Autolus Therapeutics plc

Note 1. Nature of the Business

Autolus Therapeutics plc (with its subsidiaries, collectively, “Autolus” or the “Company”) is a biopharmaceutical company developing next-generation programmed T cell therapies for the treatment of cancer and autoimmune diseases. Using its broad suite of proprietary and modular T cell programming technologies, the Company is engineering precisely targeted, controlled and highly active T cell therapies that are designed to better recognize target cells, break down their defense mechanisms and attack and kill these cells. The Company believes its programmed T cell therapies have the potential to be best-in-class and to offer patients substantial benefits over the existing standard of care, including the potential for cure in some patients. In November 2023, the Company submitted a Biologics License Application (“BLA”) to the U.S. Food and Drug Administration (“FDA”) for its lead product candidate obecabtagene autoleucel (“obe-cel”) for the treatment of relapsed/refractory (“r/r”) adult B-cell Acute Lymphoblastic Leukemia (“B-ALL”), with a Prescription Drug User Fee Act (“PDUFA”) target action date of November 16, 2024.

Autolus Therapeutics plc is registered in England and Wales. Its registered office is The MediaWorks, 191 Wood Lane, London, W12 7FP, United Kingdom.

The Company is subject to risks and uncertainties common to companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Obe-cel and the Company’s other product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. Even if obe-cel is approved by the FDA, the Company will need to incur significant additional costs to prepare for its commercialization. These efforts will require significant amounts of capital, adequate personnel and infrastructure and extensive compliance capabilities. Even if the Company’s product development efforts for obe-cel and its other product candidates are successful, it is uncertain when, if ever, the Company will realize revenue from its product sales.

On February 6, 2024 (the “Execution Date”), the Company concurrently entered into a (i) Securities Purchase Agreement (the “BioNTech Securities Purchase Agreement”), (ii) a Registration Rights Agreement (the “BioNTech Registration Rights Agreement”), (iii) a Letter Agreement (the “BioNTech Letter Agreement”) and (iv) a License and Option Agreement (the “BioNTech License and Option Agreement”), collectively called the “BioNTech Agreements”, with BioNTech. The BioNTech Agreements were entered into and in contemplation of one another and, accordingly, the Company assessed the accounting for these agreements in the aggregate. The following descriptions of the BioNTech Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements.

(i) BioNTech Securities Purchase Agreement

Pursuant to the BioNTech Securities Purchase Agreement the Company sold to BioNTech ADSs, each representingone ordinary share with a nominal value of $0.000042 per share, of the Company (the “Ordinary Shares”) in a private placement transaction (the “Private Placement”). On February 13, 2024, the Company completed the Private Placement of 33,333,333 ADSs(the “Initial ADSs”), representing 33,333,333 Ordinary Shares at an offering price of $6.00 per Initial ADS. Aggregate net proceeds to the Company, after underwriting discounts and offering expenses, were $193.8 million.

In the event that BioNTech and the Company enter into a Manufacturing and Commercial Services Agreement (as defined below) within 18 months of the initial closing of the Private Placement, BioNTech will purchase additional ADSs (the “Subsequent ADSs” and, together with the Initial ADSs, the “Private Placement ADSs”), not to exceed 15,000,000 ADSs, for an aggregate purchase price of up to $20.0 million. The total number of Subsequent ADSs that may be issued is subject to additional limitations and restrictions.

The BioNTech Securities Purchase Agreement contains customary representations, warranties, and covenants of each of the Company and BioNTech.

(ii) BioNTech Registration Rights Agreement

Pursuant to the BioNTech Registration Rights Agreement the Company agreed to file a registration statement with the SEC to register the resale of the Private Placement ADSs.

(iii) BioNTech Letter Agreement

The BioNTech Letter Agreement provides BioNTech with certain additional rights and subjects BioNTech’s investment in the Company to certain restrictions. BioNTech received the right to nominate a director to the Company’s board of directors. If BioNTech acquires beneficial ownership of at least 30% of the issued and outstanding Ordinary Shares of the Company (including in the form of ADSs) within five years of the Execution Date, BioNTech will have the right to designate an additional director who shall be independent. BioNTech’s director nomination rights shall automatically terminate upon BioNTech’s ownership of Ordinary Shares dropping below certain specified percentages. Additionally, BioNTech has the right to purchase equity securities sold by the Company in bona fide financing transactions in amounts that are based on BioNTech maintaining specified ownership thresholds following such financing transactions.

Subject to specified exceptions, BioNTech may not sell the Private Placement ADSs without the Company’s approval for a period ofsix months following the applicable closing date for such ADSs.

The BioNTech Letter Agreement terminates upon the earlier of (a) the later of (i) February 6, 2027 and (ii) such time as no securities of the Company are held by BioNTech or its affiliates and (b) the consummation of a change of control transaction involving the Company.

(iv) BioNTech License and Option Agreement

License and Options

The Company, through its wholly owned subsidiaries, Autolus Limited and Autolus Holdings (U.K.) Limited, entered into the BioNTech License and Option Agreement with BioNTech pursuant to which the Company granted to BioNTech:

•an exclusive, worldwide, sublicensable license (the “Binder License”) to certain binders and to exploit products that express in vivo such binders (collectively, the “Binder Licensed Products”), and

•several time-limited options (the “Options”) to acquire additional rights to specified clinical-stage product candidates, binders and technologies of the Company, described in more detail below:

◦an option to obtain exclusive rights to co-fund development costs of the Company’s development-stage programs AUTO1/22 and AUTO6NG (“Product Options”), in return for agreed upon economic terms, including an option exercise fee, milestone payments and a profit-sharing arrangement for each such product candidate, with additional options to co-promote or co-commercialize each such product candidate;

◦an option to obtain an exclusive worldwide license to exploit products that express certain additional binders in vivo or, with respect to certain binders, in an antibody drug conjugate (the “Binder Option”);

◦an option to obtain a co-exclusive worldwide license to exploit products that express in vivo the Company’s modules for activity enhancement, with a non-exclusive right, in certain agreed instances, to exploit products that include Company’s modules for activity enhancement but do not express in vivo such modules (the “Activity Enhancement Option”); and

◦an option to obtain a non-exclusive worldwide license to exploit products that contain the Company’s safety switches (the “Safety Switch Option” and, together with the Binder Option and the Activity Enhancement Option, the “Technology Options”).

In consideration for the Binder License and the Technology Options, BioNTech made an initial payment to the Company of $10.0 million. In the event that all Options are fully exercised, the Company would be eligible to receive maximum aggregate payments of up to $582.0 million pursuant to the License Agreement. This maximum amount includes the potential milestone payments for the Binder Licensed Products described below, all option exercise fees and potential milestone payments for licenses to optioned products and technologies, and additional payments that BioNTech may pay to the Company for an increased revenue interest with respect to the Company’s product candidate obe-cel as described below.

The option exercise fee for each Technology Option is a low seven-digit amount. Each of the Activity Enhancement Option and the Safety Switch Option must be exercised with respect to a given biological target or combination of targets. There is a cap on the total option exercise fee if multiple options are exercised with respect to a given target.

There is also a cap on milestone payments across all agreements entered into as the result of BioNTech exercising one or more of the Technology Options and a cap on the royalty rate payable on any given product for which multiple Options are exercised.

Obe-cel Product Revenue Interest

BioNTech has also agreed to financially support the expansion of the clinical development program for, and planned commercialization of obe-cel. In exchange for the grant of rights to future revenues from the sales of obe-cel products, BioNTech made an upfront payment to the Company of $40.0 million. The Company will pay BioNTech a low single-digit percentage of annual net sales of obe-cel products, which may be increased up to a mid-single digit percentage in exchange for milestone payments of up to $100.0 million in the aggregate on achievement of certain regulatory events for specific new indications upon BioNTech's election.

Manufacturing and Commercial Services Agreement

Under the terms of the BioNTech License and Option Agreement, the Company has agreed to grant BioNTech the option to negotiate a joint manufacturing and commercial services agreement pursuant to which the parties may access and leverage each other’s manufacturing and commercial capabilities, in addition to Autolus’ commercial site network and infrastructure, with respect to certain of each parties’ CAR T products, including BioNTech’s product candidate BNT211 (the “Manufacturing and Commercial Services Agreement” or “MCSA”). The MCSA, if entered into, would also grant BioNTech access to the Company’s commercial site network and infrastructure.

The Company concluded there were four freestanding financial instruments arising from the execution of the BioNTech Agreements, comprising:

1. the Initial ADSs representing ordinary shares purchased pursuant to the BioNTech Securities Purchase Agreement;

2. the potential Subsequent ADSs representing ordinary shares that may be purchased pursuant to the BioNTech Securities Purchase Agreement;

3. the BioNTech License and Option Agreement, and

4. the MCSA.

The Subsequent ADSs are classified as a forward instrument contingent on the MCSA being executed. As of June 30, 2024, the MCSA had not been entered into. The forward instrument has an inconsequential market value as the exercise price approximates the Company’s stock price on the last trading day prior to the signing date of the MCSA. Consequently, the initial proceeds arising from the purchase of Initial ADSs pursuant to the BioNTech Securities Purchase Agreement will not be separately allocated to this freestanding financial instrument at inception of the BioNTech Agreements. Furthermore, as the MCSA has yet to be entered into no consideration will be allocated to this freestanding financial instrument at inception of the BioNTech Agreements.

Within the BioNTech License and Option Agreement, there are a number of embedded features which have each been assessed for freestanding financial instrument accounting in accordance with Accounting Standards Codification (“ASC”) 480–Distinguishing Liabilities from Equity. Although these embedded features are separately exercisable, they lack legal detachability and, therefore, the BioNTech License and Option Agreement is accounted for asone freestanding financial instrument. However, each embedded feature is assessed for derivative accounting in accordance to ASC 815–Derivative and Hedging(“ASC 815”).

The Company analyzed how it should account for the host Contract (i.e., the BioNTech License and Option Agreement) as the Binder License represents an agreement with customer for goods and services and therefore should be accounted for under ASC 606 –Revenue from Contracts with Customers(“ASC 606”). However, as the other embedded features of the BioNTech License and Option Agreement fall under the scope of other topics that specify how to initially measure the contract (i.e., ASC 470 –Debt(“ASC 470”)), the Company determined that the host contract should not be accounted for and initially measured pursuant to ASC 606. Furthermore, the Company determined the host contract (the BioNTech License and Option Agreement) met the scope exception of ASC 815-10-15-59(d) and therefore should not be accounted for as a derivative under ASC 815 but instead be accounted for as a debt financial instrument in accordance with ASC 470.

Thefour units of accounting were recorded at fair value upon initial recognition and will not be subsequently measured at fair value. The Company allocated the total gross proceeds arising from the BioNTech Securities Purchase Agreement (i.e. the Initial ADSs representing ordinary shares), and the BioNTech License and Option Agreement among thefour units of accounting on a relative fair value basis at the time of the transaction as follows:

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the US (“U.S. GAAP”) and are presented in U.S. dollars. All intercompany accounts and transactions between the Company and its subsidiaries have been eliminated upon consolidation.

The significant accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with those discussed in Note 2, “Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission on March 21, 2024 (the “Annual Report”).

Certain information and footnote disclosures have been condensed or omitted as permitted under U.S. GAAP. The information included in these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2023, included in the Annual Report. However, these interim financial statements include all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to fairly state the results of the interim period. The interim results are not necessarily indicative of results to be expected for the full year ending December 31, 2024, any other interim periods, or any future year or period.

Going Concern

The Company has incurred recurring losses since its inception, including net losses of $58.3 million and $45.6 million for the three months ended June 30, 2024 and 2023, respectively and $111.0 million and $85.4 million for the six months ended June 30, 2024 and 2023, respectively. The Company had an accumulated deficit of $989.5 million and $878.6 million as of June 30, 2024 and December 31, 2023, respectively. The Company expects to continue to generate operating losses in the foreseeable future. The Company’s inability to raise additional capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all. The Company expects that its cash and cash equivalents at June 30, 2024 of $705.9 million will be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these unaudited condensed consolidated financial statements and accordingly they have been prepared on a going concern basis. As the Company continues to incur losses, the transition to profitability is dependent upon the successful development, approval and commercialization of its product candidates and achieving a level of revenues adequate to support its cost structure. Even if the Company’s planned regulatory submissions for its products are approved, and the Company is successful in its commercialization efforts, additional funding will be needed before the Company is expected to reach cash breakeven.

Foreign Currency Translation

The reporting currency of the Company is U.S. dollars. The Company has determined that its functional currency of the ultimate parent company, Autolus Therapeutics plc, is British Pound Sterling. The functional currency of each subsidiary’s operations is the applicable local currency. Monetary assets and liabilities denominated in currencies other than the Company’s functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the date of the transaction.

The Company recorded foreign exchange gains of $1.2 million and $0.4 million for the three months ended June 30, 2024 and 2023, respectively, and foreign exchange losses of $0.5 million and foreign exchange gains of $1.3 million for the six months ended June 30, 2024 and 2023, respectively, which are included in other income (expense), net in the unaudited condensed Consolidated Statements of Operations and Comprehensive Loss.

For financial reporting purposes, the financial statements of the Company have been translated into U.S. dollars. Assets and liabilities have been translated at the exchange rates at the balance sheet dates, while revenue and expenses are translated at the average exchange rates over the reporting period and shareholders’ equity amounts are translated based on historical exchange rates as of the date of each transaction. Translation adjustments are not included in determining net income (loss) but are included in foreign exchange adjustment to other comprehensive loss, a component of shareholders’ equity.

Segment Information

The Company’s chief operating decision maker (the “CODM”), its Chief Executive Officer, manages the Company’s operations on an integrated basis for the purpose of appropriately allocating resources. When evaluating the Company’s financial performance, the CODM reviews total revenue, total expenses and expenses by function and makes decisions using this information on a global basis. The Company and the CODM view the Company’s operations and manage its business as asingle operating segment, which is the business of developing and commercializing CAR T therapies.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses, share-based compensation including assessing the probability of meeting performance conditions, income taxes, initial fair value of warrants, and interest expense on liability related to future royalties and milestones, net and related cumulative catch-up adjustment, initial lease term of the Company’s new manufacturing facility (“The Nucleus”), incremental borrowing rates related to the Company's leased properties and allocation of transaction price using the relative standalone selling price. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from those estimates.

Allocation of transaction price using the relative standalone selling price

Upfront payments are allocated between performance obligations using the Company’s best estimate of the relative standalone selling price of the performance obligation. The relative standalone selling price is estimated by determining the market values of development and license obligations. As these inputs are not directly observable, the estimate is determined considering all reasonably available information including internal pricing objectives used in negotiating the contract, taking into account the different stage of development of each development program and consideration of adjusted-market data from comparable arrangements. Where performance obligations have been identified relating to material rights, the determination of the relative standalone selling price of these performance obligations also includes an assessment of the likelihood that the options will be exercised and any payments by the customer that are triggered upon exercising the right. This assessment involves significant judgment and could have a significant impact on the amount and timing of revenue recognition.

An assessment of the allocation of transaction price using the relative standalone selling price was required for the three and six months ended June 30, 2024 and 2023 for the BioNTech License and Option Agreement and the Option and License Agreement with Cabaletta Bio Inc. (“Cabaletta”), respectively. See Note 3 for additional information on the allocation of the transaction price for those agreements.

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

The Company accounted for each of the Blackstone Collaboration Agreement (See Note 12) (“Blackstone Collaboration Agreement Liability”) and the BioNTech Obe-cel Product Revenue Interest (“BioNTech Liability”) as liabilities measured at amortized cost based on an effective interest rate determined at the outset of the arrangement The Blackstone Collaboration Agreement Liability related to future royalties and milestones, net is measured based on the Company’s current estimates of the timing and amount of expected future royalties, milestone payments to be paid and the milestones receivable upon the achievement of certain specified clinical, manufacturing and regulatory milestones (each such payment, a “Blackstone Development Payment” and collectively, the “Blackstone Development Payments”) expected to be received over the estimated term of the agreement. Similarly, the BioNTech Liability related to future royalties is measured based on the Company’s current estimates of the timing and amount of expected future royalty expected to be paid over the estimated term of the agreement. Milestone payments pursuant to the BioNTech License and Option Agreement (“BioNTech Milestone Payments”) are payable upon BioNTech's election, and therefore have not been included in the determination of the effective interest rate or in the measurement of the liability.

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

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

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

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board, (“FASB”), issued Accounting Standards Update, or (“ASU”), 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or (“ASU 2023-07”), which expanded the disclosures for reportable segments made by public entities. These amendments within ASU 2023-07 retained the existing disclosure requirements in ASC 280 -Segment Reporting (“ASC 280”) and expanded upon them to require public entities to disclose significant expenses for reportable segments in both interim and annual reporting periods, as well as items that were previously disclosed only annually on an interim basis, including disclosures related to a reportable segment’s profit or loss and assets. In addition, entities with a single reportable segment must provide all segment disclosures required in ASC 280, including the new disclosures for reportable segments under the amendments in ASU 2023-07. The amendments did not change the existing guidance on how a public entity identified and determined its reportable segments. A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in ASU 2023-07 are effective for annual periods for all public entities in fiscal years beginning after December 15, 2023, and in interim periods within fiscal years beginning after December 15, 2024. The Company will comply with any new applicable disclosures in its Annual Report on Form 10-K for the year ending December 31, 2024. The Company does not expect the adoption to have a material effect on its financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU improves the transparency of income tax disclosure by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. This guidance is effective for the Company for the year beginning January 1, 2025, with early adoption permitted. The amendments should be applied on a prospective basis, with retrospective application permitted. The Company intends to adopt the guidance in the fiscal year beginning January 1, 2025. The Company does not expect the adoption of ASU 2023-09 to have a material effect on its financial statements and related disclosures.

Unless otherwise discussed, the impact of recently issued standards that are not yet effective are not expected to have a material impact on the Company’s consolidated financial statements and disclosures in this report and for the full year ending December 31, 2024.

Note 3. License Revenue

License revenue for the three and six months ended June 30, 2024, and 2023, is presented in the table below by geographical location (in thousands):

Major customers

During the six months ended June 30, 2024, and 2023,100% of the Company’s license revenues were generated from BioNTech and Cabaletta, respectively.

License and Option Agreement with BioNTech

See Note 1 for a description of the BioNTech License and Option Agreement, under which the Company recognized revenue during six months ended June 30, 2024. For further details on the terms and accounting treatment considerations for the BioNTech Agreement, refer to following notes to these interim condensed consolidated financial statements:

•Note 1, “Nature of the business”

•Note 10, “Shareholders’ equity”

•Note 12, “Liabilities related to future royalties and milestones, net”

•Note 14, “Commitments and contingencies”

As the BioNTech License and Option Agreement has been accounted for asone freestanding financial instrument with various embedded features, including the Binder License and related transfer of know-how, Technology Options, and Product Options, the Company is required to consider if the embedded features are required to be bifurcated from the host contract and therefore accounted for as a separate derivative. The Company concluded the Binder License and related transfer of know-how, Technology Options, and Product Options meet the scope exception set out in ASC 815-10-15-59(d) and therefore not accounted for as derivatives under ASC 815.

Binder License

The Company applied ASC 606 to account for the Binder License and related know-how as functional intellectual property. The Binder License and related transfer of know-how were not distinct from one another and must be combined as a performance obligation, as BioNTech requires the know-how to derive benefit from the license. Based on these determinations, the Company identifiedone combined distinct performance obligation at the inception of the BioNTech License and Option Agreement.

The Company further determined the consideration received included in the transaction price at contract inception, is to be allocated to theone combined performance obligation. The Company determined that the performance obligation was recognized at a point-in-time, upon the delivery of the transfer of know-how and Binder License to BioNTech. The Company recognized total license revenue of $10.1 million (net of foreign exchange differences), related to the BioNTech License and Option Agreement for the three months ended March 31, 2024. No license revenue was recognized during the three months ended June 30, 2024.

The Company is eligible to receive milestone payments of up to $32.0 million in the aggregate upon the achievement of specified clinical development and regulatory milestones for each Binder Licensed Product that achieves such milestones. The Company is also eligible to receive a low single-digit royalty on net sales of Binder Licensed Products, subject to customary reductions, which are subject to specified limits. The royalty will be increased if BioNTech, its affiliates or sublicensees commercialize a Binder Licensed Product in an indication and country in which the Company or its affiliates or licensees also commercializes a product containing the same binders. Under the BioNTech License and Option Agreement, BioNTech is solely responsible for, and has sole decision-making authority with respect to, at its own expense, the exploitation of Binder Licensed Products. Milestone payments and royalty payments are regarded as variable consideration andwill be evaluated under the most likely amount method. Milestone payments and royalty payments were not included in the transaction price, as these amounts were fully constrained as of June 30, 2024.

Technology Options

As the Technology Options are outside the scope of ASC 815, the Company considered other relevant accounting guidance to apply to this component of the BioNTech License and Option Agreement. The Company therefore applied ASC 606, considering particularly the accounting guidance related to any options granted to customers to purchase additional goods or services at a future date as this could provide a material right to the customer. A material right is a promise embedded in a current contract that should be accounted for as a separate performance obligation. The Company determined the Technology Options were not offered at a significant and incremental discount. Accordingly, the Technology Options granted to BioNTech do not represent a material right and, therefore, were not a performance obligation at the outset of the arrangement. The Technology Option exercise fee equates to the standalone selling price of the technologies underlying each option and consequently, the transaction price of $10.0 million was not allocated to the Technology Options' performance obligation. No Technology Options were exercised during the three and six months ended June 30, 2024.

Product Options

As the Product Options are precluded from being accounted for under ASC 815 due to the scope exception, management considered the terms of the Product Options and concluded that they should be accounted for as a gain contingency under the scope of ASC 450- Contingencies("ASC 450"). The Product Options, unlike the Technology Options, are 1) still subject to negotiation as to the specific activities to be performed be each party, which will be determined and agreed before the Product Options can be exercised, and 2) have not been exercised upon signature of the BioNTech License and Option Agreement. As a result, Product Options are not accounted for under to ASC 606, and no recognition is required under ASC 450, until the Product Options are exercised. No Product Options were exercised during the three and six months ended June 30, 2024.

Option and License Agreement with Cabaletta

On January 9, 2023, the Company entered into an Option and License Agreement (the “Cabaletta Agreement”) with Cabaletta, pursuant to which the Company granted to Cabaletta a non-exclusive license to research, develop, manufacture, have manufactured, use, and commercialize products incorporating the Company’s safety switch technology (the “RQR8 technology”). Upon the execution of the Cabaletta Agreement, the Company made available the RQR8 licensed know-how to Cabaletta for a non-refundable license fee of $1.2 million. The Company has no further material performance obligations related to the Cabaletta Agreement.

The Company further granted to Cabaletta the option to expand the rights and licenses granted under the Cabaletta Agreement to include the research, development, manufacture, use, or commercialization of licensed products up to a predetermined number of target options upon payment of an option exercise fee.

The Company identified the following material promises relating to the granting of a non-exclusive license for research, development, manufacturing and commercialization activities as well as the initial transfer of know-how and information to Cabaletta. The Company determined the option exercise fee is not offered at a significant and incremental discount. Accordingly, the option granted to Cabaletta does not represent a material right and, therefore, is not a performance obligation at the outset of the arrangement. The Company determined that the granting of the research license and the initial transfer of know-how were not distinct from one another and must be combined as a performance obligation, as Cabaletta requires the know-how to derive benefit from the license. Based on these determinations, the Company identifiedone distinct performance obligation at the inception of the contract.

The Company further determined that the license fee payable constituted the entirety of the consideration included in the transaction price at contract inception, which was allocated to theone performance obligation. The amount of the transaction price allocated to the performance obligation is recognized as or when the Company satisfies the performance obligation. The Company determined that the performance obligation was recognized at a point-in-time, upon the delivery of the transfer of know-how and research license to Cabaletta. The Company recognized total license revenue of $1.2 million related to the Cabaletta Agreement for the six months ended June 30, 2023. No license revenue was recognized related to the Cabaletta Agreement for the three and six months ended June 30, 2024.

Upon execution of the Cabaletta Agreement, the transaction price included only the $1.2 million non-refundable license fee payable to the Company. The Company may receive further payments upon the exercise of the options for licensed targets, the achievement of certain development and sales milestones, as well as royalty payments based on net sales of each product covered by the licensed intellectual property.

The future milestones, which represent variable consideration, will be evaluated under the most likely amount method, and were not included in the transaction price, as these amounts were fully constrained asof June 30, 2024. For the three and six months ended June 30, 2024 and 2023, the Company has not recognized any variable consideration with regards to the development milestones and sales-based milestones with its customers as they are deemed not probable.

Note 4. Interest expense

Interest expense consisted of the following (in thousands):

Note 5. Net loss per ordinary share

Basic and diluted net loss per ordinary share was calculated as follows (in thousands, except share and per share amounts):

For all periods presented, outstanding but unvested restricted stock units and share options have been excluded from the calculation, because their effects would be anti-dilutive. Therefore, the weighted average number of ordinary shares used to calculate both basic and diluted loss per share is the same for all periods presented.

The following potentially dilutive securities have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

Note 6. Fair value measurements

The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in of the following levels:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•Level 3 — Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The carrying amounts reported in the balance sheet for cash and cash equivalents, restricted cash, prepaid expenses and other assets, accounts payable and accrued expenses and other liabilities approximate their fair value because of the short-term nature of these instruments.

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

During the three and six months ended June 30, 2024 and the year ended December 31, 2023, there were no transfers between levels.

Note 7. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

Note 8. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Depreciation expense for the three months ended June 30, 2024 and 2023 was $1.9 million and $1.5 million, respectively, and for the six months ended June 30, 2024 and 2023 was $3.7 million and $3.4 million, respectively.

Note 9. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

Note 10. Shareholders’ Equity

Ordinary Shares

Each holder of ordinary shares is entitled toone vote per ordinary share and to receive dividends when and if such dividends are recommended by the Company’s board of directors and declared by the shareholders. As of June 30, 2024, the Company has not declared any dividends.

Restricted Stock Units

At June 30, 2024, restricted stock unit awards for 100 ordinary shares had vested but the underlying shares had not been issued. However, these vested restricted stock unit awards have been included in the calculation of the Company’s outstanding shares at June 30, 2024 as they are considered issuable for little or no cash consideration. Subsequent to June 30, 2024, all of the underlying ordinary shares were issued.

February 2024 Underwritten Offering

On February 12, 2024, the Company completed an underwritten offering of 58,333,336 ADSs representing 58,333,336 ordinary shares at an offering price of $6.00 per ADS. Aggregate net proceeds to the Company, after underwriting discounts and offering expenses, were$326.8 million.

BioNTech Securities Purchase Agreement

Concurrently with the execution of the BioNTech License and Option Agreement (see Note 1 and Note 3), the Company and BioNTech entered into the BioNTech Securities Purchase Agreement pursuant to which the Company sold ADSs, each representingone ordinary share, to BioNTech in a Private Placement transaction. On February 13, 2024, the Company completed the Private Placement of 33,333,333 ADSs representing 33,333,333 ordinary shares at an offering price of $6.00 per ADS. Aggregate net proceeds to the Company, after underwriting discounts and offering expenses, were$193.8 million.

In the event that BioNTech and the Company enter into the MCSA within 18 months of the initial closing of the Private Placement, BioNTech will purchase up to 15,000,000 ADSs for an aggregate purchase price of up to $20.0 million, subject to additional limitations and restrictions.

Note 11. Share-based Compensation

The following table summarizes the total share-based compensation expense included in the unaudited condensed consolidated statements of operations and comprehensive loss (in thousands):

Share Options

The table below summarizes Company’s share option activity during the six months ended June 30, 2024:

During the six months ended June 30, 2024, the Company modified the exercise period of 571,352 share options resulting in the recognition of incremental share-based compensation expense of $0.3 million.

The total intrinsic value of options exercised was $0.4 million for the six months ended June 30, 2024. The weighted average grant-date fair value of share options granted was $3.12 per share option for the six months ended June 30, 2024.

As of June 30, 2024, the total unrecognized compensation expense related to unvested share options without performance conditions was $14.8 million, which the Company expects to recognize over a weighted average vesting period of 2.90 years.

As of June 30, 2024, the total unrecognized share-based compensation expense related to unvested share options with performance conditions was $2.9 million, which the Company expects to recognize over a weighted average vesting period of 0.38 years.

Restricted Stock Units

The table below summarizes Company’s restricted stock unit (“RSU”) awards activity during the six months ended June 30, 2024:

As of June 30, 2024, there was less than $0.1 million of unrecognized share-based compensation expense related to unvested RSUs without performance conditions, which is expected to be recognized over a weighted average period of 1.62 years.

Note 12. Liabilities related to future royalties and milestones, net

During the three months ended June 30, 2024 and 2023, interest expense on liabilities related to future royalties and milestones, net amounted to$10.2 million and$5.0 million, respectively. During the six months ended June 30, 2024 and 2023, interest expense on liabilities related to future royalties and milestones, net amounted to$18.6 million and$9.9 million, respectively.

During the three months ended June 30, 2024 and 2023 and six months ended June 30, 2023, there wasno cumulative catch-up adjustment (included in interest expense). During the six months ended June 30, 2024, the cumulative catch-up adjustment amounted to$10.9 million.

Blackstone Collaboration Agreement

On November 6, 2021, the Company concurrently entered into the following agreements with BXLS V - Autobahn L.P, (“Blackstone”): (i) Strategic Collaboration Agreement (the “Blackstone Collaboration Agreement”), (ii) Securities Purchase Agreement (the “Blackstone Securities Purchase Agreement”), (iii) Warrant Agreement (the “Blackstone Warrant”) and (iv) a Registration Rights Agreement (the “Blackstone Registration Rights Agreement”). The Blackstone Collaboration Agreement, the Blackstone Securities Purchase Agreement, the Blackstone Warrant and the Blackstone Registration Rights Agreement are collectively referred to as the “Blackstone Agreements”. The Blackstone Agreements were entered into and in contemplation of one another and, accordingly, the Company assessed the accounting for the Blackstone Agreements in the aggregate.

For further details on the terms and accounting treatment considerations for these contracts, please refer to following notes to the Company’s consolidated financial statements contained in the Company’s Annual Report:

•Note 11, “Liability related to future royalties and milestones, net”

•Note 12,“Warrants”

•Note 13, “Shareholders’ equity”

In November 2021, the upfront payment of $50.0 million was paid by Blackstone upon execution of the Blackstone Collaboration Agreement. In December 2022, two Blackstone Development Payments were paid by Blackstone of $35.0 million each as a result of (i) the joint steering committee’s review of the Company’s interim analysis of pivotal FELIX Phase 2 clinical trial of obe-cel in r/r ALL and (ii) achievement of a pre-agreed manufacturing milestone as a result of completion of planned activities demonstrating the performance and qualification of the Company’s obe-cel’s manufacturing process. The remaining $30.0 million will be payable to the Company on the achievement of certain specified regulatory milestones. The Company considers the achievement of the specified regulatory milestone as probable when actually achieved.

On February 6, 2024, the Company concurrently entered into the BioNTech Agreements.

For further details on the terms and accounting treatment considerations for these contracts, refer to following notes to these interim condensed consolidated financial statements:

•Note 1, “Nature of the business”

•Note 3, “License Revenue”

•Note 10, “Shareholders’ equity”

•Note 14, “Commitment and contingencies”

Obe-cel Product Revenue Interest

Under the BioNTech License and Option Agreement, BioNTech has agreed to financially support the expansion of the clinical development program for, and planned commercialization of obe-cel. In exchange for the grant of rights to future revenues from the sales of obe-cel products, BioNTech made an upfront payment to the Company of $40.0 million. The Company will pay BioNTech a low single-digit percentage of annual net sales of obe-cel products, which may be increased up to a mid-single digit percentage in exchange for milestone payments of up to $100.0 million in the aggregate on achievement of certain regulatory events for specific new indications upon BioNTech's election.

As the BioNTech License and Option Agreement has been accounted for asone freestanding financial instrument with various embedded features, (e.g. the Obe-cel Product Revenue Interest, milestone payments and royalties), the Company is required to consider if these embedded features are required to bifurcated from the host contract and therefore accounted for as a separate derivative. The Company determined the host contract to be debt-like and therefore the embedded features were analyzed pursuant to a debt host contract. The Company concluded the BioNTech License and Option Agreement (the host contract) should not be accounted as a derivative in accordance with ASC 815-10-15-59(d) but rather as a debt instrument under ASC 470.

The Company has accounted for the Obe-cel Product Revenue Interestas a liability primarily due to the Company’s significant continuing involvement in generating the royalty stream. The Company initially recognized the BioNTech Liability at $38.3 million being the face value less debt issuance costs. If and when obe-cel is commercialized and royalties become payable, the Company will recognize the portion of royalties paid to BioNTech as a decrease to the liability with a corresponding reduction in cash.

The carrying amount of the BioNTech Liability is based on the Company’s estimate of the future royalties to be paid to BioNTech to be received over the life of the arrangement as discounted using an effective interest rate. The excess or deficit of estimated present value of future royalties over the initial carrying amount, is recognized using the cumulative catch-up method within interest expense using the initial effective interest rate. The imputed rate of interest on the unamortized portion of the BioNTech Liability was approximately 28.70% as of February 6, 2024, the execution date of the BioNTech Agreements and June 30, 2024.

On a quarterly basis, the Company assesses the amount and timing of expected royalty using a combination of internal projections and forecasts from external sources. To the extent the present value of such payments is greater or less than its initial estimates or the timing of such payments is materially different than its original estimates, the Company will adjust the amortization of the BioNTech Liability using the catch-up method.

Note 13. Leases

Operating leases - Lessee

The Company leases certain office space, laboratory space, and equipment. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

The Company’s costs as a lessee for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

Supplemental cash flow information for the three months ended June 30, 2024 and 2023 were as follows (in thousands):

The weighted average remaining lease term and weighted average discount rate of operating leases at June 30, 2024 and 2023 were as follows:

The maturities of operating lease liabilities as of June 30, 2024 were as follows (in thousands):

Operating leases - Lessor (sublease agreements)

The Company subleasestwo manufacturing spaces in Enfield, U.K. to third parties. The annual lease payments to be received for each of the subleased units are £97,000 and £109,000, over lease terms from October 2021 to February 2029 and October 2021 to October 2026, respectively.

The following table shows the sublease rental income for the three and six months ended June 30, 2024 and 2023 (in thousands):

Future fixed receipts for non-cancellable operating subleases in effect as of June 30, 2024 are receivable as follows (in thousands):

Note 14. Commitments and Contingencies

License Agreements

The Company has entered into an exclusive license agreement, as amended, with UCL Business Ltd (“UCLB”). In connection with the UCLB license agreement, the Company is required to make annual license payments and may be required to make payments to UCLB upon the achievement of specified milestones. During the three and six months ended June 30, 2024, less than $0.1 million was paid or payable to UCLB by the Company, relating to the income allocable to the value of the sublicensed intellectual property rights.

In November 2019, the Company entered into an exclusive license agreement with Noile-Immune Biotech Inc. (“Noile”) under which the Company will have the right to develop CAR T cell therapies incorporating Noile’s PRIME (proliferation-inducing and migration-enhancing) technology. The Company may be obligated to make additional payments to Noile upon the achievement of development milestones and receipt of regulatory approvals product sale milestones, as well as royalty payments based on possible future sales resulting from the utilization of the licensed technology.

In September 2023, the Company entered into a non-exclusive sublicense agreement with Miltenyi Biotech B.V. & Co. KG (“Miltenyi”) under which the Company received a sublicense related to the use of certain Miltenyi products in the Company’s development, manufacture and sale of its products. Under the agreement, the Company is obligated to make specified payments to Miltenyi upon the achievement of certain regulatory and clinical milestones. The Company recognized $0.4 million of expense in aggregate relating to an upfront license payment and milestone payments that were deemed probable during the year ended December 31, 2023. The Company did not recognize any further milestone payments during the three and six months ended June 30, 2024.

Contractual obligations

In July 2022, the Company renegotiated a master services agreement with Adaptive Biotechnologies Corporation (“Adaptive”), under which Adaptive's assay is used to analyze patient samples from r/r B-ALL patients. Under the agreement, the Company is obligated to make specified payments to Adaptive upon the achievement and receipt of certain regulatory approvals and achievement of commercial milestones in connection with the Company’s use of the Adaptive assay. During the year ended December 31, 2023, the Company recognized all contractual milestones relating to this contract, and as a result no contractual milestones were recognized during the three and six months ended June 30, 2024.

In previous periods, the Company has entered into agreements with certain advisory firms. The Company is obligated to make specified payments upon the achievement of certain strategic transactions involving the Company. During the three and six months ended June 30, 2024, the Company paid a fee under these agreements.

The Company has estimated the probability of the Company achieving each potential milestone in relation to the agreements with UCLB, Noile, Miltenyi and its agreements with certain advisory firms in accordance with ASC 450. The Company considers the regulatory approval, commercial milestones and execution of collaboration agreements probable when actually achieved. Furthermore, the Company recognizes expenses for clinical milestones when their achievement is deemed probable. The Company concluded that, as of June 30, 2024, there were no other milestones for which the likelihood of achievement was currently probable.

Capital Commitments

As of June 30, 2024, the Company’s unconditional purchase obligations for capital expenditures totaled $9.7 million and included signed orders for capital equipment and capital expenditures for construction and related expenditures relating to its properties in the U.K. and the US. The Company expects to incur the full amount of these obligations within one year.

Master Supply Commitments

As of June 30, 2024, the Company’s unconditional purchase obligations with Miltenyi Biotec GmbH for reagents and disposables totaled $1.1 million, which the Company expects to incur within one year.

Distribution Commitments

The Company entered into an Exclusive Distribution Agreement, effective as of April 25, 2024 (the “Effective Date”), with Cardinal Health 105, LLC (“Cardinal Health”). Pursuant to, and subject to the terms and conditions of, the Exclusive Distribution Agreement, the Company engaged Cardinal Health as its exclusive third-party logistics distribution agent for sales of obe-cel in the US. The Exclusive Distribution Agreement runs for an initial term ofthree years following commercial launch and automatically renews for additional terms ofone year each, unless either party elects not to renew. In addition, the Company can terminate the Exclusive Distribution Agreement without cause, subject to the payment of termination fees if such termination occurs during the initial three-year term. Under the terms of the Exclusive Distribution Agreement, the Company must pay to Cardinal Health a one-time start-up fee, and if the Company proceeds with commercialization of obe-cel, upon its launch, a monthly account management fee, and other fees for various services, including post-launch program implementation, information systems, warehouse operations and financial services.

Blackstone and BioNTech Agreements

Refer to Note 12, “Liabilities related to future royalties and milestones, net” for further details about the BioNTech Agreements and Blackstone Agreements.

BioNTech License and Option Agreement - Product Options gain contingency

As the Product Options within the BioNTech License and Option Agreement were an embedded feature within a freestanding financial instrument, the Company assessed if the Product Options should be accounted for as a derivative under ASC 815. However, the Company determined the Product Options met the scope exception for derivative accounting under ASC 815 and therefore should be accounted for a gain contingency under the scope of ASC 450. As of June 30, 2024, Product Options were not exercised and therefore no amounts were recognized.

Legal Proceedings

From time to time, the Company may be a party to litigation or subject to claims incident to the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. The Company was not a party to any litigation and didnot have contingency reserves established for any liabilities as of June 30, 2024 and December 31, 2023.

Indemnification Agreements

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because they involve claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

In accordance with the indemnification agreements entered into with relevant individuals in accordance with the Company’s Articles of Association, the Company has indemnification obligations to its directors, officers and members of senior management for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date under these indemnification agreements, and the Company has director and officer insurance that may enable it to recover a portion of any amounts paid for future potential claims.

Note 15. Related party transactions

Blackstone Agreements

In November 2021, the Company concurrently entered into the Blackstone Agreements. As of the execution of the Blackstone Agreements, Blackstone became a related party of the Company, as Blackstone became the owner of more than 10% of the Company’s outstanding voting securities. In addition, Blackstone received and exercised its right to nominateone director to the board of directors of the Company and is therefore considered to be one of the principal owners of the Company.

As of June 30, 2024, the carrying amount of the Blackstone Collaboration Agreement Liability was $195.9 million which included aggregated cumulative non-cash interest expense and cumulative catch-up adjustment of $25.0 million. As of December 31, 2023, the carrying amount of the Blackstone Collaboration Agreement Liability was $170.9 million which included aggregated cumulative non-cash interest expense (including cumulative catch-up adjustments), of $45.0 million. Refer to Note 12,“Liabilities related to future royalties and milestones, net” for further details.

In February 2024, the Company concurrently entered into the BioNTech Agreements. Upon the execution of the BioNTech Agreements, BioNTech became a related party of the Company. BioNTech owns more than 10% of the Company’s outstanding voting securities and is therefore one of the principal owners of the Company. In addition, BioNTech has the right to nominateone director to the board of directors of the Company which BioNTech has not yet exercised.

As of June 30, 2024, the carrying amount of the BioNTech Liability was $42.8 million which included aggregated cumulative interest expense and cumulative catch-up adjustment of $2.7 million. Refer to Note 12, “Liabilities related to future royalties and milestones, net” for further details.

Note 16. Subsequent Events

The Company evaluated subsequent events through August 8, 2024, the date on which these unaudited condensed consolidated financial statements were issued. The Company has concluded that no subsequent event has occurred that requires disclosure.