYL797 CAR T cells were present in all solid-tumor biopsies, indicating that LYL797 CAR T cells enhanced with our anti-exhaustion technology were able to infiltrate and persist in the solid tumor microenvironment. In addition, the tumor biopsies have features consistent with T cell-mediated tumor lysis, including T cell-rich inflammation with scattered tumor cells.

•Updated data from the ongoing Phase 1 trial in solid tumor indications, including the initiation of dose expansion, are expected in late 2024 to early 2025.

•An IND is expected to be filed in the second half of 2024 to initiate a Phase 1 trial of LYL797 in patients with relapsed/refractory multiple myeloma or CLL.

LYL845 - A TIL product candidate epigenetically reprogrammed using Lyell’s proprietary Epi-R manufacturing protocol, designed for differentiated potency and durability

We are applying our epigenetic reprogramming technology, Epi‑R, to develop LYL845, which is expected to be an intravenously‑administered autologous TIL therapy for multiple solid tumors. Our Epi‑R manufacturing protocol comprises proprietary media, optimized cytokine compositions and well-defined cell activation and expansion protocols used during our manufacturing process.

TIL have previously shown clinical benefit in patients with advanced melanoma and other solid tumors with high mutational burden. Published data from third-party TIL trials show that treating metastatic melanoma patients with TIL can result in complete and durable responses. Response rates to TIL therapy in patients with other advanced solid tumors such as lung, colorectal and breast have been much lower than those observed in advanced melanoma. Broad TIL efficacy has been limited by poor enrichment of tumor-reactive T cells and the poor quality and limited growth potential of expanded T cells. Failure to maintain polyclonality of TIL during production may also limit their ability to eradicate cancer cells given the inherent heterogeneous nature of solid tumors. LYL845 incorporates our Epi‑R technology that has shown promising improvements in enhancing T-cell phenotypes reported in the literature to be associated with improved clinical outcomes (Krishna et al., Science, Dec. 2020), antitumor activity and increased polyclonality of TIL with stem-like qualities in nonclinical experiments. We received Orphan Drug Designation for LYL845 as a potential novel treatment for patients with advanced melanoma.

We are initially developing LYL845 for advanced melanoma, NSCLC and colorectal cancer (CRC). Based on our success with those indications, we may include patients with other solid tumors, potentially including head and neck, cervical, breast and pancreatic cancer.

•Enrollment in the Phase 1 clinical trial for LYL845 is ongoing. The study is designed to include patients with relapsed or refractory metastatic or locally advanced melanoma, NSCLC and CRC.

Table of Contents

•The Phase 1 clinical trial is an open-label, dose-escalation and -expansion trial in patients with relapsed or refractory metastatic or locally advanced melanoma, NSCLC and CRC. The study will enroll at least 15 patients each with advanced melanoma, and relapsed or refractory NSCLC or CRC in the expansion phase of the study.

•Initial clinical and translational data from the Phase 1 trial of LYL845 in patients with advanced melanoma are expected in the second half of 2024.

LYL119 - A next-generation ROR1-targeted CAR T-cell product candidate incorporating Lyell’s four stackable and complementary anti-exhaustion technologies designed for enhanced potency

A key pillar of our strategy is to continually innovate to develop and advance novel, breakthrough technologies that address key barriers to effective cell therapy for solid tumors. We have advanced a new genetic reprogramming technology, NR4A3 knockout, and a new epigenetic reprogramming technology, Stim‑R, that are being applied in our new CAR T-cell product candidate, LYL119. These technologies are stackable and complementary to c-Jun and Epi‑R and are designed to enable T cells to further resist exhaustion and to improve antitumor potency and durability.

LYL119 is being advanced with the goal of potentially creating even greater benefit for patients with ROR1‑positive solid tumors.

•LYL119 is a ROR1-targeted CAR T-cell product enhanced with Lyell’s four novel genetic and epigenetic reprogramming technologies: c-Jun overexpression, NR4A3 knockout, Epi-R manufacturing protocol and Stim‑RTM T-cell activation technology.

•An IND application for LYL119 was cleared by the FDA.

•The Phase 1 trial is designed as an open label dose escalation and expansion trial in patients with ROR1 positive solid tumors and will initially enroll patients with ROR1 positive platinum-resistant ovarian cancer or endometrial cancer. Initial clinical data are expected in the second half of 2025.

Our Manufacturing Capabilities

We believe it is critically important to control and continuously monitor all aspects of the cell therapy manufacturing process to mitigate risks, including challenges in managing production, supply chain, patient specimen chain of custody and quality control. As we developed our technologies, we made a strategic decision to invest in building our own manufacturing facility to control our supply chain, maximize efficiencies in cell product production time, optimize cost and quality, protect proprietary aspects of our reprogramming technologies and have the ability to rapidly incorporate advancements and new innovations. We view our manufacturing team and capabilities as a significant competitive advantage.

Our LyFE Manufacturing Center™ located in Bothell, Washington is approximately 73,000 square feet and is comprised of manufacturing suites, laboratories and offices. Our LyFE Manufacturing Center was designed to be in compliance with U.S. and European Union current Good Manufacturing Practices (cGMP) standards and has a flexible and modular design enabling CAR T-cell, TIL, TCR T-cell and cGMP viral vector production to control and de-risk the manufacturing sequence and timing of the major components of our supply chain. Owning our own facility has enabled seamless collaboration across research, process development and manufacturing for high-quality reproducibility at manufacturing scale.

We are currently producing clinical supply for our Phase 1 trials at our LyFE Manufacturing Center. At full staffing and capacity, we expect to be able to manufacture approximately 500 infusions per year depending on product candidate mix. While we believe this capacity is sufficient to support our pipeline programs into pivotal trials and, if approved, early commercialization, we are also advancing multiple strategic alternatives to innovate and scale manufacturing in the future. We are evaluating third-party manufacturing options as part of an overall CAR T‑cell manufacturing strategy to build scale and reduce cost. For TIL, we are advancing our Epi-R P2 manufacturing protocol to shorten delivery time of TIL product to patients.

Macroeconomic Environment

Our business and operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges such as the effects of the ongoing geopolitical conflicts in Ukraine, armed conflicts and turmoil in the Middle East, tensions in U.S.-China relations, inflationary pressures, fluctuations in the interest rate environment, instability in the banking industry, supply constraints and overall market volatility. Economic uncertainty may persist into the remainder of 2024, and the market dynamics discussed above and similar adverse conditions may negatively impact our business.

Table of Contents

For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Components of Results of Operations

Revenue

We have no products approved for sale and have never generated any revenue from product sales. In the future, we may generate additional revenue from collaborations, strategic alliances, licensing agreements, product sales, or a combination of these.

Operating Expenses

Research and Development

To date, research and development expenses consist of costs incurred by us for the discovery and development of our technology platforms and product candidates and include costs incurred in connection with strategic collaborations, costs to license technology, personnel-related costs, including stock-based compensation expense, facility and technology related costs, research and laboratory expenses, as well as other expenses, which include consulting fees and other costs. Upfront payments and milestones paid to third parties in connection with technology platforms that have not reached technological feasibility and do not have an alternative future use are expensed as incurred.

Research and development expenses also include non-cash expenses related to the change in the estimated fair value of the success payment obligations over their respective requisite service terms granted to Fred Hutchinson Cancer Center (Fred Hutch) and The Board of Trustees of the Leland Stanford Junior University (Stanford). As of December 31, 2022, Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration. For the three and six months ended June 30, 2023 and future periods, the change in the Fred Hutch success payment liability fair value is recognized in other (expense) income, net, as the requisite service obligation had been met. See Note 3, License, Collaboration and Success Payment Agreements, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q. Research and development expenses related to our success payment liabilities are unpredictable and may vary significantly from quarter‑to‑quarter and year‑to‑year due to changes in our assumptions used in the calculation.

We deploy our employee and infrastructure resources across multiple research and development programs for identifying and developing product candidates and establishing manufacturing capabilities. Due to the stage of development and number of ongoing programs and our ability to use resources across several programs, most of our research and development costs are not recorded on a program-specific basis. These include costs for personnel, laboratory and other indirect facility and operating costs.

Research and development activities account for a significant portion of our operating expenses. We anticipate that our research and development expenses will increase over the foreseeable future as we expand our research and development efforts including completing nonclinical studies, commencing planned clinical trials, conducting and completing current and planned clinical trials, seeking regulatory approvals of our product candidates, identifying new product candidates and incurring costs to acquire and license technology platforms. A change in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates. Because we are early in our research and clinical development efforts of our product candidates, and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the nonclinical development, clinical development and commercialization of product candidates or whether, or when, we may achieve profitability.

Our research and development expenses may vary significantly based on factors such as:

•the number and scope of nonclinical and IND-enabling studies;

•per patient trial costs;

•the number of trials required for approval;

•the number of sites included in the trials;

•the countries in which the trials are conducted;

•the length of time required to enroll eligible patients;

•the number of patients that participate in the trials;

•the drop-out or discontinuation rates of patients;

Table of Contents

•potential additional safety monitoring requested by regulatory agencies;

•the duration of patient participation in the trials and follow-up;

•the cost and timing of manufacturing our product candidates;

•the phase of development of our product candidates;

•the efficacy and safety profile of our product candidates;

•the extent to which we establish additional collaboration or license agreements; and

•whether we choose to partner any of our product candidates and the terms of such partnership.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates. We may obtain unexpected results from our nonclinical studies and clinical trials.

General and Administrative

General and administrative costs include personnel-related expenses, including stock-based compensation expense for personnel in executive, legal, finance and other administrative functions, legal costs, transaction costs related to collaboration and licensing agreements, as well as fees paid for accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expenses. Legal costs include those related to corporate, dispute and patent matters.

We anticipate that our general and administrative expenses will increase over the foreseeable future to support our continued research and development activities, operations generally, future business development opportunities, consulting fees, as well as the costs of operating as a public company such as costs related to accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission (SEC) requirements, director and officer insurance costs and investor and public relations costs.

Other Operating Income, Net

Other operating income, net consists primarily of service and occupancy fees received associated with subleases as well as losses on the retirement of property and equipment.

Interest Income, Net

Interest income, net consists primarily of interest earned on our cash, cash equivalents and marketable securities balances.

Other (expense) income, net

Other (expense) income, net consists primarily of the change in fair value associated with our success payment liabilities to Fred Hutch and adjustments to the fair value of our marketable equity security that is publicly traded.

Impairment of Other Investments

Impairment of other investments consists of a reduction in the value of certain other investments.

Table of Contents

Results of Operations

Three and Six Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2024		2023		Change		2024		2023		Change
Revenue	$	13	$	27	$	(14)	$	16	$	92	$	(76)
Operating expenses:
Research and development	40,261		47,471		(7,210)		83,435		92,101		(8,666)
General and administrative	12,256		19,030		(6,774)		25,750		38,309		(12,559)
Other operating income, net	(976)		(569)		(407)		(2,066)		(1,857)		(209)
Total operating expenses	51,541		65,932		(14,391)		107,119		128,553		(21,434)
Loss from operations	(51,528)		(65,905)		14,377		(107,103)		(128,461)		21,358
Interest income, net	6,364		5,264		1,100		13,183		9,761		3,422
Other (expense) income, net	(645)		(326)		(319)		445		774		(329)
Impairment of other investments	—		(2,923)		2,923		(13,001)		(12,923)		(78)
Total other income (loss), net	5,719		2,015		3,704		627		(2,388)		3,015
Net loss	$	(45,809)	$	(63,890)	$	18,081	$	(106,476)	$	(130,849)	$	24,373

Research and Development Expenses

The following table summarizes the components of our research and development expenses for the periods presented (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2024		2023		Change		2024		2023		Change
Personnel	$	15,979	$	22,161	$	(6,182)	$	32,453	$	41,805	$	(9,352)
Facilities and technology	12,018		13,695		(1,677)		24,915		26,833		(1,918)
Research activities, collaborations and outside services	13,057		11,010		2,047		26,335		23,466		2,869
Success payments	(793)		605		(1,398)		(268)		(3)		(265)
Total research and development expenses	$	40,261	$	47,471	$	(7,210)	$	83,435	$	92,101	$	(8,666)

Research and development expenses were $40.3 million and $47.5 million for the three months ended June 30, 2024 and 2023, respectively. The $7.2 million decrease was primarily due to a $6.2 million reduction in personnel‑related expenses, mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce; a decrease of $1.7 million in facilities and technology costs primarily driven by the reduction in workforce and lower software implementation costs; and a decrease of $1.4 million associated with our success payment liabilities primarily driven by the change in our stock price. These decreases were partially offset by an increase of $2.0 million in research activities, collaborations and outside services primarily driven by clinical trials activity.

Research and development expenses were $83.4 million and $92.1 million for the six months ended June 30, 2024 and 2023, respectively. The $8.7 million decrease was primarily due to a $9.4 million reduction in personnel-related expenses mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce; a decrease of $1.9 million in facilities and technology costs primarily driven by the reduction in workforce and lower software implementation costs; and a decrease of $0.3 million associated with our success payment liabilities primarily driven by the change in our stock price. These decreases were partially offset by an increase of $2.9 million in research activities, collaborations and outside services primarily driven by clinical trials activity.

General and Administrative Expenses

General and administrative expenses were $12.3 million and $19.0 million for the three months ended June 30, 2024 and 2023, respectively. The $6.8 million decrease was primarily due to a $6.5 million reduction in personnel costs, including a $4.5 million decrease in stock-based compensation expense, primarily related to significant awards being fully

Table of Contents

expensed in the previous periods and a decrease of $2.0 million in personnel‑related expenses mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce.

General and administrative expenses were $25.8 million and $38.3 million for the six months ended June 30, 2024 and 2023, respectively. The $12.6 million decrease was primarily due to a $11.2 million reduction in personnel costs, including a $8.4 million decrease in stock-based compensation expense, primarily related to significant awards being fully expensed in the previous periods and a decrease of $2.8 million in personnel-related expenses mainly due to a decrease in headcount associated with the Company’s November 2023 reduction in workforce. General and administrative expenses also decreased due to a reduction of $1.2 million in other administrative expenses.

Other Operating Income, Net

Other operating income, net was $1.0 million and $0.6 million for the three months ended June 30, 2024 and 2023, respectively, and $2.1 million and $1.9 million for the six months ended June 30, 2024 and 2023, respectively.

Interest Income, Net

Interest income, net was $6.4 million and $5.3 million for the three months ended June 30, 2024 and 2023, respectively, and $13.2 million and $9.8 million for the six months ended June 30, 2024 and 2023, respectively. The increase in interest income, net was primarily driven by higher interest rates in 2024.

Other (expense) income, net

Other (expense) income, net was $(0.6) million and $(0.3) million for the three months ended June 30, 2024 and 2023, respectively, and $0.4 million and $0.8 million for the six months ended June 30, 2024 and 2023, respectively. Other (expense) income, net consists primarily of the change in fair value associated with our success payment liabilities to Fred Hutch and for the three and six months ended June 30, 2024, adjustments to the fair value of our marketable equity security investment that is publicly traded.

Impairment of Other Investments

Impairment of other investments was zero for the three months ended June 30, 2024 and $2.9 million for the three months ended June 30, 2023, which consisted of the full impairment of one of our other investments. Impairment of other investments was $13.0 million and $12.9 million for the six months ended June 30, 2024 and 2023, respectively, which consisted of the full impairment of one of our other investments for the six months ended June 30, 2024 and the full impairment of two of our other investments for the six months ended June 30, 2023. See Note 5, Other Investments, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q, for additional details regarding the impairments of other investments.

Liquidity and Capital Resources

Sources of Liquidity

As of June 30, 2024, we had $491.1 million in cash, cash equivalents and marketable securities. To date we have raised an aggregate of $1.4 billion in gross proceeds from sales of common stock and convertible preferred stock.

Since our inception, we have incurred significant operating losses. We have not yet commercialized any product candidates, and we do not expect to generate revenue from sales of any product candidates for a number of years, if ever.

On February 28, 2024, we entered into a sales agreement (Sales Agreement) with Cowen and Company, LLC (Cowen) acting as our sales agent, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $150.0 million from time to time in a series of one or more at-the-market equity offerings. We will pay Cowen commissions of up to 3.0% of the gross proceeds of the sale, and reimbursement of certain expenses, under this agreement. Neither us nor Cowen is obligated to sell any shares and, to date, we have not made any sales under the Sales Agreement.

Future Funding Requirements

We expect to incur additional losses in the foreseeable future as we conduct and expand our research and development efforts, including conducting nonclinical studies and clinical trials, developing new product candidates, establishing internal manufacturing capabilities and funding our operations generally. Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure needs into 2027. However, we anticipate that we will need to raise additional capital in the future to fund our operations, including further development of our product candidates and the commercialization of any approved product candidates. In addition, we regularly consider fund-raising opportunities and may decide, from time to time, to raise additional capital, including pursuant to the Sales Agreement, based on various factors, including market conditions

Table of Contents

and our plans of operation. We are subject to the risks typically related to the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

Our future capital requirements will depend on many factors, including:

•the scope, timing, progress, costs and results of discovery, nonclinical development and clinical trials for our current and future product candidates and any additional nonclinical studies;

•the number of clinical trials required for regulatory approval of our current and future product candidates;

•the costs, timing and outcome of regulatory review of any of our current and future product candidates;

•the cost of manufacturing clinical and commercial supplies of our current and future product candidates;

•the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

•further investment to build additional manufacturing facilities or expand the capacity of our existing ones;

•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

•our ability to maintain existing, and establish new, collaborations, licenses, product acquisitions or other strategic transactions and the fulfillment of our financial obligations under any such agreements, including the timing and amount of any success payment, future contingent payments, milestone, royalty or other payments due under any such agreement;

•the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

•expenses to attract, hire and retain skilled personnel;

•the costs of operating as a public company, including legal, accounting and other related expenses as well as costs relating to maintaining or expanding our operational, financial and management systems and compliance programs;

•addressing or responding to any potential disputes or litigation; and

•the extent to which we acquire or invest in businesses, products and technology platforms.

Until such time as we complete nonclinical and clinical development and receive regulatory approval of our product candidates and can generate significant revenue from product sales, if ever, we expect to finance our operations from the sale of additional equity or debt financings, or other capital that is generated from strategic collaborations, licensing or other arrangements. In the event that additional capital is required, we may not be able to raise it on terms acceptable to us, or at all. If we raise additional funds through the issuance of equity or convertible debt securities, including pursuant to the Sales Agreement, it may result in dilution to our existing stockholders. Debt financing or preferred equity financing, if available, may result in increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that may restrict our operations. If we raise funds through strategic collaboration, licensing or other arrangements, we may relinquish significant rights or grant licenses on terms that are not favorable to us. Our ability to raise additional funds may be adversely impacted by potentially unfavorable global economic conditions and any disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from actual or perceived changes in interest rates and economic inflation, the anticipated impact of any geopolitical instability and otherwise. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be adversely affected.

Material Cash Requirements

We continually evaluate our liquidity and capital resources to ensure that we can adequately and efficiently finance our operations. As of June 30, 2024, our material cash requirements consisted primarily of paying salaries and benefits, administering clinical trials, conducting research, improving our manufacturing capabilities, providing the technology and facilities necessary to support our operations, funding operating lease obligations and other payments related to our collaborative agreements. See Note 3, License, Collaboration and Success Payment Agreements, and Note 7, Leases, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information.

Table of Contents

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):


	Six Months Ended June 30,
	2024		2023
Net cash (used in) provided by:
Operating activities	$	(80,110)	$	(85,373)
Investing activities	67,001		185,066
Financing activities	889		1,127
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(12,220)	$	100,820

Operating Activities

During the six months ended June 30, 2024, net cash used in operating activities was $80.1 million, reflecting our net loss of $106.5 million, partially offset by $30.6 million of non-cash items primarily related to stock-based compensation expense of $17.4 million, the impairment of other investments of $13.0 million and depreciation and amortization expense of $9.9 million, partially offset by net amortization and accretion on marketable securities of $8.1 million and non-cash lease income of $1.0 million. Additionally, net operating assets and liabilities decreased $4.2 million primarily driven by a $3.1 million decrease in accrued liabilities and other current liabilities and a $0.6 million decrease in accounts payable.

During the six months ended June 30, 2023, net cash used in operating activities was $85.4 million, primarily reflecting our net loss of $130.8 million, partially offset by $46.2 million of non-cash items primarily related to stock-based compensation expense of $28.1 million, impairment of other investments of $12.9 million and depreciation and amortization of $10.1 million, partially offset by net amortization and accretion on marketable securities of $3.9 million and non-cash lease income of $0.8 million. Additionally, net operating assets and liabilities decreased $0.7 million primarily driven by a $3.6 million decrease in accrued liabilities and other current liabilities partially offset by a $2.4 million increase in accounts payable.

Investing Activities

During the six months ended June 30, 2024, cash provided by investing activities was $67.0 million, consisting primarily of net maturities and purchases of marketable securities.

During the six months ended June 30, 2023, cash provided by investing activities was $185.1 million, consisting of net maturities and purchases of marketable securities of $187.5 million offset by purchases of property and equipment of $2.5 million.

Financing Activities

During the six months ended June 30, 2024, cash provided by financing activities was $0.9 million, consisting of proceeds from the employee stock purchase plan of $0.8 million and proceeds from the exercise of stock options of $0.2 million, partially offset by taxes paid related to the net share settlement of equity awards of $0.1 million.

During the six months ended June 30, 2023, cash provided by financing activities was $1.1 million, consisting of proceeds from the employee stock purchase plan of $1.2 million and proceeds from the exercise of stock options of $0.1 million, partially offset by taxes paid related to the net share settlement of equity awards of $0.1 million.

Off-Balance Sheet Arrangements

Since our inception, we have not had, and we do not currently have, any off-balance sheet arrangements as defined under the applicable rules and regulations of the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

Our unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these unaudited Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited Condensed Consolidated Financial Statements, as well as the reported revenue and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for

Table of Contents

making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates as compared to those described in our Annual Report on Form 10‑K for the year ended December 31, 2023 (Annual Report) other than our stock‑based compensation policy for performance-based restricted stock units. For information related to our stock‑based compensation policy for performance-based restricted stock units, see Note 2, Summary of Significant Accounting Policies, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. Our primary risks include interest rate sensitivities.

Interest Rate Risk

We had cash equivalents of $119.7 million as of June 30, 2024, which consisted of money market funds and highly liquid investments purchased with original maturities of three months or less from the purchase date. We also had fixed income marketable securities of $357.5 million as of June 30, 2024. The primary objective of our investment activities is to preserve capital to fund our operations, and we currently do not hedge our interest rate risk exposure. Because our fixed income marketable securities are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant, and a hypothetical 10% relative change in interest rates during any of the periods presented would not have had a material effect on our unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We had no debt outstanding as of June 30, 2024.

Foreign Currency Exchange Risk

All of our employees and operations are currently located in the United States and our expenses are generally denominated in U.S. dollars. We therefore are not currently exposed to significant market risk related to changes in foreign currency exchange rates. However, we have contracted with and may continue to contract with non-U.S. vendors who we may pay in their local currency. Our operations may be subject to fluctuations in foreign currency exchange rates in the future. To date, foreign currency transaction gains and losses have not been material to our unaudited Condensed Consolidated Financial Statements, and we have not had a formal hedging program with respect to foreign currency. We believe a hypothetical 10% change in exchange rates during any of the periods presented would not have a material effect on our unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and our clinical trial costs. We believe that inflation has not had a material effect on our unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of June 30, 2024, management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2024, the design and operation of our disclosure controls and procedures were effective at a reasonable assurance level.

Table of Contents

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we have been or may become involved in material legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently not party to any legal proceedings material to our operations or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by a government authority or otherwise. Regardless of outcome, any such proceedings or claims is subject to inherent uncertainties and can have an adverse impact on us because of defense and settlement costs, diversion of time and resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

Item 1A. Risk Factors.

Our business involves significant risks, some of which are described below. You should carefully consider the risks described below, as well as the other information contained in this Quarterly Report on Form 10-Q, including our unaudited Condensed Consolidated Financial Statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. The risk factors set forth below that are marked with an asterisk (*) contain substantive changes to the similarly titled risk factors included in, or did not appear as separate risk factors in, Item 1A of our Annual Report, which was filed with the SEC on February 28, 2024.

Summary of Risk Factors

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, follows this summary. This summary is qualified in its entirety by that more complete discussion of such risks and uncertainties.

•We are an early clinical stage biopharmaceutical company and have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing net losses for the foreseeable future.

•We operate in a rapidly evolving field and have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

•We currently have no products approved for sale and have never generated revenue from product sales. We may never generate revenue from product sales or achieve profitability.

•We will require substantial additional capital to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

•Our success payment obligations in our success payment agreements may result in dilution to our stockholders or may be a drain on our cash resources to satisfy the payment obligations.

•We are early in our research and clinical development efforts for our product candidates. If we are unable to successfully develop, manufacture and commercialize product candidates or experience significant delays in doing so, our business may be harmed.

•Our product candidates and technology platforms are based on novel technologies that are unproven and may not result in approvable or marketable products, which exposes us to unforeseen risks and makes it difficult for us to predict the time and cost of product development and potential for regulatory approval, and we may not be successful in our efforts to use and expand our technology platforms to develop any product candidate.

•We currently have no marketing, sales or distribution infrastructure, and we intend to either establish a sales and marketing infrastructure or outsource this function to a third party. Either of these commercialization strategies carries substantial risks to us.

•We currently manufacture drug products for our clinical trials ourselves. Delays in further qualifying or in receiving regulatory approvals for any manufacturing facility or product candidates, or in expanding our

Table of Contents

manufacturing capacity or finding suitable third-party manufacturing partners, could delay our development plans and thereby limit our ability to generate product revenues.

•The manufacturing of cellular therapies is very complex. We are subject to a multitude of manufacturing risks, including risks associated with supply chain complexity related to patient materials, any of which could substantially increase our costs, delay our programs or limit supply of our product candidates.

•If our sole clinical or commercial manufacturing facility or any of our potential contract manufacturing organizations are damaged or destroyed or production at these facilities is otherwise interrupted, our business would be negatively affected.

•We may rely on third parties to manufacture our product candidates, which subjects us to risks and could delay or prevent our development and/or commercialization, if approved, of our product candidates.

•Cell-based therapies rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or at all.

•We rely on third parties to conduct, supervise and monitor a significant portion of our research and nonclinical studies and clinical trials for our product candidates, and, if those third parties do not successfully carry out their contractual duties, comply with regulatory requirements or otherwise perform satisfactorily, we may not be able to obtain regulatory approval or commercialize product candidates, or such approval or commercialization may be delayed, and our business may be substantially harmed.

•We have in the past, and we may in the future, form or seek collaborations or strategic alliances or enter into additional licensing arrangements, and we may not realize the benefits of such alliances or licensing arrangements.

•We depend on the enrollment and retention of patients in our current and planned clinical trials for our product candidates. If we experience delays or difficulties enrolling or retaining patients in our clinical trials, our research and development efforts and business, financial condition and results of operations could be materially adversely affected.

•We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

•Our cellular therapy product candidates represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinical development or delays in or our inability to achieve regulatory approvals, commercialization or payor coverage of our product candidates.

•The results of research, nonclinical studies or earlier clinical trials are not necessarily predictive of future results, initial clinical results in a clinical trial may not be predictive of future results in the same clinical trial and results in one indication may not be predictive of results to be expected for the same product candidate in another indication. If clinical trials of our product candidates fail to produce positive results or demonstrate satisfactory safety and efficacy, at the appropriate dose level or at all, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates. Any product candidate we advance into clinical trials may not have favorable results in later clinical trials or receive regulatory approval.

•Clinical development involves a lengthy and expensive process with an uncertain outcome.

•Interim, topline or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available or as we make changes to our manufacturing processes and are subject to audit and verification procedures that could result in material changes in the final data.

•Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

•If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete effectively may be adversely affected.

•We have in-licensed a portion of our intellectual property from our partners. If we breach any of our license agreements with these partners, we could potentially lose the ability to continue the development and potential commercialization of one or more of our product candidates.

Table of Contents

Risks Related to Our Financial Condition, Limited Operating History and Need for Additional Capital

We are an early clinical stage biopharmaceutical company and have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing net losses for the foreseeable future.

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to prove safe and effective, gain regulatory approval or become commercially viable. We are an early clinical stage biopharmaceutical company, and we do not have any products approved by regulatory authorities and have incurred significant research, development and other expenses related to our ongoing operations and expect to continue to incur such expenses. Since our inception, we have not generated any revenue from product sales and have incurred significant net losses. Substantially all of our net losses since inception have resulted from our research and development programs and general and administrative costs associated with our operations.

We do not expect to generate revenue from product sales for the foreseeable future, if at all. We also expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate these losses to increase as we continue to research, develop and seek regulatory approvals for our product candidates, expand our manufacturing capabilities, in-license or acquire additional technologies and potentially begin to commercialize product candidates that may achieve regulatory approval. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. Moreover, our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period‑to‑period comparison of our results of operations may not be a good indication of our future performance. If any of our product candidates fails in research and development or clinical trials or does not gain regulatory approval, or, if approved, fails to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

We expect to incur additional expenses and operating losses in the foreseeable future, as we:

•continue nonclinical development of our current and future product candidates and initiate additional nonclinical studies;

•commence and continue clinical trials of our current and future product candidates;

•advance our genetic and epigenetic reprogramming technologies as well as other research and development efforts;

•attract, hire and retain qualified personnel;

•seek regulatory approval of our current and future product candidates;

•expand our manufacturing and process development capabilities;

•expand our operational, financial and management systems and compliance programs;

•acquire and license technology or technology platforms;

•continue to develop, protect and defend our intellectual property portfolio; and

•incur additional legal, accounting or other expenses in operating our business, including the additional costs associated with operating as a public company.

We operate in a rapidly evolving field and have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

We operate in a rapidly evolving field and, having commenced operations in June 2018, have a limited operating history, which makes it difficult to evaluate our business and prospects. Our primary activities to date have included clinical development of T‑cell therapies, conducting research and development, acquiring technology, entering into strategic collaboration and license agreements, enabling and executing manufacturing activities in support of our product candidate development efforts, executing clinical trials, organizing and staffing the company, business planning, establishing our intellectual property portfolio, regulatory submissions and other preparations to initiate and execute clinical trials, raising capital and providing general and administrative support for these activities. Any predictions about our future success, performance or viability may not be as accurate as they could be if we had a longer operating history or approved products on the market.

In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point 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 expect our

Table of Contents

financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, any of our quarterly or annual periods’ results are not indicative of future operating performance.

We currently have no products approved for sale and have never generated revenue from product sales. We may never generate revenue from product sales or achieve profitability.

To date, we have not generated any revenues from product sales. Our ability to generate revenues from product sales and achieve profitability will depend on our ability to successfully develop and subsequently obtain regulatory approval for and commercialize our product candidates. Our ability to generate revenues and achieve profitability also depends on a number of additional factors, including our ability to:

•successfully complete our research activities to identify the technologies and product candidates to further investigate in clinical trials;

•successfully complete development activities, including the necessary clinical trials;

•complete and submit regulatory submissions to the FDA, the European Medicines Agency (EMA) or other agencies and obtain regulatory approval for indications for which there is a commercial market;

•obtain coverage and adequate reimbursement from third parties, including government and private payors;

•set commercially viable prices for our products, if any;

•develop manufacturing and distribution processes for our product candidates;

•produce commercial quantities of our products at acceptable cost levels;

•maintain adequate supply of our product candidates, including the starting materials and reagents needed;

•maintain the supply of our product candidates in a manner that is compliant with global legal requirements or to the extent necessary;

•establish and maintain manufacturing relationships with reliable third parties;

•achieve market acceptance of our products, if any;

•attract, hire and retain qualified personnel;

•protect our rights in our intellectual property portfolio;

•develop a commercial organization capable of sales, marketing and distribution for any products we intend to sell ourselves in the markets in which we choose to commercialize on our own; and

•find suitable distribution partners to help us market, sell and distribute our approved products in other markets.

Our revenues for any product for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price and whether we own the commercial rights for that territory. In addition, we anticipate incurring significant costs associated with commercializing any approved product. As a result, even if we generate revenue from product sales, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

We will require substantial additional capital to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.*

We expect to expend substantial resources for the foreseeable future to advance and expand our research pipeline, conduct nonclinical studies and pursue clinical development and manufacturing of our product candidates. We also expect to continue to expend resources for the development of our technology platforms. These expenditures will include costs associated with research and development, potentially acquiring or licensing new technologies, conducting nonclinical studies and clinical trials and potentially obtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for sale, if any. We will also need to make significant expenditures to develop a commercial organization capable of sales, marketing and distribution for any products, if any, that we intend to sell ourselves in the markets in which we choose to commercialize. In addition, we may be required to make substantial payments related to our success payment agreements and other contingent consideration payments under our license and collaboration agreements. Because the design and outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably

Table of Contents

estimate the actual amounts necessary to successfully complete the discovery, development and commercialization of our existing and potential product candidates, and other unanticipated costs may arise.

As of June 30, 2024, we had $491.1 million in cash, cash equivalents and marketable securities. As a result of expense timing, as well as diligent expense management, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure needs into 2027. However, our future capital requirements and the period for which our existing resources will support our operations may vary significantly from what we expect, and we will in any event require additional capital to complete clinical development of any of our current programs.

We do not have any committed external source of funds. Additional funds may not be available when we need them on terms that are acceptable to us, or at all, and our ability to raise additional capital may be adversely impacted by potentially unfavorable global economic conditions or conditions in the biotechnology sector of the market, including disruptions to, or volatility in, the credit and financial markets in the United States and worldwide, actual or perceived changes in interest rates and economic inflation, the current or anticipated impact of geopolitical instability and otherwise. If adequate funds are not available to us on a timely basis, including pursuant to the Sales Agreement (as defined below), we may be required to delay, limit, reduce or terminate nonclinical studies, clinical trials or other development activities for our product candidates or delay, limit, reduce or terminate our establishment of sales, marketing and distribution capabilities or other activities that may be necessary to commercialize our product candidates.

Our success payment obligations in our success payment agreements may result in dilution to our stockholders or may be a drain on our cash resources to satisfy the payment obligations.

We agreed to make success payments payable in cash or publicly-tradeable shares of our common stock at our discretion pursuant to our success payment agreements with Fred Hutch and Stanford. On each contractually prescribed measurement date, we may be required to make success payments based on increases in the per share fair value of our common stock. The total amount of success payments that we may become obligated to make is currently $400.0 million and may increase in the future due to amendments of our existing success payment agreements. For information related to our success payment obligations, see Note 3, License, Collaboration and Success Payment Agreements, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.

In order to satisfy our obligations to make these success payments, if and when they are triggered, we may issue equity or convertible debt securities that may cause dilution to our stockholders, or we may use our existing cash to satisfy the success payment obligation in cash, which may adversely affect our financial position. In addition, these success payments may impede our ability to raise money in future public offerings of debt or equity securities or to obtain a third-party line of credit.

The success payment agreements may cause operating results to fluctuate significantly from quarter to quarter and year to year, which may reduce the usefulness of our consolidated financial statements.

Our success payment obligations are recorded as liabilities on our condensed consolidated balance sheets. Under U.S. generally accepted accounting principles (GAAP), we are required to estimate the fair value of these liabilities as of each quarter end and changes in the estimated fair value are accreted to research and development expense over the service period of the collaboration agreement. Once the requisite service obligation to earn the potential success payment consideration is met under our continued collaboration agreements, the change in the success payment liabilities fair value is recognized in other income or expense, net. For example, in December 2022, Fred Hutch had provided the requisite service obligation to earn the potential success payment consideration under the continued collaboration; accordingly in 2023 and future periods, the change in the success payments liability fair value is recognized in other income or expense, net.

Factors that may lead to increases or decreases in the estimated fair value of our success payment liabilities include, among others, changes in the value of the common stock, changes in volatility and changes in the risk-free rate. As a result, our operating results and financial condition as reported by GAAP may fluctuate significantly from quarter to quarter and from year to year and may reduce the usefulness of our GAAP consolidated financial statements. See Note 3, License, Collaboration and Success Payment Agreements, in the accompanying notes to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Table of Contents

Risks Related to Our Business and Industry

We are early in our research and clinical development efforts. If we are unable to successfully develop, manufacture and commercialize product candidates or experience significant delays in doing so, our business may be harmed.*

We are early in our research and clinical development efforts for our product candidates. LYL797 and LYL845 are in Phase 1 clinical development, LYL119 is entering Phase 1 clinical development and our other proprietary TIL product candidate is currently in preclinical development. We have not yet demonstrated our ability to successfully complete any clinical trials (including any Phase 3 or other pivotal clinical trials), obtain regulatory approvals, manufacture a commercial‑scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. We have invested substantial resources in developing our technology platforms and our product candidates, conducting nonclinical studies, commencing clinical trials and building our manufacturing facilities and capabilities, each of which will be required prior to any regulatory approval and commercialization. Our ability to generate revenue from product sales, which we do not expect will occur for several years, if ever, will depend heavily on the successful research and development and eventual commercialization of one or more product candidates in profitable indications and markets. The success of our efforts to identify, develop, manufacture and commercialize product candidates will depend on many factors, including the following:

•timely and successful completion of our nonclinical studies and research activities to identify and develop product candidates to investigate in clinical trials;

•submission of INDs to the FDA to proceed with clinical trials, or comparable applications to foreign regulatory authorities that allow the commencement of our planned clinical trials for our product candidates;

•successful enrollment and completion of clinical trials in compliance with Good Clinical Practice (GCP) requirements with positive results;

•the level of efficacy observed with our product candidates;

•the prevalence and severity of adverse events experienced with any of our product candidates;

•successfully developing, or making arrangements with third parties for, manufacturing and distribution processes for our product candidates and for commercial manufacturing and distribution for any of our product candidates that receive regulatory approval;

•receipt of timely regulatory approvals from applicable authorities for our product candidates for their intended uses;

•protecting our rights in our intellectual property portfolio, including by obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

•establishing capabilities and infrastructure to obtain the tumor tissues needed to develop and, if successful, commercialize approved products;

•manufacturing our product candidates at an acceptable cost;

•launching commercial sales of our products, if approved by applicable regulatory authorities, whether alone or in collaboration with others;

•acceptance of our products, if approved by applicable regulatory authorities, by patients and the medical community;

•obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for our products, if approved by applicable regulatory authorities;

•effectively competing with other marketed therapies;

•maintaining compliance with regulatory requirements, including the cGMP requirements;

•maintaining a continued acceptable benefit/risk profile of the products following approval; and

•maintaining and growing an organization of scientists and functional experts who can develop and commercialize our products and technology.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully develop and commercialize our product candidates, which could harm our business. If we do not receive marketing approvals for any product candidate we develop, we may not be able to continue our operations.

Table of Contents

Our product candidates and technology platforms are based on novel technologies that are unproven and may not result in approvable or marketable products, which exposes us to unforeseen risks and makes it difficult for us to predict the time and cost of product development and potential for regulatory approval, and we may not be successful in our efforts to use and expand our technology platforms to develop any product candidate.

We are seeking to identify and develop a broad pipeline of product candidates using our proprietary technology platforms. The scientific research that forms the basis of our efforts to develop product candidates with our technology platforms is still ongoing. Further, the scientific evidence to support the feasibility of developing therapeutic treatments based on our technology platforms are both preliminary and limited. Additionally, although LYL797 and LYL845 are in, and LYL119 is entering, Phase 1 clinical development, our current clinical data are limited, and nonclinical data from murine tumor models and in vitro experiments with tumor cell lines may not translate into humans or may not accurately predict the safety and efficacy of our product candidates in humans. As a result, we are exposed to a number of unforeseen risks, and it is difficult to predict the types of challenges and risks that we may encounter during development of our product candidates.

Given the novelty of our technology platforms, we intend to work closely with the FDA and comparable foreign regulatory authorities to perform the requisite scientific analyses and evaluation of our methods to obtain regulatory approval for our product candidates; however, the regulatory pathway with the FDA and comparable regulatory authorities may be more complex and time-consuming relative to other more well-known therapeutics. Even if we obtain human data to support our product candidates, the FDA or comparable foreign regulatory authorities may lack sufficient experience in evaluating the safety and efficacy of our product candidates developed using our technology platforms, which could result in a longer than expected regulatory review process, increase our expected development costs and delay or prevent commercialization of our product candidates. The validation process takes time and resources, may require independent third-p