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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ 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 001-37368
ADAPTIMMUNE THERAPEUTICS PLC
(Exact name of Registrant as specified in its charter)
England and Wales
(State or other jurisdiction of incorporation or organization)
Not Applicable
(I.R.S. Employer Identification No.)
60 Jubilee Avenue, Milton Park
Abingdon, Oxfordshire OX14 4RX
United Kingdom
(Address of principal executive offices)
Title of each class
American Depositary Shares, each representing
6 Ordinary Shares, par value £0.001 per share
(44) 1235 430000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
ADAP
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ◻ Yes ⌧ No
Securities registered pursuant to Section 12(g) of the Act:
None
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 and post 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 ☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2022, the last business day of the registrant’s most recently
completed second fiscal quarter, was approximately $244,288,811.
As of March 3, 2023 the number of outstanding ordinary shares, par value £0.001 per share, of the registrant was 991,831,158.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2023 Annual Meeting of Shareholders to be filed with the U.S. Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference in Part III, Items 10-14 of this Annual Report on Form 10-K.
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PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
[Reserved]
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibit and Financial Statement Schedules
Item 16.
Form 10-K Summary
Signatures
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GENERAL INFORMATION
In this Annual Report on Form 10-K (“Annual Report”), “Adaptimmune,” the “Group,” the “Company,” “we,” “us” and “our”
refer to Adaptimmune Therapeutics plc and its consolidated subsidiaries, except where the context otherwise requires. “Adaptimmune” and
“SPEAR” are registered trademarks of Adaptimmune.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they
never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking
statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Annual Report are
forward-looking statements. In some cases, you can identify forward-looking statements by words such as “believe,” “may,” “will,”
“estimate,” “continue,” “anticipate,” “intend,” “expect” or the negative of these words or other comparable terminology.
Any forward-looking statements in this Annual Report reflect our current views with respect to future events or to our future
financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-
looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those
listed under Part I, Item 1A. Risk Factors and elsewhere in this Annual Report. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-
looking statements for any reason, even if new information becomes available in the future.
This Annual Report also contains estimates, projections and other information concerning our industry, our business, and the
markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain
medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently
subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this
information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys,
studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources.
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PART I
Item 1. Business
Overview
We are a clinical-stage biopharmaceutical company focused on providing novel cell therapies to people with cancer. We are a
leader in the development of T-cell therapies for solid tumors and have reported responses in multiple solid tumor indications.
Our proprietary platform enables us to identify cancer targets, find and develop cell therapy candidates active against those targets
and produce therapeutic candidates for administration to patients. Our cell therapy candidates include genetically engineered T-cell
receptors (“TCRs”) and HLA-independent TCRs (“HiTs”) where surface proteins are targeted independently of the peptide-HLA complex.
Our cell therapies are currently manufactured on an autologous or per patient basis and we have a proprietary preclinical allogeneic
platform for the development of “off the shelf” cell therapies.
Our MAGE-A4 cell therapy franchise includes T-cell therapy products targeting solid tumor indications in which the MAGE-A4
antigen is expressed, with responses seen in eight indications (head and neck, esophagogastric junction (“EGJ”), non-small cell lung cancer
(NSCLC)-squamous, synovial sarcoma, melanoma, urothelial, ovarian and myxoid/round cell liposarcoma (MRCLS) indications). Filing of
a Biologics License Application (BLA) for the lead product (afamitresgene autoleucel or “afami-cel”) in synovial sarcoma has been
initiated with the U.S. Food and Drug Administration (“FDA”), with completion of the filing targeted for mid-2023.
Clinical programs with our MAGE-A4 targeted cell therapies are as follows:
● SPEARHEAD-1 Phase 2 Trial with afami-cel (ADP-A2M4): A registration directed Phase 2 clinical trial is ongoing in
synovial sarcoma in which the MAGE-A4 antigen is expressed. Enrollment in Cohort 1 is complete, and the cohort met its
primary endpoint with an overall response rate (ORR) of approximately 39% and a median duration of response of 50.3
weeks seen in synovial sarcoma patients. Cohort 2 of the trial is ongoing although enrollment is now complete.
● SURPASS-3 Phase 2 Trial with ADP-A2M4CD8. A Phase 2 trial for people with platinum resistant ovarian cancer is
initiating in early 2023. We have received RMAT designation (Regenerative Medicine Advanced Therapy designation) for
ADP-A2M4CD8 for the treatment of this indication from the FDA. In the Phase 1 SURPASS trial an ORR of 43% in ovarian
cancer was reported in November 2022. The Phase 2 trial will evaluate ADP-A2M4CD8 in both monotherapy and in
combination with a checkpoint inhibitor, nivolumab, in ovarian cancer in conjunction with The GOG Foundation, Inc.
● SURPASS Phase 1 Trial with ADP-A2M4CD8: Enrollment is ongoing in a Phase 1 trial for ADP-A2M4CD8, focusing on
treatment of patients with head and neck and urothelial cancers in which the MAGE-A4 antigen is expressed. Across all
indications and as of November 23, 2022, the trial has an overall response rate of 37%. In the focus areas of ovarian,
urothelial and head and neck cancers the response rate is 75% in patients with 3 or fewer prior lines of therapy (9 out of 12
patients). The trial includes a combination cohort where participants receive a combination of ADP-A2M4CD8 together with
a checkpoint inhibitor (nivolumab). Two new cohorts in urothelial and head and neck cancers for patients with fewer lines of
therapy and in combination with standard of care in those settings are also planned to initiate shortly.
Outside of the MAGE-A4 franchise, we have a preclinical program for T-cell therapies directed to the PRAME target which is
expressed in a broad range of tumors. This program is being transitioned from GSK following termination of our collaboration agreement
with GSK. Dependent on the data arising from the preclinical program, the first cell therapy targeting PRAME is anticipated to be IND-
ready by the end of 2023.
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We are also developing allogeneic or “off-the-shelf” cell therapies utilizing a proprietary allogeneic platform. The platform utilizes
cells derived from Induced Pluripotent Stem Cells (“iPSCs”), which can be gene-edited to express our engineered TCRs or other constructs
and then differentiated into the required end cell type, for example T-cells. The platform is applicable to all of our cell therapies.
We have a strategic collaboration with Genentech Inc (“Genentech”). The collaboration with Genentech covers the research and
development of “off-the-shelf” cell therapies for up to five shared cancer targets (“off-the-shelf” products) and the development of a novel
allogeneic personalized cell therapy platform.
We also have several development and research collaborations including a clinical and preclinical alliance agreement with MD
Anderson Cancer Center. A prior collaboration with GSK terminated during 2022 and we are negotiating a transition agreement with GSK
in relation to ongoing clinical trials with T-cell therapies directed to the NY-ESO and PRAME targets. A prior Co-development and Co-
commercialization agreement (the “Astellas Collaboration Agreement”) with Universal Cells, Inc., a wholly-owned subsidiary of Astellas
Pharma Inc. (“Universal Cells”) under which we collaborated with Universal Cells to research, develop, and commercialize certain cellular
therapy products directed to certain targets was mutually agreed to terminate as of March 6, 2023. Termination does not impact the
development of our allogeneic cell lines for our internal allogeneic programs or for our collaboration with Genentech Inc. The parties
previously terminated an Amended and Restated Research Collaboration and License Agreement, dated January 13, 2020, effective
February 26, 2023.
We are an integrated cell therapy company with our own manufacturing facility in the U.S. for autologous products and in the
United Kingdom (“U.K.”) for allogeneic products together with a dedicated lentiviral vector manufacturing suite in the UK within the Cell
and Gene Therapy Catapult facility at Stevenage. This enables us to continue improving the patient experience associated with our cell
therapies including the ability to rapidly introduce improvements to the manufacturing process and patient supply chain.
In November 2022 we took a decision to focus our clinical and preclinical programs on the MAGE-A4 and PRAME targets
including the BLA submission for afami-cel. We have stopped the SURPASS-2 trial in GE cancers and the TIL-IL7 program. We have also
paused any further investment in non-core activities including certain preclinical programs including the HiT program, additional target
programs (other than the PRAME program) and alternative HLA programs. We also announced that investment in commercialization of
afami-cel will be delayed given the BLA filing timelines. Given the de-prioritisation of non-core programs resulting from this decision, we
are undertaking associated cost reduction activities including a reduction in headcount of approximately 25% which we currently estimate
will extend our cash runway into early 2025. The headcount reduction has now concluded.
On March 6, 2023 we announced entry into a definitive agreement under which we will combine with TCR² Therapeutics Inc
(“TCR2”) in an all-stock transaction to create a preeminent cell therapy company focused on treating solid tumors. The combination
provides extensive advantages for clinical development and product delivery supported by complementary technology platforms. The lead
clinical franchises for the combined company will utilize engineered T-cell therapies targeting MAGE-A4 and mesothelin. These targets are
expressed on a broad range of solid tumors and are supported by early- and late-stage clinical data. The combined company also has a
preclinical pipeline of additional target opportunities with development initially focused on PRAME and CD70. The merger agreement was
unanimously approved by the boards of directors of both companies. Following the closing of the transaction, Adaptimmune shareholders
will own approximately 75% of the combined company and TCR2 stockholders will own approximately 25% of the combined company.
The agreement contains customary representations, warranties and covenants given by us and TCR2. The agreement also contains
customary pre-closing covenants, including covenants by each of the parties relating to conduct of their respective business prior to the
closing of the transaction. The transaction is expected to close in Q2 2023, subject to the receipt of approvals by Adaptimmune
shareholders and TCR2 stockholders and satisfaction or waiver of other customary closing conditions. Following the closing of the
transaction we currently estimate that the cash runway of the combined company will extend into early 2026.
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Business Strategy
Building on our leadership position with engineered T-cell therapies in solid tumor indications, our strategic objective is to be a
world leader in designing, developing and delivering cell therapies that transform the lives of people with cancer. Our objective is to
revolutionize the treatment of solid tumors with a single dose of engineered TCR T-cells and as a result to address cancers with high unmet
needs with both autologous and allogeneic solutions. To achieve our objectives, our primary core value drivers are as follows:
Filing the BLA for afami-cel and progressing towards commercialization of afami-cel. We initiated the rolling filing of the BLA
with the FDA in Q4 2022 for use of afami-cel for the treatment of synovial sarcoma. Completion of the rolling filing of all modules of the
BLA is targeted for mid-2023. Commercial preparations are underway for the launch of afami-cel in synovial sarcoma where there are
limited options and a poor prognosis for individuals with advanced disease.
Progressing the ADP-A2M4CD8 T-cell therapy into later phase clinical trials. Subject to the data from the ongoing SURPASS
family of clinical trials, we plan to rapidly progress clinical candidates through clinical trials and towards BLA filing. For example, our
Phase 2 ovarian cancer trial with ADP-A2M4CD8 is initiating in 2023 and the SURPASS Phase 1 trial continues in multiple indications
including with cohorts aimed at using ADP-A2M4CD8 in earlier lines of treatment alongside existing standard of care.
Progressing the ADP-A2M4CD8 T-cell therapy into earlier lines of therapy. We are initiating two new cohorts in the SURPASS
trial in urothelial and head and neck cancers for patients with fewer lines of therapy and in combination with standard of care in those
settings.
Progressing PRAME directed T-cell therapies into the clinic. We aim to complete preclinical development of our first T-cell
therapy directed to PRAME during 2023 and file an IND rapidly following completion of preclinical studies.
Continuing to develop “off-the-shelf” cell immunotherapies and progress allogeneic cell therapies to the clinic. We continue to
develop our “off-the-shelf” (allogeneic) platform, which is broadly applicable to cell therapies, both internally and in collaboration with our
partners Astellas and Genentech.
Continuing to improve our manufacturing and patient supply processes to optimize how we deliver our cell therapies to
patients. Our integrated cell therapy capabilities enable us to continually enhance our cell and vector manufacturing and supply processes
which we believe will ultimately enable us to treat patients quicker, at a lower cost and more effectively. We have manufacturing facilities
in the U.K. and U.S. and our U.S. manufacturing facility has been expanded in anticipation, pending FDA approval, of commercialization
of afami-cel for the treatment of synovial sarcoma.
Our Cell Therapies for Cancer
The Immune System and T-cells
The immune system plays an important role in targeting and destroying cancer cells. Specifically, T-cells, which are a type of
white blood cell, and their receptors create a natural system that is designed to scan the body for diseased cells. In general, cells process
proteins internally and then convert these proteins into peptide fragments which are then presented on the cell surface by a protein complex
called the Human Leukocyte Antigen (“HLA”). T-cells naturally scan all other cells in the body for the presence of abnormal peptide
fragments, such as those generated from infectious agents. Recognition of this peptide-HLA complex takes place through the T-cell
receptor or TCR expressed on the T-cells. However, binding of naturally occurring TCRs to cancer targets tends to be very poor because
cancer proteins appear very similar to naturally occurring proteins on healthy cells.
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Cancer Target Identification and Validation
Before developing any engineered T-cell therapy, it is important to identify and validate a suitable target cancer peptide or protein.
The target must be expressed only on the cancer cells of interest and with expression in normal non-cancerous tissue only where a risk to
the patient would be deemed acceptable. Careful validation and identification of targets is important to ensure that any engineered cell
therapy is specific to the targeted cancer and does not bind to the same target on non-cancer cells, or that the receptor in the cell therapy
does not recognize a similar peptide or protein derived in normal cells.
Cell Therapies
We have developed a range of cell therapies all of which utilize the interaction between a T-cell via its TCRs and a peptide or
protein. Our cell therapies can be made directly from a patient’s own T-cells (“autologous” cell therapies) or manufactured from stem cells
(“allogeneic” cell therapies).
For all of our autologous cell therapies patient T-cells are extracted and are then engineered to generate the end cell therapy
whether this is through engineering of the TCR itself or through the addition of another agent which enhances the efficacy of the TCR or T-
cell. The nature of the engineering impacts the type of cell therapy product generated. The engineered T-cells are then expanded and
infused back into the patient. When these T-cells encounter a recognized peptide or protein within the patient’s body, they multiply and
initiate the destruction of the targeted cancer cells.
For our allogeneic T-cell therapies, Induced Pluripotent Stem Cells ("iPSCs”) are gene edited to express the engineered TCR or
HiT and potentially a range of next gen modifications. As part of the gene editing the iPSCs are also edited to remove certain HLA-type
expression so that patients expressing any HLA-type can be treated with the same end product. Those gene-edited iPSCs are then
differentiated, using a number of directed process steps, into T-cells, which can then be used to treat patients expressing the tumor antigen
to which the TCR or HiT is directed.
Our TCR T-cells (SPEAR T-cells)
Following identification of a suitable target peptide, we identify TCRs that are capable of binding to that target peptide or protein.
We then engineer and optimize those identified receptors to enhance their ability to recognize and bind to the cancer targets, thereby
enabling a highly targeted immunotherapy which complements a patient’s immune system. The optimized TCR or SPEAR-T-cell for the
cell therapy then undergoes extensive preclinical safety testing prior to administration to patients. A lentiviral vector is used to transfer the
engineered TCR into the patient’s T-cells if that patient has the relevant target and HLA type for our TCR cell therapy. The optimized cell
therapy then undergoes extensive preclinical safety testing prior to administration to patients.
Our HiT Cell Therapies
Naturally occurring TCRs recognize peptides that are presented on the cell surface by a protein complex called HLA. Patient
treatment with our SPEAR T-cells requires patients to express a particular HLA-type. We have now developed a TCR platform capable of
producing TCRs able to recognize targets expressed on the surface of cancer cells independently of HLA-type. The TCR is engineered to
recognize and bind to a cell surface protein. The HiT platform enables us to identify suitable targets and to then generate engineered HiTs
which can bind and interact with those targets. These HLA-independent TCRs or HiTs use the same internal cell signaling processes as
naturally occurring TCRs.
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Our Product Pipeline
SURPASS Ph1 additional cohorts
MAGE-A4 franchise
We have multiple autologous cell therapies in clinical trials or entering clinical trials which target indications in which the
MAGE-A4 antigen is expressed.
● SPEARHEAD-1 Phase 2 Trial with afami-cel:
Afami-cel is a TCR T-cell therapy (“SPEAR T-cell”) directed to a MAGE-A4 peptide presented on HLA. The diagram below
illustrates the SPEAR T-cell interacting with the MAGE-A4 antigen on the tumor cell.
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A registration directed Phase 2 clinical trial is underway in synovial sarcoma in which the MAGE-A4 antigen is expressed.
Enrollment in Cohort 1 is complete, and the cohort met its primary endpoint. Cohort 2 of the trial is ongoing although enrollment
has now met its target and ongoing enrollment is paused. A BLA is in the process of being filed with the FDA, with the first
modules filed in December 2022. Completion of the rolling filing of all modules of the BLA is targeted for mid-2023.
Clinical data was presented at the Connective Tissue Oncology Society (“CTOS”) in November 2022. An Overall Response Rate
(ORR) per independent review of approximately 39% in synovial sarcoma was presented together with a median duration of
response of just over 50 weeks. Afami-cel continues to have an acceptable benefit to risk profile. The charts below summarize the
best overall responses by RECIST v1.1 as of August 29, 2022 for cohort 1 of the Spearhead-1 trial.
The graph represents data from Cohort 1. PR= partial response; SD=stable-disease; PD=progressive disease. Data represent
percent changes from baseline in sum of diameters (sum of the long diameters for non-nodal lesions and short axis for nodal
lesions) in target lesions through progression or prior to surgical resection.
Orphan Drug designation for afami-cel for the treatment of soft tissue sarcomas has been granted in the European Union
(“EU”) and U.S. together with Regenerative Medicine Advanced Therapy (“RMAT”) designation in the U.S. for the treatment
of synovial sarcoma and access to the Priority Medicines (“PRIME”) Regulatory Support initiative by the European
Medicines Agency (“EMA”) for the treatment of synovial sarcoma.
● SURPASS family of trials
Phase 1 Trial with ADP-A2M4CD8
Enrollment is ongoing in a Phase 1 trial (“SURPASS” trial) for a next generation SPEAR T-cell, ADP-A2M4CD8. This next
generation SPEAR T-cell utilizes the same engineered T-cell receptor as afami-cel, but with the addition of a CD8α
homodimer. The addition of the CD8α homodimer has been shown in
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vitro to increase cytokine release and SPEAR T-cell potency. As of November 23, 2022 responses (per RECIST 1.1) were
seen in five solid tumor indications with a 37% response rate across the whole trial. The following chart shows the responses
seen in the trial.
PR= partial response; SD=stable-disease; PD=progressive disease. Data represent percent changes from baseline in sum of
diameters (sum of the long diameters for non-nodal lesions and short axis for nodal lesions) in target lesions through
progression or prior to surgical resection.
We are focusing recruitment in the SURPASS trial on head and neck cancer and urothelial cancer. Taken together with
ovarian cancer, a response rate of 75% was seen as of November 23, 2022 in patients with three or fewer lines of therapy (9
out of 12 patients in trial). As a result of these data, we are initiating new cohorts within the SURPASS trial for treatment of
earlier line patients in urothelial and head and neck cancers alongside standard of care treatment. We also continue to enroll
in a cohort looking at the combination of ADP-A2M4CD8 with a checkpoint inhibitor.
The charts below show the responses seen in ovarian, urothelial and head and neck indications. Data provided is as of
November 23, 2022.
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Data cut-off: Nov. 23, 2022, one non-evaluable patient with ovarian cancer not shown;
* oral, pharyngeal, and laryngeal cancers;
CR=complete response: PR=partial response; SD=stable disease; PD=progressive disease;
SOC=standard-of-care; PFS=progression free survival
Phase 2 Trial with ADP-A2M4CD8 in ovarian cancer: A Phase 2 trial with ADP-A2M4CD8 in ovarian cancer is initiating in
early 2023 in collaboration with The GOG Foundation Inc. The trial will evaluate the T-cell therapy in both monotherapy and in
combination with nivolumab (a checkpoint inhibitor) in platinum resistant ovarian cancer. We recently received FDA RMAT
designation for ADP-A2M4CD8 for the treatment of patients with platinum resistant ovarian cancer.
Other Clinical Programs
Two further clinical programs, the ADP-A2AFP Phase 1 trial and the SURPASS-2 Phase 2 trial, have closed to enrollment. We are
also in discussions with GSK in relation to the transition of clinical trial programs for cell therapies targeting the NY-ESO antigen
across multiple tumors.
Preclinical Candidate Pipeline
Our aim is to utilize the insights we obtain from our clinical trials and translational sciences work to improve the efficacy of our
existing products and approaches; and to increase the scope of our cell therapies and ability to treat an increasing number of patients. We
are currently focusing our preclinical pipeline on the development of T-cell therapies to target PRAME expressing tumors and on our
allogeneic cell therapies.
Allogeneic iPSC Platform
We continue to develop our allogeneic platform which can be used to generate ‘off-the-shelf’ cell therapies that are universally
applicable to all eligible patients by developing gene-edited iPSCs which are differentiated to T-cells by our in-house proprietary process.
These “off-the-shelf” cells are being developed to overcome the current limitation of autologous therapies that need to be manufactured
specifically for each patient. Additionally, our process starts with iPSCs instead of donor-derived T-cells, which potentially reduces product
variability.
The enhanced T-cell technology being developed involves selective engineering for the removal of potentially immunogenic cell
surface proteins (for example, HLA molecules) and the addition of our TCRs, without the use of
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nucleases, to develop these T-cell products. If successful, this will enable us to treat our patients with an “off-the-shelf” or on demand cell
therapy product without the need to acquire a patient’s own cells.
We have two collaboration programs, one with Astellas in which an allogeneic product incorporating a HiT targeting mesothelin is
being developed (and a further target has been nominated); and one with Genentech, in which “off-the-shelf” cell therapies for up to five
shared cancer targets (“off the shelf” products) and a novel allogeneic personalized cell therapy platform are being developed.
Integrated Cell Therapy Company
We are committed to building an integrated cell therapy company with a broad range of capabilities that enable the research and
development of cell therapies, the translational analyses of clinical responses, control of the manufacturing and supply chain and
commercialization. The ability to take learnings from every stage of the process and feed these learnings back into further research and
development enables decisions to be taken at the appropriate time and improvements and enhancements to processes and products to be
made effectively and in a timely manner.
We have our own autologous cell therapy manufacturing facility at the Navy Yard in Philadelphia, Pennsylvania which is capable
of supplying all of our autologous cell therapies currently in the clinic. The Navy Yard facility will also support the anticipated commercial
launch in the US of afami-cel. A new manufacturing facility dedicated to allogeneic drug product manufacture opened in 2022 and is co-
located with our research facility in Milton Park in the U.K. We also have our own dedicated vector manufacturing capability in the U.K.,
within the Catapult Cell and Gene Therapy Manufacturing Centre in Stevenage, which is now able to produce lentiviral vector for our
clinical trials using a proprietary suspension process.
Control of our own end-to-end manufacturing processes (including vector, T-cell and analytical quality control testing) enables us
to improve and further develop these processes for manufacture of our cell therapies. The ability to manufacture in-house provides security
of supply at a lower cost than using a third-party provider. In addition, the ability to continually evaluate and optimize processes enables
ongoing reduction in the times taken to treat our patients and the overall cost of goods applicable to manufacture and supply of our cell
therapies.
Core Alliances and Collaborations
Genentech Strategic Collaboration and License Agreement
On September 3, 2021, Adaptimmune Limited, a wholly-owned subsidiary of Adaptimmune Therapeutics Plc, entered into a
Strategic Collaboration and License Agreement with Genentech, Inc. and F. Hoffman-La Roche Ltd (the “Agreement”).
The collaboration has two components:
1) Development of allogeneic T-cell therapies for up to five shared cancer targets
2) Development of personalized allogeneic T-cell therapies utilizing αβ T-cell receptors (TCRs) isolated from a patient, with
such therapies being administered to the same patient.
The parties will collaborate to perform a research program, initially during an eight-year period (which may be extended for up to
two additional two-year terms at Genentech’s election upon payment of an extension fee for each two-year term), to develop the cell
therapies, following which Genentech will determine whether to further develop and commercialize such therapies.
Under the terms of the Agreement, Adaptimmune received a $150 million upfront payment. Adaptimmune may also receive:
● $150 million in additional payments spread over a period of five years from the effective date of the Agreement, unless the
Agreement is earlier terminated;
● research milestones of up to $50 million;
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● development milestones of up to $100 million in relation to the development of off-the-shelf T-cell therapies per collaboration
target (unless Adaptimmune exercises its right to opt-in to receive a profit share) and up to $200 million in relation to the
development of personalized T-cell therapies;
● commercialization milestones of up to $1.1 billion for “off-the-shelf” T-cell therapies (unless Adaptimmune exercises its right to
opt-in to receive a profit share and assuming off-the-shelf T-cell therapies are developed to five targets) and for personalized T-
cell therapies; and
● net sales milestones of up to $1.5 billion for “off-the-shelf” T-cell therapies (unless Adaptimmune exercises its right to opt-in to
receive a profit share and assuming “off-the-shelf” T-cell therapies are developed to five targets) and for personalized T-cell
therapies
In addition, Adaptimmune will receive tiered royalties on net sales in the mid-single to low-double digits.
Adaptimmune also has a right to opt-in to receive a profit share and to co-promote “off-the-shelf” T-cell therapies. If
Adaptimmune elects to opt in, then Adaptimmune will be eligible to share 50 percent of profits and losses from U.S. sales on such products
and to receive up to $800 million in ex-U.S. regulatory and sales-based milestone payments, as well as royalties on ex-U.S. net sales.
The parties can terminate the Agreement in the event of material breach or insolvency of the other party. Genentech is entitled to
terminate the Agreement in its entirety, on a product-by-product basis or collaboration target by collaboration target basis on provision of
180 days notice.
Universal Cells Co-development Collaboration Agreement
On January 13, 2020, the Company entered into a Co-development and Co-commercialization agreement (the “Astellas
Collaboration Agreement”) with Universal Cells, Inc., a wholly-owned subsidiary of Astellas Pharma Inc. (“Universal Cells”).
Under the Astellas Collaboration Agreement the parties agreed on up to three targets with the aim of co-developing T-cell therapies
directed to those targets pursuant to an agreed research plan. The Company and Universal Cells mutually agreed to terminate the agreement
as of March 6, 2023. In connection with the termination, all licenses and sublicenses granted to either party pursuant to the Collaboration
Agreement ceased, and each party is required to return all confidential information of the other party within 30 days of the Effective Date.
Each party also agreed to destroy all cell lines and other materials of the other party in its possession within 30 days of the Effective Date.
There were no termination penalties in connection with the termination.
In addition to the Astellas Collaboration Agreement, the parties previously entered into an agreement relating to the use of Universal
Cells gene editing and HLA-editing technology in the context of our development of allogeneic T-cell therapies. This Agreement was
terminated by notice on January 27, 2023, effective 30 days following receipt of notice of termination. Termination follows our decision to
change the cell line being used to develop its MAGE-A4 allogeneic cell therapy due to the presence of a chromosomal abnormality in the
original cell line provided by Universal Cells under the Agreement. As a result of termination, all licenses between the parties to the
Agreement will cease and each party is required to return all confidential information of the other party.
Development and Research Collaborations
GSK Collaboration and License Agreement
We entered into the GSK Collaboration and License Agreement regarding the development, manufacture and commercialization
of TCR therapeutic candidates in May 2014. The collaboration was terminated in October 2022 and we are in discussions with GSK in
relation to the transition of the NY-ESO and PRAME programs under the collaboration agreement to Adaptimmune. A further amendment
to the collaboration agreement was entered into on December 19, 2022 for the deletion of certain provisions relating to GSK’s post
termination manufacturing and supply obligations and payment of £5 million by GSK to Adaptimmune.
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Preclinical and Clinical Collaborations
We have third-party collaborations in place with Noile-Immune and Alpine Immune Sciences.
With Alpine, we are collaborating to develop next-generation SPEAR T-cell products that incorporate Alpine’s secreted and
transmembrane immunomodulatory protein technology. The collaboration agreement was announced in May 2019, and we believe that the
Alpine technology could complement our existing internal next generation technology and enhance anti-tumor potential through
engagement of further rapid and flexible immunomodulatory mechanisms.
In the Noile-Immune collaboration, announced in August 2019, we will co-develop next-generation SPEAR T-cell products,
incorporating Noile-Immune’s PRIME (proliferation inducing and migration enhancing) technology, based upon co-expression of IL-7 and
CCL19.
We also have a strategic alliance agreement with the MD Anderson Cancer Center which covers both the conduct of certain
clinical trials for our SPEAR T-cell therapies and also certain pre-clinical research work.
Intellectual Property
We seek to protect the intellectual property and proprietary technology that we believe is important to our business, including
seeking, maintaining, enforcing and defending patent rights for our SPEAR T-cells and processes, whether developed internally or licensed
from third parties. Our success will depend on our ability to obtain and maintain patent and other protection including data/market
exclusivity for our cell therapies, manufacturing and platform technology, preserve the confidentiality of our know-how and trade secrets
and operate without infringing the valid and enforceable patents and proprietary rights of third parties. See “Risk Factors—Risks Related to
Our Intellectual Property.”
Our policy is to seek to protect our proprietary position generally by filing an initial priority filing at the U.K. Intellectual Property
Office (“UKIPO”) and/or the U.S. Patent Trademark Office (“USPTO”). This is followed by the filing of a patent application under the
Patent Co-operation Treaty (“PCT”) claiming priority from the initial application(s) and then application for patent grant in, for example,
the U.S., Europe (including major European territories), Japan, Australia, New Zealand, India and Canada. In each case, we determine the
strategy and territories required after discussion with our patent professionals to ensure that we obtain relevant coverage in territories that
are commercially important to us and reflect the scope of cell therapies being developed. We will additionally rely on data exclusivity,
market exclusivity and patent term extensions when available, including as relevant exclusivity through orphan or pediatric drug
designation. We also rely on trade secrets and know-how relating to our underlying platform technologies, manufacturing processes and
pre-clinical candidates.
Product Patent Families
Afami-cel - We own three patent families covering the composition of matter of ADP-A2M4 and other related TCRs and T-cell
therapies. The patent application claims are primarily directed to the engineered TCR therapeutic candidate and in particular the amino acid
substitutions required for such engineered TCR therapeutic candidate. National/regional applications have been filed via the PCT in all
commercially relevant territories and claims have been allowed in Europe and the US. We project the patents within these families, if
issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, will expire in 2037 (worldwide,
excluding possible patent term extensions). PCT applications have also been filed in relation to the use of ADP-A2M4 TCR in the
treatment of head and neck, lung and ovarian cancers.
ADP-A2M4CD8 – We own a patent family covering the composition of matter of ADP-A2M4CD8 and other related TCR T-cell
therapies. The patent application claims are directed to the engineered TCR therapeutic candidate in combination with the CD8 next
generation technology. We project the patents within this family, if issued, and if the appropriate maintenance, renewal, annuity, or other
governmental fees are paid, to expire in 2039 (worldwide, excluding
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possible patent term extensions). PCT applications have also been filed in relation to the use of A2M4CD8 TCR in the treatment of
esophageal and gastric cancers, head and neck, urothelial and ovarian cancers.
PRAME TCR T-cell – We have filed a priority patent application covering the composition of matter of the TCR T-cell therapy
family directed to the PRAME target. The patent application claims are primarily directed to the engineered TCR candidate and in
particular to the amino acid substitutions required for such TCR candidate. National and regional applications will be filed via the PCT in
due course.
Platform Technology
We own a number of platform technology patents and patent applications which are directed to certain aspects of the process that
we use to engineer our SPEAR TCRs and other cell therapies. Some of these are owned jointly with Immunocore Limited, with whom we
have historically had a shared development history.
Manufacturing Process Patents and Patent Applications
We have trade secrets and patent applications relating to the manufacture of our cell therapies. For example, we have filed patent
applications in commercially relevant territories, which claim priority from initial priority patent applications filed at the USPTO and
UKIPO, which are directed to a particular modification to the lentiviral vector technology. We believe this modification enhances the safety
profile of the lentiviral vector technology. This has been granted in the U.S. Further patent applications have been filed on the
manufacturing and quality control of our products.
Preclinical and Next Generation Approaches
We have filed seven patent families covering a range of next generation technology approaches and/or combination approaches.
Allogeneic iPSC Platform Approaches
We have filed a number of patent applications covering our proprietary iPSC stem cell differentiation technology which enables
the differentiation of stem cells into T-cells which can then be administered to patients. The patent applications are primarily directed to the
various stages required for the differentiation of the iPSC stem cells into different cell line types including NK cells, NKT cells,
macrophages, dendritic cells and T-cells. The earliest of these applications have now been filed as PCT applications and will be pursued in
all commercially relevant territories. Patent protection is projected to extend to 2040 (worldwide, excluding possible patent term
extensions).
Third-Party Intellectual Property Rights
We have a non-exclusive license from ThermoFisher Inc. under certain of its intellectual property rights covering its Dynabeads®
CD3/CD28 technology. This technology is used in our manufacturing process to isolate, activate and expand patient T-cells. We also have a
supply agreement which runs until December 31, 2025. See “Risk Factors—Risks Related to Our Reliance Upon Third Parties—We rely
heavily on ThermoFisher and the technology we license from them.”
Whether licenses are required under any third-party patents depends on what steps we take going forward in relation to our
manufacturing processes, development processes and development products including our allogeneic manufacturing and differentiation
process. We may need to negotiate a license under any third-party patents or develop alternative strategies for dealing with any third party
patents if licenses are not available on commercially acceptable terms or at all.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies and intense competition.
Competitors include large pharmaceutical companies with established development and
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commercialization programs, biotechnology companies with varying development and commercialization capabilities and academic centers
developing novel technologies and products.
We face competition in all of the following areas:
(a) From other autologous cell therapies: There are a number of other cell therapies which have already received marketing
approval or which are currently in clinical trials. For example, AbecmaTM, BreyanziTM, CARVYTKITM, TecartusTM,
KymriaTM, and YescartaTM which have received marketing Iovance’s Lifileucel TIL cell therapy and TCR2 Therapeutics’
TRuC T-cells.
(b) From other TCR T-cell therapies: Third parties and academic institutions are developing TCR-based cell therapies which
are directed to single or multiple targets including HPV-16 E6/E7, KRAS, MAGE-A1, MAGE-A3, MAGE A3/A6, MAGE-
A4, MART1, NRAS, NY-ESO-1, p53, PRAME, mesothelin, as well as personalized neoantigen targets. These cell therapies
are at a variety of preclinical and clinical development stage. Examples include Immatics’ IMA203 and IMA203CD8 assets
that recognize a PRAME pHLA complex, which is currently being investigated across various solid tumor indications in
clinical Phase I trial evaluations.
(c) From other cell-based immunotherapy approaches: The immune system utilizes a number of different cell types and
processes. Other immunotherapy approaches may target different parts of the immune system including different types of T-
cells (for example, gamma delta T-cells), macrophage based systems, NK-cell based products, Marrow-infiltrating
lymphocytes (MILs) and virus-specific T-cells.
(d) From other allogeneic cell therapy approaches: Multiple third parties are currently developing allogeneic cell therapy
approaches. These can be derived from healthy donors (for example Allo-501A from Allogene Therapeutics), umbilical cord
blood, or induced pluripotent stem cells (for example, FT819 being developed by Fate Therapeutics). In Dec 2022, Atara
Bio’s donor-derived EbvalloTM was granted approval from the European Commission for both adults and children with
Epstein-Barr positive post-transplant lymphoproliferative disorder.
(e) From other therapeutic product types. In any indication that we address there may be multiple other product modalities
which are already being marketed and where we will have to show increased benefit to patients, or which are in clinical trials.
For example, small molecule chemotherapy agents, biologics (e.g. peptides, antibodies, antibody-drug conjugates), vaccines,
oncolytic viruses, other cell therapies (for example, gamma delta T-cells, macrophage-based systems, NK-cell-based
products, Marrow-infiltrating lymphocytes, and virus-specific T-cells). Where products receive approval and start being used
within the patient setting, such products can also impact our ability to complete clinical development and obtain information
around the safety and efficacy of our own products.
Where we see competition in any indication and a competitor receives marketing approval before our cell therapy, we will need to
demonstrate increased efficacy over the competing product.
Government Regulation and Product Approvals
Government authorities in the U.S., at the federal, state and local level, and in other countries and jurisdictions, including the EU
and U.K, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging,
storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and
export of pharmaceutical products. The processes for obtaining regulatory approvals in the U.S. and in foreign countries and jurisdictions,
along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of
substantial time and financial resources. Failure to comply with the various federal, state and local level laws and requirements can also
result in severe penalties and restrictions to the business.
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FDA Approval Process
In the U.S., therapeutic products, including drugs, biologics, and medical devices are subject to extensive regulation by the FDA.
The Federal Food, Drug, and Cosmetic Act (the “FDC Act”), and other federal and state statutes and regulations, govern, among other
things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution,
post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products, including biological products.
Biological products are subject to regulation under the FDC Act, and are approved for marketing under provisions of the Public Health
Service Act (“PHSA”) via a BLA. The application process and requirements for approval of BLAs are generally similar to those for new
drug applications (“NDAs”), and biologics are associated with generally similar, if not greater, approval risks and costs as drugs. Failure to
comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal
to approve pending NDAs or BLAs, clinical holds, warning or untitled letters, product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
Biological product development for a new product or certain changes to an approved product in the U.S. typically involves:
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preclinical studies, including laboratory and animal tests,
the submission to the FDA of an Investigational New Drug application (“IND”), which must become effective before human
clinical testing may commence, and
adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which
FDA approval is sought.
Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary
substantially based upon the type, complexity, and novelty of the product or disease.
Preclinical Studies
Preclinical studies include laboratory evaluation of product biochemistry, formulation and stability, as well as in vitro and animal
studies to assess the potential for toxicity and to establish a rationale for therapeutic use for supporting subsequent clinical testing. In the
United States, certain preclinical trials must comply with the FDA's Good Laboratory Practice requirements ("GLPs") and the U.S.
Department of Agriculture's Animal Welfare Act, as well as other federal regulations and requirements.
IND Submission
In order to begin clinical testing of an investigational biologic product, the results of the preclinical tests, together with
manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, among other things, are
submitted to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational product to
humans and must become effective before human clinical trials may begin. Some long-term preclinical testing, such as animal tests of
reproductive adverse events and carcinogenicity, may continue after the IND is submitted. An IND automatically becomes effective 30
days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials
and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical
trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical Studies
The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under
the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with
Good Clinical Practice (“GCP”) requirements, which include the requirement that all research subjects provide their informed consent for
their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the
clinical trial, dosing procedures, subject
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selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any
subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be
reviewed and approved by an Investigational Review Board (“IRB”) for each institution at which the clinical trial will be conducted to
ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits.
The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and
must monitor the clinical trial until completed. There also are requirements governing the reporting of ongoing clinical trials and completed
clinical trial results to public registries.
Clinical trials to support BLAs for marketing approval are typically conducted in three sequential phases, but the phases may
overlap. In Phase 1, the initial introduction of the biologic into healthy human subjects or patients, the product is tested to assess
metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence on
effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug or biologic for a
particular indication, dosage tolerance, and optimum dosage, and to identify common adverse effects and safety risks. If a compound
demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the
additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial
sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug or biologic and to provide adequate information for the
labeling of the product.
The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it
believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the
clinical trial patients. An Investigational Review Board (“IRB”) may also require the clinical trial at the site to be halted, either temporarily
or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.
In December 2022, Congress passed the Food and Drug Omnibus Reform Act (“FDORA”), which includes provisions related to
diversity in clinical trial enrollment. Once the new provisions go into effect, sponsors conducting a phase three study or another pivotal
study must submit a diversity action plan to the FDA by the time they submit their study protocol. The FDA may waive the requirement to
submit a diversity action plan if a waiver is necessary due to the prevalence or incidence of the disease or condition that is the subject of the
trial or the patient population that may use the drug or device, or if implementing a diversity action plan would be impracticable, or against
the public health interest during a public health emergency. The FDA may apply a waiver on its own initiative or at the request of a sponsor.
If a sponsor requests a waiver, the FDA must grant or deny a waiver within 60 days of receiving such a request.
BLA Review Process
After completion of the required clinical testing, a BLA is prepared and submitted to the FDA. FDA approval of the BLA is
required before marketing of the product may begin in the U.S. The BLA must include the results of all preclinical, clinical, and other
testing, compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls, as well as proposed labeling for
the product.
Under the Prescription Drug User Fee Act (“PDFUA”), the FDA has 60 days from its receipt of a BLA to determine whether the
application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive
review. Once the submission is accepted for filing, the FDA begins an in-depth review. Under PDUFA, the FDA has agreed to certain
performance goals in the review of BLAs. Under Standard Review, applications for new biologic products are reviewed within 10 months
of the date the FDA filed the BLA (approximately 60 days after receipt); under Priority Review, BLAs are reviewed within six months of
the date the FDA filed the BLA. Priority Review can be applied to a biologic that the FDA determines has the potential to treat a serious or
life-threatening condition and, if approved, would be a significant improvement in safety or effectiveness compared to available therapies.
The FDA does not always meet its PDUFA goal dates for Standard and Priority BLAs, and the review process can be extended by FDA
requests for additional information or clarification.
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Before approving a BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to
determine whether they comply with Good Manufacturing Practices (“cGMP”) requirements. The FDA will not approve the product unless
it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent
production of the product within required specifications. The FDA also may audit data from clinical trials to ensure compliance with GCP
requirements. Additionally, the FDA may refer applications for novel drug products or drug products which present difficult questions of
safety or efficacy to an advisory committee, typically a panel that includes physicians and other experts, for review, evaluation and a
recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by
recommendations of an advisory committee, but it considers such recommendations when making decisions on approval.
After the FDA evaluates the BLA, it issues either an approval letter or a Complete Response Letter (“CRL”). An approval letter
authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter
indicates that the review cycle of the application is complete and the application will not be approved in its present form. A CRL generally
outlines the deficiencies in the submission and may identify substantial additional testing, or information, that must be developed in order
for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of
the BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending
on the type of information included.
As a condition of BLA approval, the FDA may require a Risk Evaluation And Mitigation Strategy (“REMS”) to help ensure that
the benefits of the biologic outweigh the potential risks. REMS can include medication guides, communication plans for healthcare
professionals, and elements to assure safe use (“ETASU”). ETASU can include, but are not limited to, special training or certification for
prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries.
Expedited Development Programs
The FDA is required to facilitate the development, and expedite the review, of certain biologics that are intended for the treatment
of a serious or life-threatening disease or condition for which there is no effective treatment, which demonstrate the potential to address
unmet medical needs for the condition, and/or would provide an improvement over existing therapies. These expedited programs include
Fast Track designation, Breakthrough Therapy designation, Accelerated Approval, and Priority Review:
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Pursuant to Section 506(b) of the FDCA, Fast Track designation is available for drug and biological products that are intended to
treat a serious or life-threatening condition and for which preclinical or clinical data demonstrate the potential to address an
unmet medical need. Fast Track designation applies to both the product and the specific indication for which it is being studied.
For biologics, the sponsor can request the FDA to designate the product for Fast Track status any time before receiving a BLA
approval, but ideally no later than the pre-BLA meeting. Fast Track designation provides for additional interactions with FDA to
expedite development and review of the BLA, and may also allow for rolling submission and review of the BLA.
Pursuant to Section 506(a) of the FDCA, Breakthrough Therapy designation is available if the product is intended, alone or in
combination with one or more other drug products, to treat a serious or life-threatening condition and preliminary clinical
evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more
clinically significant endpoints. The benefits of Breakthrough Therapy designation include the same benefits as Fast Track
designation, plus intensive guidance from the FDA to ensure an efficient drug development program. Requests for
Breakthrough Therapy designation should ideally be made prior to the End-of-Phase 2 Meeting.
Accelerated Approval is available for drug or biological products that treat a serious or life-threatening condition and generally
provide a meaningful advantage over available therapies. In addition, the product must demonstrate an effect on a surrogate
endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than
irreversible morbidity or mortality (IMM), which is reasonably likely to predict an effect on IMM or other clinical benefit. As a
condition of approval, the FDA
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may require that a sponsor of a biologic receiving Accelerated Approval perform adequate and well-controlled confirmatory
clinical trials in the post-marketing phase. If the FDA concludes that a biologic shown to be potent can be safely used only if
distribution or use is restricted, it may require such post-marketing restrictions as it deems necessary to assure safe use of the
product. In December 2022, the passage of FDORA made several changes to the FDA’s Accelerated Approval program. Among
other things, FDORA provides the FDA greater authority to ensure that sponsors begin confirmatory trials promptly, including
prior to BLA approval. FDORA also provides the FDA with additional authority to withdraw approval of a product for which
confirmatory studies are not completed or are inadequate to demonstrate a satisfactory benefit:risk profile.
Under PDUFA, a BLA that receives Priority Review will have a 6-month goal date for first cycle review, rather than the 10-
month goal date under Standard Review. To qualify for Priority Review, the FDA must determine that the biologic product has
the potential to treat a serious or life-threatening condition and, if approved, would be a significant improvement in safety or
effectiveness compared to available therapies. The decision to grant Priority Review is made by the FDA within 60 days of
receipt of the BLA.
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Fast Track designation, Breakthrough Therapy designation, Priority Review, and Accelerated Approval generally do not change
the standards for approval, but may expedite the development or approval process.
Regenerative Medicine Advanced Therapy designation
As part of the 21st Century Cures Act, Congress created the Regenerative Medicine Advanced Therapy (“RMAT”) designation to
facilitate an efficient development program for, and expedite review of, a product candidate that meets the following criteria:
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it qualifies as an RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue
product, or any combination product using such therapies or products, with limited exceptions;
it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and
preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such a disease or
condition.
A sponsor may request that the FDA designate a drug as a RMAT concurrently with or at any time after submission of an IND.
The FDA has 60 calendar days to determine whether the drug meets the criteria. A BLA for a regenerative medicine therapy that has
received RMAT designation may be eligible for Priority Review or Accelerated Approval through use of surrogate or intermediate
endpoints reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites.
Benefits of RMAT designation also include early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be
used to support accelerated approval. A regenerative medicine therapy with RMAT designation that is granted Accelerated Approval and is
subject to post-approval requirements may, as appropriate, fulfill such requirements through the submission of clinical evidence from
clinical trials, patient registries, or other sources of real world evidence, such as electronic health records; the collection of larger
confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to its approval. Like some of FDA’s other
expedited development programs, RMAT designation does not change the standards for approval but may help expedite the development or
approval process.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drug or biological products intended to treat a rare
disease or condition. A rare disease or condition is one that affects fewer than 200,000 individuals in the U.S., or if it affects more than
200,000 individuals in the U.S., for which there is no reasonable expectation that the cost of developing and making a product available in
the U.S. for such disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before
submitting a BLA. After the FDA grants orphan drug designation, the identity of the biological product and its potential orphan use are
disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory
review and approval process.
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Orphan drug designation confers several benefits, including certain tax credits for clinical research, a waiver of the BLA
application fee, and exemption from certain pediatric study requirements, among others. The key benefit of orphan drug designation is
orphan drug exclusivity, which is a seven-year exclusive marketing period in the U.S. for that product for that indication. Generally, the
first BLA applicant with FDA orphan drug designation for a particular biological substance to treat a particular disease that obtains FDA
approval is entitled to orphan drug exclusivity. During the orphan drug exclusivity period, the FDA may not approve any other applications
to market the same biological product for the same rare disease or condition, with limited exceptions. One exception is if the later
application can demonstrate clinical superiority to the biological product with orphan drug exclusivity. Clinical superiority may be shown
by greater efficacy, greater safety, or a major contribution to patient care.
Orphan drug exclusivity does not prevent the FDA from approving a different drug or biological product for the same disease or
condition, or the same biological product for a different disease or condition.
Pediatric Data and Study Requirements
Under the Pediatric Research Equity Act (“PREA”), NDAs or BLAs (as well as efficacy supplements) must contain data to assess
the safety and effectiveness of the drug or biological product for the claimed indications in all relevant pediatric subpopulations and to
support dosing and administration for each pediatric subpopulation for which the drug or biological product is approved as safe and
effective. The FDA may, on its own initiative or at the request of the applicant, grant full or partial waivers, or deferrals, for submission of
these assessments. With enactment of the Food and Drug Administration Safety and Innovation Act (“FDASIA”) in 2012, sponsors must
also submit pediatric study plans (“PSPs”) within sixty days of an end-of-phase 2 meeting, or as may be agreed between the sponsor and
FDA. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study
objectives and design, any deferral or waiver requests, and other information required by regulation. The applicant, the FDA, and the
FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The
FDA or the applicant may request an amendment to the plan at any time.Unless otherwise required by regulation, PREA does not apply to
any biological product for an indication for which orphan designation has been granted.
Under the Best Pharmaceuticals for Children Act (“BPCA”), a sponsor may qualify for “pediatric exclusivity” if it conducts
pediatric studies in response to a Written Request issued by FDA. Pediatric exclusivity extends by 6 months the period of other regulatory
exclusivities, such as orphan drug exclusivity, so long as those exclusivity periods will not expire within 9 months of the award of pediatric
exclusivity. For drug products, pediatric exclusivity will also extend the preclusive effect of patents on the FDA’s authority to approve
certain competitor applications. Pediatric exclusivity does not extend patents for biological products approved under BLAs. To qualify for
pediatric exclusivity, a sponsor must conduct studies that fairly respond to a Written Request, which outlines in detail the nature and type of
studies that must be conducted. The studies need not show the product to be effective in the pediatric population; so long as the clinical
studies are determined to fairly respond to the Written Request, pediatric exclusivity will be awarded. The FDA may issue a Written
Request on its own initiative or at the sponsor’s request. A Written Request can include multiple studies in both approved and “off-label”
indications.
Additional Controls for Biologics
To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of
manufacturing controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to
immediately suspend licenses in situations where there exists a danger to public health, to prepare or procure products in the event of
shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread
of communicable diseases in the U.S. and between states.
After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the
manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution.
If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a
release protocol showing a summary of the history of manufacture of
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the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA may also perform certain confirmatory tests on lots
of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts
laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products. As with
drugs, after approval of biologics, manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing,
and are subject to periodic inspection after approval.
Biosimilars
The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created an abbreviated approval pathway for biological
products shown to be “highly similar” to or “interchangeable” with an FDA-licensed reference biological product. Under the BPCIA, an
application for a biosimilar product must contain evidence to show that the biosimilar product is “highly similar” to an approved reference
biological product, notwithstanding minor differences in clinically inactive components and that there are no clinically meaningful
differences between the biological product and the reference product in terms of safety, purity, and potency. Data to show biosimilarity can
include: (1) analytical studies; (2) animal studies; and (3) a clinical study or studies. The FDA has the discretion not to require each of these
categories of data. A biosimilar can be approved by the FDA for some or all of the same conditions of use, strengths, dosage forms, and
routes of administration as the FDA-approved reference product. Interchangeability requires that a product is biosimilar to the reference
product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given
patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or
switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use
of the reference biologic. At this time, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily
substituted by pharmacies, which are governed by state pharmacy law.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that
the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the
FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another
company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product
containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity
and potency of the product.
The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. The first biologic
product submitted under the abbreviated approval pathway that is determined to be interchangeable with the reference product has
exclusivity against a finding of interchangeability for other biologics for the same condition of use for the lesser of (i) one year after first
commercial marketing of the first interchangeable biosimilar, (ii) 18 months after the first interchangeable biosimilar is approved if there is
no patent challenge, (iii) 18 months after resolution of a lawsuit over the patents of the reference biologic in favor of the first
interchangeable biosimilar applicant, or (iv) 42 months after the first interchangeable biosimilar has been approved if a patent lawsuit is
ongoing within the 42-month period.
The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, government proposals have
sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA
exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the
BPCIA is subject to significant uncertainty.
Post-Approval Requirements
Approved drug and biological products are subject to ongoing regulation by the FDA, including, among other things, requirements
relating to quality control and quality assurance, record-keeping, reporting of adverse experiences, periodic reporting, product sampling and
distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new
indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under
which FDA assesses an annual program fee
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for each product identified in an approved BLA. Biologic manufacturers and their subcontractors are required to register their
establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state
agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party
manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require
prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and
impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must
continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other
aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur
after the product reaches the market. Later discovery of previously unknown problems with a product, including AEs of unanticipated
severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the
approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or
imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other
things:
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restrictions on the marketing or manufacturing of a product, mandated modification of promotional materials or issuance of
corrective information, issuance by FDA or other regulatory authorities of safety alerts, Dear Healthcare Provider letters, press
releases or other communications containing warnings or other safety information about the product, or complete withdrawal of
the product from the market or product recalls;
fines, warnings or untitled letters or holds on post-approval clinical studies;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of
existing product approvals;
product seizure or detention, or refusal of the FDA to permit the import or export of products; or
injunctions, consent decrees or the imposition of civil or criminal penalties.
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A sponsor may only make claims
relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved
label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply
with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and
criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that
differ from those tested by us and approved by the FDA. The FDA does not regulate the behavior of physicians in their choice of
treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
FDA Regulation of Companion Diagnostics
If safe and effective use of a therapeutic product depends on an in vitro diagnostic, the FDA generally will require approval or
clearance of the diagnostic, known as a companion diagnostic, at the same time that the FDA approves the therapeutic product. The FDA
has generally required in vitro companion diagnostics intended to select the patients who will respond to cancer treatment to obtain
marketing approval through the pre-market approval (“PMA”) process for that diagnostic simultaneously with approval of the therapeutic.
The review of these in vitro companion diagnostics in conjunction with the review of a cancer therapeutic involves coordination of review
by the FDA’s Center for Biologics Evaluation and Research (“CBER”) and by the FDA’s Center for Devices and Radiological Health
(“CDRH”).
The PMA process involves a rigorous premarket review during which the applicant must prepare and provide the FDA with
reasonable assurance of the device’s safety and effectiveness and information about the device and its components regarding, among other
things, device design, manufacturing and labeling. In addition, PMAs for certain devices must generally include the results from extensive
preclinical and adequate and well-controlled clinical trials to establish the safety and effectiveness of the device for each indication for
which FDA approval is sought.
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Successful PMA approval is uncertain, and the FDA may ultimately respond to a PMA submission with a not approvable
determination based on deficiencies in the application and require additional clinical trial or other data that may be expensive and time-
consuming to generate and that can substantially delay approval. If the FDA finds the PMA application is approvable, the FDA typically
issues an approvable letter requiring the applicant’s agreement to specific conditions, such as changes in labeling, or specific additional
information, such as submission of final labeling, in order to secure final approval of the PMA. If the FDA concludes that the applicable
criteria have been met, the FDA will issue a PMA for the approved indications, which can be more limited than those originally sought by
the applicant. The PMA can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the
device, including, among other things, restrictions on labeling, promotion, sale and distribution.
Anti-Kickback, False Claims Laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been
applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes,
false claims statutes, and other statutes pertaining to health care fraud and abuse. The federal healthcare program anti-kickback statute
prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for,
purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare,
Medicaid, or other federally financed healthcare programs. Violations of the anti-kickback statute are punishable by imprisonment, criminal
fines, civil monetary penalties, and exclusion from participation in federal healthcare programs.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to
the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. In addition, certain
marketing practices, including off-label promotion, may also violate false claims laws. Additionally, the Healthcare Reform Act amended
the federal false claims law such that a violation of the federal healthcare program anti-kickback statute can serve as a basis for liability
under the federal false claims law.
Other federal statutes pertaining to healthcare fraud and abuse include the civil monetary penalties statute, which prohibits the
offer or payment of remuneration to a Medicaid or Medicare beneficiary that the offeror/payor knows or should know is likely to influence
the beneficiary to order a receive a reimbursable item or service from a particular supplier, and the healthcare fraud statute, which prohibits
knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or obtain by means of false
or fraudulent pretenses, representations, or promises any money or property owned by or under the control of any healthcare benefit
program in connection with the delivery of or payment for healthcare benefits, items, or services.
Other Federal and State Regulatory Requirements
Various federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory practices,
the experimental use of animals, the environment and the purchase, storage, movement, import, export, use, and disposal of hazardous or
potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research are
applicable to our activities. They include, among others, the U.S. Atomic Energy Act, the Clean Air Act, the Clean Water Act, the
Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, and Resources
Conservation and Recovery Act, national restrictions on technology transfer, import, export, and customs regulations, and other present and
possible future local, state, or federal regulation.
European Union, UK and Rest of the World Regulation
In addition to regulations in the U.S., we are subject to a variety of regulations in other jurisdictions both due to the location of our
facilities and the fact that we are engaging in clinical programs outside of the U.S. and will need to obtain worldwide regulatory approval
for our TCR therapeutic candidates. In particular we have clinical trials ongoing in the United Kingdom and in certain countries in the
European Union (“EU”) and are subject to regulations relating to performance of those clinical trials and manufacture and supply of our
cell therapies in those countries. Prior to supplying any cell therapy in any country or starting any clinical trials in any country outside of
the U.S. we must obtain
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the requisite approvals from regulatory authorities in such countries. The existence of a U.S. regulatory approval does not guarantee that
regulatory approvals will be obtained in other countries in which we wish to conduct clinical trials or market our cell therapies. In the EU,
for example, a clinical trial application must be submitted to each country’s national health authority and an independent ethics committee,
much like the FDA and IRB, respectively prior to any clinical trial being conducted in the relevant country. A marketing authorization
application is then submitted to the EMA for approval by the European Commission. Finally, prior to any commercial supply, a pricing and
reimbursement application is submitted to each relevant country’s national or local health authority(ies).
The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from
country to country. In all cases, the clinical trials are conducted in accordance with Good Clinical Practice (“GCP”) and the applicable
regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. However, the interpretation of these
requirements may well differ from country to country.
Review and Approval of Drug Products Outside of the U.S.
In order to market any product outside of the U.S., a company must also comply with numerous and varying regulatory
requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials,
marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA approval for a product, the company
would need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical trials or
marketing of the product in those countries or jurisdictions. The approval process ultimately varies between countries and jurisdictions and
can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries
and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or
jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or
jurisdiction may negatively impact the regulatory process in others.
Procedures Governing Approval of Products in the EU and U.K.
Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the EU has been implemented
through national legislation of the member states. Under this system, an applicant must obtain approval from the competent national
authority of a EU member state in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial after a
competent ethics committee has issued a favorable opinion. A clinical trial application must be accompanied by an investigational
medicinal product dossier with supporting information prescribed by the European Clinical Trials Directive and corresponding national
laws of the member states and further detailed in applicable guidance documents. Similar approval requirements apply in the UK and a
clinical trial application must be made to the UK regulatory authority (MHRA) prior to starting any clinical trial.
To obtain marketing approval of a product under EU regulatory systems, an applicant must submit a marketing authorization
application, or MAA, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single
marketing authorization by the European Commission that is valid for all EU member states. The centralized procedure is compulsory for
specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal
products, advanced therapy medicinal products and products with a new active substance indicated for the treatment of certain diseases. For
products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a
centralized process is in the interest of patients, the centralized procedure may be optional.
Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established at the EMA is
responsible for conducting the scientific assessment of a product. The CHMP is also responsible for several post-authorization and
maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. For advanced therapy
medicinal products (ATMPs), the scientific evaluation of MAA is primarily performed by the Committee for Advanced Therapies (CAT).
The CAT prepares a draft opinion of each ATMP subject to a MAA which is sent for final approval to the CHMP.
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Under the centralized procedure in the EU, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock
stops, when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP.
Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of
view of public health and in particular from the viewpoint of therapeutic innovation. In this circumstance, the EMA ensures that the opinion
of the CHMP is given within 150 days. Then, the European Commission grants or refuses the marketing authorization, following a
procedure that involves representatives of the member states. Although the CHMP's opinion is not binding, the Commission's decision to
grant or refuse the market authorization is frequently in accordance with the CHMP's assessment except in very rare cases. For marketing
approval in the U.K, an application for marketing approval will be made for the MHRA and follows a similar process to that used in the
EU.
Marketing authorization is valid for five years in principle and the marketing authorization may be renewed after five years on the
basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member state or in the U.K.
To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version of the file in
respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted, at least six months
before the marketing authorization ceases to be valid. Once renewed, the marketing authorization is valid for an unlimited period, unless
the Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional
five-year renewal. Any authorization which is not followed by the actual placing of the drug on the EU market (in case of centralized
procedure) or on the market of the authorizing member state within three years after authorization ceases to be valid (the so-called sunset
clause).
As a result of Brexit, as of January 1, 2021, marketing authorizations granted on the basis of a centralized procedure in the EU are
only valid in Northern Ireland, but not in Great Britain (England, Scotland and Wales). However, prior EU authorizations have all been
automatically converted into U.K. marketing authorizations effective in Great Britain. UK rules require marketing authorization holders to
be established in the U.K. or in the EU/European Economic Area. EU rules require marketing authorization holders to be established in the
EU/European Economic Area and, in addition, that certain activities be performed in the EU, related for example to pharmacovigilance,
batch release and quality control. Marketing authorization holders may need to take steps to comply with these requirements aiming at
holding both a EU and a U.K. marketing authorization.
With regard to the sunset clause, from the perspective of the U.K, the period of three years during which the drug has not been
marketed in Great Britain will be restarted from the date of conversion to a Great Britain marketing authorization. From the perspective of
the EU, in case the drug has been marketed in the U.K, the placing on the U.K. market before the end of the Brexit transition period will be
taken into account. If, after the end of the Brexit transition period, the drug is not placed on any other market of the remaining member
states of the EU, the three year period for the sunset clause will start running from the last date the drug was placed on the U.K. market
before the end of the Brexit transition period.
Legal Proceedings and Related Matters
From time to time, we may be party to litigation that arises in the ordinary course of our business. We do not have any pending
litigation that, separately or in the aggregate, would, in the opinion of management, have a material adverse effect on our results of
operations, financial condition or cash flows.
Employees and Human Capital Management
As of December 31, 2022, we had 534 employees. Of these employees, 407 were in research and development (including in
manufacturing and operations, and quality control and quality assurance) and 127 were in management and administrative functions
(including business development, finance, intellectual property, information technology and general administration). We have never had a
work stoppage and none of our employees are covered by collective bargaining agreements or require representation by a labor union. In
November 2022, we announced that, in addition to de-prioritizing non-core programs, we were also undertaking a headcount reduction of
approximately 25% to 30%. The reduction was completed in Q1 2023 with an overall reduction of approximately 25%.
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We value our employees and as a company work hard to employ those individuals that will work with us to achieve the objectives
of the Company and share our values. We engage with our employees in multiple ways including through companywide business meetings,
social events and smaller team events. We employ individuals based on their experience and ability to perform the applicable job and
encourage diversity in our workforce whenever possible. We have an equal opportunities policy which promotes the right of every
employee to be treated with dignity and respect and not to be harassed or bullied on any grounds. We employ individuals from
approximately 32 different nationalities within our U.K. and U.S. offices and are working to encourage diversity within our workforce. We
have a Diversity and Inclusion Council with membership comprising diverse employees from all levels in the Company and a Diversity and
Inclusion Plan has been created and championed across the business by the executive team and presented to the Board. D&I progress
updates are reviewed regularly by the Board Remuneration Committee.
We have a performance-based reward scheme, bonus scheme and share option plan which all employees are entitled to participate
in. These schemes and other employee incentive programs are designed to retain employees. Over 2022, the total global attrition rate was
approximately 22%.
Other Information
The Company’s primary website is www.adaptimmune.com. Information in the investor section and on our website is not part of
this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein or therein by reference. The
Company makes available, free of charge, at its corporate website, its Annual Report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after they are electronically filed with the
Securities and Exchange Commission (“SEC”). The SEC maintains an internet site that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Item 1A. Risk Factors.
Our business has significant risks. You should carefully consider the following risk factors as well as all other information
contained in this Annual Report, including our consolidated financial statements and the related notes, before making an investment
decision regarding our securities. The risks and uncertainties described below are those material risk factors currently known and specific
to us that we believe are relevant to our business, results of operations and financial condition. Additional risks and uncertainties not
currently known to us or that we now deem immaterial may also impair our business, results of operations and financial condition.
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business.
Risks Related to Our Financial Condition and Capital Requirements
● We have incurred net losses every year since inception and expect to continue to incur net losses in the future. If we are unable to
obtain additional financing or funding we may be unable to complete the development and commercialization of our cell
therapies.
● We may never generate revenue from sales of our cell therapies and become profitable and our generation of revenue depends on
our ability to timely progress our cell therapies through development.
Risks Related to the entry into a merger agreement with TCR2 Therapeutics Inc.
● Our shareholders may not realize a benefit from the entry into the merger agreement and closing of transaction commensurate
with the ownership dilution they will experience.
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● The merger transaction may not close and failure to complete the merger transaction may result in us incurring additional
expenses and potentially oblige us to pay a termination fee.
Risks Related to the Development of Our Cell Therapies
● Our ability to fund our business and continue to develop our cell therapies is dependent on the data obtained from our ongoing
afami-cel (“SPEARHEAD-1”) and ADP-A2M4CD8 clinical trials (“SURPASS”).
● Our clinical trials and clinical data are at an early stage and future data may not support continued development of our cell
therapies.
● Clinical trials are time consuming and expensive, and we may not be able to recruit patients as planned.
● Our cell therapies are novel, and there is an increased risk that we may see unacceptable toxicities.
Risks Related to the Manufacture and Supply of Our Cell Therapies
● Manufacture of cell therapies is complex, and we may encounter difficulties manufacturing and supplying our cell therapies to
patients, whether for clinical trials or for commercial purposes.
● We have our own manufacturing facility and our ability to manufacture cell therapies is dependent on our ability to maintain
regulatory approval for the facility, recruit employees required for manufacture, manufacture cell therapies reliably and
reproducibly, and increase manufacturing and supply to meet the required demand.
● We opened a new manufacturing facility for allogeneic cell therapies during 2022, and our ability to manufacture allogeneic cell
therapies on current timelines is dependent on our ability to obtain regulatory approval for the facility and develop and scale-up
suitable manufacturing processes.
Risks Related to the Commercialization and Marketing of Our Cell Therapies
● We have never commercialized a product as a company and our ability to commercialize is dependent on our ability to increase
manufacturing capacity, set up processes and recruit employees required for such commercialization.
● We may not be able to obtain marketing approvals of our cell therapies as broadly as planned or on the timescales we plan.
● We may not be able to adequately price our cell therapies due to regulatory changes affecting pricing, coverage, and
reimbursements or to other impacts such as inflation, increasing underlying raw material costs, availability of materials, or
increasing third party supply chain costs.
Risks Related to the COVID-19 Pandemic
● The COVID-19 pandemic has and may in the future materially delay our clinical programs and research programs, delay our
ability to treat patients where clinical sites decide to delay participation, interrupt our ability to carry out our normal processes and
cause delays with regulatory authorities.
Risks Related to Government Regulation
● We are subject to significant regulatory, compliance and legal requirements and will continue to be subject to these requirements.
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● Any commercialization of our cell therapies will also require approval for a companion diagnostic. We are reliant on a third party
for development of the companion diagnostic.
Risks Related to Our Reliance Upon Third Parties
● We are reliant on third parties for provision of services including manufacturing services and clinical research services, for the
provision of components and materials required for manufacturing, research and development and for the performance of our
collaborations.
Risks Related to Our Intellectual Property
● We may be forced to litigate to defend our intellectual property rights and we may be subject to patent infringement proceedings
brought against us by third parties.
● Our ability to be competitive depends, in part, on our ability to protect our proprietary technology including through patents and
through maintaining confidentiality in our trade secrets.
General Business Risks
● Our inability to continue to attract and retain qualified personnel may hinder our business.
● We expect to face intense competition from third parties and this competition may come from companies with significantly
greater resources and experience than we have.
● Information technology systems may fail or suffer cybersecurity incidents including related to data protection and privacy laws
and adversely affect our business and operations.
● The market price of our ADSs is subject to volatility.
For a more complete discussion of the risks we face as a business, please see the discussion below.
Risks Related to Our Financial Condition and Capital Requirements
We have incurred net losses every year since our inception and expect to continue to incur net losses in the future.
We have generated losses since our inception in 2008, during which time we have devoted substantially all of our resources to
research and development efforts relating to our cell therapies, including engaging in activities to manufacture and supply our cell therapies
for clinical trials, conducting clinical trials of our cell therapies, providing general and administrative support for these operations,
enhancing capabilities to support commercialization for ADP-A2M4 and protecting our intellectual property. For the years ended
December 31, 2022, 2021 and 2020, we incurred net losses of $165.5 million, $158.1 million, and $130.1 million respectively. As of
December 31, 2022, we had accumulated losses of $909.3 million. We do not have any products approved for sale and have not generated
any revenue from product supplies or royalties. Based on our current plans, we do not expect to generate product or royalty revenues unless
and until we obtain marketing approval for, and commercialize, any of our SPEAR T-cells or other cell therapies.
We are currently operating in a period of heightened economic uncertainty and capital markets volatility which has been
significantly impacted by geopolitical instability, including the conflict between Russia and Ukraine, the continued impact of COVID-19
and high inflation globally which has materially adversely affected our ability to raise additional equity. These conditions have had and
may continue to have a material adverse effect on our business, financial condition and results of operations.
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Economic uncertainty in various global markets, including the U.S. and Europe, caused by the COVID-19 pandemic and political
instability, including the effects of Russia's invasion of Ukraine, have led to market disruptions, including significant increases in
commodity prices, energy and fuel prices, credit and capital market instability and supply chain interruptions which have caused record
inflation globally. As a result, central banks around the world have raised interest rates significantly and have signaled that they will
continue to do so in an effort to fight inflation. Certain governments have also introduced additional measures to address rising inflation
(including the Inflation Reduction Act in the U.S.) which may further impact investment into the biotechnology industry. This has led to
significant volatility in capital markets which continues to limit our ability to raise funds and as a result has impacted our ability to conduct
certain of our planned activities including the start of certain trials, progression of pre-clinical candidates into clinical trials and the speed
with which we can manufacture and supply cell therapies for clinical trials. We have stopped certain non-core activities, including stopping
enrolment in the SURPASS-2 trial and delaying the new clinical trials with our TIL-IL7 product and the next generation ADP-
A2M4N7X19 cell therapy. We are also taking a number of further actions to extend our cash runway including a reduction of headcount by
approximately 25% which we expect to complete in the first quarter of 2023. The reduction in headcount will affect our ability to progress
our planned business activities, could result in a loss of individuals who are key to core business activities and will also impact the timing
of commercialization for our afami-cel cell therapy product. We have also ceased investment in non-core programs including
commercialization activities for afami-cel, the SURPASS-2 clinical trial, the TIL-IL7 clinical trial and certain of our preclinical programs.
The full impact of these actions is not currently known but could result in skilled individuals leaving the Company which would further
impact our ability to progress our business objectives. If these market conditions persist for a prolonged period of time, we could be
required to take additional measures and potentially restructure the Company’s business. Any such disruptions may also magnify the impact
of other risks and may impact our ability to realize value from our ongoing third-party collaborations or to perform those collaborations or
other business activities as currently planned.
If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our cell
therapies.
We expect to continue incurring significant losses as we continue with our research and development programs and to incur
general and administrative costs associated with our operations. The extent of funding required to develop our cell therapies is difficult to
estimate given the novel nature of our cell therapies and their un-proven route to market and we may not have anticipated all the costs
required to meet our planned objectives. As of December 31, 2022, the Company had cash and cash equivalents of $108.0 million,
marketable securities of $96.6 million, and stockholders’ equity of $81.9 million. We expect to use these funds to advance and accelerate
the clinical development of our cell therapies, to further develop and enhance our manufacturing capabilities and secure a commercially
viable manufacturing platform for all of our cell therapies, to advance cell therapies through preclinical testing and progress such cell
therapies through to clinical trials, to support commercialization for ADP-A2M4 and to fund working capital, including for other general
corporate purposes. We believe that our cash and cash equivalents and marketable securities will be sufficient to fund our operations, based
upon our currently anticipated research and development activities and planned capital spending, into early 2025. This belief is based on
estimates that are subject to risks and uncertainties and may change if actual results differ from management’s estimates. Our expenses may
increase significantly in the event of any of the following:
● any requirement to outsource manufacture of our cell therapies to third parties, or acquire additional raw materials to
support manufacture in the event of any inability to manufacture at our own facilities;
● any requirement to conduct additional or further clinical trials or to treat additional patients to satisfy the regulatory
authorities that a cell therapy is safe or that it is efficacious and can be approved for marketing or to proceed to the next
stage of development;
● any requirement to vary, change or amend our current manufacturing processes;
● any requirement to materially vary any ongoing clinical trial protocol;
● third party litigation, including patent litigation, being brought against the company;
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● a requirement to pay any third party upfront, milestone, royalty or other payments in order to continue to develop or
commercialize any of our cell therapies, including our allogeneic cell therapies;
● a requirement to create additional infrastructure to support our ongoing operations, including future commercialization
efforts;
● any inability to recruit patients to our clinical trials on a timely basis necessitating the need to open additional clinical
sites or otherwise enable increased recruitment or to extend the duration of such trials;
● faster than expected recruitment of patients in our clinical trials necessitating recruitment of additional resources to
ensure cell therapies can be manufactured and provided to patients;
● any unplanned capital expenditure including any requirement to increase or enhance manufacturing capability or invest
in additional manufacturing facilities;
● changes in the timing on when we receive payments from our third party collaborators, in particular Genentech;
● business activities and negotiations including agreements with third parties for collaborations, combinations, mergers or
acquisitions which do not execute or finalize on suitable terms or do not complete as expected including the transaction
for combination with TCR2 Therapeutics Inc; or
● inability of third parties to provide critical supplies on a timely basis necessitating alternative or additional third party
supplies to be put in place.
We cannot be certain that additional funding will be available on acceptable terms, or at all. We have no committed source of
additional capital and if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to
significantly delay, scale back or discontinue the development or commercialization of our cell therapies or other research and development
initiatives. Our license and supply agreements may also be terminated if we are unable to meet the payment obligations under these
agreements. We could be required to seek collaborators for our cell therapies at an earlier stage than otherwise would be desirable or on
terms that are less favorable to us than might otherwise be available or relinquish or license on unfavorable terms our rights to our cell
therapies in markets where we otherwise would seek to pursue development or commercialization ourselves.
Our current cash projections include reliance on the ability to obtain certain tax credits and the operation of certain tax regimes within
the U.K. Should these cease to be available, this could impact our ongoing requirement for investment and the timeframes within which
additional investment is required.
As a company that carries out extensive research and development activities, we benefit from the U.K. research and development
tax credit regime for small and medium sized companies, whereby our principal research subsidiary company, Adaptimmune Limited, is
able to surrender the trading losses that arise from its research and development activities for a payable tax credit of up to approximately
33.4% of eligible research and development expenditures. Qualifying expenditures largely comprise employment costs for research staff,
consumables and certain internal overhead costs incurred as part of research projects. Subcontracted research expenditures are eligible for a
cash rebate of up to approximately 21.7%. The majority of our pipeline research, clinical trials management and manufacturing
development activities, all of which are being carried out by Adaptimmune Limited, are eligible for inclusion within these tax credit cash
rebate claims.
We may not be able to continue to claim research and development tax credits (R&D tax credits) or the amount we can claim may
reduce in the future as we expand our business because we may no longer qualify as an SME (small or medium-sized enterprise) or as a
result of announced changes to the UK R&D tax credit regime lowering the amount of tax credits SMEs can claim. In order to qualify as an
SME for R&D tax credits, we must continue to be a company with
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fewer than 500 employees and also have either an annual turnover not exceeding €100 million or a balance sheet not exceeding €86
million. Once we no longer qualify for SME R&D tax credits, it is likely we would qualify for the U.K. research and development
expenditure credit scheme (the “RDEC Scheme”) which is claimable by large companies. The cash credit rate for the RDEC Scheme is
currently approximately 10.5% of qualifying expenditure in comparison to approximately 33.4% for SME R&D credits. In addition, the
types of qualifying expenditure are more restricted under the RDEC Scheme, in that certain subcontracted costs can no longer qualify for
relief. The U.K. government has introduced some changes to the U.K. research and development credit rules, which include potential
restrictions in the eligibility of costs where research and development activities are performed overseas. These changes may give rise to a
reduction in our U.K. research and development credit claims in the future.
We may also benefit in the future from the U.K.’s “patent box” regime, which would allow certain profits attributable to revenues
from patented products to be taxed at a rate of 10%. As we have many different patents covering our products, future upfront fees,
milestone fees, product revenues, and royalties could be taxed at this favorably low tax rate. When taken in combination with the enhanced
relief available on our research and development expenditures, we expect a long-term lower rate of corporation tax to apply to us. If,
however, there are unexpected adverse changes to the U.K. research and development tax credit regime or the “patent box” regime, or we
are unable to qualify for such advantageous tax legislation, our business, results of operations and financial condition may be adversely
affected.
Our ability to generate revenue from sales of our cell therapies and become profitable depends on our ability to progress our cell
therapies through development.
We have no cell therapies approved for commercial sale, have not generated any revenue from sales of our cell therapies, and do
not anticipate generating any revenue from sales of our cell therapies until sometime after we receive regulatory approval, if at all, for the
commercial sale of a cell therapy. We may never become profitable.
Our ability to generate revenue and achieve profitability depends on many factors, including:
● progressing our cell therapies through preclinical development and clinical development without substantial delays;
● demonstrating a favorable benefit (efficacy parameters): risk (safety) profile for our cell therapies;
● obtaining regulatory approvals and marketing authorizations for our cell therapies for which we or our collaborator complete
clinical trials;
● developing sustainable and scalable manufacturing and supply processes for our cell therapies to support commercial supply;
● obtaining market acceptance, pricing and reimbursement of our cell therapies as viable treatment options;
● the costs of commercializing any cell therapy;
● the indications any cell therapy is approved in and the patient population treatable with any cell therapy; and
● our ability to develop and obtain approval for the companion diagnostic assay required for administration of our cell
therapies.
Risks Related to the entry into a merger agreement with TCR2 Therapeutics Inc.
Our shareholders may not realize a benefit from transaction for the combination of us and TCR2 Therapeutics (“Merger”)
commensurate with the ownership dilution they will experience in connection with the Merger.
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On March 5, 2023, we, CM Merger Sub, Inc., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”), and
TCR2 Therapeutics Inc. (“TCR2 Therapeutics”), entered into the Agreement and Plan of Merger dated as of March 5, 2023 (the “Merger
Agreement”), pursuant to which, among other things, and subject to the satisfaction or waiver of certain conditions set forth in the Merger
Agreement, Merger Sub will merge with and into TCR2 Therapeutics, with TCR2 Therapeutics continuing as our wholly-owned subsidiary
and the surviving corporation of the merger (the “Merger”). If the combined company is unable to realize the full strategic and financial
benefits currently anticipated from the Merger, our shareholders will have experienced substantial dilution of their ownership interests
without receiving commensurate benefits, or only receiving part of the commensurate benefit to the extent the combined company is able to
realize only part of the strategic and financial benefits currently anticipated from the Merger.
Failure to complete the Merger may result in either us or TCR2 Therapeutics paying a termination fee to the other party and could
significantly harm the market price of our ADSs and negatively affect the future business and operations of each company.
If the Merger is not completed and the Merger Agreement is terminated under certain circumstances, the terminating party may be required
to pay the other party a termination fee of up to $2.4 million. Even if a termination fee or reimbursement of expenses of the other party are
not payable in connection with a termination of the Merger Agreement, each of us and TCR2 Therapeutics will have incurred significant
fees and expenses, which must be paid whether or not the Merger is completed. In addition, if the Merger Agreement is terminated and our
board of directors determines to seek another business combination, there can be no assurance that we will be able to find a partner and
close an alternative transaction on terms that are as favorable or more favorable than the terms set forth in the Merger Agreement. In
addition, if the Merger is not consummated our need to raise additional capital to fund our operations will increase and capital whether in
the form of equity or debt financing may not be available to us on favorable terms or at all.
The issuance of our ordinary shares to TCR2 Therapeutics stockholders pursuant to the Merger Agreement must be approved by our
shareholders, and the Merger Agreement and transactions contemplated thereby must be approved by TCR2 Therapeutics stockholders.
Failure to obtain these approvals would prevent the closing of the Merger.
Before the Merger can be completed, our stockholders must approve, among other things, the issuance of our ordinary shares to
TCR2 Therapeutics stockholders pursuant to the Merger Agreement, and TCR2 Therapeutics stockholders must adopt the Merger Agreement
and approve the Merger and the related transactions. Failure to obtain the required shareholders approvals may result in a material delay in,
or the abandonment of, the Merger. Any delay in completing the Merger may materially adversely affect the timing and benefits that we
expect to achieve from the Merger.
Our shareholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the
combined company following the closing of the Merger as compared to their current ownership and voting interest in our company.
If the proposed Merger is completed, our current shareholders will own a smaller percentage of the combined company than their
ownership in our company prior to the Merger. Immediately after the Merger, our pre-Merger shareholders and TCR2 Therapeutics pre-
Merger stockholders are expected to own approximately 75% and 25%, respectively, of our outstanding shares of the combined company.
During the pendency of the Merger, we may not be able to enter into a business combination with another party on more favorable
terms because of restrictions in the Merger Agreement, which could adversely affect our business prospects.
Covenants in the Merger Agreement may impede our ability to make acquisitions during the pendency of the Merger, subject to specified
exceptions or may alternatively require the consent of TCR2 Therapeutics. As a result, if the Merger is not completed, we may be at a
disadvantage to our competitors during such period. In addition, while the Merger Agreement is in effect, we are generally prohibited from
soliciting, initiating or knowingly encouraging, inducing or facilitating any inquiries, indications of interest, proposals or offers that
constitute or may reasonably be expected to lead
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to certain transactions involving a third party, including a merger, sale of assets or other business combination, subject to specified
exceptions. Any such transactions could be favorable to our shareholders, but we may be unable to pursue them.
If the conditions to the Merger are not satisfied or waived, the Merger will not occur.
Even if the transactions contemplated by the Merger Agreement are approved by our shareholders and TCR2 Therapeutics stockholders,
certain other specified conditions set forth in the Merger Agreement must be satisfied, to the extent permitted by applicable law, or waived
to complete the Merger, including approval from The Nasdaq Stock Market LLC (“Nasdaq”) to issue the ordinary shares underling the
ADSs for the Merger consideration. We cannot be certain that all of the conditions will be satisfied or waived. If the conditions are not
satisfied or waived, the Merger will not occur or will be delayed, and we may lose some or all of the intended benefits of the Merger.
Risks Related to the Development of Our Cell Therapies
We are heavily reliant on the data obtained from our ongoing ADP-A2M4CD8 clinical trials.
Our ability to obtain additional financing is dependent on the data from our ADP-A2M4CD8 (“SURPASS”, “SURPASS-2” and
“SURPASS-3”) clinical trials among other factors. Data from any of these trials might not be sufficient to enable us to further develop
ADP-A2M4CD8 or other cell therapies within the pipeline. If we do not see sufficiently positive data in any of these clinical trials or if we
see an adverse side effect profile preventing continuation of any clinical trials, we may not be able to obtain the additional financing
required to fund our anticipated business operations. This in turn may necessitate delays in planned activities, including the
commercialization of ADP-A2M4 in synovial sarcoma and our ability to progress other cell therapies into and through clinical
development.
Our cell therapy products require significant additional clinical testing before we can seek regulatory approval and begin
commercialization.
Our cell therapies may not achieve regulatory approval or proceed to the next stage of development. All of our cell therapies
require further clinical development before a BLA can be filed with any regulatory authority to permit commercialization. Results seen in
early clinical trials, for example, with our ADP-A2M4, ADP-A2M4CD8, and ADP-A2AFP cell therapy candidates may not be predictive of
the data we will obtain in our later phase clinical trials. Negative results in any cell therapy clinical program may also impact our ability to
continue with clinical development of other similar cell therapies. Although each cell therapy may target a different cancer peptide or
protein, the underlying technology platform and other aspects of our clinical programs are the same or substantially similar for many of our
cell therapies. Accordingly, a failure or delay in any one program may affect the ability to obtain regulatory approval to continue or conduct
clinical programs for other cell therapies.
The data produced in our ongoing clinical trials is at an early stage, and future data may not support continued progression of any of
our therapies through development.
The patient response data that has been reported in our trials (excluding SPEARHEAD-1 in synovial sarcoma patients) represents
data from small numbers of patients within each study at the applicable dosing level. As such, the data is initial data, and there is no
assurance that any responses will persist, that we will see responses in any other patients or that such patients will not suffer severe adverse
events which may result in a delay or halt to any clinical trial. Further data may be required in order to progress cell therapies to the next
stage of development. Negative results in one clinical trial may also impact ability to proceed with development in other clinical trials
given the common technology platform and similarity of other aspects of our clinical programs.
Like other biologic products, we expect there may be greater variability in results for cell therapies which are administered on a
patient-by-patient basis than for “off-the-shelf” products, like many other biologics. There is typically an extremely high rate of attrition
from the failure of any products proceeding through clinical trials. Cell therapies in later stages of clinical trials may fail to show the
desired safety and efficacy profile despite having progressed through preclinical programs and initial clinical trials. A number of companies
in the biopharmaceutical industry have suffered
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significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in
earlier trials. Most biologic candidates that begin clinical trials are never approved by regulatory authorities for commercialization. We may
therefore be unsuccessful in demonstrating the required efficacy and safety profile from the performance of any of our clinical programs.
We are aware that certain patients do not respond to our SPEAR T-cells and that other patients may relapse or cease to present the
peptide being targeted by such SPEAR T-cells. The percentage of the patient population in which these events may occur is unknown, but
the inability of patients to respond and the possibility of relapse may impact our or our collaborator’s ability to conduct clinical trials, to
obtain regulatory approvals, if at all, and to successfully commercialize any SPEAR T-cell.
We plan to provide further data updates as and when the applicable data is believed to be sufficiently mature. Given the nature of
T-cell therapies and the time taken to observe patient responses to our SPEAR T-cells, we cannot provide any assurance that further data
updates will be provided frequently or that such data updates will be available at any particular time.
We may not be able to commence additional clinical trials for cell therapies on the timeframes we expect.
Progression of new cell therapies into clinical trials is inherently risky and dependent on the results obtained in preclinical
programs, the results of other clinical programs and any other activities which may impact our ability to commence clinical trials, for
example, availability of manufacturing process and components. If any issues are identified during any cell therapy development, we may
experience significant delays in development of pipeline candidates and in existing clinical programs. This may also impact our ability to
achieve certain financial milestones and the expected timeframes to market any of our cell therapies.
The FDA or other regulatory authorities may not approve any IND (or equivalent application) for any of our future cell therapies,
or for new indications for our cell therapies already in clinical trials, or may require amendments to existing protocols (including as a result
of the COVID-19 pandemic). For example, we amended the protocols for all of our pending and on-going ADP-A2M4 and ADP-A2M10
clinical trials in response to reported serious adverse events (“SAEs”) of prolonged serious pancytopenia in our clinical trials for ADP-
A2M4 and ADP-A2M10 in two patients treated with the highest lymphodepletion regimen. Such amendments and updates may delay our
clinical trials, may require changes or resubmission of our INDs, or may result in or be related to a halt in our planned or contemplated
clinical trials.
We conduct clinical trials at sites in the UK and European Union. This requires gaining the approval of country specific review
bodies for GMO application and Clinical Trial Application (“CTA”). As this is not a harmonized process, the requirements can vary
considerably, and delays can be incurred at a country level. For example, the information required in relation to manufacturing processes or
assays may differ between countries and may require additional testing to be conducted in order for approval to be obtained.
T-cell therapy is a novel approach to cancer treatment that creates significant increased risk in terms of side-effect profile.
Development of a pharmaceutical or biologic therapy or product has inherent risks based on differences in patient population and
responses to therapy and treatment. The mechanism of action and impact on other systems and tissues within the human body following
administration of our cell therapies is complex and not completely understood, which means that we cannot predict the long-term effects of
treatment with any of our cell therapies (whether by us or a collaborator). In addition, it is not possible for any pre-clinical safety package
to completely identify all potential safety risks. For example, there is a risk that the target (or similar) peptide to which any SPEAR T-cell is
directed may be present in both patients’ cancer cells and other non-cancer cells and tissues. Cross-reactivity or allo-reactivity (binding to
peptides presented on other HLA types) could also occur where the affinity-enhanced engineered TCR contained within any cell therapy
including SPEAR T-cells binds to peptides presented by HLAs other than the HLA type for which the relevant TCR was developed. Should
any of these cross-reactivities occur, patients may suffer a range of side effects associated with the SPEAR T-cell binding to both the cancer
cells and/or other cells and tissues and such side effects
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could cause patient death. The extent of these side effects will depend on which cells and tissues are affected as well as the degree to which
the target (or similar) peptide is expressed in these cells and tissues.
Any unacceptable toxicities arising in ongoing clinical programs could result in suspension or termination of those clinical
programs. The more SAEs that are reported the greater the risk of suspension of termination of clinical programs, even where the SAEs are
unrelated to each other or to our cell therapies. Our patients undergo lymphodepletion prior to receiving our SPEAR T-cells which leaves
them immuno-compromised for a period of time after the lymphodepletion and increases their risk of contracting other unrelated diseases
or pathogens including COVID-19. The treatment regimen used in our protocols, in particular the use of chemotherapy, also carries an
inherent risk of cytopenia (including pancytopenia), where blood cell levels reduce to lower than normal. If blood cell levels do not recover
sufficiently the patient may suffer serious adverse events, which may even be life threatening. There have been multiple events of
pancytopenia as well as SAEs similar to those reported across our clinical trials; these are multifactorial in etiologies and could result in
regulatory authorities imposing a hold on one or more clinical programs whilst the events are investigated further. Serious adverse events
seen with other immunotherapy products, such as the severe cytokine release syndrome (“CRS”) and neurotoxicity events observed with
CD19-directed CAR-T cell treatments, may also occur at any stage of the clinical program. Further, following infusion of any SPEAR T-
cells, there may be a transient inflammatory reaction of the disease to the treatment. Symptoms in any given subject would be dependent on
the location and other characteristics of their tumor. For example, subjects with lung tumors may experience dyspnea. Cardiac toxicities
may be observed in patients with pre-existing cardiac or pericardial masses. These inflammatory reactions and related symptoms may be
mild and self-limited, but can be severe, potentially life-threatening and require medical intervention.
Any side effects may also result in the need to perform additional trials, which will delay regulatory approval for such cell
therapies and require additional resources and financial investment to bring the relevant cell therapy to market.
Use of cell therapies in combination with other third party products or therapies may increase or exacerbate side effects that have
been seen with our cell therapies alone or may result in new side effects that have not previously been identified with our cell therapies
alone. Any undesirable side effects seen in combination trials may affect our ability to continue with and obtain regulatory approval for the
combination therapy, but may also impact our ability to continue with and obtain regulatory approval for our cell therapies alone.
Summary information on adverse events seen in relation to each of our cell therapies are provided below based on data cuts as of
the dates stated. Where we have become aware of material safety events after the date of any data cut, a description of such events is also
included.
● As of December 27, 2022 for afamicel, 128 subjects received at least one dose of transduced cells of afami-cel across multiple
studies. 127 patients experienced adverse events.
Adverse events occurring in >10% of subjects considered by investigators to be at least possibly related to ADP-A2M4 include
CRS, pyrexia, neutropenia/neutrophil count decreased, fatigue, leukopenia/WBC decreased, lymphopenia/ lymphocyte count
decreased, nausea, rash, sinus tachycardia/tachycardia, chills, headache, thrombocytopenia/platelet count decreased, decreased
appetite, hypotension, febrile, neutropenia dyspnea and hypophosphataemia. Serious adverse event (SAEs), considered by
investigators to be at least possibly related to ADP-A2M4, were reported for 32 (25%) subjects under the program. These events
include CRS, empyema, sepsis, pleural effusion, pneumothorax, pulmonary embolism, pyrexia, anemia, aplastic anemia,
pancytopenia, cerebrovascular accident, encephalopathy, neurotoxicity, arrhythmia, alanine aminotransferase increased, aspartate
aminotransferase increased, blood alkaline phosphatase increased, platelet count decreased, lymphoproliferative disorder, deep
vein thrombosis, superior vena cava occlusion, acute kidney injury, pulmonary hemorrhage, white blood cell count decreased and
rash. Two of these subjects have had treatment related fatal SAEs: one patient experienced pancytopenia/aplastic anemia and the
other experienced a cerebrovascular accident (stroke).
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For the 13 patients in long term follow-up, one case of thrombocytopenia/Platelet count decreased and one case of CRS were
reported as related to ADP-A2M4. No related SAEs were reported.
● As of November 23, 2022 for ADP-A2M4CD8:
In the SURPASS study, there have been 43 patients treated with ADP-A2M4CD8 monotherapy. The adverse events occurring in
>10% of patients treated with ADP-A2M4CD8 monotherapy (n=43) and considered by investigators to be at least possibly related
to ADP-A2M4CD8 include CRS, neutropenia/neutrophil count decreased, anemia/red blood cell count decreased, fatigue, pyrexia,
rash, thrombocytopenia/platelet count decreased, dyspnea, hypoxia, immune effector cell-associated neurotoxicity syndrome
(ICANS), leukopenia/ white blood cell count decreased, pleural effusion, febrile neutropenia, and lymphopenia/ lymphocyte count
decreased. SAEs, considered by investigators to be at least possibly related to ADP-A2M4CD8 monotherapy, were reported for 21
(48.8%) patients in the study. These events include CRS, ICANS, anemia, pancytopenia, infusion related reaction, pyrexia,
hypoxia, dyspnea, drug reaction with eosinophilia and systemic symptoms (DRESS Syndrome), rash, small intestinal obstruction,
device related infection, pneumonia, blood creatinine increased and tumor lysis syndrome. Two of these patients had treatment-
related fatal SAEs: one patient experienced pancytopenia and the other experienced CRS.
In the SURPASS-2 study (ADP-0055-002), there have been 3 patients treated with ADP-A2M4CD8 monotherapy. The adverse
events considered by investigators to be at least possibly related to ADP-A2M4CD8 include rash, sciatica, CRS, pyrexia and
respiratory failure. CRS was the only SAE considered by investigators to be at least possibly related to ADP-A2M4CD8
monotherapy.
In addition, there have been 3 patients treated with nivolumab in combination with ADP-A2M4CD8. The nivolumab combination
group had a similar safety profile as the monotherapy group but is based on a small sample size with limited follow-up at this data
cut off.
Across all ADP-A2M4CD8 trials, 27 total patients treated with ADP-A2M4CD8 monotherapy continue in long term follow up as
at date of data cut-off. No related AE/SAEs were reported.
We may encounter substantial delays in our clinical trials or may not be able to conduct our trials on the timelines we expect.
Any delay in our clinical trials will impact our ability to obtain clinical data from those trials and our ability to progress our
business along anticipated timelines and to raise capital. Delays in clinical trials can also increase the costs incurred in performing those
clinical trials or necessitate a need to initiate additional clinical trial sites. Our ability to progress our clinical trials is dependent on a
number of factors including:
● Finding clinical sites prepared to carry out the relevant clinical trials, screening of patients by the clinical sites,
recruitment of patients both in terms of number and type of patients and general performance of the relevant clinical site.
● The ability of our clinical sites to recruit patients on the timelines we expect. It can be difficult for clinical sites to find
patients that express both the required HLA-type and required antigen type and which also meet the inclusion criteria for
our clinical trials. In addition, during the COVID-19 pandemic, resources at clinical sites are being prioritized towards
treatment of COVID-19 and as a result there may be a delay in their ability to progress our clinical trials, recruit and
enroll patients into clinical trials or to start new clinical trials.
● The patient population in which any required peptide antigen is presented. The patient population may be lower than
expected which will increase the timescales required to find and recruit patients into the applicable clinical trial.
Screening of a large number of patients is required to identify HLA and tumor antigen positive patients for all of our
clinical trials with our SPEAR T-cells.
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● Our ability to select, initiate and activate clinical sites on the timelines we expect. Selection and activation of clinical trial
sites can take a long period of time and includes requirements to assess the clinical trial site, obtain IRB approval of
clinical trial protocols, negotiate and execute clinical trial agreements and educate study staff to enable them to carry out
the clinical trial.
● Any requirement to change clinical trial design as the clinical trial progresses. It is also difficult to predict whether
changes may be required to any clinical trial design as our clinical trials progress. The need to make changes to any
clinical trial design can result in delays to the performance of that clinical trial whilst any changes are approved by the
FDA or other relevant authority and implemented at applicable clinical trial sites.
● Any competition for patients at our clinical sites. Many of our clinical trial sites have multiple clinical trials ongoing
which compete for patients in any specific indication. We may have to wait before treating patients while patients
complete existing clinical trials or receive other treatment therapies for their cancer. Moreover, because our cell therapies
represent a departure from more commonly used methods for cancer treatment, potential patients and their physicians
may opt to use conventional therapies, such as chemotherapy and hematopoietic cell transplantation, rather than
enrollment in any of our current or future clinical trials. This may also mean we cannot recruit patients at a suitable time
in their disease progression.
● Any change in the standard of care for patients. Where standard of care for patients changes clinical sites may no longer
be prepared to continue with any clinical trial or require amendments to agreed protocols for clinical trials. Such
circumstances can lead to the suspension of the relevant clinical trial at a site, inability to recruit further patients at that
clinical site or a requirement to amend the protocol, all of which will delay or potentially halt progression of a cell
therapy through clinical trials.
● Any country-specific requirement. In certain countries, additional data, studies or documentation may be required ahead
of any clinical trial starting. For example, comparability studies may be required in relation to any changes in
manufacturing process and the extent of these comparability studies can vary between different countries. This can result
in delays to the start of any clinical trials in those countries and lead to increased research and development being
required ahead of the start of those clinical trials.
● The severity of the disease we are trying to treat and the type of patient we are trying to recruit. For many of our clinical
trials patients have received numerous prior therapies and have few or no other remaining treatment options. Given the
late stage of their disease the patients also tend to be very ill and hence require treatment quickly and have the potential
for increased SAEs following treatment. Depending on the protocol it can be difficult to find patients that meet the
inclusion requirements for our clinical trials and can wait for manufacture of our cell therapy products.
● The clinical trial protocol design and in particular the inclusion and exclusion requirements applicable to the clinical
trial.
● Patient referral practices. It is common for investigators or physicians not to refer patients to other investigators or
physicians either within their own clinical sites or to other clinical sites. This increases the number of clinical sites which
have to be initiated in order to recruit patients to our clinical trials.
● Availability of reimbursement from insurance companies. The availability of reimbursement for patients to participate in
clinical trials can impact on their ability to enroll in our clinical trials.
Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in, and
have resulted in, increased costs or may affect the timing or outcome of the planned clinical trials,
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which could prevent completion of these trials and adversely affect our ability to advance the development of our SPEAR T-cells and other
cell therapies.
Certain of our clinical trials include dose escalation studies in which the dose of cell therapies administered to patients is varied or
initial studies in which the pre-treatment regimen may be varied, for example, a regimen with and without fludarabine. The outcome of
such dose escalation or initial studies will inform the clinical study going forward. However, the need to carry out dose escalation or other
initial studies may result in delays in data from such clinical programs while the most suitable dose or regimen is assessed. For example,
the trial design for our SPEAR T-cell trials includes dose escalation and therefore efficacy data may not be obtained from initial patients
treated in such studies during the dose escalation phase.
Our cell therapies represent a novel approach to cancer treatment that could result in heightened regulatory scrutiny and delays in
clinical development.
Use of any of our cell therapies to treat a patient involves genetically engineering a patient’s T-cells. This is a novel treatment
approach that carries inherent development risks including the following, any of which can result in delays to our ability to develop our cell
therapies:
● Further development, characterization and evaluation may be required at any point in the development of any cell therapy
where clinical or preclinical data suggest any potential safety risk for patients. The need to develop further assays, or to
modify in any way the protocols related to our cell therapies to improve safety or effectiveness, may delay the clinical
program, regulatory approval or commercialization, if approved at all, of any cell therapy.
● End users and medical personnel require a substantial amount of education and training in their administration of cell
therapies either to engage in clinical trials and recruit patients or ultimately to provide cell therapies to patients once our cell
therapies have been approved.
● Regulators may be more risk averse or require substantial dialogue and education as part of the normal regulatory approval
process for each stage of development of any cell therapy. Many regulators have additional requirements or processes relating
to cell therapy products which need to be addressed during development. To date, only a limited number of gene therapy
products have been approved in the U.S. and EU. Consequently, it is difficult to predict and evaluate what additional
regulatory hurdles may apply to the development of our cell therapies and whether additional investment, time or resources
will be required to overcome any such hurdles.
● Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in
the future.
● Random gene insertion associated with retrovirus-mediated genetically modified products, known as insertional oncogenesis,
could lead to lymphoma, leukemia or other cancers, or other aberrantly functioning cells. Insertional oncogenesis was seen in
early gene therapy studies conducted outside of the U.S. in 2003 although these studies utilized a murine gamma-retroviral
vector rather than a lentiviral vector.
● Although our viral vectors are not able to replicate, there may be a risk with the use of retroviral or lentiviral vectors that they
could undergo recombination and lead to new or reactivated pathogenic strains of virus or other infectious diseases.
● There is the potential for delayed adverse events following exposure to gene therapy products due to persistent biological
activity of the genetic material or other components of products used to carry the genetic material. In part for this reason, the
FDA recommends a 15-year follow-up observation period for all surviving patients who receive treatment using gene
therapies in clinical trials.
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● Clinical trials using genetically modified cells may be subject to additional or further regulatory processes, for example, by
the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee, or RAC or the need to apply for a
specific applications relating to the use of Genetically Modified Organism application in the EU. These additional processes
may delay or impede the initiation of a clinical trial.
● Increased risk to patient safety caused by the need to lymphodeplete patients prior to administration of our cell therapies
including in circumstances in which there is a heightened safety risk or in which medical resources could be prioritized
elsewhere, for example, during a pandemic such as COVID-19.
● Negative results seen in third party clinical trials utilizing gene therapy products may result in regulators halting development
of our cell therapies or in requiring additional data or requirements prior to our cell therapies progressing to the next stage of
development. For example, regulators could require changes to be made to our clinical trial protocols or increase
requirements for dose escalation studies as part of our clinical trial protocols.
Our clinical trials may fail to demonstrate adequately the safety and efficacy of any cell therapies which would prevent or delay
regulatory approval and commercialization.
There is a risk in any clinical trial that side effects from cell therapies will require a hold on, or termination of, clinical programs
or further adjustments to clinical programs in order to progress any cell therapy. Our cell therapy must demonstrate an acceptable
benefit:risk profile in its intended patient population and for its intended use. The benefit:risk profile required for product licensure will
vary depending on these factors and may include not only the ability to show tumor shrinkage, but also adequate duration of response, a
delay in the progression of the disease and/or an improvement in survival. For example, response rates from the use of the SPEAR T-cells
may not be sufficient to obtain regulatory approval unless we or our collaborators can also show an adequate duration of response.
The regulatory authorities (including the FDA) may issue a hold on our clinical trials as a result of safety information and data
obtained in third party clinical trials or in relation to third party products. Any such hold will require addressing by us and will inevitably
delay progression of the clinical trials concerned, if such clinical trials progress at all.
In addition, even if such trials are successfully completed, the FDA or foreign regulatory authorities may not interpret the results
as we or our collaborators do. Accordingly, more trials may be required before we can submit any cell therapy for regulatory approval. To
the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing
authorization application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials
in support of potential approval of our cell therapies. We cannot predict whether any of our cell therapies will satisfy regulatory
requirements at all or for indications in which such cell therapies are currently being evaluated as part of any clinical programs.
We have limited experience conducting later stage clinical trials which may cause a delay in any clinical program and in the obtaining
of regulatory approvals.
Although we have recruited a team that has significant experience with clinical trials, as a company we have limited experience in
conducting clinical trials through to regulatory approval. In part because of this lack of experience, we cannot be certain that planned
clinical trials will begin or be completed on time, if at all. Large-scale trials would require significant additional financial and management
resources, and reliance on third-party clinical investigators, contract research organizations, or CROs, or consultants. Relying on third-party
clinical investigators, consultants or CROs may force us to encounter delays that are outside of our control.
Clinical trials are expensive, time-consuming and difficult to implement.
Clinical trials, depending on the stage, can be costly as well as difficult to implement and define, particularly with technologies
that are not tried and tested, such as our cell therapies. These factors can lead to a longer clinical development timeline and regulatory
approval process, including a requirement to conduct further or more complex
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clinical trials in order to obtain regulatory approval. Regulatory authorities may disagree with the design of any clinical program, and
designing an acceptable program could lead to increased timeframes for obtaining of approvals, if any. In addition, progression of clinical
trials depends on the ability to recruit suitable patients to those trials and delay in recruiting will impact the timeframes of such clinical
trials and as a result the timeframes for obtaining regulatory approval, if any, for the relevant cell therapy.
In particular, eligible patients must be screened for the target peptide and HLA type, which may reduce the number of patients
who can be recruited for any clinical program. For example, low target peptide expression levels in the NY-ESO SPEAR T-cell and ADP-
A2M10 programs affected speed of patient recruitment in certain of the clinical trials. The ability to administer cell therapies to patients in
accordance with set protocols for the clinical trials and the results obtained depends on patient participation for the duration of the clinical
trial, which many of these patients are unable to do because of their late-stage cancer and limited life expectancy.
Validation of our cell therapies requires access to human samples which we may be unable to obtain or, if they can be obtained, that the
terms under which they are provided will be favorable to us.
Certain of the steps involved in validating and carrying out safety testing in relation to our cell therapies require access to human
samples (e.g., tissues samples or cell samples) from third parties. Such samples may be obtained from universities or research institutions
and will often be provided subject to certain terms and conditions. We may not be able to obtain samples in sufficient quantities to enable
preclinical testing in sufficient quantities for planned activities, particularly during the period in which COVID-19 impacts the ability of
research institutions to supply and access such samples. In addition, the terms under which such samples are available may not be
acceptable to us or may restrict our use of any generated results or require us to make payments to the third parties.
Our cell therapies and their application are not fully scientifically understood and are still undergoing validation and investigation.
Cell therapies including our SPEAR T-cells and their potential associated risks are still under investigation. Our cell therapies
including our SPEAR T-cells may not work in the way that we currently anticipate and affinity modification of the receptors within T-cells
or other cellular therapies may not produce the anticipated enhancements in activity. For example, there is a potential risk that, given that
the TCR chains in our SPEAR T-cells are produced separately and then assembled within patient T-cells into full TCRs, the TCR chains
from both transduced and naturally occurring T-cells could be assembled into an unintended end TCR due to mispairing of TCR chains,
which could create unknown recognition and cross-reactivity problems within patients. Although this phenomenon has not been reported in
humans, it remains a theoretical risk for our SPEAR T-cells and other similar cell therapies and is still being studied and investigated. This
could delay regulatory approval, if any, for the relevant cell therapy. To the extent that any mispairing is identified, either in our or our
competitors’ clinical trials, additional investment may be required in order to modify relevant cell therapies and to further assess and
validate the risk of such mispairing to patients. Following modification of the relevant SPEAR T-cell or other cell therapy, such modified
cell therapy may not remain suitable for patient treatment and may not eliminate the risk of mispairing of TCR chains and regulatory
approval may not be obtained on a timely basis or at all in relation to such modified cell therapy. The occurrence of such events would
significantly harm our business, prospects, financial condition and results of operations.
We may not be able to identify and validate additional target peptides or isolate and develop affinity-enhanced TCRs or other cell
therapy candidates that are suitable for validation and further development.
The success of our cell therapies depends on both the identification of target peptides presented on cancer cells, which can be
bound by our cell therapy products, and isolation and affinity enhancement of receptors including TCRs, which can be used to treat patients
if regulatory approval is obtained. Any failure to identify and validate further target peptides will reduce the number of potential cell
therapies that we can successfully develop, which in turn will reduce the commercial opportunities available to us and increase our reliance
on our existing SPEAR T-cells. Delays in our ability to identify and develop target peptides and cell therapies, including as caused by
COVID-19 or similar pandemics, may also impact our ability to progress development of programs and obtain additional funds to support
our business.
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We may not develop new cell therapy candidates for which the safety and efficacy profiles enable progression to and through
preclinical testing and into clinical development. Failure to identify further candidates for progression into preclinical testing and clinical
programs will significantly impact our pipeline of cell therapies and also increase our reliance on the SPEAR T-cells currently in clinical
development. If resources become limited or if we fail to identify suitable target peptides, receptors including TCRs or affinity-enhanced
receptors, our ability to submit INDs for further cell therapies may be delayed or never realized, which would have a materially adverse
effect on our business.
Development of an “off-the-shelf” cell therapy takes a considerable amount of time and such development may not be successful.
We have a platform process which may enable us to treat patient populations with an “off-the-shelf” product. However, our
research program may not be successful, might not be carried out within the timescales currently anticipated, or even if successful might
not result in a cell therapy that can be used to treat patients or achieve a profitable return on investment. In particular the various cell lines
developed during this process will need to be properly characterized and produced in accordance with regulatory requirements and this
development process can take a significant amount of time and resource to ensure that any process or cell lines can be used for the
production of clinical stage and ultimately commercial stage products. For example, we have taken a decision to change the cell line being
used to develop our MAGE-A4 allogeneic cell therapy due to the presence of a chromosomal abnormality in the original cell line provided
by Universal Cells under our Agreement with them. It is not known at this time whether the cell therapy candidates resulting from the
process will have a similar profile of activity to our existing cell therapy products or whether such cell therapy candidates will be safe to
administer to patients. Delays may occur at any part of the process, including obtaining results during development that necessitate a
requirement to repeat or modify steps in the process.
Risks Related to the Manufacture and Supply of Our Cell Therapies
Manufacturing and supply of cell therapies is complex, and if we encounter any difficulties in manufacture or supply of cell therapies
our ability to provide supply of our cell therapies for clinical trials or for commercial purposes could be delayed or stopped.
The process of manufacturing and administering cell therapies is complex and highly regulated. The manufacture of cell therapies
requires the harvesting of white blood cells from the patient, isolating certain T-cells from these white blood cells, combining patient T-cells
with our lentiviral delivery vector through a process known as transduction, expanding the transduced T-cells to obtain the desired dose,
and ultimately infusing the modified T-cells back into the patient. As a result of the complexities, our manufacturing and supply costs are
likely to be higher than those at more traditional manufacturing processes and the manufacturing process is less reliable and more difficult
to reproduce.
Delays or failures in the manufacture of cell therapies (whether by us, any collaborator or our third party contract manufacturers)
can result in a patient being unable to receive their cell therapy or a requirement to re-manufacture which itself then causes delays in
manufacture for other patients. Any delay or failure or inability to manufacture on a timely basis can adversely affect a patient’s outcomes
and delay the timelines for our clinical trials. Such delays or failure or inability to manufacture can result from:
● a failure in the manufacturing process itself for example, by an error in manufacturing process (whether by us or our third
party contract manufacturing organization), equipment or reagent failure, failure in any step of the manufacturing process,
failure to maintain a GMP environment, failure in quality systems applicable to manufacture, sterility failures, contamination
during process;
● a lack of reliability or reproducibility in the manufacturing process itself leading to variability in end manufacture of cell
therapy. Should the process be unreliable, the relevant regulatory agency (such as the FDA in the U.S.) may place a hold on a
clinical trial or request further information on the process which could in turn result in delays to the clinical trials;
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● variations in patient starting material or apheresis product resulting in less product than expected or product which is not
viable, or which cannot be used to successfully manufacture a cell therapy;
● product loss or failure due to logistical issues including issues associated with the differences between patients’ white blood
cells or characteristics, interruptions to process, contamination, failure to supply patient apheresis material within required
timescales (for example, as a result of an import or export hold-up) or supplier error;
● inability to have enough manufacturing slots to manufacture cell therapies for patients as and when those patients require
manufacture;
● inability to procure components, consumables, ingredients, or starting materials, or to manufacture starting materials
(including at our U.K. vector facility), as a result of supply chain issues;
● loss of or close-down of any manufacturing facility used in the manufacture of our cell therapies. For example, we will be
manufacturing cell therapies at our Navy Yard manufacturing facility. Should there be a contamination event at the facility
resulting in the close-down of that facility, it would not be possible to find alternative manufacturing capability for these cell
therapies within the timescales required for ongoing clinical trials. In addition, as with many pharmaceutical manufacturing
facilities, the facility will have periods of time within which it cannot be used for manufacture of patient product to enable
routine checks to be performed on the facility;
● loss or contamination of patient starting material, requiring the starting material to be obtained again from the patient or the
manufacturing process to be re-started;
● a requirement to modify or make changes to any manufacturing process. Such changes may additionally require
comparability testing which then may reduce the amount of manufacturing slots available for manufacture of our cell
therapies. Delays in our ability to make the required modifications or perform any required comparability testing within
currently anticipated timeframes or that such modifications or comparability testing, when made, will obtain regulatory
approval or that the new processes or modified processes will successfully be transferred to the third party contract suppliers
within currently anticipated timeframes can also impact timelines for manufacture;
● reduction or loss of the staff resources required to manufacture our cell therapies at our facilities or those of our CMOs;
● allocation of the resources, materials, and services of any collaborator or our third party contract manufacturers away from
our cell therapy programs, for example, to utilize such assets on the research, development and manufacture of COVID-19
vaccines or therapies;
● reduction in available workforce to perform manufacturing processes, for example, as a result of a COVID-19 outbreak or
workforce exhibiting potential COVID-19 symptoms, and pending receipt of test results for COVID-19 infection;
● increased country-specific requirements. For example, our current manufacturing site is in the U.S. and this means that for
patients outside of the U.S. there is a need to transfer patient-specific apheresis material from clinical sites in Europe to the
manufacturer in the U.S., for the patient product to be converted into our end cell therapy product, for that product to be
released for use in Europe and then for that cell therapy product to be transported back to the site in Europe for administration
to the patient. The supply and manufacturing chain required to achieve this is very complex and could be subject to failures at
any point; and
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● changes in the manufacturing and supply process. As our cell therapies progress through preclinical programs and clinical
trials towards approval and commercialization, it is expected that various aspects of the manufacturing and administration
process will be altered in an effort to optimize processes and results. We have already identified some improvements to our
manufacturing and administration processes, but these changes may not achieve the intended objectives, may not be
transferable to third parties or able to be used at larger scales and could cause our cell therapies to perform differently or
affect the results of planned clinical trials or other future clinical trials. Any changes to the manufacturing process may
require amendments to be made to regulatory applications or comparability tests to be conducted which can further delay
timeframes. If cell therapies manufactured under the new process have a worse safety or efficacy profile than the prior
investigational product or the process is less reproducible than the previous process, we may need to re-evaluate the use of
that manufacturing process, which could significantly delay or even result in the halting of our clinical trials.
We have insurance to cover certain business interruption events which is capped at £10 million in the U.K. and $5 million in the U.S.
However, because our level of insurance is capped, it may be insufficient to fully compensate us if any of these events were to occur in the
future.
Our manufacturing process needs to comply with regulations, and any failure to comply with relevant regulations could result in delays
in or termination of our clinical programs and suspension or withdrawal of any regulatory approvals.
In order to commercially produce our products, we will need to comply with the FDA’s and other regulatory authorities’ cGMP
requirements at our Navy Yard facility, vector facility and third party contract manufacturing facilities. We may encounter difficulties in
achieving quality control and quality assurance and may experience shortages in qualified personnel. We and our third party contract
manufacturers are subject to inspections by the FDA and comparable agencies in other jurisdictions to confirm compliance with applicable
regulatory requirements once the process has been approved. Any failure to follow cGMP or other regulatory requirements, reliably
manufacture product or delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our cell
therapies as a result of a failure of our facilities or the facilities or operations of third parties to comply with regulatory requirements or pass
any regulatory authority inspection could significantly impair our ability to develop and commercialize our cell therapies, including leading
to significant delays in the availability of our cell therapies for our clinical trials or the termination of or suspension of a clinical trial, or the
delay or prevention of a filing or approval of marketing authorization applications for our cell therapies. Significant non-compliance could
also result in the imposition of sanctions, including warning letters, fines, injunctions, civil penalties, failure of regulatory authorities to
grant marketing approvals for our cell therapies, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of
products, operating restrictions and criminal prosecutions, any of which could damage our reputation and our business.
Given we now manufacture cell therapies at our own U.S. manufacturing facility and our allogeneic facility in the UK, and
lentiviral vectors at a dedicated U.K. vector facility, regulatory authorities might raise non-compliance issues or require us to make changes
to the way in which we operate our facilities. This may result in a delay in our ability to manufacture cell therapies at our own facility or in
our ability to supply vector material for use in the manufacturing process. In addition, any cell therapy or vector produced in any of our
facilities might not be able to meet regulatory requirements and we may be unable to recruit and maintain sufficient staff to enable
manufacture of products within required timescales. Resourcing of cell manufacturing facilities is increasingly competitive, which may
restrict the number of available skilled operators which can be recruited at our manufacturing facilities. Any failure to meet regulatory
requirements or produce cell therapies and vector according to regulatory requirements could result in delays to our clinical programs,
potential side effects and even fatalities to patients and may result in withdrawal of regulatory approval for our manufacturing facility.
We have our own manufacturing capabilities which may result in increased costs being incurred by us.
During 2017, we opened a manufacturing facility for our SPEAR T-cell products within our Navy Yard facility in Philadelphia,
Pennsylvania and have started manufacturing SPEAR T-cells for use in our clinical trials. Regulatory
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authorities, in particular the FDA, might not continue to approve our ability to manufacture SPEAR T-cells or other cell therapies at the
Navy Yard facility. We opened a manufacturing facility in the UK for our off-the-shelf cell therapies in 2022 and manufacture of cell
therapies at that facility will require the obtaining of regulatory approval and maintenance of the regulatory approval once obtained.
Our ability to successfully manufacture our own cell therapies at our facilities within a reasonable period of time and within
currently projected costs is dependent on a number of factors including:
● our ability to recruit the required employees at a suitable level and experience and within required timescales and to maintain
employment of such required employees;
● our ability to obtain regulatory approval for the facility and for the manufacture of cell therapies at the facility and to satisfy
regulatory authorities on an ongoing basis;
● our ability to manufacture cell therapies reliably and reproducibly and to timescales sufficient to support required patient
administration;
● our ability to manufacture cell therapies in compliance with the applicable regulatory requirements, including requirements
applicable in the U.S., UK and EU;
● our ability to develop internal quality controls and processes sufficient to enable manufacture and supply of cell therapies at
our facilities;
● our ability to establish comparability with currently used manufacturing processes and for such comparability data to be
accepted by the appropriate regulatory authorities; and
● our ability to be able to fund the ongoing development including equipment requirements necessary for successful
manufacture of cell therapies at our facilities.
Any delay or failure in manufacture at our facility could result in delays to the supply of cell therapies for our clinical programs.
Should any of our third party manufacturers also cease to be able to or be unable to supply cell therapies at a time where our own
manufacturing facility is unable to produce cell therapies for use in our clinical programs or is unable to produce cell therapies at the
required level, then we will be unable to support such clinical programs until alternative manufacturing capability is secured.
Our autologous cell therapy products are patient-specific and we need to ensure that the correct product is administered to the
correct patient.
Administration of cell therapies is patient-specific. The process requires careful handling of patient-specific products and fail-safe
tracking to ensure that the tracking process is without error and that patient samples are tracked from patient removal, through
manufacturing and re-administration to the same patient. While such mechanisms are in place, should the tracking process fail, whether at
our own facility, a third party facility or at any point in the manufacturing and supply process, a patient could receive another patient’s T-
cells resulting in significant toxicity and potentially patient fatality. We will need to invest in enhanced systems, such as bar coding, to
further ensure fail safe tracking. There is always a risk of a failure in any such system. Inability to develop or adopt an acceptable fail-safe
tracking methodology and handling regime may delay or prevent us from receiving regulatory approval and/or result in significant toxicity
and potentially patient fatality if a patient receives another patient’s T-cells. This risk may be increased where cell therapies are used in
clinical programs that we do not control or sponsor and, should an error be made in the administration of our cell therapies in such clinical
programs, this could affect the steps required in our own clinical programs and manufacturing process requiring the addition of further
tracking mechanisms to ensure fail-safe tracking. The tracking systems required to further ensure safe patient administration may also
require increased administration to satisfy other regulatory requirements, for example, data protection requirements in Europe. The need to
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ensure tracking systems are adequate and to comply with these additional regulatory requirements may result in delay to the start of trials or
the need to obtain additional regulatory licenses or consents prior to starting such trials.
Risks Related to the COVID-19 pandemic
The outbreak of COVID-19 and its variants or any other similar pandemic may materially delay development of our cell therapies and
our ability to obtain additional financing.
The outbreak of coronavirus, SARS-CoV-2 (“COVID-19”) has developed into a global pandemic, spreading to most regions of the
world including the U.S., U.K. and areas of Europe where we have facilities or ongoing clinical trials. Whilst impacts if the pandemic are
reducing, should new strains be identified that are highly infectious or which cause serious side effects our business could be affected in the
following ways:
● Any requirement to stay at home and the control measures required to mitigate risks to our work force including social distancing
requirements limits effectiveness of our work force, the numbers of individuals that can work at the facility at any one time and is
resulting in delays to performance of manufacturing, development and research activities. Increased working from home also impacts
normal communications and may increase the cyber security risk or create data accessibility concerns.
● Any significant outbreak could result in manufacturing operations or facilities being closed or necessitate a further reduction in the
work we are able to perform at those facilities which in turn could result in a delay to the treatment of patients and a delay in our
research and development programs.
● Clinical sites may divert resources away from the performance of clinical trials or impose restrictions on their ability to perform
clinical trials, particularly where those clinical trials may increase the risk to the patients being treated. This may result in treatment
being delayed for patients or a reduction in the number of patients being treated.
● We have provided our clinical sites with guidance in relation to the treatment of patients during the COVID-19 pandemic, however,
there is an increased risk to our patients as a result of the pandemic including as a result of infection with COVID-19 whilst they are
being treated in any of our clinical trials or are attending at clinical sites for routine scans or treatments. This risk is increased by the
requirement in our clinical trial protocols to treat patients with a lymphodepletion regimen which leaves patients’ immune-
compromised for a period of time.
● Our clinical sites may be unable to conduct clinical trial activities in accordance with the applicable clinical trial protocol or other
regulatory requirements including monitoring requirements, timing of patient visits, ability to follow patients after they have received
treatment, ability to perform scans and patient assessments. Deviations and changes to clinical trial protocols may be required in order
to address the interruptions caused by COVID-19. Inability to perform clinical trials in accordance with regulatory requirements may
impact a later ability to obtain regulatory approval in relation to our cell therapies or may delay our ability to obtain such regulatory
approval.
● Many of the third parties we rely on for our development of cell therapies may also be impacted by the COVID-19 pandemic. This
could result in delays with the supply of certain raw materials and consumables required for manufacturing and research activities as a
result of diversion of those materials and consumables to high priority vaccine development requirements.
● Given third party service providers may be subject to restrictions on resources as a result of the COVID-19 pandemic, we may see
delays in the provision of their services to us.
● Regulatory authorities may postpone or delay certain activities including surveillance inspections of manufacturing facilities or
responding to applications and authorization requirements.
The COVID-19 pandemic continues to evolve and the extent to which it may impact our future business is highly uncertain and
difficult to predict. The impact on global health systems, the life sciences industry more generally or the economy as a whole is not yet
known. Depending on the length and progression of such pandemic, we may experience disruptions that would significantly impact our
business.
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Risks Related to the Commercialization and Marketing of Our Cell Therapies
We may not be able to obtain marketing approvals of our cell therapies as broadly as planned or on the timescales we plan.
The process of obtaining marketing approvals, both in the U.S. and in countries outside of the U.S., is expensive, may take
many years and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the cell therapies
involved. For example, clinical trials may be required in pediatric populations before any marketing approval can be obtained, which can
be time consuming and costly. Changes in marketing approval policies during the development period, changes in or the enactment of
additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval
or rejection of an application. The FDA and foreign regulatory authorities also have substantial discretion in the drug and biologics
approval process. The number and types of preclinical programs and clinical trials that will be required for regulatory approval varies
depending on the cell therapy, the disease or condition that the cell therapy is designed to address, and the regulations applicable to any
particular cell therapy. Approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during
the course of a cell therapy’s clinical development and may vary among jurisdictions, and there may be varying interpretations of data
obtained from preclinical programs or clinical trials, either of which may cause delays or limitations in the approval or the decision not to
approve an application.
In addition, approval of our cell therapies could be delayed or refused for many reasons, including the following:
● the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our or our
collaborators’ clinical trials;
● we or our collaborators may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory
authorities that our SPEAR T-cells have a beneficial benefit:risk profile for any of their proposed indications;
● the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign
regulatory authorities for approval;
● the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical programs
or clinical trials;
● the data collected from clinical trials of our cell therapies may not be sufficient to the satisfaction of the FDA or comparable
foreign regulatory authorities to support the submission of a BLA (including as a result of impacts caused by the COVID-19
outbreak) or other comparable submission in foreign jurisdictions or to obtain regulatory approval in the U.S. or elsewhere;
● our manufacturing processes or facilities or those of the third-party manufacturers we use may not be adequate to support
approval of our cell therapies;
● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a
manner rendering our clinical data insufficient for approval
● requirement for additional clinical trials ahead of the grant of any regulatory approval;
● requirement for further development or characterization of processes. For example, the potency of our cell therapies will need
to be assessed by a potency assay and although we believe that our assay will be satisfactory to assess potency, the regulatory
authorities may disagree which will necessitate development of a further assay or process;
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● third parties we rely on being unable to meet regulatory requirements or provide information or documentation to support
regulatory applications or questions from regulatory authorities. For example, we rely on a third party vector manufacturer
who will be required to provide certain information to enable us to file the BLA;
● access to an approved companion diagnostic to support the launch of any cell therapy. Commercialization of our cell
therapies will require approval for and access to a companion diagnostic. We are reliant on a third party for development of
our companion diagnostic assay and there is no certainty that development will be possible in the timelines we require or that
end regulatory approval will be available in the timelines we require; and
● data from clinical trials sponsored by third party competitors for similar cell therapy products which might impact a
regulators view of the safety or efficacy profile or our cell therapies or the grant of marketing approvals to competitors ahead
of any application we make for marketing approval which may preclude our ability to obtain marketing approval in the same
indication unless we can show increased efficacy.
Our estimates of the patient population that may be treated by our cell therapies is based on estimates informed by published
information. This information may not be accurate in relation to our cell therapies and our estimates of potential patient
populations could therefore be much higher or lower than those that are actually available or possible for commercialization. In
addition, these estimates are based on assumptions about the number of eligible patients which have the peptide and HLA type
targeted by the applicable cell therapy. Different patient populations will present different peptides according to their specific HLA
type. HLA types vary across the patient population and, due to this variability, any therapy will initially only be suitable for
treatment of patients expressing the particular HLA type presenting the relevant peptide.
We have begun submission of a BLA for afami-cel, but the review and approval of this BLA may not occur on the anticipated timelines,
and we cannot be certain that the FDA will grant final marketing approval.
We began submitting modules of a BLA for afami-cel for the treatment of synovial sarcoma in December 2022, and we plan to
complete the rolling submission by mid-2023. The BLA submission for afami-cel is supported by positive clinical data from the
SPEARHEAD-1 clinical trial in patients with advanced synovial sarcoma. We anticipate that the application will be eligible for Priority
Review under the FDA's Regenerative Medicine Advanced Therapy (“RMAT”) program.
However, approval of this BLA can be delayed or denied by the FDA for several reasons, including but not limited to those
outlined above. In particular, the FDA may conclude that the data submitted in support of the BLA are insufficient to demonstrate a
favorable benefit:risk profile in the proposed patient population without the submission of additional information or data, which could
require the conduct of additional clinical studies and the resubmission of the BLA.
Development of a commercially available cell therapy process is difficult, and we may be unable to develop the process on currently
anticipated timescales or at all.
Developing a commercially viable process is a difficult and uncertain task, and there are risks associated with scaling to the level
required for advanced clinical trials or commercialization, including, among others, requirements to characterize the manufacturing
process, increased costs, potential problems with process scale-out, process reproducibility, stability issues, lot consistency, loss of product,
and timely availability of reagents or raw materials or contract manufacturing services or facilities. A failure to develop such a
commercially viable process within anticipated timescales may prevent or delay progression of our T-cell therapies into pivotal clinical
trials and ultimately commercialization. This failure to develop a timely process may result from, for example, inability to scale-up within
required timelines, inability to put in place the required processes and control measures for a commercial process or failure of third parties
(including vector suppliers) to put in place adequate facilities or processes to enable commercial manufacture. In addition, we may
ultimately be unable to reduce the expenses associated with our SPEAR T-cells to levels that will allow us to achieve a profitable return on
investment.
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Following grant of marketing authorization we will be subject to ongoing regulatory obligations, which may result in significant
additional expense as well as significant penalties if we fail to comply with regulatory requirements or experience unanticipated
problems with our cell therapies.
If the FDA or a comparable foreign regulatory authority approves our cell therapies, the manufacturing processes, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our cell therapies
will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-
marketing information and reports, registration and listing, as well as continued compliance with cGMPs and cGCPs for any clinical trials
that we conduct post-approval. We and our contract manufacturers will be subject to periodic unannounced inspections by the FDA to
monitor and ensure compliance with cGMPs. We must also comply with requirements concerning advertising and promotion for any cell
therapies for which we obtain marketing approval. Promotional communications with respect to prescription drugs, including biologics, are
subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling.
Thus, we will not be able to promote any cell therapies we develop for indications or uses for which they are not approved.
We may not be able to develop or obtain approval for the analytical assays and companion diagnostics required for commercialization
of our cell therapies including ADP-A2M4.
Administration of our cell therapies requires the use of an immuno-chemistry or other screening assay in which patients are
screened for the presence of the cancer peptide targeted by our cell therapies. For example, in our ADP-A2M4 trial patients are screened for
the presence of MAGE-A4. This assay requires the identification of suitable antibodies which can be used to identify the presence of the
relevant target cancer peptide. Our patients are also screened for their HLA-type as only patients with certain HLA-types can receive our
cell therapies.
If safe and effective use of a biologic product depends on an in vitro diagnostic, such as a test to detect patients with a particular
cancer peptide, then the FDA generally requires approval or clearance of the diagnostic, known as a companion diagnostic, concurrently
with approval of the therapeutic product. To date, the FDA has generally required in vitro companion diagnostics that are intended for use
in selection of patients who will respond to cancer treatment to obtain a pre-market approval, or PMA, which can take up to several years,
for that diagnostic approval or clearance to occur simultaneously with approval of the biologic product.
We expect that, for all our cell therapies, the FDA and similar regulatory authorities outside of the U.S. will require the
development and regulatory approval of a companion diagnostic assay as a condition to approval. We also expect that the FDA may require
PMA supplemental approvals for use of that same companion diagnostic as a condition of approval of additional cell therapies. We do not
have experience or capabilities in developing or commercializing these companion diagnostics and plan to rely in large part on third parties
to perform these functions.
If we or our collaborators, or any third parties that we engage to assist us, are unable to successfully develop companion
diagnostic assays for use with any SPEAR T-cells, or are unable to obtain regulatory approval or experience delays in either development
or obtaining regulatory approval (including as a result of the impact of the COVID-19 pandemic), we may be unable to identify patients
with the specific profile targeted by the relevant cell therapy for enrollment in our clinical trials. In addition, delay in development and
approval of any companion diagnostic (including as a result of the impact of the COVID-19 pandemic) may also impact our ability to
obtain a marketing approval for the therapeutic product and to commercialize the therapeutic product. For example, delays in the
development of a companion diagnostic for detection of the MAGE-A4 antigen in synovial sarcoma and MRCLS indications may result in
delays to any marketing approval for ADP-A2M4 in those indications. Accordingly, further investment may be required to further develop
or obtain the required regulatory approval for the relevant companion diagnostic assay, which would delay or substantially impact our
ability or our collaborators’ ability to conduct further clinical trials or obtain regulatory approval.
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Obtaining and maintaining regulatory approval of our cell therapies in one jurisdiction does not mean that we will be successful in
obtaining regulatory approval of our cell therapies in other jurisdictions.
We or our collaborators may submit marketing authorization applications in multiple countries. Regulatory authorities in different
countries have different requirements for approval of cell therapies with which we must comply prior to marketing in those jurisdictions.
Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties
and costs for us and could delay or prevent the introduction of our cell therapies in certain countries. For example, in certain jurisdictions
additional clinical trials in different patient populations may be required. If we fail to comply with the regulatory requirements in
international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full
market potential of our cell therapies will be harmed.
The market opportunities for cell therapies may be limited to those patients who have failed prior treatments.
Initial approval of new cancer therapies may be limited to what is referred to as third-line use. Third-line treatment is the third type
of treatment following initial, or first-line, treatment and second-line treatment, which is given when first-line treatment does not work or
ceases working. However, cancer therapies may be used from the point at which cancer is detected in its early stages (first-line) onward.
Whenever the first-line therapy fails or the process is unsuccessful, second-line therapy may be administered, such as additional rounds of
chemotherapy, radiation and antibody drugs or a combination of these treatments. If second-line therapies fail, patients are generally given
the opportunity to receive third-line therapies, which tend to be more novel therapies. Our current clinical trials generally require that
patients have received chemotherapy prior to enrollment and are primarily directed to third-line use. Depending upon the outcome of
current trials, we or our collaborators may conduct future clinical trials using cell therapies for first-line therapy, but clinical trials might not
be approved or if approved such trials might not lead to regulatory approval. If our cell therapies only receive third-line or second-line
approval, the patient population into which we or our collaborators can supply our cell therapies will be significantly reduced, which may
limit commercial opportunities.
In addition, our patient population may be derived from those who have previously failed checkpoint therapy, which may result in
tumor resistance mechanisms which also impart resistance to our cell therapies and hence may reduce the effectiveness of our cell
therapies.
We currently have a limited marketing and sales organization and have no experience in marketing products.
As an organization, we have never marketed or supplied commercial pharmaceutical or biologic products or therapies. We will
need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We
may not be successful in such a transition.
We do not currently have a sales force and will need to hire and develop the sales function and associated support network if we
are to supply cell therapies on a commercial basis. As our cell therapies proceed through clinical programs, we intend to develop an in-
house marketing organization and sales force, which will require significant capital expenditures, management resources, and time. We will
have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train, and retain suitably skilled and experienced
marketing and sales personnel. This process may result in additional delays in bringing our cell therapies to market or in certain cases
require us to enter into alliances with third parties in order to do so. However, there can be no assurance that we will be able to establish or
maintain such collaborative arrangements, or even if we are able to do so, that they will result in effective sales forces. Any revenue we
receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing
and sales efforts of such third parties, and our revenue from cell therapy sales may be lower than if we had commercialized our cell
therapies ourselves. We also face significant competition in our search for third parties to assist us with the sales and marketing efforts of
our cell therapies. Such competition may also result in delay or inability to supply cell therapies to particular countries or territories in the
world which in turn will restrict the revenue that can be obtained from any cell therapy. Any inability on our part to develop in-house sales
and commercial distribution capabilities or to establish and maintain relationships with third-party collaborators that can successfully
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commercialize any cell therapy in the U.S. or elsewhere will have a materially adverse effect on our business and results of operations.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization
of our cell therapies.
We face an inherent risk of product liability as a result of the clinical testing of our cell therapies and our ongoing manufacture of
cell therapies and will face an even greater risk upon any commercialization. For example, we may be sued if any of our SPEAR T-cells
causes or is perceived to cause injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any
such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in
the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we
cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit
commercialization of our cell therapies. Even a successful defense would require significant financial and management resources and,
regardless of the merits or eventual outcome, liability claims may result in:
● decreased demand for our cell therapies;
● injury to our reputation;
● withdrawal of clinical trial participants;
● initiation of investigations by regulators;
● costs to defend the related litigation;
● a diversion of management’s time and our resources;
● substantial monetary awards to trial participants or patients;
● product recalls, withdrawals or labeling, marketing or promotional restrictions;
● loss of revenue;
● exhaustion of any available insurance and our capital resources;
● the inability to commercialize our cell therapies; and
● a decline in our share price.
Our inability to obtain sufficient product liability insurance at an acceptable price to protect against potential product liability
claims could also prevent or inhibit the commercialization of our cell therapies. We currently hold £15.0 million in clinical trial insurance
coverage in the aggregate per year, with a per trial limit of £5.0 million. We also hold products and services liability insurance capped at
£5.0 million in the aggregate and public liability insurance capped at £5.0 million per occurrence. These levels may not be adequate to
cover all liabilities that we may incur. We may also need to increase our insurance coverage as we expand the scope of our clinical trials
and commercialize any of our cell therapies. In addition, insurance coverage is increasingly expensive. We may not be able to maintain
insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
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Even if we or our collaborators obtain regulatory approval of our cell therapies, they may not gain market acceptance among
physicians, patients, hospitals, cancer treatment centers and others in the medical community.
The use of engineered T-cells and cell therapies more generally as a potential cancer treatment is a recent development and may
not become broadly accepted by physicians, patients, hospitals, cancer treatment centers and others in the medical community. Additional
factors will influence whether SPEAR T-cells are accepted in the market, including:
● the clinical indications for which our cell therapies are approved;
● physicians, hospitals, cancer treatment centers and patients considering the SPEAR T-cells as a safe and effective treatment;
● the potential and perceived advantages of our cell therapies over alternative treatments;
● the prevalence and severity of any side effects;
● product labeling or prescribing information requirements of the FDA or other regulatory authorities;
● limitations or warnings contained in the labeling approved by the FDA;
● the timing of market introduction of our cell therapies as well as competitive products;
● the cost of treatment in relation to alternative treatments;
● the availability of coverage, adequate reimbursement and pricing by third-party payors and government authorities;
● the willingness of patients to pay for cell therapies on an out-of-pocket basis in the absence of coverage by third-party payors
and government authorities;
● relative convenience and ease of administration as compared to alternative treatments and competitive therapies; and
● the effectiveness of our sales and marketing efforts.
In addition, although we are not utilizing embryonic stem cells or replication competent vectors in our manufacturing process,
adverse publicity due to the ethical and social controversies surrounding the therapeutic use of such technologies, and reported side effects
from any clinical trials using these technologies or the failure of such trials to demonstrate that these therapies are safe and effective may
limit market acceptance of cell therapies including SPEAR T-cells. If our cell therapies are approved but fail to achieve market acceptance
among physicians, patients, hospitals, cancer treatment centers or others in the medical community, we or our collaborators will not be able
to generate significant revenue.
Even if our cell therapies achieve market acceptance, we or our collaborators may not be able to maintain that market acceptance
over time if new products or technologies are introduced that are more favorably received than our cell therapies, are more cost effective or
render our cell therapies obsolete.
Coverage, price flexibility, and reimbursement may be limited or unavailable in certain market segments for cell therapies.
Successful sales of cell therapies, if approved, depend on the availability of coverage and adequate reimbursement from third-
party payors. In addition, because cell therapies represent new approaches to the treatment of
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cancer, we cannot accurately estimate the potential revenue from cell therapies. Patients who are provided medical treatment for their
conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Obtaining coverage and
adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to
new product acceptance.
Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which
drugs and treatments they will cover and the amount of reimbursement. Reimbursement by a third-party payor may depend upon a number
of factors, including, but not limited to, the third-party payor’s determination that use of a product is:
● a covered benefit under its health plan;
● safe, effective and medically necessary;
● appropriate for the specific patient;
● cost-effective; and
● neither experimental nor investigational.
Obtaining coverage and reimbursement approval of a cell therapy from a government or other third-party payor is a time-
consuming and costly process which could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for
the use of our products. Even if we obtain coverage for a given cell therapy, the resulting reimbursement payment rates might not be
adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Patients are unlikely to
use cell therapies unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of the cell therapy.
In the U.S., no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage
and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a
time-consuming and costly process that will require us to provide scientific and clinical support for the use of our cell therapies to each
payor separately, with no assurance that coverage and adequate reimbursement will be obtained.
In some foreign countries, particularly those in the EU, the pricing of biologics is subject to governmental control. In these
countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a cell
therapy. In addition, market acceptance and sales of our cell therapies will depend significantly on the availability of coverage and adequate
reimbursement from third-party payors for the cell therapies and may be affected by existing and future health care reform measures.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, national and state levels
directed at broadening the availability of healthcare and containing or lowering the cost of healthcare, including the Affordable Care Act
(ACA) or provisions of the Inflation Reduction Act (IRA). Such regulatory changes may bring prescription drug pricing reform or
healthcare affordability programs that, for example, seek to lower prescription drug costs by allowing governmental healthcare programs to
negotiate prices with drug companies, put an inflation cap on drug prices, and lower out-of-pocket expenses for recipients of governmental
healthcare programs. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government,
insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or
impose price controls may adversely affect:
● the demand for cell therapies, if we or our collaborators obtain regulatory approval;
● our or our collaborators’ ability to set a price that is fair for our cell therapies;
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● our or our collaborators’ ability to generate revenue and achieve or maintain profitability;
● the level of taxes that we are required to pay; and
● the availability of capital.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from
private payors, which may adversely affect our future profitability.
Our cell therapies for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The enactment of the Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated pathway for the
approval of biosimilar and interchangeable biological products. The abbreviated regulatory pathway establishes legal authority for the FDA
to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to
an existing reference product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after
the original branded product or “reference” is approved under a BLA. On March 6, 2015, the FDA approved the first biosimilar product
under the BPCIA. However, the law is complex and is still being interpreted and implemented by the FDA and as a result, its ultimate
impact, implementation and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA
may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our
biological products.
There is a risk that the FDA will not consider our cell therapies to be reference products for purposes of 12-year reference product
exclusivity, potentially creating the opportunity for biosimilar competition sooner than anticipated. Additionally, this period of regulatory
exclusivity does not apply to companies pursuing regulatory approval via their own full BLA, rather than via the abbreviated biosimilar
pathway. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that
is similar to traditional generic substitution for non-biological drug products is not yet clear, and will depend on a number of marketplace
and regulatory factors that are still developing.
Foreign countries also have abbreviated regulatory pathways for biosimilars and hence even where the FDA does not approve a
biosimilar biologic, a biosimilar could be approved using an abbreviated regulatory pathway in other markets where our cell therapies are
approved and marketed.
Risks Related to Government Regulation
Regulatory authorities may impose a hold on our clinical trials.
A clinical trial may be suspended or terminated by us or a collaborator, IRBs for the institutions in which such trials are being
conducted, the Data Monitoring Committee for such trial, or by the FDA or other regulatory authorities due to a number of factors,
including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical
trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues
or adverse side effects, failure to demonstrate a benefit from using a cell therapy, changes in governmental regulations or administrative
actions or lack of adequate funding to continue the clinical trial. If we or our collaborators experience termination of, or delays in the
completion of, any clinical trial of our cell therapies, the commercial prospects for our cell therapies will be harmed, and our ability to
generate product revenue will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow our product
development and approval process and jeopardize our ability to commence product sales and generate revenue.
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The FDA regulatory process can be difficult to predict, in particular whether for example, accelerated approval processes are available
or further unanticipated clinical trials are required will depend on the data obtained in our ongoing clinical trials.
The regulatory approval process and the amount of time it takes us to obtain regulatory approvals for our cell therapies will
depend on the data that are obtained in our ongoing clinical trials and in one or more future registration or pivotal clinical trials. We may
attempt to seek approval on a per indication basis for our cell therapies on the basis of a single pivotal trial or on the basis of data from a
Phase 2 trial. While the FDA requires in most cases two adequate and well-controlled pivotal clinical trials to demonstrate the efficacy of a
product candidate, a single trial with other confirmatory evidence may be sufficient where the trial is a large multicenter trial demonstrating
internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or
prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically
difficult. Depending on the data we obtain, the FDA or other regulatory authorities may require additional clinical trials to be carried out or
further patients to be treated prior to the granting of any regulatory approval for marketing of our cell therapies. It is difficult for us to
predict with such a novel technology exactly what will be required by the regulatory authorities in order to take our cell therapies to market
or the timeframes under which the relevant regulatory approvals can be obtained. In December 2022, Congress passed FDORA, which
made changes to the Accelerated Approval program, and it is unclear how those changes may impact our ability to obtain or maintain
regulatory approval via the Accelerated Approval program.
Obtaining and maintaining regulatory approval of our cell therapies in one jurisdiction does not mean that we will be successful in
obtaining regulatory approval of our cell therapies in other jurisdictions.
Obtaining and maintaining regulatory approval of our cell therapies in one jurisdiction does not guarantee that we or our
collaborators will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory
approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants
marketing approval of a SPEAR T-cell, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing,
marketing and promotion of the SPEAR T-cell in those countries. Approval procedures vary among jurisdictions and can involve
requirements and administrative review periods different from, and greater than, those in the U.S., including additional preclinical
programs or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other
jurisdictions. In many jurisdictions outside the U.S., a cell therapy must be approved for reimbursement before it can be approved for sale
in that jurisdiction. In some cases, the price that we or our collaborators intend to charge for our cell therapies is also subject to approval.
We may be unable to obtain breakthrough or similar designations for our cell therapies or maintain the benefits associated with such
designations.
In 2012, the FDA established a Breakthrough Therapy designation which is intended to expedite the development and review of
products that treat serious or life-threatening diseases when “preliminary clinical evidence indicates that the drug may demonstrate
substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects
observed early in clinical development.” The designation of a SPEAR T-cell as a Breakthrough Therapy provides potential benefits that
include more frequent meetings with the FDA to discuss the development plan for the SPEAR T-cell and ensure collection of appropriate
data needed to support approval; more frequent written correspondence from the FDA about things such as the design of the proposed
clinical trials and use of biomarkers; intensive guidance on an efficient drug development program, beginning as early as Phase 1;
organizational commitment involving senior managers; and eligibility for rolling review and Priority Review.
We have obtained RMAT designation (Regenerative Medicine Advanced Therapy designation) from the FDA for ADP-A2M4 for
the treatment of synovial sarcoma. We may apply for similar status or accelerated programs in other countries and for other of our products
and indications. However, given the novel nature of our cell therapies, it is difficult for us to predict whether the FDA or other regulatory
authorities will approve such requests or what further clinical or other data may be required to support an application for such accelerated
approval procedures.
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Breakthrough Therapy designation does not change the standards for product approval. Additionally, other treatments from
competing companies may obtain the designations and impact our ability to develop and commercialize our SPEAR T-cells, which may
adversely impact our business, financial condition or results of operation.
We may also seek Accelerated Approval under the FDA’s Fast Track And Accelerated Approval programs, the FDA may approve a
drug or biologic for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments
based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier
than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical
benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. For
drugs granted Accelerated Approval, post-marketing confirmatory trials have been required to describe the anticipated effect on irreversible
morbidity or mortality or other clinical benefit. These confirmatory trials must be completed with due diligence. Moreover, the FDA may
withdraw approval of our cell therapy or indication approved under the accelerated approval pathway if, for example:
● the trial or trials required to verify the predicted clinical benefit of our cell therapy fail to verify such benefit or do not
demonstrate sufficient clinical benefit to justify the risks associated with the drug;
● other evidence demonstrates that our cell therapy is not shown to be safe or effective under the conditions of use;
● we fail to conduct any required post approval trial of our cell therapy with due diligence; or
● we disseminate false or misleading promotional materials relating to the relevant cell therapy.
The FDA’s Accelerated Approval program has come under increased scrutiny in recent years from both internal and external
stakeholders have raised concerns that confirmatory trials have not been completed or have not demonstrated intended effect. Recent
legislation (FDORA) has increased the FDA’s authority to impose more stringent requirements on the timing and conduct of confirmatory
trials, and on the FDA’s ability to expedite the withdrawal from approval of a biological product when confirmatory trials have not been
completed or do not show intended effect.
In Europe, the EMA has implemented the so-called "PRIME" (Priority Medicines) status in order support the development and
accelerate the approval of complex innovative medicinal products addressing an unmet medical need. The PRIME status enables early
dialogue with the relevant EMA scientific committees and, possibly, some payers; and thus reinforces the EMA's scientific and regulatory
support. It also opens accelerated assessment of the marketing authorization application (150 days instead of 210 days). The PRIME status,
which is decided by the EMA, is reserved to medicines that may benefit from accelerated assessment, i.e. medicines of major interest from
a public health perspective, in particular from a therapeutic innovation perspective.
In 2020, the EMA granted access to the PRIME initiative to ADP-A2M4 for the treatment of certain patients with synovial
sarcoma. We may apply for PRIME status for other of our cell therapy products. There can be no assurance that any application will be
successful in obtaining PRIME status.
We will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional
expense as well as significant penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our
cell therapies.
Any regulatory approvals that we receive for our cell therapies will require surveillance to monitor the safety and efficacy of the
cell therapy. The FDA may also require a risk evaluation and mitigation strategy in order to approve
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our cell therapies, which could entail requirements for a medication guide, physician communication plans or additional elements to ensure
safe use, such as restricted distribution methods, patient registries and other risk minimization tools.
Later discovery of previously unknown problems with our cell therapies, including adverse events of unanticipated severity or
frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result
in, among other things:
● restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials;
● restrictions on such products’ manufacturing processes;
● restrictions on the marketing of a product;
● restrictions on product distribution;
● requirements to conduct post-marketing clinical trials;
● untitled or warning letters;
● withdrawal of the products from the market;
● refusal to approve pending applications or supplements to approved applications that we submit;
● recall of products;
● fines, restitution or disgorgement of profits or revenue;
● suspension or withdrawal of regulatory approvals;
● refusal to permit the import or export of our products;
● product seizure;
● injunctions;
● imposition of civil penalties; or
● criminal prosecution.
The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that
could prevent, limit or delay regulatory approval of our cell therapies. We cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we are slow or unable to adapt to
changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance,
we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
In addition, if following any pivotal clinical trial we were able to obtain accelerated approval of any of our cell therapies, the FDA
will require us to conduct a confirmatory trial or trials to verify the predicted clinical benefit and additional safety studies. The results from
the confirmatory trial or trials may not support the clinical benefit, which would result in the approval being withdrawn.
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We may seek a conditional marketing authorization in Europe for some or all of our current cell therapies, but we may not be able to
obtain or maintain such authorization.
As part of its marketing authorization process, the EMA may grant marketing authorizations for certain categories of medicinal
products on the basis of less complete data than is normally required, when doing so may meet unmet medical needs of patients and serve
the interest of public health. In such cases, it is possible for the Committee for Medicinal Products for Human Use, or CHMP, to
recommend the granting of a marketing authorization, subject to certain specific obligations to be reviewed annually, which is referred to as
a conditional marketing authorization. This may apply to medicinal products for human use that fall under the centralized procedure
(EMA's scientific assessment and European Commission's approval), including those that aim at the treatment, the prevention, or the
medical diagnosis of seriously debilitating diseases or life-threatening diseases and those designated as orphan medicinal products.
A conditional marketing authorization may be granted when the CHMP finds that, although comprehensive clinical data referring
to the safety and efficacy of the medicinal product have not been supplied, all the following requirements are met:
● the benefit:risk profile of the medicinal product is positive;
● it is likely that the applicant will be in a position to provide the comprehensive clinical data;
● unmet medical needs will be fulfilled; and
● the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk
inherent in the fact that additional data is still required.
The granting of a conditional marketing authorization is restricted to situations in which only the clinical part of the application is
not yet fully complete. Incomplete preclinical or quality data may only be accepted if duly justified and only in the case of a product
intended to be used in emergency situations in response to public-health threats. Conditional marketing authorizations are valid for
one year, on a renewable basis. The holder will be required to complete ongoing trials or to conduct new trials with a view to confirming
that the benefit-risk balance is positive. In addition, specific obligations may be imposed in relation to the collection of pharmacovigilance
data.
Granting a conditional marketing authorization allows medicines to reach patients with unmet medical needs earlier than might
otherwise be the case and will ensure that additional data on a product are generated, submitted, assessed and acted upon. Although we may
seek a conditional marketing authorization for one or more of our cell therapies, the CHMP may ultimately not agree that the requirements
for such conditional marketing authorization have been satisfied. This would delay the commercialization of our cell therapies as we would
have to wait for a complete data package before submitting the marketing authorization application.
We or our collaborators may not be able to obtain or maintain orphan drug exclusivity for our cell therapies.
Regulatory authorities in some jurisdictions, including the U.S. and Europe, may designate drugs or biologics for relatively small
patient populations as orphan drugs. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory
review and approval process, but it can lead to financial incentives, such as opportunities for grant funding toward clinical trial costs, tax
advantages in-lieu of R&D tax credits and user-fee waivers.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for
which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from
approving another marketing authorization application for the same drug for that time period. The applicable period is seven years in the
U.S. and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan
drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be
lost if the FDA determines
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that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the
needs of patients with the rare disease or condition. In addition, a competitor could avoid our orphan drug exclusivity, if its products is
shown to be clinically superior. In Europe, the orphan exclusivity may be lost vis-à-vis another drug in cases the manufacturer is unable to
assure sufficient quantity of the drug to meet patient needs or if that other product is proved to be clinically superior to the approved orphan
product. Generally, the clinical superiority standards in the U.S. and in Europe are similar, and a product is clinically superior if it shows
greater efficacy, greater safety, or makes a major contribution to patient care.
As a result of Brexit, as of January 1, 2021, incentives related to an orphan designation granted in the EU are limited to the EU
and Ireland, but not Great Britain (England, Wales and Scotland). The competent authority in the U.K. (MHRA) will review applications
for orphan designation at the time of a marketing authorization, and has announced that it will offer incentives in the form of market
exclusivity and full or partial refunds for marketing authorization fees to encourage the development of medicines in rare diseases.
There can be no assurance that any of our cell therapies will be eligible for orphan drug designation in the U.S. or in other
jurisdictions or that it will obtain orphan drug exclusivity upon approval or that we will not lose orphan drug designation for ADP-A2M4.
Inability to obtain orphan drug designation for a specific cell therapy or loss of such designation for ADP-A2M4 in the future would
prevent any ability to take advantage of the financial benefits associated with orphan drug designation and would preclude us from
obtaining marketing exclusivity upon approval, if any. Even if we obtain orphan drug exclusivity for a product, that exclusivity may not
effectively protect the product from competition because different drugs can be approved for the same condition.
The FDA’s interpretation of the scope of orphan drug exclusivity has been the subject of recent litigation in the Eleventh Circuit
Court of Appeals. In the Catalyst case, the appellate court concluded that the FDA has impermissibly narrowed the scope of orphan
exclusivity to the approved indication or use, rather than the broader disease or condition which was the basis of the orphan drug
designation. The FDA has announced that it will continue to follow its existing regulations, notwithstanding the court decision. However,
it is possible or even likely that additional litigation may arise, and there is considerable uncertainty about the scope of any orphan drug
exclusivity that our products may be awarded.
Any failure by us to comply with existing regulations could harm our reputation and operating results.
The production of cell therapies is highly regulated and subject to constant inspection. The regulatory environment may also
change from time to time. Any failure to comply with regulatory requirements, whether in the U.S. or in other countries in which our cell
therapies are supplied, may result in investigation by regulatory authorities, suspension of regulatory authorizations and, as a result,
suspension of clinical programs or ability to supply any of our cell therapies and potentially significant fines or other penalties being
imposed in relation to any breach. Any failure may also harm our reputation and impact our ability going forward to obtain regulatory
approvals for other cell therapies or require us to undertake additional organizational changes to minimize the risk of further breach. A
failure to comply may apply to any part of our business, for example, to the processes used for manufacture of our cell therapies (including
the reliability of the process) or to the processes used for treatment of patients (including tracking of patient product and supply of patient-
specific product).
Our research and development activities utilize hazardous, radioactive and biological materials. Should such materials cause injury or
be used other than in accordance with applicable laws and regulations, we may be liable for damages.
We use hazardous and biological reagents and materials in our research and development at our U.K. site. We have obtained the
appropriate certification or ensured that such certification has been obtained as required for the use of these reagents but our use is subject
to compliance with applicable laws and there is a risk that should any third party or employee suffer injury or damage from radioactive,
hazardous or biological reagents that we may incur liability or obligations to compensate such third parties or employees. We have
employer’s liability insurance capped at £10.0 million per occurrence and public liability insurance capped at £5.0 million per occurrence;
however, these amounts may be insufficient to compensate us if these events actually occur in the future.
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We are subject to the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control
laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to
civil or criminal penalties, other remedial measures, and legal expenses, which could adversely affect our business, results of operations
and financial condition.
Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010, or Bribery Act, the U.S. Foreign Corrupt
Practices Act, or FCPA, and other anti-corruption laws that apply in countries where we do business. The Bribery Act, the FCPA and these
other laws generally prohibit us and our employees and intermediaries from bribing, being bribed or making other prohibited payments to
government officials or other persons to obtain or retain business or gain some other business advantage. Under the Bribery Act, we may
also be liable for failing to prevent a person associated with us from committing a bribery offense. We and our commercial partners may
operate in a number of jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we participate in collaborations
and relationships with third parties whose actions, if non-compliant, could potentially subject us to liability under the Bribery Act, FCPA or
local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our
international operations might be subject or the manner in which existing laws might be administered or interpreted.
We are also subject to other laws and regulations governing our international operations, including regulations administered by the
governments of the U.K. and the U.S., and authorities in the EU, including applicable export control regulations, economic sanctions on
countries and persons, anti-money laundering laws, customs requirements and currency exchange regulations, collectively referred to as the
Trade Control laws.
However, there is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption
laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the
Bribery Act, the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties,
disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business,
financial condition, results of operations and liquidity. Likewise, any investigation of any potential violations of the Bribery Act, the FCPA,
other anti-corruption laws or Trade Control laws by U.K., U.S. or other authorities could also have an adverse impact on our reputation, our
business, results of operations and financial condition.
If we are found in violation of federal or state “fraud and abuse” or other health care laws, we may be required to pay a penalty and/or
be suspended from participation in federal or state health care programs, which may adversely affect our business, financial condition
and results of operations.
If we obtain marketing approval for our products in the U.S., if at all, we will be subject to various federal and state health care
“fraud and abuse” and other health care laws. Healthcare providers, physicians and third-party payors play a primary role in the
recommendation and use of pharmaceutical products that are granted marketing approval. Accordingly, arrangements with third-party
payors, existing or potential customers and referral sources are subject to broadly applicable fraud and abuse and other healthcare laws and
regulations, and these laws and regulations may constrain the business or financial arrangements and relationships through which
manufacturers market, sell and distribute the products for which they obtain marketing approval.
Such restrictions under applicable federal and state healthcare laws and regulations include the following the Anti-Kickback
Statute, the Healthcare Reform Act, the False Claims Act, or FCA, federal criminal laws that prohibit executing a scheme to defraud any
healthcare benefit program or making false statements relating to healthcare matters; the Physician Payment Sunshine Act, the Health
Insurance Portability and Accountability Act of 1996 (HIPAA)
Violation of any of the laws described above or any other governmental laws and regulations may result in penalties, including
civil and criminal penalties, damages, fines, the curtailment or restructuring of operations, the exclusion from participation in federal and
state healthcare programs and imprisonment. Furthermore, efforts to ensure that business activities and business arrangements comply with
applicable healthcare laws and regulations can be costly for manufacturers of branded prescription products. Additionally, if we are found
in violation of one or more of these laws our business, results of operations and financial condition may be adversely affected.
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The U.K.’s withdrawal from the EU may adversely impact our and our collaborators’ ability to obtain regulatory approvals of our
drug candidates in the U.K. and EU and may require us to incur additional expenses to develop, manufacture and commercialize our
drug candidates in the U.K. and EU.
We are headquartered in the U.K. The U.K. formally exited the EU, commonly referred to as Brexit, on January 31, 2020. Under the
terms of its departure, the U.K. entered a transition period, or the Transition Period, during which it continued to follow all EU rules, which
ended on December 31, 2020. On December 30, 2020, the U.K. and EU signed the EU-UK Trade and Cooperation Agreement (“TCA”),
which includes an agreement on free trade between the two parties and has been provisionally applicable since January 1, 2021.
Since January 1, 2021 the U.K. has operated under a separate regulatory regime to the European Union. European Union laws
regarding medicinal products only apply in respect of the U.K. to Northern Ireland (as set out in the Protocol on Ireland/Northern Ireland).
The EU laws that have been transposed into U.K. law through secondary legislation remain applicable. While the U.K. has indicated a
general intention that new law regarding the development, manufacture and commercialization of medicinal products in the U.K. will align
closely with EU law there are limited detailed proposals for future regulation of medicinal products. The TCA includes specific provisions
concerning medicinal products, which include the mutual recognition of Good Manufacturing Practice, or GMP, inspections of
manufacturing facilities for medicinal products and GMP documents issued (such mutual recognition can be rejected by either party in
certain circumstances), but does not foresee wholesale mutual recognition of U.K. and EU pharmaceutical regulations including in relation
to batch testing and pharmacovigilance, which remain subject to further negotiation. Therefore, there remains political and economic
uncertainty regarding to what extent the regulation of medicinal products will differ between the U.K. and the EU in the future.
Since a significant proportion of the regulatory framework in the U.K. applicable to our business and our drug candidates is
derived from European Union directives and regulations, the withdrawal has and could continue to materially impact the regulatory regime
with respect to the development, manufacture, importation, approval and commercialization of our cell therapies in the U.K. or the
European Union. Great Britain is no longer covered by the European Union’s procedures for the grant of marketing authorizations
(Northern Ireland is covered by the centralized authorization procedure and can be covered under the decentralized or mutual recognition
procedures). A separate marketing authorization will be required to market drugs in Great Britain. It is currently unclear whether the
Medicines and Healthcare products Regulatory Agency in the U.K.is sufficiently prepared to handle the increased volume of marketing
authorization applications that it is likely to receive. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result
of Brexit or otherwise, would prevent us and our collaborators or delay us in commercializing any of our products in the UK and/or the EU
and may restrict our ability to generate revenue and achieve sustainable profitability.
Following Brexit, there is no pre-marketing authorization orphan designation in Great Britain, instead an application for orphan
designation is made at the same time as an application for marketing authorization. Orphan designation in the U.K. (or Great Britain,
depending on whether there is a prior centralized marketing authorization in the EEA) following Brexit based on the prevalence of the
condition in Great Britain as opposed to the current position where prevalence in the EU is the determinant. It is therefore possible that
conditions that are currently designated as orphan conditions in the U.K., or Great Britain, will no longer be and that conditions are not
currently designated as orphan conditions in the European Union will be designated as such in the U.K., or Great Britain.
There is a degree of uncertainty regarding the overall impact that Brexit will have in the long-term on the development, manufacturing
and commercialization of pharmaceutical products, including the process to obtain regulatory approval in the U.K. for drug candidates and
the award of exclusivities that are normally part of the European Union legal framework (for instance Supplementary Protection
Certificates, Pediatric Extensions or Orphan exclusivity). Any divergence between the regulatory environments in place in the European
Union and the U.K. could lead to increased costs and delays in bringing drug candidates to market.
Given certain regulatory authorizations within the EU can only be held by entities located in the EU, we have set up an EU subsidiary,
Adaptimmune B.V.. This subsidiary currently holds orphan designation for our ADP-A2M4 product. We have also set up a third party to act
as a qualified person to release product for use in the EU and ensure we can continue to treat patients in our EU clinical trials. Additional
resources and requirements may be required to enable us to
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continue to hold required authorizations including marketing authorization in the EU and to commercialize our cell therapies in the EU.
In addition, we may be required to pay taxes or duties or be subjected to other hurdles in connection with the importation of our drug
candidates into the European Union, or we may incur expenses in establishing a manufacturing facility in the EU to circumvent such
hurdles, all of which may make our doing business in the EU and the EEA more difficult. If any of these outcomes occur, we may be forced
to restrict or delay efforts to seek regulatory approval in the U.K. or the EU for our drug candidates, or incur significant additional expenses
to operate our business, which could significantly and materially harm or delay our ability to generate revenues or achieve profitability of
our business.
As a result of Brexit, other European countries may seek to conduct referenda with respect to their continuing membership with the
European Union. Given these possibilities and others we may not anticipate, as well as the absence of comparable precedent, it is unclear
what financial, regulatory and legal implications the withdrawal of the U.K. from the European Union will have in the long-term and how
such withdrawal will affect us, and the full extent to which our business could be adversely affected.
Risks Related to Our Reliance Upon Third Parties
We rely on Universal Cells Inc. and Genentech Inc. in relation to the performance of collaboration agreements between us for the
further development of ‘off-the-shelf’ cell therapies.
Development of allogeneic T-cell therapies and our ability to commercialize those allogeneic T-cell therapies may depend heavily
on the performance of Universal Cells under the ongoing collaboration (the "Universal Cells Collaboration"), performance of Genentech
under the ongoing collaboration (the “Genentech Collaboration”) and payments made by our collaborators to us in relation to such
development. In particular:
● Research funding, development or sales milestones or product royalties or any other sums might not become due or
payable to us at any time or on the time frames currently expected under the Universal Cells Collaboration or Genentech
Collaboration.
● Our collaborators have a right to terminate programs under the Universal Cells Collaboration Genentech Collaboration
and the agreements in whole or in part on provision of prior written notice. Termination may impact not only our
requirement for additional investment or capital but also the timeframes within which current research and development
programs (including clinical programs) can be performed or whether we can continue to perform those research and
development programs at all. Termination may also impact our ability to access and use certain collaborator technology
within our own allogeneic platform and products arising from that platform.
● Any research or development plan agreed upon in our collaborations may be delayed (including as a result of the impact
of the COVID-19 pandemic) or may be unsuccessful or fail to result in therapies that are feasible for further development
or commercialization.
● The timing for commercialization of any products under the Universal Cells Collaboration or Genentech Collaboration is
currently unknown and will depend on the targets selected , the type of allogeneic T-cell therapy being developed and the
timing of performance of obligations under the relevant collaboration agreement.
● Changes to the development plans or agreement may impact the timing and extent of milestone payments, the amount of
research funding received, the nature of the relationship with our collaborators or the scope of the collaboration.
● Delay in performance of responsibilities under any research or development plan could impact our ability to progress T-
cell therapies through research and development, including where Universal Cells or Genentech Inc. delays the
performance of any of its responsibilities.
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● Universal Cells has the ability to influence or control certain decisions relating to the development of therapies covered
by the Universal Cells Collaboration. Genentech has the ability to influence or control certain decisions relating to the
development of therapies covered by the Genentech Collaboration. This ability could result in delays to the research and
development programs covered by the collaboration or changes to the scope of those programs, including the disease
indications relevant to such clinical programs.
We rely heavily on ThermoFisher and the technology that we license from them.
The ability to use the ThermoFisher Dynabeads® CD3/CD28 technology to isolate, activate and expand T-cells is important to our
ongoing ability to offer SPEAR T-cells. In December 2012, we entered into a series of license and sub-license agreements with Life
Technologies Corporation (now part of ThermoFisher Scientific Inc. (“Thermofisher”)), such agreements having been amended as of
November 2019. These agreements provide us with a field-based non-exclusive license under certain intellectual property rights owned or
controlled by ThermoFisher in relation to the methods of use of the ThermoFisher Dynabeads® CD3/CD28 technology to isolate, activate
and expand T-cells and enable transfection of the T-cells with any TCR genes to manufacture our TCR products and use and sell those TCR
products to treat cancer, infectious disease and/or autoimmune disease. We also have a field-based non-exclusive sub-license under certain
other patents which cover the method of use of the Dynabeads® CD3/CD28 and are controlled by ThermoFisher under a head-license from
the University of Michigan, the United States Navy and the Dana-Farber Cancer Institute.
In June 2016, we entered into a supply agreement with ThermoFisher for the supply of the Dynabeads® CD3/CD28 technology.
The supply agreement runs until December 31, 2025.
ThermoFisher has the right to terminate the above described agreements for material breach or insolvency. On termination of the
license agreements, the supply agreement will also automatically terminate. If ThermoFisher terminates the non-exclusive license, sub-
license and supply agreements or otherwise refuses or is unable to supply the Dynabeads® product, we will have to seek an alternative
source of the beads or develop an alternative process methodology to enable supply of our cell therapies. Should ThermoFisher change its
process or make changes to its product, we may have to validate those changes to ensure there is no impact to our cell therapies. Such
validation, including any comparability testing, will take additional time and resources.
We rely on third parties to manufacture and supply our cell therapies and to develop next generation cell therapies, and we may have to
rely on third parties to produce and process our cell therapies, if approved.
We rely on a limited number of third-party manufacturers and third party service providers for clinical trial product supplies and
services at each stage of the manufacturing process, and as a result we are exposed to the following risks (including where such third party
risks arise as a result of the impact of COVID-19):
● We may be unable to contract with manufacturers on commercially acceptable terms or at all because the number of potential
manufacturers is limited and the FDA, EMA and other comparable foreign regulators must approve any replacement
manufacturer, which would require new testing and compliance inspections. In addition, a new manufacturer would have to
be educated in, and develop substantially equivalent processes for, production of our cell therapies after receipt of any
applicable regulatory approval.
● We may not be able to obtain lentiviral delivery manufacturing slots with third party contract manufacturers within the
timescales we require for supply of lentiviral delivery vector or to obtain agreed dates for such manufacturing slots
sufficiently in advance of the requirement for supply.
● Our third-party manufacturers might be unable to timely formulate and manufacture our cell therapies or produce the quantity
and quality required to meet our clinical trial and commercial needs or to provide commercially viable product on the
timelines we require or at all, which may necessitate a change in third-party manufacturers or a requirement to further
develop internal capabilities, all of which may result in delays to clinical trials or to commercialization plans.
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● With any new manufacturing process or new CMO we will need to transfer the manufacturing process or new process to that
CMO. Any delay in the development and transfer of these new processes to the third-party contract supplier or inability of the
third-party contract supplier to replicate or carry out the transferred process at the appropriate level and quality or in a
reproducible fashion will result in delays in our ability to progress clinical programs, further develop our cell therapies and
obtain marketing approval for our cell therapies.
● Introduction of new raw material or intermediate material manufacturers, such as CMOs for vectors, may require
comparability testing to be carried out to show that the manufacturing process and end material is comparable to the currently
used manufacturing process and/or material. Any inability to show comparability or delay in comparability testing may result
in delays to the supply of the affected materials and as a result delays to clinical trials.
● Contract manufacturers may not be able to execute our manufacturing procedures appropriately, or we may be unable to
transfer our manufacturing processes to contract manufacturers successfully or without additional time and cost. Even where
CMOs fail to manufacture our cell therapies successfully, it may not be possible to achieve re-manufacture quickly or without
expending resources or additional costs.
● Our future contract manufacturers may not perform as agreed, may be acquired by competitors or may not remain in the
contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and
distribute our cell therapies. In addition, contract manufacturers may not manufacture within agreed timescales for
manufacture and/or may cancel pre-agreed manufacturing slots, which would result in delays in manufacturing and could
require us to find replacement manufacturers which may not be available to us on favorable terms or at all.
● Manufacturers are subject to ongoing periodic unannounced inspection by the FDA, EMA, and other comparable foreign
regulators and corresponding state agencies to ensure strict compliance with cGMP and other government regulations and
corresponding foreign standards. Although we do not have day-to-day control over third-party manufacturers’ compliance
with these regulations and standards, we are responsible for ensuring compliance with such regulations and standards.
● We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party
manufacturers in the manufacturing process for our cell therapies. Our third party manufacturers may use processes which
infringe or potentially infringe third party intellectual property rights which may result in inability to use such processes
going forward, an increase in the pricing of such processes or a need to change a different process.
● Our third party manufacturers may fail to perform testing and analysis services accurately, in a manner that can be interpreted
or on a timely basis. This could delay or prevent release of our cell therapies and as a result delay clinical trials and patient
treatment.
● Our third-party manufacturers could breach or terminate their agreement with us.
● Our third-party manufacturers may cease to be able to do business with us (whether for insolvency or other reasons, including
takeover, merger or acquisition) at a time when we are unable to source such manufacture elsewhere or at our own
manufacturing facility.
● Increased costs, unexpected delays, equipment failures, lack of reproducibility, labor shortages, natural disasters, power
failures and numerous other factors which are outside of our control or which may be imposed by our CMOs. For example,
moving to commercial phase manufacture usually incurs increased cost and qualification requirements at our CMOs. Such
costs may be prohibitive, or such activities may not be able to be performed within appropriate timelines.
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● Our collaborators or third party contract manufacturers may allocate their resources, materials, and services away from our
cell therapy programs, for example, to utilize such assets on the research, development and manufacture of COVID-19
vaccines or therapies.
Certain of the components required for manufacturing of our cell therapies come from sole source or limited source suppliers.
Certain raw materials or precursor materials used in the manufacture and supply of our cell therapies may come from sole source
or limited source suppliers. For example, there are currently a limited number of third party manufacturers within the U.S. that can supply
us with our lentiviral delivery vector and ThermoFisher is currently the only supplier of the Dynabeads® CD3/CD28 technology. Should
such suppliers be unable to supply or manufacture such raw materials or precursor materials either at all or within required timescales we
may be unable to supply our cell therapies or such supply may be significantly delayed. Inability to obtain such raw materials or precursor
materials may also necessitate changes in the manufacturing process used for supply of our cell therapies. Such changes to the
manufacturing process may need to be developed internally or by a third party and may also require additional regulatory approvals to be
obtained before they can be used for the manufacture and supply of our cell therapies for clinical trials.
In addition, we are focusing manufacture of our cell therapies at a single manufacturing site, namely our Navy Yard facility for
autologous cell therapies and our new UK facility for allogeneic cell therapies. Should either facility be unable to manufacture our cell
therapies for any reason, including natural disaster, contamination or for any regulatory reason, we may be unable to supply cell therapies
for our clinical trials unless we can procure manufacture from a third party manufacturer. There is no assurance that we will be able to
procure manufacture from a third party manufacturer or that such manufacture will be provided within the timescales we require or at an
acceptable price. Any change in manufacturer used to produce our cell therapies requires notification to regulatory authorities which can be
time consuming. There is no assurance that regulatory authorities will agree that any change in manufacturer is acceptable or that the
processes used at such manufacturer are comparable to the processes previously used and additional evidence of comparability may be
required.
We rely on third parties to conduct our clinical trials.
We depend upon independent investigators and collaborators, such as universities, medical institutions, CROs and strategic
partners to conduct our preclinical programs and sponsored clinical trials under agreements with us. We expect to have to negotiate budgets
and contracts with CROs and trial sites (either directly or through a third party consultant), which may result in delays to our development
timelines and increased costs. We rely heavily on these third parties over the course of our clinical trials, and we do not have day-to-day
control of their activities. Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with applicable
protocols and legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory
responsibilities.
We and these third parties are required to comply with cGCPs, which are regulations and guidelines enforced by the FDA and
comparable foreign regulatory authorities for cell therapies in clinical development. Regulatory authorities enforce these cGCPs through
periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable
cGCP regulations and guidelines (including as a result of the outbreak of COVID-19), the clinical data generated in our clinical trials may
be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before
approving our marketing authorization applications. Moreover, our business may be implicated if any of these third parties violates federal
or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
Any third parties conducting our clinical trials are not and will not be our employees and, except for remedies available to us
under our agreements with such third parties which could be limited, we cannot control whether or not they devote sufficient time and
resources to our ongoing clinical trials and preclinical programs. These third parties may also have relationships with other commercial
entities, including our competitors, for whom they may also be conducting clinical trials or other drug or biologic development activities,
which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations
or meet expected deadlines
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(including as a result of the outbreak of COVID-19), if they need to be replaced or if the quality or accuracy of the clinical data they obtain
is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may
be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory approval of, or successfully
commercialize our cell therapies. As a result, our financial results and the commercial prospects for our cell therapies would be harmed, our
costs could increase and our ability to generate revenue could be delayed.
Switching or adding third parties to conduct our clinical trials involves substantial cost and requires extensive management time
and focus. In addition, there is a natural transition period when a new third party commences work. As a result, delays may occur, which
can materially impact our ability to meet our timelines for bringing our cell therapies to market, if at all.
Risks Related to Our Intellectual Property
We may be forced to litigate to enforce or defend our intellectual property rights, and/or the intellectual property rights of our licensors.
We may be forced to litigate to enforce or defend our intellectual property rights against infringement and unauthorized use by
competitors, and to protect our trade secrets. In so doing, we may place our intellectual property at risk of being invalidated, held
unenforceable, narrowed in scope or otherwise limited. Further, an adverse result in any litigation or defense proceedings may increase the
risk of non-issuance of pending applications. In addition, if any licensor fails to enforce or defend its intellectual property rights, this may
adversely affect our ability to develop and commercialize our SPEAR T-cells and to prevent competitors from making, using, and selling
competing products. Any such litigation could be very costly and could distract our management from focusing on operating our business.
The existence and/or outcome of any such litigation could harm our business, results of operations and financial condition.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a
risk that some of our confidential and proprietary information could be compromised by disclosure during this type of litigation. In
addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If
securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our ADSs.
We may also be forced to defend our intellectual property rights in opposition proceedings in front of patent offices in order to
obtain or continue to hold granted patent rights. Our inability to successfully defend our patents and patent applications in opposition
proceedings may result in a reduction in the scope of protection offered by such patents or patent applications or alternatively the patents or
patent applications may be revoked. Anonymous third party oppositions have been lodged against certain our European patents. None of
these oppositions relate to any cases which claim any of our clinical candidates.
We may not be able to protect our proprietary technology in the marketplace or the cost of doing so may be prohibitive or excessive.
Our success will depend, in part, on our ability to obtain patents, protect our trade secrets and operate without infringing on the
proprietary rights of others. We rely upon a combination of patents, trade secret protection (i.e., know-how), and confidentiality agreements
to protect the intellectual property of our cell therapies. However, patent protection may not be available for some of the cell therapies or
technology we are developing. If we must spend significant time and money protecting or enforcing our patents, designing around patents
held by others or licensing, potentially for large fees, patents or other proprietary rights held by others, our business results of operations
and financial condition may be harmed.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention
from other aspects of our business. Enforcement of patents may also be cost prohibitive and we may be unable to prevent competitors from
entering the market with products that are similar to or the same as our cell therapies.
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In addition, patents have a limited lifespan. In most countries, including the U.S., the standard expiration of a patent is 20 years
from the effective filing date. Various extensions of patent term may be available in particular countries; however, in all circumstances the
life of a patent, and the protection it affords, has a limited term. If patent term extension is not available, our competitors may be able to
take advantage of our investment in development and clinical trials by referencing our clinical and non-clinical data, and then may be able
to launch their product earlier than might otherwise be the case.
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets to protect our proprietary know-how and technological advances, especially where we do not believe
patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely, in part, on confidentiality agreements
with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and
other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an
adequate remedy in the event of unauthorized disclosure of confidential information. Proceedings to enforce trade secrets can be cost
prohibitive and we may be unable to prevent our competitors using our trade secrets.
If third parties claim that our activities or products infringe upon their intellectual property, our operations could be adversely affected.
There is a substantial amount of litigation, both within and outside the U.S., involving patents and other intellectual property rights
in the pharmaceutical industry. If we or our third party suppliers were found to infringe upon a patent or other intellectual property right, or
if we failed to obtain or renew a license under a patent or other intellectual property right from a third party, or if a third party that we were
licensing technologies from was found to infringe upon a patent or other intellectual property rights of another third party, we may be
required to pay damages, including triple damages if the infringement is found to be willful, suspend the manufacture of certain of our cell
therapies or reengineer or rebrand our cell therapies, if feasible, or we may be unable to enter certain new product markets. Any such claims
could also be expensive and time- consuming to defend and divert management’s attention and resources.
Licenses may be required from third parties in relation to any of cell therapies developed or commercialized by us.
We may identify third-party intellectual property rights that are required to enable the further development, commercialization,
manufacture or development of our SPEAR T-cells or other cell therapies, including our allogeneic cell therapies. Licenses to such
intellectual property rights may or may not be available on commercial terms that are acceptable to us. As a result we may incur additional
license fees for such intellectual property rights, or the cost and expenses to identify an alternative route for commercialization, that does
not require the relevant third-party intellectual property rights, or the cost and diversion of resources required to challenge any such third
party intellectual property rights.
Where we license certain technology from a third party, the prosecution, maintenance and defense of the patent rights licensed from
such third party may be controlled by the third party which may impact the scope of patent protection which will be obtained or
enforced.
Where we license patent rights or technology from a third-party, control of such third party patent rights may vest in the licensor,
particularly where the license is non-exclusive or field restricted. This may mean that we are not able to control or affect the scope of the
claims of any relevant third-party patent or have control over any enforcement of such a patent. Where a licensor brings an enforcement
action, this could negatively impact our business or result in additional restrictions being imposed on the license we have and the scope of
such license or result in invalidation or limitation of the scope of the licensed patent. In addition, should we wish to enforce the relevant
patent rights against a third person, we may be reliant on consent from the relevant licensor or the cooperation of the licensor. The licensor
may refuse to bring such action and leave us unable to restrict competitor entry into the market.
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Issued patents protecting our SPEAR T-cells or other cell therapies could be found invalid or unenforceable if challenged in court or at
the USPTO.
If we or one of our collaborators initiate legal proceedings against a third party to enforce a patent protecting one of our SPEAR T-
cells or cell therapies, the defendant could counterclaim that the patent protecting our cell therapy, as applicable, is invalid and/or
unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and
there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise
similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include
re-examination, post grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings
could result in revocation or amendment to our patents in such a way that they no longer cover our cell therapies.
General Business Risks
We depend upon our key personnel and our ability to attract and retain employees.
We are heavily dependent on the ongoing employment and involvement of certain key employees in particular, Adrian Rawcliffe,
our Chief Executive Officer; Dr. Helen Tayton-Martin, our Chief Business and Strategy Officer; William Bertrand, our Chief Operating
Officer; John Lunger, our Chief Patient Supply Officer; Dr. Joanna Brewer, our Chief Scientific Officer; Dr. Elliot Norry, our Chief
Medical Officer; and Gavin Wood, our Chief Financial Officer. We do not hold key-man insurance for our senior managers.
Our business is dependent on our ability to recruit experienced and suitably trained employees or consultants, and to retain such
employees on a long-term basis. Despite our efforts to retain valuable employees, members of our management, scientific and development
teams may terminate their employment with us on short notice which could result in us being unable to conduct our business in accordance
with current timelines and priorities. Although we have employment agreements with all of our employees in the U.K., these employment
agreements provide for a mutual nine months’ notice period in the case of Dr. Tayton-Martin, Mr. Wood and Dr. Brewer; mutual
three months’ or two months’ notice periods in the case of senior managers and mutual one-month notice periods for all other employees. In
the U.S., the employment agreements provide for at-will employment except that, under their employment agreements, Mr. Rawcliffe, Mr.
Bertrand, Mr. Lunger and Dr. Norry must provide 60 days’ written notice and our senior vice-presidents must provide 30 days’ written
notice. This means that any of our employees in the U.S., except for Mr. Rawcliffe, Mr. Bertrand, Mr. Lunger, Dr. Norry and our senior
vice-presidents, could leave our employment at any time, with or without notice. In November 2022, we announced a headcount reduction
and de-prioritization of non-core programs to extend our cash runway. Any headcount reduction may impact our ability to retain other
experienced members of staff which could in turn impact our ability to progress our development programs on the timelines currently
expected.
We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.
As of December 31, 2022, we had 534 employees. As our development and commercialization plans and strategies develop, we
will need to add a significant number of additional managerial, operational, sales, marketing, financial, and other personnel. Future growth
will impose significant added responsibilities on members of management, including:
● identifying, recruiting, integrating, maintaining, and motivating additional employees;
● managing our internal development efforts effectively, including the clinical and FDA review process for our SPEAR T-cells,
while complying with our contractual obligations to contractors and other third parties; and
● improving our operational, financial and management controls, reporting systems, and procedures.
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Our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to
devote a substantial amount of time to managing growth activities and the resourcing of replacement employees in the event employees
leave. The ability to hire additional individuals and to integrate those individuals into the business may be more difficult whilst the
COVID-19 pandemic is ongoing given the need for certain employees to work from home, the difficulty in providing adequate training and
the inability to conduct interviews in person. In November 2022, we announced a headcount reduction and de-prioritization of non-core
programs to extend our cash runway. The impact of the ongoing business and employees as a result of any headcount reduction is difficult
to predict and will require management to divert attention away from day-to-day activities in order to manage the reduction in headcount
and transition of activities to remaining individuals.
We expect to face intense competition, which may be from companies with greater resources and experience than we have.
The pharmaceutical industry, and the immuno-oncology industry specifically, is highly competitive and subject to rapid
developments in treatment options. Competitors include large global pharmaceutical companies, biotechnology companies, specialty
immune-therapy companies and universities and research organizations, whether alone or in collaboration with other entities. Many of our
competitors have substantially greater financial, technical and other resources, such as larger research and development staff and may also
be able to progress clinical candidates through clinical studies quicker than we are able to. Mergers and acquisitions within the
pharmaceutical and biotechnology industry can also result in resources being concentrated within our competitors. Our competitors may
also have better developed commercialization capabilities and already established sales forces and manufacturing capability.
Within in any particular cancer indication we may face competition from other cell therapy companies, from personalized
medicine approaches, from other modalities of treatment, alternative drug products or therapies or from pre-existing treatment regimens
used to treat patients with that cancer indication.
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Our internal information technology systems, or those of our partners, third-party CROs or other contractors or consultants, may fail
or suffer cybersecurity incidents, including related to data protection and privacy laws and adversely affect our business and operations.
In the ordinary course of business, we collect, store, use, transmit, disclose and otherwise process proprietary, confidential and
sensitive data (including personal data such as health-related data), intellectual property and trade secrets. We may process such
information on our internal networks or rely upon third-party service providers, partners, CROs and other contractor and consultants, and
technologies, to operate critical business systems to process such information in a variety of contexts (including, without limitation, third-
party providers of cloud-based infrastructure, personnel email and other functions). Despite the implementation of security policies and
procedures, the computer systems on which such information is processed or stored may be subject to cybersecurity threats. Our third-party
providers may also be subject to cybersecurity threats which they do not detect on a timely basis and which may in turn impact our
business. During the fourth quarter of 2022 one of our third party suppliers suffered a cybersecurity breach which resulted in payments
being made to the wrong accounts. There was no financial impact to the Company as a result of the breach. We have implemented
additional verification steps to mitigate the risk of a similar breach to third party systems that could affect us in the future.
We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective
against all such security threats. If a failure, accidental or cybersecurity breach were to occur and cause interruptions, it could result in a
breach, loss or compromise of critical or sensitive information, including personal information, and could give rise to legal liability and
regulatory action under data protection and privacy laws such as the General Data Protection Regulation (“GDPR”) and relevant member
state law in the European Union, the California Consumer Privacy Act and the California Privacy Rights Act (“CCPA”), and other domestic
state and federal privacy laws that have been or may be passed such as HIPAA, and such laws may result in liability through private actions
and enforcement or could greatly increase our cost of providing our products and services or even prevent us from offering certain services
in jurisdictions in which we operate. Moreover, because we maintain sensitive company data on our computer networks, including our
intellectual property and proprietary business information, any such security breach may compromise information stored on our networks
and may result in significant data losses or theft of our intellectual property or proprietary business information. Our current cybersecurity
liability insurance, and any such insurance that we may obtain in the future, may not cover the damages we would sustain based on any
breach of our computer security protocols or other cybersecurity attack. To the extent that any disruption or security breach results in a loss
of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate
disclosure of confidential or proprietary information, our reputation could be harmed and we could incur significant liabilities and the
further development, clinical evaluation, or commercialization of our product candidates could be disrupted.
We are exposed to risks related to currency exchange rates.
We conduct a significant portion of our operations within the U.K.in both U.S. dollars and pounds sterling and our arrangements
with GSK are denominated in pounds sterling. Changes in currency exchange rates have had and could have a significant effect on our
operating results. Exchange rate fluctuations between the U.S. dollar and local currencies create risk in several ways, including the
following: weakening of the pound sterling may increase the cost of overseas research and development expenses and other costs outside
the U.K.; strengthening of the U.S. dollar may decrease the value of any future revenues denominated in other currencies. Effects of
exchange rates on transactions and cash deposits held in a currency other than the functional currency of a subsidiary can distort our
financial results; and commercial pricing and profit margins are affected by currency fluctuations.
Risks Related to Ownership of our American Depositary Shares (ADSs)
The market price and trading volume of our ADSs may be volatile.
Many factors may have a material adverse effect on the market price of the ADSs, including but not limited to:
● the commencement, enrollment or results of our planned clinical trials;
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● the loss of any of our key scientific or management personnel;
● announcements of the failure to obtain regulatory approvals or receipt of a complete response letter from the FDA;
● announcements of undesirable restricted labeling indications or patient populations, or changes or delays in regulatory review
processes;
● announcements of therapeutic innovations or new products by us or our competitors;
● adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and
marketing activities;
● changes or developments in laws or regulations applicable to SPEAR T-cells;
● any adverse changes to our relationship with licensors, manufacturers or suppliers;
● the failure of our testing and clinical trials;
● unanticipated safety concerns;
● the failure to retain our existing, or obtain new, collaboration partners;
● announcements concerning our competitors or the pharmaceutical industry in general;
● the achievement of expected product sales and profitability;
● the failure to obtain reimbursements for SPEAR T-cells, if approved for marketing, or price reductions;
● manufacture, supply or distribution shortages;
● acquisitions or mergers and business deals announced by our competitors;
● the progress of competing treatment options and products or advent of new products which could impact the uptake or
commercial value of our cell therapies;
● actual or anticipated fluctuations in our operating results;
● our cash position;
● changes in financial estimates or recommendations by securities analysts;
● potential acquisitions;
● the trading volume of ADSs on the Nasdaq Global Select Market (“ Nasdaq”);
● sales of our ADSs by us, our executive officers and directors or our shareholders in the future;
● general economic and market conditions and overall fluctuations in the U.S. equity markets including as resulting from the
COVID-19 outbreak and economic effects of such outbreak; and
● changes in accounting principles.
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In addition, the stock market in general, and Nasdaq and biopharmaceutical companies in particular, have experienced extreme price
and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market
and industry factors may negatively affect the market price of our ADSs, regardless of our actual operating performance. Further, a decline
in the financial markets and related factors beyond our control may cause the price of our ADSs to decline rapidly and unexpectedly. In the
past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This
type of litigation could result in substantial costs and could divert our management and other resources.
Substantial future sales of our ADSs in the public market, or the perception that these sales could occur, could cause the price of the
ADSs to decline and dilute shareholders.
Substantial future sales of our ADSs in the public market, or the perception that these sales could occur, could cause the market
price of the ADSs to decline. Sales of a substantial number of our ADSs in the public market could occur at any time. In addition, we have
registered an aggregate of 151,248,915 ordinary shares that we may issue under our equity compensation plans and, as a result, they can be
freely sold in the public market upon issuance and following conversion into ADSs, but subject to volume limitations applicable to
affiliates under Rule 144. Additionally, the majority of ordinary shares that may be issued under our equity compensation plans also remain
subject to vesting in tranches over a four-year period. As of December 31, 2022, an aggregate of 75,064,373 options over our ordinary
shares had vested and become exercisable. If a large number of our ADSs are sold in the public market after they become eligible for sale,
the sales could reduce the trading price of our ADSs and impede our ability to raise capital in the future.
We incur increased costs as a result of being a public company whose ADSs are publicly traded in the U.S. and our management must
devote substantial time to public company compliance and other compliance requirements.
As a U.S. public company whose ADSs trade on Nasdaq, we have incurred and will continue to incur significant legal, accounting,
insurance and other expenses. We are subject to the reporting requirements of the Exchange Act, which requires, among other things, that
we file with the SEC annual, quarterly and current reports with respect to our business and financial condition and must comply with the
Nasdaq listing requirements and other applicable securities rules and regulations. In addition, the Sarbanes-Oxley Act, as well as
rules subsequently adopted by the SEC and the Nasdaq to implement provisions of the Sarbanes-Oxley Act, impose significant
requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and
changes in corporate governance practices.
We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance
costs and to make some activities more time-consuming and costly. Our insurance costs have increased, particularly for directors and
officers liability insurance, and we may be required to incur further substantial increased costs to maintain the same or similar coverage or
be forced to accept reduced coverage in future. To the extent these requirements divert the attention of our management and personnel from
other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The
increased costs will increase our net loss and may require us to reduce costs in other areas of our business or increase the requirement for
future financing. These laws and regulations could also make it more difficult and expensive for us to attract and retain qualified persons to
serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations
as a public company, we could be subject to delisting of the ADSs from Nasdaq, fines, sanctions and other regulatory action and potentially
civil litigation.
Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to
our technologies or product candidate.
We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic
partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible
debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect
your rights as a shareholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain
restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual
property rights and other
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operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic
partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or
product candidates, or grant licenses on terms unfavorable to us.
We may be classified as a passive foreign investment company in any taxable year and U.S. holders of our ADSs could be subject to
adverse U.S. federal income tax consequences.
The rules governing passive foreign investment companies, or PFICs, can have adverse effects for U.S. federal income tax
purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the
relative amounts of certain kinds of income. The determination of whether we are a PFIC depends on the particular facts and circumstances
(such as the valuation of our assets, including goodwill and other intangible assets) and may also be affected by the application of the PFIC
rules, which are subject to differing interpretations. In addition, it is not entirely clear how to apply the income test to a company like us,
which for any particular taxable year may have gross income that is either entirely passive or that significantly exceeds any active gross
income, but the overall losses of which from research and development activities exceed the overall amount of its gross income for that
year. Based on our estimated gross income, the average value of our assets, including goodwill and the nature of our active business,
although not free from doubt, we do not believe that the Company was classified as a PFIC for U.S. federal income tax purposes for the
U.S. taxable year ended December 31, 2022. There can be no assurance, however, that we will not be considered to be a PFIC for this
taxable year or any particular year in the future because PFIC status is factual in nature, depends upon factors not wholly within our
control, generally cannot be determined until the close of the taxable year in question and is determined annually.
If we are a PFIC, U.S. holders of our ADSs would be subject to adverse U.S. federal income tax consequences, such as
ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as
deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. A U.S. holder of our ADSs may be able
to mitigate some of the adverse U.S. federal income tax consequences described above with respect to owning the ADSs if we are classified
as a PFIC, provided that such U.S. investor is eligible to make, and validly makes, a “mark-to-market” election. In certain circumstances a
U.S. Holder can make a “qualified electing fund” election to mitigate some of the adverse tax consequences described with respect to an
ownership interest in a PFIC by including in income its share of the PFIC’s income on a current basis. However, we do not currently intend
to prepare or provide the information that would enable a U.S. Holder to make a qualified electing fund election.
Investors should consult their own tax advisors regarding our PFIC status for any taxable year and the potential application of the
PFIC rules to an investment in our ADSs or ordinary shares.
If we fail to establish and maintain proper internal controls, our ability to produce accurate financial statements or comply with
applicable regulations could be impaired. A material weakness related to our risk assessment process over the design, implementation
and operational effectiveness of controls over deferred income taxes, specifically the accounting for deferred income tax asset valuation
allowance, was identified as part of the audit of our financial statements for the fiscal year ended December 31, 2021, the remediation
of which will require significant costs and resources.
We must maintain effective internal control over financial reporting in order to accurately and timely report our results of
operations and financial condition. The rules governing the standards that must be met for our management to assess our internal control
over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act are complex and require significant documentation, testing and
possible remediation. These stringent standards require that our audit committee be advised and regularly updated on management’s review
of internal control over financial reporting.
Our compliance with applicable provisions of Section 404 requires that we incur substantial accounting expenses and expend
significant management attention and time on compliance-related issues as we implement additional corporate governance practices and
comply with reporting requirements. If we fail to staff our accounting and finance function adequately, if key employees within our
accounting and finance function leave, or if we fail to maintain internal control over financial reporting adequate to meet the requirements
of the Sarbanes-Oxley Act, our business and reputation may be harmed. Moreover, if we are not able to comply with the applicable
requirements of Section 404 in a timely manner, we may be subject to sanctions or investigations by regulatory authorities, including the
SEC and
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Nasdaq. Furthermore, if we are unable to conclude that our internal control over financial reporting is effective or if our independent
registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material
weaknesses, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our ADSs
could decline, and we could be subject to sanctions or investigations by the SEC, Nasdaq or other regulatory authorities. Failure to
implement or maintain effective internal control systems required of U.S. public companies could also restrict our access to the capital
markets. The occurrence of any of the foregoing would also require additional financial and management resources.
In connection with the audit of our financial statements for the fiscal year ended December 31, 2021, we identified a material
weakness. This was related to our risk assessment process over the design, implementation and operational effectiveness of controls over
deferred income taxes, specifically the accounting for deferred income tax asset valuation allowance. This material weakness resulted in a
material misstatement in deferred income taxes that was corrected prior to the issuance of the financial statements. A material weakness is a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The underlying
causes of this material weakness have been identified and primarily relate to insufficient experience and inadequate training for new
individuals to identify and address the relevant risks and design of and to implement and operate controls over the related process and risks.
We have taken steps to remediate the material weakness, including (i) recruiting appropriate personnel with appropriate
qualification, including a Vice President Financial Controller with experience of income tax accounting; (ii) improving the design of our
controls for deferred income taxes, specifically in enhancing the requirements to perform the assessment of deferred income tax assets to
enable new personnel to effectively execute the control and (iii) enhancing the training provided to the individuals operating the deferred
income taxation controls.
U.S. investors may have difficulty enforcing civil liabilities against our company, our directors, officers and members of senior
management.
We are incorporated under the laws of England and Wales. The rights of holders of our ordinary shares and, therefore, certain of
the rights of holders of ADSs, are governed by English law, including the provisions of the Companies Act 2006, and by our articles of
association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations organized in, for example,
Delaware. Some of our directors, officers and members of senior management reside outside the U.S., and a substantial portion of our
assets and all or a substantial portion of the assets of such persons are located outside the U.S. As a result, it may be difficult for you to
serve legal process on us or our directors and executive officers or have any of them appear in a U.S. court. The U.S. and the U.K. do not
currently have a treaty providing for the recognition and enforcement of judgments, other than arbitration awards, in civil and commercial
matters. The enforceability in the U.K. of any judgment of a U.S. federal or state court will depend on the particular facts of the case as
well as the laws and any treaties in effect at the time, including conflicts of laws principles (such as those bearing on the question of
whether a U.K. court would recognize the basis on which a U.S. court had purported to exercise jurisdiction over a defendant). In this
context, there is doubt as to the enforceability in the U.K., in original actions or in actions for enforcement of judgments of U.S. courts, of
civil liabilities based solely on the federal securities laws of the U.S.. In addition, awards for punitive damages in actions brought in the
U.S. or elsewhere may be unenforceable in the U.K. An award for monetary damages under the U.S. securities laws would likely be
considered punitive if it did not seek to compensate the claimant for loss or damage suffered and was intended to punish the defendant.
Provisions in the U.K. City Code on Takeovers and Mergers that may have anti-takeover effects do not apply to us.
The U.K. City Code on Takeovers and Mergers, or the Takeover Code, applies to an offer for, among other things, a public
company whose registered office is in the U.K. if the company is considered by the Panel on Takeovers and Mergers, or the Takeover
Panel, to have its place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man). This is
known as the “residency test.” The test for central management and control under the Takeover Code is different from that used by the U.K.
tax authorities. Under the Takeover Code, the Takeover Panel will determine whether we have our place of central management and control
in the United Kingdom by looking at various factors, including the structure of our Board, the functions of the directors and where they are
resident.
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In July 2018, the Takeover Panel confirmed that, based on our current circumstances, we are not subject to the Takeover Code. As
a result, our shareholders are not entitled to the benefit of certain takeover offer protections provided under the Takeover Code. We believe
that this position is unlikely to change at any time in the near future but, in accordance with good practice, we will review the situation on a
regular basis and consult with the Takeover Panel if there is any change in our circumstances which may have a bearing on whether the
Takeover Panel would determine our place of central management and control to be in the United Kingdom.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The following table summarizes the facilities we lease as of December 31, 2022, including the location and size of the facilities,
and their primary use.
Location
Approximate Square Feet
Primary Usage
Lease Expiration Dates
Abingdon, Oxfordshire, United Kingdom
67,140
Corporate headquarters , Research,
Development, Process development,
Manufacturing, Administration
October 2041
Abingdon, Oxfordshire, United Kingdom
46,017
Manufacturing, Process Development,
Research
October 2041
Abingdon, Oxfordshire, United Kingdom
11,657 Research, Development, Process
August 2023
development, Manufacturing
Philadelphia, Pennsylvania, United States
47,700
Manufacturing, Process Development,
Research
October 2031
Stevenage, Hertfordshire, United
Kingdom
2,642
Administration
December 2023
As of December 31, 2022, all of the above sites were utilized by the Company. During January 2023, the Company served notice
to terminate the lease of one of its facilities in Abingdon, Oxfordshire of 11,657 square feet effective on May 31, 2023.
We believe that our existing facilities are adequate for our near-term needs, but we expect to need additional space as we grow and
expand our operations. We believe that suitable additional or alternative office, laboratory, and manufacturing space will be available as
required in the future on commercially reasonable terms.
Item 3. Legal Proceedings
As of December 31, 2022, we were not a party to any material legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
General Market Information
Our ADSs have been listed on The Nasdaq Global Select Market since May 6, 2015 and are traded under the symbol “ADAP”.
Each ADS represents six ordinary shares. As of March 3, 2023, there were approximately 27 holders of record of our ordinary shares, par
value £0.001 per share, and approximately nine holders of record of our ADSs. The closing sale price per ADS on Nasdaq on March 3,
2023 was $1.76.
Equity Compensation Plans
For information about our equity compensation plans, see Part III, Item 11, below
Sales of Unregistered Securities
We did not sell any unregistered securities during the year ended December 31, 2022.
Company Purchases of Equity Securities
We did not repurchase any of our equity securities during the year ended December 31, 2022.
Stock Performance Graph
Notwithstanding any statement to the contrary in any of our previous or future filings with the Securities and Exchange
Commission, the following information relating to the price performance of our ADSs shall not be deemed “filed” with the Securities and
Exchange Commission or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings.
The following graph compares the cumulative total shareholder return on our ADSs with that of the Nasdaq Biotech Index and the
Nasdaq Composite Index for the period that our ADSs were publicly traded, which commenced
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on May 6, 2015. We selected the Nasdaq Biotech Index because our ADSs trade on The Nasdaq Global Select Market and we believe this
indicates our relative performance against a group consisting of more similarly situated companies.
Item 6. [Reserved]
Item 7. 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 in conjunction with our
consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report. In addition
to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans,
estimates, beliefs and expectations. Our actual results and the timing of events could differ materially from those discussed in these
forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this
Annual Report, particularly in Part I, Item 1A. “Risk Factors.”
Overview
We are a clinical-stage biopharmaceutical company focused on providing novel cell therapies to people with cancer. We are a
leader in the development of T-cell therapies for solid tumors and have reported responses in multiple solid tumor indications.
Our proprietary platform enables us to identify cancer targets, find and develop cell therapy candidates active against those targets
and produce therapeutic candidates for administration to patients. Our cell therapy candidates include genetically engineered T-cell
receptors (“TCRs”) and HLA-independent TCRs (“HiTs”) where surface proteins are targeted independently of the peptide-HLA complex.
Our cell therapies are currently manufactured on an autologous or per patient basis and we have a proprietary preclinical allogeneic
platform for the development of “off the shelf” cell therapies.
Our MAGE-A4 cell therapy franchise includes T-cell therapy products targeting solid tumor indications in which the MAGE-A4
antigen is expressed, with responses seen in eight indications (head and neck, esophagogastric junction (“EGJ”), non-small cell lung cancer
(NSCLC)-squamous, synovial sarcoma, melanoma, urothelial, ovarian and myxoid/round cell liposarcoma (MRCLS) indications). Filing of
a Biologics License Application (BLA) for the lead
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product (afamitresgene autoleucel or “afami-cel”) in synovial sarcoma has been initiated with the U.S. Food and Drug Administration
(“FDA”), with completion of the filing targeted for mid-2023.
Clinical programs with our MAGE-A4 targeted cell therapies are focused around synovial sarcoma with afami-cel and urothelial,
head and neck and ovarian cancers with our ADP-A2M4CD8 cell therapy:
● SPEARHEAD-1 Phase 2 Trial with afami-cel (ADP-A2M4): A registration directed Phase 2 clinical trial is ongoing in
synovial sarcoma in which the MAGE-A4 antigen is expressed. Enrollment in Cohort 1 is complete, and the cohort met its
primary endpoint with an overall response rate (ORR) of approximately 39% and a median duration of response of 50.3
weeks seen in synovial sarcoma patients. Cohort 2 of the trial is ongoing although enrollment is now complete.
● SURPASS-3 Phase 2 Trial with ADP-A2M4CD8. A Phase 2 trial for people with platinum resistant ovarian cancer is
initiating in early 2023. We have received RMAT designation for ADP-A2M4CD8 for the treatment of this indication from
the FDA. In the Phase 1 SURPASS trial an ORR of 43% in ovarian cancer was reported in November 2022.
● SURPASS Phase 1 Trial with ADP-A2M4CD8: Enrollment is ongoing in a Phase 1 trial for ADP-A2M4CD8, focusing on
patients with head and neck and urothelial cancers in which the MAGE-A4 antigen is expressed. Across all indications and as
of November 23, 2022, the trial has an overall response rate of 37%. In the focus areas of ovarian, urothelial and head and
neck cancers the response rate is 75% in patients with 3 or fewer prior lines of therapy (9 out of 12 patients). The trial
includes a combination cohort where participants receive a combination of ADP-A2M4CD8 together with a checkpoint
inhibitor (nivolumab). Two new cohorts in urothelial and head and neck cancers for patients with fewer lines of therapy and
in combination with standard of care in those settings are also planned to initiate shortly.
Outside of the MAGE-A4 franchise, we have a preclinical program for T-cell therapies directed to the PRAME target which is
expressed in a broad range of tumors. This program is being transitioned from GSK following termination of our collaboration agreement
with GSK. Dependent on the data arising from the preclinical program, the first cell therapy targeting PRAME is anticipated to be IND-
ready by the end of 2023.
We are also developing allogeneic or “off-the-shelf” cell therapies utilizing a proprietary allogeneic platform. The platform utilizes
cells derived from Induced Pluripotent Stem Cells (“iPSCs”), which can be gene-edited to express our engineered TCRs or other constructs
and then differentiated into the required end cell type, for example T-cells. The platform is applicable to all of our cell therapies.
We have a strategic collaboration with Genentech Inc (“Genentech”). The collaboration with Genentech covers the research and
development of “off-the-shelf” cell therapies for up to five shared cancer targets (“off-the-shelf” products) and the development of a novel
allogeneic personalized cell therapy platform.
We also have several development and research collaborations including a clinical and preclinical alliance agreement with MD
Anderson Cancer Center. A prior collaboration with GSK terminated during 2022 and we are negotiating a transition agreement with GSK
in relation to ongoing clinical trials with T-cell therapies directed to the NY-ESO and PRAME targets. A prior Co-development and Co-
commercialization agreement (the “Astellas Collaboration Agreement”) with Universal Cells, Inc., a wholly-owned subsidiary of Astellas
Pharma Inc. under which we collaborated with Universal Cells to research, develop, and commercialize certain cellular therapy products
directed to certain targets was mutually agreed to terminate as of March 6, 2023. Termination does not impact the development of our
allogeneic cell lines for our internal allogeneic programs or for our collaboration with Genentech Inc. The parties previously terminated an
Amended and Restated Research Collaboration and License Agreement, dated January 13, 2020, effective February 26, 2023.
We are an integrated cell therapy company with our own manufacturing facility in the U.S. for autologous products and in the
United Kingdom (“U.K.”) for allogeneic products together with a dedicated lentiviral vector
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manufacturing in the UK. This enables us to continue improving the patient experience associated with our cell therapies including the
ability to rapidly introduce improvements to the manufacturing process and patient supply chain.
In November 2022 we took a decision to focus our clinical and preclinical programs on the MAGE-A4 and PRAME targets
including the BLA submission for afami-cel. We have stopped the SURPASS-2 trial in GE cancers and the TIL-IL7 program. We have also
paused any further investment in non-core activities including certain preclinical programs including the HiT program, additional target
programs (other than the PRAME program) and alternative HLA programs. We also announced that investment in commercialization of
afami-cel will be delayed given the BLA filing timelines. Given the de-prioritisation of non-core programs resulting from this decision, we
are undertaking associated cost reduction activities including a reduction in headcount of approximately 25% which we currently estimate
will extend our cash runway into early 2025. The headcount reduction has now concluded.
On March 6, 2023 we announced entry into a definitive agreement under which we will combine with TCR² Therapeutics Inc
(“TCR2”) in an all-stock transaction to create a preeminent cell therapy company focused on treating solid tumors. The combination
provides extensive advantages for clinical development and product delivery supported by complementary technology platforms. The lead
clinical franchises for the combined company will utilize engineered T-cell therapies targeting MAGE-A4 and mesothelin. These targets are
expressed on a broad range of solid tumors and are supported by early- and late-stage clinical data. The combined company also has a
preclinical pipeline of additional target opportunities with development initially focused on PRAME and CD70. The merger agreement was
unanimously approved by the boards of directors of both companies. Following the closing of the transaction, Adaptimmune shareholders
will own approximately 75% of the combined company and TCR2 stockholders will own approximately 25% of the combined company.
The agreement contains customary representations, warranties and covenants given by us and TCR2. The agreement also contains
customary pre-closing covenants, including covenants by each of the parties relating to conduct of their respective business prior to the
closing of the transaction. The transaction is expected to close in Q2 2023, subject to the receipt of approvals by Adaptimmune
shareholders and TCR2 stockholders and satisfaction or waiver of other customary closing conditions. Following the closing of the
transaction we currently estimate that the cash runway of the combined company will extend into early 2026.
We have generated losses since our inception in 2008, during which time we have devoted substantially all of our resources to the
research and development of our cell therapies. We expect to continue to incur losses for the foreseeable future and our net losses may
fluctuate significantly from quarter to quarter. Our expenses may increase significantly depending on the progress of our clinical trials,
requirements to conduct additional clinical trials (including as a result of the filing of a BLA), requirement for further manufacturing to
support our development activities, investment in additional manufacturing capabilities, requirements to support collaborations or
engagement with third parties and investment in resources and infrastructure to support the planned commercialization of our cell therapies.
Further information can be founded in Item 1A. Risk Factors.
COVID-19 pandemic and Our Business
During the COVID-19 pandemic we have continued to focus on ensuring the safety of our work force whilst continuing the work
we do to make our therapies available to people with cancer.
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The pandemic has created challenges for conducting clinical trials and we continue to work with our clinical sites to enroll and
treat patients at the earliest possible time particularly given that many of our patients have late-stage cancer. Certain clinical sites have
chosen to postpone treatment of patients or participation in trials whilst the pandemic is impacting resources at those sites. We have
experienced challenges around our supply chain. Many of the materials and consumables we require for manufacture and supply of
products and also for research are also required for manufacture of COVID-19 vaccines and as a result these were prioritized to meet
vaccine supplies. In certain cases, for example, in accordance with the U.S. Defense Production Act, suppliers were required to prioritize
vaccine supplies. This resulted in some delays in supply of materials and consumables we require for our business, however, we were able
to mitigate against impacts associated with any supply delays by purchasing in advance where possible, prioritizing use of such supplies
and sourcing alternative suppliers where necessary.
We have continued and will continue to adjust our working practices as the pandemic evolves to ensure we can continue to treat
people with cancer as quickly and as effectively as possible whilst protecting the health of our colleagues.
Financial Operations Overview
Revenue
The Company had three revenue-generating contracts with customers in the years ended December 31, 2022 and 2021: a
collaboration and license agreement with GSK, a collaboration agreement with Astellas and a strategic collaboration and license agreement
with Genentech.
The Genentech Collaboration and License Agreement
On September 3, 2021, Adaptimmune Limited, a wholly owned subsidiary of Adaptimmune Therapeutics Plc, entered into a Strategic
Collaboration and License Agreement with Genentech, Inc. (“Genentech”) and F. Hoffman-La Roche Ltd. The collaboration has two
components:
1) development of allogeneic T-cell therapies for up to five shared cancer targets
2) development of personalized allogeneic T-cell therapies utilizing αβ T-cell receptors (TCRs) isolated from a patient, with
such therapies being administered to the same patient.
The parties will collaborate to perform a research program, initially during an eight-year period (which may be extended for up to
two additional two-year terms at Genentech’s election upon payment of an extension fee for each two-year term), to develop the cell
therapies, following which Genentech will determine whether to further develop and commercialize such therapies. The Company began
recognizing revenue for the performance obligations relating to the initial “off-the-shelf” collaboration targets and the personalized
therapies in 2021, however this did not have a material impact on the consolidated financial statements.
The Company identified the following performance obligations under the agreement: (i) research services and rights granted under
the licenses for each of the initial “off-the-shelf” collaboration targets, (ii) research services and rights granted under the licenses for the
personalized therapies, (iii) material rights relating to the option to designate additional “off-the-shelf” collaboration targets and (iv)
material rights relating to the two options to extend the research term. The revenue allocated to the initial “off-the-shelf” collaboration
targets and the personalized therapies is recognized as development progresses. The revenue allocated to the material rights to designate
additional ‘off-the-shelf’ collaboration targets is recognized from the point that the options are exercised and then as development
progresses, in line with the initial “off-the-shelf” collaboration targets, or at the point in time that the rights expire. The revenue from the
material rights to extend the research term is recognized from the point that the options are exercised and then over period of the extension,
or at the point in time that the options expire.
The GlaxoSmithKline (“GSK”) Collaboration and License Agreement
The GSK Collaboration and License Agreement consisted of multiple performance obligations. GSK nominated its third target
under the Collaboration and License Agreement in 2019, and the Company received $3.2 million
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following the nomination of the target and a further $4.2 million in June 2021 following achievement of a development milestone, which
were being recognized as revenue as development progressed.
The collaboration was terminated in October 2022. A further amendment to the collaboration agreement was entered into on
December 19, 2022 for the deletion of certain provisions relating to GSK’s post termination manufacturing and supply obligations and
payment of £5 million ($6 million) by GSK to Adaptimmune. The revenue associated with this payment and the remaining deferred income
relating to the third target of $0.4 million were recognized as revenue in the year-ended December 31, 2022.
The Astellas Collaboration Agreement
On January 13, 2020, the Company entered into a collaboration agreement with Universal Cells Inc. a wholly owned subsidiary of
Astellas Pharma Inc, (“Astellas”). The Company received a $50.0 million non-refundable upfront payment in January 2020 after entering
into the agreement. Under the agreement the parties will agree on up to three targets and will co-develop T-cell therapies directed to those
targets pursuant to an agreed research plan. For each target, Astellas will fund co-development up until completion of a Phase 1 trial for
products directed to such target. In addition, Astellas was also granted the right to develop, independently of Adaptimmune, allogeneic T-
cell therapy candidates directed to two targets selected by Astellas. Astellas will have sole rights to develop and commercialize products
resulting from these two targets.
The agreement consists of the following performance obligations: (i) research services and rights granted under the co-exclusive
license for each of the three co-development targets and (ii) the rights granted for each of the two independent Astellas targets. The revenue
allocated to the co-development targets is recognized as the development of products directed to the targets progresses up until completion
of a Phase 1 trial. The revenue allocated to each of the research licenses for the targets being independently developed by Astellas will be
recognized when the associated license commences, which is upon designation of a target by Astellas. The agreement was terminated by
mutual agreement on March 6, 2023.
Research and Development Expenses
Research and development expenditures are expensed as incurred. Research and development expenses consist principally of the
following:
● salaries for research and development staff and related expenses, including benefits;
● costs for production of preclinical compounds and drug substances by contract manufacturers;
● fees and other costs paid to contract research organizations in connection with additional preclinical testing and the
performance of clinical trials;
● costs associated with the development of a process to manufacture and supply our lentiviral vector and cell therapies for use
in clinical trials;
● costs to develop manufacturing capability at our U.S. facility for manufacture of cell therapies for use in clinical trials;
● costs relating to facilities, materials and equipment used in research and development;
● costs of acquired or in-licensed research and development which does not have alternative future use;
● costs of developing assays and diagnostics;
● an allocation of indirect costs clearly related to research and development;
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● amortization and depreciation of property, plant and equipment and intangible assets used to develop our cells therapies; and
● share-based compensation expenses.
These expenses are partially offset by:
● reimbursable tax and expenditure credits from the U.K. government.
Research and development expenditure is presented net of reimbursements from reimbursable tax and expenditure credits from the
U.K. government. As a company that carries out extensive research and development activities, we benefit from the U.K. research and
development tax credit regime for small and medium sized companies (“SME R&D Tax Credit Scheme”), whereby our principal research
subsidiary company, Adaptimmune Limited, is able to surrender the trading losses that arise from its research and development activities
for a payable tax credit of up to approximately 33.4% of eligible research and development expenditures, decreasing to 18.6% after April 1,
2023. Qualifying expenditures largely comprise employment costs for research staff, consumables and certain internal overhead costs
incurred as part of research projects for which we do not receive income. Subcontracted research expenditures are eligible for a cash rebate
of up to approximately 21.7%, decreasing to 12.1% after April 1, 2023. A large proportion of costs in relation to our pipeline research,
clinical trials management and manufacturing development activities, all of which are being carried out by Adaptimmune Limited, are
eligible for inclusion within these tax credit cash rebate claims.
Expenditures incurred in conjunction with our collaboration agreements are not qualifying expenditures under the SME R&D Tax
Credit Scheme but certain of these expenditures can be reimbursed through the U.K. research and development expenditure credit scheme
(the “RDEC Scheme”). Under the RDEC Scheme tax relief is given at 12% (up to April 1, 2020) and 13% (after April 1, 2020) of allowable
R&D costs, which may result in a payable tax credit at an effective rate of approximately 10.5% of qualifying expenditure for the year
ended December 31, 2022. The RDEC Scheme tax relief rate is scheduled to increase to 20% after April 1, 2023, which may result in a
payable tax credit at an effective rate of 15%.
Our research and development expenses may vary substantially from period to period based on the timing of our research and
development activities, which depends upon the timing of initiation of clinical trials and the rate of enrollment of patients in clinical trials.
The duration, costs, and timing of clinical trials and development of our cell therapies will depend on a variety of factors, including:
● the scope, rate of progress, and expense of our ongoing as well as any additional clinical trials and other research and
development activities;
● uncertainties in clinical trial enrollment rates;
● future clinical trial results;
● significant and changing government regulation;
● the timing and receipt of any regulatory approvals; and
● supply and manufacture of lentiviral vector and cell therapies for clinical trials.
A change in the outcome of any of these variables may significantly change the costs and timing associated with the development
of that SPEAR T-cell. For example, if the FDA, or another regulatory authority, requires us to conduct clinical trials beyond those that we
currently anticipate will be required for regulatory approval, or if we experience significant delays in enrollment in any of our clinical
trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
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General and Administrative Expenses
Our general and administrative expenses consist principally of:
● salaries for employees other than research and development staff, including benefits;
● provisions for restructuring activity;
● business development expenses, including travel expenses;
● professional fees for auditors, lawyers and other consulting expenses;
● costs of facilities, communication, and office expenses;
● cost of establishing commercial operations;
● information technology expenses;
● amortization and depreciation of property, plant and equipment and intangible assets not related to research and development
activities; and
● share-based compensation expenses.
Other Income (Expense), Net
Other income (expense), net primarily comprises foreign exchange gains (losses). We are exposed to foreign exchange rate risk
because we currently operate facilities in the United Kingdom and United States. Our expenses are generally denominated in the currency
in which our operations are located, which are the United Kingdom and United States. However, our U.K.-based subsidiary incurs
significant research and development costs in U.S. dollars and, to a lesser extent, Euros. Our U.K. subsidiary has an intercompany loan
balance in U.S. dollars payable to the ultimate parent company, Adaptimmune Therapeutics plc. Since July 1, 2019, the intercompany loan
has been considered as being a long-term investment as repayment is not planned or anticipated in the foreseeable future. It is
Adaptimmune Therapeutics plc’s intent not to request payment of the intercompany loan for the foreseeable future. The foreign exchange
gains or losses arising on the revaluation of intercompany loans of a long-term investment nature are reported within other comprehensive
(loss) income, net of tax.
Our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which
could harm our business in the future. We seek to minimize this exposure by maintaining currency cash balances at levels appropriate to
meet forthcoming expenditure in U.S. dollars and pounds sterling. To date, we have not used hedging contracts to manage exchange rate
exposure, although we may do so in the future.
Taxation
We are subject to corporate taxation in the United Kingdom and the United States. We incur tax losses and tax credit
carryforwards in the United Kingdom. No deferred tax assets are recognized on our U.K. losses and tax credit carryforwards because there
is currently no indication that we will make sufficient taxable profits to utilize these tax losses and tax credit carryforwards.
We benefit from reimbursable tax credits in the United Kingdom through the SME R&D Tax Credit Scheme as well as the RDEC
Scheme which are presented as a deduction to research and development expenditure.
Our subsidiary in the United States has generated taxable profits due to a Service Agreement between our U.S. and U.K. operating
subsidiaries and is subject to U.S. federal corporate income tax of 21%. Due to its activity in the
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United States, and the sourcing of its revenue, the U.S. subsidiary is not currently subject to any state or local income taxes. The Company
also benefits from the U.S Research Tax Credit and Orphan Drug Credit.
In the future, if we generate taxable income in the United Kingdom, we may benefit from the United Kingdom’s “patent box”
regime, which would allow certain profits attributable to revenues from patented products to be taxed at a rate of 10%. As we have many
different patents covering our products, future upfront fees, milestone fees, product revenues, and royalties may be taxed at this favorably
low tax rate.
U.K. Value Added Tax (“VAT”) is charged on all qualifying goods and services by VAT-registered businesses. An amount of 20%
of the value of the goods or services is added to all relevant sales invoices and is payable to the U.K. tax authorities. Similarly, VAT paid on
purchase invoices paid by Adaptimmune Limited and Adaptimmune Therapeutics plc is reclaimable from the U.K. tax authorities.
Results of Operations
Comparison of Years Ended December 31, 2022 and 2021
The following table summarizes the results of our operations for the years ended December 31, 2022, and 2021, together with the
changes to those items (in thousands):
Revenue
Research and development expenses
General and administrative expenses
Total operating expenses
Operating loss
Interest income
Other (expense) income, net
Loss before income tax expense
Income tax expense
Loss for the period
Revenue
$
Year ended
December 31,
$
2022
27,148
(127,726)
(63,387)
(191,113)
(163,965)
1,542
(536)
(162,959)
(2,497)
$
2021
6,149
(111,090)
(57,305)
(168,395)
(162,246)
1,095
3,852
(157,299)
(791)
$ (165,456) $ (158,090) $
Increase/decrease
20,999
(16,636)
(6,082)
(22,718)
(1,719)
447
(4,388)
(5,660)
(1,706)
(7,366)
342 %
15 %
11 %
13 %
1 %
41 %
(114)%
4 %
216 %
5 %
Revenue increased by $21.0 million to $27.1 million in the year ended December 31, 2022, compared to $6.1 million for the year
ended December 31, 2021, due largely to an increase in development activities under our collaboration agreements. In particular, the
Company recognized revenue in relation to development activities under the Genentech agreement for the year ended December 31, 2022,
however, as the agreement was not effective until October 19, 2021, there was minimal revenue from development activities under the
Genentech agreement for the year ended December 31, 2021. Revenue also increased due to a $6 million payment from GSK as a result of
the termination and amendment to the GSK agreement.
We expect that revenues will increase in future periods as the Company continues activities under the Genentech and Astellas
agreements.
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Research and development expenses
Research and development expenses increased by $16.6 million to $127.7 million for the year ended December 31, 2022 from
$111.1 million for the year ended December 31, 2021. Our research and development expenses comprise the following (in thousands):
Salaries, materials, equipment, depreciation of property, plant and equipment and
other employee-related costs(1)
Subcontracted expenditure
Manufacturing facility expenditure
Share-based compensation expense
In-process research and development costs
Reimbursements receivable for research and development tax and expenditure
credits
Year ended
December 31,
2022
2021
Increase/decrease
$
86,611
54,689
8,072
6,264
2,316
79,505
46,469
9,584
9,052
562
$
7,106
8,220
(1,512)
(2,788)
1,754
(30,226)
$ 127,726
(34,082)
$ 111,090
3,856
$ 16,636
9 %
18 %
(16)%
(31)%
312 %
(11)%
15 %
(1) These costs are not analyzed by project since employees may be engaged in multiple projects at a time.
The net increase in our research and development expenses of $16.6 million for the year ended December 31, 2022 compared to
the year ended December 31, 2021 was primarily due to the following:
● an increase of $7.1 million in salaries, materials, equipment, depreciation of property, plant and equipment and other
employee-related costs, which is mainly driven by an increase in the average number of employees engaged in research and
development in the year ended December 31, 2022;
● an increase of $8.2 million in subcontracted expenditures, including clinical trial expenses, contract research organization
(CRO) costs and contract manufacturing expenses, largely driven by an increase in external manufacturing costs and an
upfront payment to Alpine. This was offset by a decrease in clinical trial expenses;
● a decrease of $2.8 million in share-based compensation expense due to a decrease in the fair value of options granted and
increase in the value of forfeitures. This was offset by an increase in the number of options granted;
● an increase of $1.8 million in in-process research and development costs due to milestones accrued for, and paid to, Universal
Cells; and
● a decrease in reimbursements receivable for research and development tax and expenditure credits of $3.9 million due
primarily to a decline in the average exchange rate between pounds sterling and the U.S. dollar.
Our subcontracted costs for the year ended December 31, 2022 were $54.7 million, compared to $46.5 million in the same period
of 2021. This includes $40.1 million directly associated with our afami-cel, ADP-A2M4CD8 and ADP-A2AFP SPEAR T-cells and $14.6
million of other costs.
Our research and development expenses are highly dependent on the phases and progression of our research projects and will
fluctuate depending on the outcome of ongoing clinical trials.
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General and administrative expenses
General and administrative expenses increased by $6.1 million to $63.4 million for the year ended December 31, 2022 compared
to $57.3 million in the same period in 2021. Our general and administrative expenses comprise the following (in thousands):
Salaries, depreciation of property, plant and equipment and
other employee-related costs
Restructuring charges
Other corporate costs
Share-based compensation expense
Reimbursements
Year ended
December 31,
2022
2021
Increase/decrease
$
$
31,903
2,297
19,555
11,976
(2,344)
63,387
$
$
28,970
—
18,911
11,577
(2,153)
57,305
$
$
2,933
2,297
644
399
(191)
6,082
10 %
N/A %
3 %
3 %
9 %
11 %
The net increase in our general and administrative expenses of $6.1 million for the year ended December 31, 2022 compared to
the same period in 2021 was primarily due to an increase of $2.9 million in salaries, depreciation of property, plant and equipment and
other employee-related costs due to an increase in average headcount compared to the same period in 2021 and the recognition of a $2.3
million restructuring provision at December 31, 2022, relating to redundancy payments that are expected to be made in Q1 2023.
Interest income
Interest income was $1.5 million for the year ended December 31, 2022, compared to $1.1 million for the year ended
December 31, 2021. Interest income primarily relates to interest on cash, cash equivalents and available-for-sale debt securities and is
presented net of amortization/accretion of the premium/discount on purchase of the debt securities. Amortization on available-for-sale debt
securities for the year ended December 31, 2022, was $2.5 million compared to amortization of $5.3 million for the year ended
December 31, 2021.
Other (expense) income, net
Other (expense) income, net was an expense of $0.5 million for the year ended December 31, 2022 compared to income of $3.9
million for the year ended December 31, 2021. Other income, net primarily relates to unrealized foreign exchange gains and losses on cash
and cash equivalents, and intercompany loans held in U.S. dollars by our U.K. subsidiary other than those of a long-term investment nature,
where repayment is not planned or anticipated in the foreseeable future.
Income taxes
Income tax expenses were $2.5 million for the year ended December 31, 2022, compared to $0.8 million for the year ended
December 31, 2021. Income taxes arise in the United States due to our U.S. subsidiary generating taxable profits. Income taxes have
increased by $1.7 million for the year ended December 31, 2022 compared to the same period in 2021 due to changes to U.S. taxation
regime coming into effect, affecting the period over which certain expenses may be deducted from taxable income. We incur losses in the
United Kingdom.
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Comparison of Years Ended December 31, 2021 and 2020
The following table summarizes the results of our operations for the years ended December 31, 2021 and 2020, together with the
changes to those items (in thousands):
Year ended
December 31,
Revenue
Research and development expenses
General and administrative expenses
Total operating expenses
Operating loss
Interest income
Other income (expense), net
Loss before income tax expense
Income tax expense
Loss for the period
Revenue
$
$
$
2020
2021
Increase/decrease
2,191
(19,522)
(11,510)
(31,032)
(28,841)
(1,218)
2,690
(27,369)
(629)
$ (158,090) $ (130,092) $ (27,998)
6,149
(111,090)
(57,305)
(168,395)
(162,246)
1,095
3,852
(157,299)
(791)
3,958
(91,568)
(45,795)
(137,363)
(133,405)
2,313
1,162
(129,930)
(162)
55 %
21 %
25 %
23 %
22 %
(53)%
231 %
21 %
388 %
22 %
Revenue increased by $2.2 million to $6.1 million in the year ended December 31, 2021 compared to $4.0 million for the year
ended December 31, 2020 due to an increase in development activities under our collaboration agreements.
We expect that revenues will increase in future periods as the Company initiates development activities under the new Genentech
Collaboration agreement and continues activities under the GSK and Astellas Collaboration Agreements.
Research and development expenses
Research and development expenses increased by $19.5 million to $111.1 million for the year ended December 31, 2021 from
$91.6 million for the year ended December 31, 2020. Our research and development expenses comprise the following (in thousands):
Salaries, materials, equipment, depreciation of property, plant and equipment and
other employee-related costs(1)
Subcontracted expenditure
Manufacturing facility expenditure
Share-based compensation expense
In-process research and development costs
Reimbursements receivable for research and development tax and expenditure
credits
84
Year ended
December 31,
2021
2020
Increase/decrease
$
79,505
46,469
9,584
9,052
562
$
64,308
33,744
7,652
4,417
889
$
15,197
12,725
1,932
4,635
(327)
24 %
38 %
25 %
105 %
(37)%
(34,082)
$ 111,090
(19,442)
91,568
(14,640)
19,522
$
$
75 %
21 %
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(1) These costs are not analyzed by project since employees may be engaged in multiple projects at a time.
The net increase in our research and development expenses of $19.5 million for the year ended December 31, 2021 compared to
the year ended December 31, 2020 was primarily due to the following:
● an increase of $15.2 million in salaries, materials, equipment, depreciation of property, plant and equipment and other
employee-related costs, primarily due to an increase in employee compensation and contractor costs in the year ended
December 31, 2021;
● an increase of $12.7 million in subcontracted expenditures, including clinical trial expenses, contract research organization
(CRO) costs and contract manufacturing expenses, largely driven by an increase in clinical trial patient costs which was offset
slightly by a decrease in external contract manufacturing costs;
● an increase of $4.6 million in share-based compensation expense due to additional stock grants and lower increase in
forfeitures compared to the number of options; and
● an increase in reimbursements receivable for research and development tax and expenditure credits of $14.6 million due to
higher research and development costs.
Our subcontracted costs for the year ended December 31, 2021 were $46.5 million, compared to $33.7 million in the same period
of 2020. This includes $34.2 million directly associated with our afami-cel, ADP-A2M4CD8 and ADP-A2AFP SPEAR T-cells and $12.3
million of other costs.
Our research and development expenses are highly dependent on the phases and progression of our research projects and will
fluctuate depending on the outcome of ongoing clinical trials.
General and administrative expenses
General and administrative expenses increased by $11.5 million to $57.3 million for the year ended December 31, 2021 compared
to $45.8 million in the same period in 2020. Our general and administrative expenses comprise the following (in thousands):
Salaries, depreciation of property, plant and equipment and other employee-related
costs
Other corporate costs
Share-based compensation expense
Reimbursements
Year ended
December 31,
2021
2020
Increase/decrease
$ 28,970
18,911
11,577
(2,153)
$ 57,305
$ 25,408
15,586
5,997
(1,196)
$ 45,795
$
$
3,562
3,325
5,580
(957)
11,510
14 %
21 %
93 %
80 %
25 %
The net increase in our general and administrative expenses of $11.5 million for the year ended December 31, 2021 compared to
the same period in 2020 was primarily due to the following:
● an increase of $3.6 million in salaries, depreciation of property, plant and equipment and other employee-related costs due to
an increase in headcount and contractor costs;
● an increase of $3.3 million in other corporate costs due to an increase in insurance and accounting, legal and professional
fees, including legal fees relating to the Genentech agreement; and
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● an increase of $5.6 million in share-based compensation expense due to additional stock grants and lower forfeitures
compared to the number of options issued, caused in part by the high forfeitures incurred in 2020 due to the previous CEO
retiring as CEO.
We expect that our general and administrative expenses will increase in the future as we expand our operations and move towards
commercial launch.
Interest income
Interest income was $1.1 million for the year ended December 31, 2021 compared to $2.3 million for the year ended
December 31, 2020. Interest income primarily relates to interest on cash, cash equivalents and available-for-sale debt securities and is
presented net of amortization/accretion of the premium/discount on purchase of the debt securities. Amortization on available-for-sale debt
securities for the year ended December 31, 2021 was $5.3 million compared to amortization of $3.8 million for the year ended December
31, 2020.
Other income, net
Other income, net was $3.9 million for the year ended December 31, 2021 compared to $1.2 million for the year ended
December 31, 2020. Other income, net primarily relates to unrealized foreign exchange gains and losses on cash and cash equivalents, and
intercompany loans held in U.S. dollars by our U.K. subsidiary other than those of a long-term investment nature, where repayment is not
planned or anticipated in the foreseeable future.
Income taxes
Income tax expenses were $0.8 million for the year ended December 31, 2021, compared to $0.2 million for the year ended
December 31, 2020. Income taxes arise in the United States due to our U.S. subsidiary generating taxable profits. We incur losses in the
United Kingdom.
Liquidity and Capital Resources
Sources of Funds
Since our inception, we have incurred significant net losses and negative cash flows from operations. We financed our operations
primarily through sales of equity securities, cash receipts under our Astellas Collaboration Agreement and Genentech and GSK
Collaboration and License Agreements, government grants and research and development tax and expenditure credits. From inception
through to December 31, 2022, we have raised:
● $870.0 million of proceeds from issues of equity, net of issue costs;
● $384.1 million through collaborative arrangements with Genentech, GSK and Astellas; and
● $108.9 million in the form of U.K. research and development tax credits and receipts from the U.K. RDEC Scheme.
We use a non-GAAP measure, Total Liquidity, which is defined as the total of cash and cash equivalents and marketable securities,
to evaluate the funds available to us in the near-term. A description of Total Liquidity and reconciliation to cash and cash equivalents, the
most directly comparable U.S. GAAP measure, are provided below under “Non-GAAP measures”.
As of December 31, 2022, we had cash and cash equivalents of $108.0 million and Total Liquidity of $204.6 million. We believe
that our Total Liquidity will be sufficient to fund our operations, based upon our currently anticipated research and development activities
and planned capital spending, into early 2025.
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During the year ended December 31, 2022, the Company incurred a net loss of $165.5 million, used cash of $141.8 million in its
operating activities, and generated revenues of $27.1 million. The Company has incurred net losses since inception, and it expects to incur
operating losses in foreseeable future periods.
Management considers that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability
to continue as a going concern for a period of at least one year from the date the financial statements are issued.
Cash Flows
The following table summarizes the results of our cash flows for the years ended December 31, 2022, 2021 and 2020 (in
thousands).
Net cash (used in)/provided by operating activities
Net cash provided by/(used in) investing activities
Net cash provided by financing activities
Cash, cash equivalents and restricted cash
$
Year ended
December 31,
2022
(141,769)
89,137
12,867
109,602
$
Year ended
December 31,
2021
10,729
75,800
32,888
151,666
$
Year ended
December 31,
2020
(53,591)
(278,924)
340,051
61,484
Year ended December 31, 2022 compared to year ended December 31, 2021
Net cash used in operating activities increased by $152.5 million to $141.8 million for the year ended December 31, 2022, from a
net cash provided by operating activities of $10.7 million for the year ended December 31, 2021. The net cash used in operating activities
in the year end December 31, 2022 was partially offset by a $20 million additional payment received under the Genentech Collaboration
and License Agreement in December 2022, as compared to a $4.2 million milestone payment received under the GSK Collaboration and
License Agreement and the upfront payment of $150.0 million received under the Genentech agreement in October 2021. The U.K. R&D
tax credits received in the year ended December 31, 2022, were $4.0 million higher than that received during the year ended
December 31, 2021.
Year ended December 31, 2021 compared to year ended December 31, 2020
Net cash provided by operating activities increased by $64.3 million to $10.7 million for the year ended December 31, 2021 from
a net cash used in operating activities of $53.6 million for the year ended December 31, 2020. The net cash provided by operating activities
in the year end December 31, 2021 was significantly increased by a $4.2 million milestone payment received under the GSK Collaboration
and License Agreement and the upfront payment of $150.0 million received under the Genentech Collaboration and License Agreement in
October 2021, as compared to a $50.0 million upfront payment from Astellas received in January 2020. The U.K. R&D tax credits received
in the year ended December 31, 2021 was $4.2 million higher than that received during the year ended December 31, 2020.
Components of cash flows from operating activities
Net cash used in operating activities of $141.8 million for the year ended December 31, 2022 comprised a net loss of
$165.5 million offset by noncash items of $25.2 million and $1.5 million of unfavorable changes in operating assets and liabilities. The
most significant items impacting the change in operating assets and liabilities include the $20 million additional payment from Genentech
and $26.9 million in U.K. R&D tax credit receipts, offset by $6 million receivable due from GSK. The noncash items consisted primarily of
depreciation expense on plant and equipment of $5.3 million, amortization of intangibles of $0.8 million, share-based compensation
expense of $18.2 million,
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amortization of marketable securities of $2.5 million, unrealized foreign exchange gains of $2.4 million and other losses of $0.8 million.
Net cash provided by operating activities of $10.7 million for the year ended December 31, 2021 comprised a net loss of
$158.1 million offset by noncash items of $34.2 million and $134.6 million of favorable changes in operating assets and liabilities. The
noncash items consisted primarily of depreciation expense on plant and equipment of $5.6 million, amortization of intangibles of $0.9
million, share-based compensation expense of $20.6 million, amortization of marketable securities of $5.3 million, unrealized foreign
exchange losses of $0.5 million and other losses of $1.2 million.
Net cash used in operating activities of $53.6 million for the year ended December 31, 2020 comprised a net loss of
$130.1 million offset by noncash items of $20.5 million and $56.0 million of favorable changes in operating assets and liabilities. The
noncash items consisted primarily of depreciation expense on plant and equipment of $6.6 million, amortization of intangibles of $1.0
million, share-based compensation expense of $10.4 million, amortization of marketable securities of $3.8 million, offset by unrealized
foreign exchange gains of $1.3 million.
Investing Activities
Net cash provided by investing activities was $89.1 million for the year ended December 31, 2022 compared to net cash provided
by investing activities of $75.8 million for the year ended December 31, 2021. The Company invests surplus cash and cash equivalents in
marketable securities. Cash provided by investing activities increased in the year ended December 31, 2022. Maturity or redemption of
marketable securities of $167.0 million was offset by investment in marketable securities of $48.1 million in the year ended
December 31, 2022.
Net cash provided by investing activities was $75.8 million for the year ended December 31, 2021 compared to net cash used in
investing activities of $278.9 million for the year ended December 31, 2020. The Company invests surplus cash and cash equivalents in
marketable securities. Cash provided by investing activities increased in the year ended December 31, 2021. Maturity or redemption of
marketable securities of $224.3 million was offset by investment in marketable securities of $139.8 million in the year ended December 31,
2021.
Net cash used in investing activities was $278.9 million for the year ended December 31, 2020 compared to net cash provided by
investing activities of $94.9 million for the year ended December 31, 2019, and net cash used in investing activities of $17.5 million for the
year ended December 31, 2018. The Company invests surplus cash and cash equivalents in marketable securities. Cash used in investing
activities increased in the year ended December 31, 2020, because the Company invested surplus cash, including net proceeds from
issuance of shares in marketable securities. Investment in marketable securities of $381.0 million was offset by $105.0 million from
maturity or redemption of marketable securities in the year ended December 31, 2020.
Financing Activities
Net cash provided by financing activities was $12.9 million, $3.3 million and $340.1 million for the years ended
December 31, 2022, 2021 and 2020, respectively.
Net cash provided by financing activities for the year ended December 31, 2022 consisted of net proceeds from public offerings of
$12.8 million and proceeds from exercise of share options of $0.1 million.
Net cash provided by financing activities for the year ended December 31, 2021 consisted of net proceeds from public offerings of
$2.5 million and proceeds from exercise of share options of $0.8 million.
Net cash provided by financing activities for the year ended December 31, 2020 consisted of net proceeds from public offerings of
$334.4 million and proceeds from exercise of share options of $5.7 million.
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Non-GAAP Measures
Total Liquidity (a non-GAAP financial measure)
Total Liquidity (a non-GAAP financial measure) is the total of cash and cash equivalents and marketable securities. Each of these
components appears in the Consolidated Balance Sheet. The U.S. GAAP financial measure most directly comparable to Total Liquidity is
cash and cash equivalents as reported in the consolidated financial statements, which reconciles to Total Liquidity as follows (in
thousands):
Cash and cash equivalents
Marketable securities - available-for-sale debt securities
Total Liquidity
December 31,
December 31,
2022
108,033
96,572
204,605
$
$
2021
149,948
219,632
369,580
$
$
We believe that the presentation of Total Liquidity provides useful information to investors because management reviews Total
Liquidity as part of its management of overall solvency and liquidity, financial flexibility, capital position and leverage. The definition of
Total Liquidity includes marketable securities, which are highly liquid and available to use in our current operations.
Material Cash Requirements
As of December 31, 2022 the Company does not have any products approved for sale and has not generated any revenue from
product supplies or royalties. The Company’s material cash requirements primarily relate to costs associated with the clinical development
of our cell therapies, the development and enhancement of our manufacturing capabilities and securing a commercially viable
manufacturing platform for all of our cell therapies, advancing additional cell therapies into preclinical testing and progressing such cell
therapies through to clinical trials, supporting commercialization for ADP-A2M4 and to fund working capital, including for other general
corporate purposes.
Operating leases
As of December 31, 2022 the Company had material operating lease obligations of $23.1 million under non-cancellable leases for
laboratory and office property in Oxfordshire, United Kingdom, and Philadelphia, United States. Further details of our operating leases are
provided in Item 2 and in Note 8 of Item 16 of this Annual Report.
Purchase obligations
As of December 31, 2022, the Company’s unconditional purchase obligations for capital expenditure totaled $2.5 million and
include signed orders for capital equipment and capital expenditure for construction and related expenditure relating to its properties in the
United Kingdom and the United States, of which the Company expects to incur $2.3 million within one year, and $0.2 million within one to
three years.
The Company also had non-cancellable commitments for the purchase of clinical materials, contract manufacturing and
maintenance which have been committed but not yet received, and committed funding under the MD Anderson strategic alliance, of up to
$10.9 million, of which the Company expects to incur $10.7 million within one year, $0.1 million within one to three years and $0.1
million within three to five years. The amount and timing of these payments vary depending on the rate of progress of development.
Future payments associated with clinical trials are not considered purchase commitments because they are contingent on
enrollment in clinical trials and the activities required to be performed by the clinical sites.
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MD Anderson
In 2016, we entered into a multi-year strategic alliance with MD Anderson designed to expedite the development of T-cell
therapies for multiple types of cancer. We and MD Anderson are collaborating on a number of studies including clinical and preclinical
development of our SPEAR T-cell therapies and we will collaborate on future clinical stage first and second generation SPEAR T-cell
therapies such as ADP-A2M4 across a number of cancers, including urothelial, lung, ovarian, head and neck, melanoma, synovial sarcoma,
esophageal and gastric cancers. Under the terms of the agreement, we committed at least $19.6 million to fund studies. The Company made
an upfront payment of $3.4 million to MD Anderson in the year ended December 31, 2017 and milestone payments of $2.3 million, $3.5
million and $0.5 million in the years ended December 31, 2018, 2020 and 2021, respectively. A further milestone of $2.3 million was met
and paid in year ended December 31, 2022. Payment of this funding is contingent on mutual agreement to study orders under the alliance
agreement and the performance of set milestones by MD Anderson. The timing and amount of future payments is uncertain.
Other obligations
On August 26, 2019, we entered into a collaboration and license agreement relating to the development of next-generation SPEAR
T-cell products with Noile-Immune. An upfront exclusive license option fee of $2.5 million was paid to Noile-Immune in 2019. This has
been recognized within Research and Development in the Consolidated Statement of Operations for the year ended December 31, 2019.
Under the agreement, development and commercialization milestone payments up to a maximum of $312 million may be payable if all
possible targets are selected and milestones achieved. Noile-Immune would also receive mid-single-digit royalties on net sales of resulting
products.
On May 14, 2019, we entered into a Collaboration Agreement relating to the development of next-generation SPEAR T-cell
products with Alpine. We paid an upfront exclusive license option fee of $2.0 million to Alpine in June 2019. Under the agreement,
Adaptimmune will pay Alpine for ongoing research and development funding costs and development and commercialization milestone
payments up to a maximum of $288 million, which may be payable if all possible targets are selected and milestones achieved. The upfront
payment of $2.0 million and the payments for ongoing research are recognized within Research and development. A further payment of $1
million was paid and recognized within Research and development in the Consolidated Statement of Operations for the year ended
December 31, 2022. Alpine would also receive low single-digit royalties on worldwide net sales of applicable products.
In 2015, we entered into a Research Collaboration and License Agreement relating to gene editing and HLA-engineering
technology with Universal Cells. We paid an upfront license fee of $2.5 million to Universal Cells. A milestone payment of $3.0 million
was made in February 2016 and further milestone payments of $0.2 million and $0.9 million were made in the year ended December 31,
2018 and 2017, respectively. The agreement was amended and re-stated as of January 13, 2020, primarily to reflect changes to the
development plan agreed between the parties. The agreement was further amended as of July 22, 2022, primarily to make certain changes
to development milestones and to agree on the status thereof, as agreed between the parties. Following the amendment, milestone payments
of $0.5 million, $0.6 million and $0.4 million were made in the year ended December 31, 2022. A further milestone of $1.8 million has
been accrued but not paid as of December 31, 2022. This Agreement was terminated by notice on January 27, 2023, effective 30 days
following receipt of notice of termination. As a result of termination, all licenses between the parties to the Agreement will cease and each
party is required to return all confidential information of the other party.
Critical Accounting Policies and Significant Judgments and Estimates
None to note in the year ended December 31, 2022.
Other Accounting Policies, Judgments and Estimates
We have prepared our consolidated financial statements in accordance with U.S. GAAP. Our preparation of these consolidated
financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities,
expenses and related disclosures at the date of the consolidated financial statements, as well as revenue and expenses during the reporting
periods. We evaluate our estimates and judgments on an ongoing basis. We
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base our estimates on historical experience and on various other factors that we believe are 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 therefore differ materially from these estimates under different assumptions or conditions.
While our accounting policies are described in more detail in Note 2 to our consolidated financial statements, we believe the
following accounting policies were critical to the judgments and estimates used in the preparation of our financial statements in the years
ended December 31, 2021 and 2020. For the year ended December 31, 2022 these accounting policies were not considered to be critical to
the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
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, together with internal data regarding the cost and margin of providing
services for each deliverable, taking into account the different stage of development of each development program and consideration of
adjusted-market data from comparable arrangements. Where 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.
There were no instances in the year-ended December 31, 2022 where an assessment of the allocation of transaction price using the
relative standalone selling price was required. The modification and termination of the GSK agreement in 2022 did not require an
assessment using the relative standalone selling price as the modification and termination did not result in any performance obligations
being identified and there was only one remaining performance obligation that was not completely satisfied prior to the modification and
termination. An assessment of the allocation of transaction price using the relative standalone selling price was required in the years ending
December 31, 2021 and 2020 for the Genentech and Astellas agreements, respectively.
Determination of the cost to complete
Revenue allocated to performance obligations relating to provision of development activities is recognized using an estimate of the
percentage of completion of the project based on the costs incurred on the project as a percentage of the total expected costs. The
determination of the percentage of completion requires management to estimate the costs-to-complete the project. A detailed estimate of the
costs-to-complete is re-assessed every reporting period based on the latest project plan and discussions with project teams. If a change in
facts or circumstances occurs, the estimate will be adjusted and the revenue will be recognized based on the revised estimate. The
difference between the cumulative revenue recognized based on the previous estimate and the revenue recognized based on the revised
estimate would be recognized as an adjustment to revenue in the period in which the change in estimate occurs. Determining the estimate
of the cost-to-complete requires significant judgment and may have a significant impact on the amount and timing of revenue recognition.
However, a 10% change in the cost-to-complete at December 31, 2022, would not have a significant impact on revenue recognized in the
year ended December 31, 2022.
Operating Leases (Incremental Borrowing Rate)
Since the rates implicit in our leases are not readily determinable, we use the Company’s incremental borrowing rates (the rate of
interest that we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a
similar economic environment) based on the information available at commencement
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date in determining the discount rate used to calculate the present value of lease payments. As we have no external borrowings, the
incremental borrowing rates are determined using information on indicative borrowing rates that would be available to us based on the
value, currency and borrowing term provided by financial institutions, adjusted for company and market specific factors.
Although we do not expect our estimates of the incremental borrowing rates to generate material differences within a reasonable
range of sensitivities, judgement is involved in selecting an appropriate rate, and the rate selected for each lease will have an impact on the
value of the lease liability and corresponding right-of-use (ROU) asset in the Consolidated Balance Sheets.
Deferred Taxes
Deferred tax is accounted for using the asset and liability method that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the financial statement carrying amount and the tax bases of
assets and liabilities at the applicable tax rates. As of December 31, 2022, we have deferred tax assets of $165.8 million, offset by deferred
tax liabilities of $5.3 million and a valuation allowance of $160.5 million.
A valuation allowance is provided when it is more-likely-than-not that some portion or all of the deferred tax assets will not be
realized. Future realization of the tax benefit of a deferred tax asset depends on the existence of sufficient taxable income of the appropriate
character (for example, ordinary income or capital gain) within the carryback or carryforward period available under the tax law. The
Company considers the following possible sources of taxable income when assessing whether there is sufficient taxable income to realize a
tax benefit for deductible temporary differences and carryforwards:
● future reversals of existing taxable temporary differences;
● future taxable income exclusive of reversing temporary differences and carryforwards;
● taxable income in prior carryback year(s) if carryback is permitted under the tax law; and
● tax-planning strategies.
The Company considers both positive and negative evidence regarding realization of the deferred tax assets and the subjectivity of
this evidence. This assessment includes estimating future taxable income, scheduling reversals of temporary differences, evaluating
expectations of future profitability, determining refund potential in the event of net operating loss carrybacks, and evaluating potential tax-
planning strategies.
The Company has generated losses in the United Kingdom since inception and is forecasted to generate tax losses for the next
several years and therefore the deferred tax assets arising in the United Kingdom are only considered more-likely-than-not of being realized
to the extent that reversing temporary taxable differences are available.
The U.S. subsidiary has generated taxable income since the fiscal year ended June 30, 2014 due to a Service Agreement between
our U.S. and U.K. operating subsidiaries and is forecast to generate taxable income in future periods. In determining whether the deferred
tax asset is more-likely-than-not of being recognized, the Company has taken into account the recent history of taxable profits, the forecast
of future taxable income, including whether future originating temporary deductible differences are likely to be realized, and the reversal of
temporary taxable deductions. Several of the temporary deductible differences reverse over a long time period, such as those relating to
share-based compensation expense, which the Company forecasts are likely to reverse over the next five years. The Company considers
that forecasting taxable income beyond the next few years is very subjective due to the nature and extent of the development process
subcontracted from the Company in the United Kingdom to the U.S. subsidiary. Less weight has been given to forecasts of taxable income
beyond the next few years.
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The Company’s analysis is subject to estimates and judgments particularly relating to the timing of the reversal of temporary
deductible differences for stock compensation expense and the availability of future taxable income beyond the next few years, which
depend on the nature and extent of the subcontract development work performed by the U.S. subsidiary.
The deferred tax asset arising in the United States is only considered more-likely-than-not of being realized to the extent that there
are available reversing temporary taxable differences. As the Company believes that our cash and cash equivalents and marketable
securities will be sufficient to fund our operations, based upon our currently anticipated research and development activities and planned
capital spending, into early 2025, the Company considered the U.S. subsidiary’s future taxable income over this period. Based on this
assessment, the Company determined that there is not sufficient objectively verifiable positive evidence of future taxable income exclusive
of reversing temporary differences and carryforwards that the U.S. subsidiary will generate each year such that it would be more-likely-
than-not that the current deferred tax asset in the U.S. subsidiary may be utilized. Therefore, the Company concluded that a full valuation
allowance should be maintained against the deferred tax asset of the U.S. subsidiary.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business, which are principally limited to interest rate fluctuations,
foreign currency exchange rate fluctuations, particularly between pound sterling and U.S. dollar, and credit risk. These risks are managed
by maintaining an appropriate mix of cash deposits and securities in various currencies, placed with a variety of financial institutions for
varying periods according to expected liquidity requirements.
As of December 31, 2022, we held $96.6 million in marketable securities, with the aim of diversifying our investments and
reducing credit risks. We have not entered into investments for trading or speculative purposes.
Interest Rate Risk
Our surplus cash and cash equivalents are invested in interest-bearing savings, money market funds, corporate debt securities and
commercial paper from time to time. Our investments in corporate debt securities are subject to fixed interest rates. Our exposure to interest
rate sensitivity is impacted by changes in the underlying U.K. and U.S. bank interest rates and the fair market value of our corporate debt
securities will fall in value if market interest rates increase. We do not believe an immediate one percentage point change in interest rates
would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to
be significantly affected by changes in market interest rates.
Currency Risk
We are exposed to foreign exchange rate risk because we currently operate in the United Kingdom and the United States. Our
expenses are generally denominated in the currency in which our operations are located, which are the United Kingdom and the United
States. However, our U.K.-based subsidiary incurs significant research and development costs in U.S. dollars and, to a lesser extent, Euros.
The results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which
could harm our business in the future. We seek to minimize this exposure by maintaining currency cash balances at levels appropriate to
meet forthcoming expenses in U.S. dollars and pounds sterling. To date, we have not used forward exchange contracts or other currency
hedging products to manage our exchange rate exposure, although we may do so in the future. The exchange rate as of December 31, 2022,
the last business day of the reporting period, was £1.00 to $1.21.
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Credit Risk
Our cash and cash equivalents are held with multiple banks and we monitor the credit rating of those banks. Our investments in
corporate debt securities and commercial paper are subject to credit risk. Our investment policy limits investments to certain types of
instruments, such as money market instruments, corporate debt securities and commercial paper, places restrictions on maturities and
concentration by type and issuer and specifies the minimum credit ratings for all investments and the average credit quality of the portfolio.
Trade receivables were $7.4 million and $0.8 million as of December 31, 2022 and 2021, respectively. Trade receivables arise in
relation to the Astellas Collaboration Agreement and the Genentech and GSK Collaboration and License Agreements. We have been
transacting with Genentech since October 2021, Astellas since January 2020 and GSK since 2014, during which time no impairment losses
have been recognized. No balances were past due as of December 31, 2022 and, as of this date, there were no receivables, either accrued or
billed, due from GSK that are no longer recoverable following the termination of the GSK Collaboration and License Agreement.
Item 8. Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial
statements is found in Item 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Management’s Report Regarding the Effectiveness of Disclosure Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this Annual Report.
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures were effective at December 31, 2022.
In connection with the audit of our financial statements for the fiscal year ended December 31, 2021, we identified a material
weakness. This was related to our risk assessment process over the design, implementation and operational effectiveness of controls over
deferred income taxes, specifically the accounting for deferred income tax asset valuation allowance which was deficient. This is described
below in “Changes in Internal Control Over Financial Reporting”. In response to this material weakness, we implemented new procedures
and controls and increased the internal skills and knowledge in this area. As a result, we believe this material weakness had been
remediated at December 31, 2022.
Management’s Report Regarding the Effectiveness of Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Securities Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonably assurance of
achieving their control objectives. Under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based
on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission
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Management has concluded that our internal control over financial reporting was effective at December 31, 2022. Management
has also concluded that our audited financial statements included in this Report are fairly stated in all material respects in accordance with
GAAP for each of the periods presented therein.
Changes in Internal Control Over Financial Reporting.
There has been no material change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) that occurred during the fourth quarter of 2022 that has materially affected, or is reasonably likely to materially affect,
internal control over financial reporting.
In connection with the audit of our financial statements for the fiscal year ended December 31, 2021, we identified a material
weakness. This was related to our risk assessment process over the design, implementation and operational effectiveness of controls over
deferred income taxes, specifically the accounting for deferred income tax asset valuation allowance which was deficient. This material
weakness resulted in a material misstatement in deferred income taxes that was corrected prior to the issuance of the financial statements.
We have taken steps to remediate the material weakness, including (i) recruiting appropriate personnel with appropriate
qualification, including a Vice President Financial Controller with experience of income tax accounting; (ii) improving the design of our
controls for deferred income taxes, specifically in enhancing the requirements to perform the assessment of deferred income tax assets to
enable new personnel to effectively execute the control and (iii) enhancing the training provided to the individuals operating the deferred
income taxation controls.
Item 9B. Other Information
None
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, to be filed with the Commission not later than 120 days after the close of our fiscal year ended December 31, 2022.
Item 11. Executive Compensation
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, to be filed with the Commission not later than 120 days after the close of our fiscal year ended December 31, 2022.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, to be filed with the Commission not later than 120 days after the close of our fiscal year ended December 31, 2022.
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Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, to be filed with the Commission not later than 120 days after the close of our fiscal year ended December 31, 2022.
Item 14. Principal Accounting Fees and Services
The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to
Regulation 14A, to be filed with the Commission not later than 120 days after the close of our fiscal year ended December 31, 2022.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements
As part of this Annual Report on Form 10-K, the consolidated financial statements are listed in the accompanying index to
financial statements on page F-1.
2. Financial Statement Schedules
All schedules have been omitted because they are not required, not applicable, not present in amounts sufficient to require
submission of the schedule, or the required information is otherwise included.
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3. Exhibit Index
The following is a list of exhibits filed as part of this Annual Report on Form 10-K or are incorporated herein by reference:
Exhibit
Number
3.1*
4.1*
4.2*
4.3*
4.4**
10.1*†
10.2*†
10.3*†
10.4*†
10.5*†
10.6*†
10.7*†
Description of Exhibit
Articles of Association of Adaptimmune Therapeutics plc (incorporated by reference to Exhibit 3.1 to our Form 8-K filed
with the SEC on June 16, 2016)
Form of certificate evidencing ordinary shares (incorporated by reference to Exhibit 4.1 to the Company’s Registration
Statement on Form F-1 (file no: 333-203267)).
Form of Deposit Agreement among Adaptimmune Therapeutics plc, Citibank, N.A., as the depositary bank and Holders
and Beneficial Owners of ADSs issued thereunder (incorporated by reference to Exhibit 4.2 to the Company’s
Registration Statement on Form F-1 (file no: 333-203267)).
Form of American Depositary Receipt (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.3 to the
Company’s Registration Statement on Form F-1 (file no: 333-203267)).
Description of the Registrant’s Securities.
Collaboration Agreement, dated January 5, 2018, between Adaptimmune Limited and Cell Therapy Catapult Limited
(incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December
31, 2017 filed with the SEC on March 15, 2018).
Collaboration Agreement dated May 14, 2019 between Adaptimmune Limited and AIS Operating Co., Inc., f/k/a Alpine
Immune Sciences, Inc. (incorporated by reference to Exhibit 10.1 to our Form 10-Q filed with the SEC on August 1,
2019).
Collaboration agreement dated as of August 26, 2019, by and between Adaptimmune Limited and Noile-Immune Biotech,
Inc. (incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on August 27, 2019).
Collaboration and License Agreement, dated January 13, 2020, by and between Universal Cells, Inc. and Adaptimmune
Limited (incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019 filed with the SEC on February 27, 2020).
Amended and Restated Research Collaboration and License Agreement, dated January 13, 2020, by and between
Adaptimmune Limited and Universal Cells, Inc. and effective as of November 25, 2015 (incorporated by reference to
Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on
February 27, 2020).
First Amendment to Commercial Development and Supply Agreement, dated November 23, 2019, between Adaptimmune
Limited and Life Technologies Corporation and effective as of November 18, 2019 (incorporated by reference to Exhibit
10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on
February 27, 2020).
Commercial Development and Supply Agreement, dated June 16, 2016, by and between Life Technologies Corporation
and Adaptimmune Limited and effective as of June 1, 2016 (incorporated by reference to Exhibit 10.1 to our Form 8-K
filed with the SEC on June 21, 2016).
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Exhibit
Number
10.8*†
10.9*†
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
Description of Exhibit
Strategic Alliance Agreement, dated September 23, 2016, by and between Adaptimmune LLC and The University Of
Texas M.D. Anderson Cancer Center (incorporated by reference to Exhibit 10.11 to our Form 10-Q filed with the SEC on
November 10, 2016).
Strategic Collaboration and License Agreement, dated September 3, 2021, by and between Adaptimmune Limited and
Genentech, Inc. and F. Hoffman-La Roche Limited (incorporated by reference to Exhibit 10.1 to our Form 10-Q filed with
the SEC on November 4, 2021).
Employment Agreement dated as of December 16, 2020 by and between Adaptimmune, LLC and Elliot Norry, and
effective January 1, 2021, (incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on December
16, 2020).
Employment Agreement dated as of August 1, 2019 by and between Adaptimmune, LLC and John Lunger (incorporated
by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on August 1, 2019).
Employment Agreement dated as of June 26, 2019 by and between Adaptimmune, LLC and Adrian Rawcliffe
(incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on June 27, 2019).
James Noble Letter Agreement dated June 26, 2019 (incorporated by reference to Exhibit 10.2 to our Form 8-K filed with
the SEC on June 27, 2019).
James Noble Variation Agreement dated June 26, 2019 (incorporated by reference to Exhibit 10.3 to our Form 8-K filed
with the SEC on June 27, 2019).
James Noble Letter of Appointment dated June 26, 2019 (incorporated by reference to Exhibit 10.4 to our Form 8-K filed
with the SEC on June 27, 2019).
Letter of Appointment dated July 5, 2018 and effective from July 5, 2018 between the Company and John Furey
(incorporated by reference to Exhibit 99.1 to our Form 8-K filed with the SEC on July 6, 2018).
Employment Agreement dated as of March 15, 2017 by and between Adaptimmune, LLC and William Bertrand
(incorporated by reference to Exhibit 99.2 to our Form 8-K filed with the SEC on March 15, 2017).
Service Agreement dated March 15, 2017 between Adaptimmune Limited and Helen Tayton-Martin (incorporated by
reference to Exhibit 99.3 to our Form 8-K filed with the SEC on March 15, 2017).
Executive Severance policy of Adaptimmune Therapeutics plc, dated March 10, 2017, and effective March 10, 2017
(incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended December
31, 2016 filed with the SEC on March 13, 2017).
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Exhibit
Number
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
Letter of Appointment, dated May 23, 2016 and effective June 23, 2016, between the Company and Barbara Duncan
(incorporated by reference to Exhibit 99.1 to our Form 8-K filed with the SEC on June 23, 2016).
Description of Exhibit
Letter of Appointment, dated August 9, 2016 and effective August 11, 2016, between the Company and David M. Mott
(incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on August 12, 2016).
Letter of Appointment, dated August 9, 2016 and effective August 11, 2016, between the Company and Lawrence M.
Alleva (incorporated by reference to Exhibit 10.2 to our Form 8-K filed with the SEC on August 12, 2016).
Letter of Appointment, dated August 9, 2016 and effective August 11, 2016, between the Company and Ali Behbahani
(incorporated by reference to Exhibit 10.3 to our Form 8-K filed with the SEC on August 12, 2016).
Letter of Appointment, dated August 9, 2016 and effective August 11, 2016, between the Company and Elliott Sigal
(incorporated by reference to Exhibit 10.5 to our Form 8-K filed with the SEC on August 12, 2016).
Service Agreement dated February 17, 2020, between Adaptimmune Limited and Gavin Wood, and effective April 1,
2020, (incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on February 18, 2020).
Letter of Appointment, dated November 7, 2016 and effective November 14, 2016, between the Company and Tal Zaks
(incorporated by reference to Exhibit 10.8 to our Form 10-Q filed with the SEC on November 10, 2016).
Employment Agreement, dated January 26, 2022, between Adaptimmune, LLC and Cintia Piccina (incorporated by
reference to Exhibit 10.1 to our Form 8-K filed with the SEC on January 26, 2022).
Adaptimmune Therapeutics plc Company Share Option Plan, dated March 16, 2015, as amended on April 15, 2015, as
further amended on January 13, 2016 (incorporated by reference to Exhibit 4.32 to the Company’s Transition Report on
Form 20-F filed with the SEC on March 17, 2016).
Adaptimmune Therapeutics plc 2015 Share Option Scheme, dated March 16, 2015, as amended on April 15, 2015,
January 13, 2016 and December 18, 2017 (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2017 filed with the SEC on March 15, 2018).
Adaptimmune Therapeutics plc 2016 Employee Share Option Scheme, dated January 14, 2016, as amended on December
18, 2017 (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2017 filed with the SEC on March 15, 2018).
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Exhibit
Number
10.31*
10.32*
10.33*
10.34*
10.35*
10.36*
10.37*
10.38*
10.39*
10.40*
Description of Exhibit
Adaptimmune Limited Share Option Scheme (Incorporating Management Incentive Options), as amended on January 13,
2016 (incorporated by reference to Exhibit 4.28 to the Company’s Transition Report on Form 20-F filed with the SEC on
March 17, 2016).
Adaptimmune Limited 2014 Share Option Scheme (Incorporating Enterprise Management Incentive Options), as
amended on January 13, 2016 (incorporated by reference to Exhibit 4.29 to the Company’s Transition Report on Form 20-
F filed with the SEC on March 17, 2016).
Adaptimmune Limited Company Share Option Plan, dated December 16, 2014, as amended on January 13, 2016
(incorporated by reference to Exhibit 4.30 to the Company’s Transition Report on Form 20-F filed with the SEC on
March 17, 2016).
Deed of Variation, dated August 20, 2021, between MEPC Milton Park No. 1 Limited and MEPC Milton Park No. 2
Limited and Adaptimmune Limited relating to a lease of 39 Innovation Drive, Milton Park (incorporated by reference to
Exhibit 10.1 to our Form 8-K filed with the SEC on August 20, 2021).
Rent Security Deposit Deed dated August 20, 2021, between MEPC Milton Park No 1 Limited and MEPC Milton Park
No. 2 Limited, Adaptimmune Limited and Adaptimmune Therapeutics plc relating to 39 Innovation Drive and 60 Jubilee
Avenue, Milton Park (incorporated by reference to Exhibit 10.2 to our Form 8-K filed with the SEC on August 20, 2021).
Agreement dated August 13, 2021, between MEPC Milton Park No 1 Limited and MEPC Milton Park No. 2 Limited,
Adaptimmune Limited and Adaptimmune Therapeutics plc relating to 39 Innovation Drive and 60 Jubilee Avenue, Milton
Park (incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on August 13, 2021).
Deed of Variation dated August 13, 2021, between MEPC Milton Park No 1 Limited and MEPC Milton Park No. 2
Limited, Adaptimmune Limited and Adaptimmune Therapeutics plc relating to a lease of 60 Jubilee Avenue, Milton Park
(incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on August 13, 2021).
Lease, dated February 28, 2018, between MEPC Milton Park No. 1 Limited, MEPC Milton Park No. 2 Limited and
Adaptimmune Limited relating to 39 Innovation Drive, Milton Park (incorporated by reference to Exhibit 10.3 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 15, 2018).
Rent Security Deposit Deed, dated February 28, 2018, between MEPC Milton Park No. 1 Limited, MEPC Milton Park
No. 2 Limited and Adaptimmune Limited relating to 39 Innovation Drive, Milton Park (incorporated by reference to
Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on
March 15, 2018).
Lease, dated October 24, 2016, by and between MEPC Milton Park No. 1 Limited and MEPC Milton Park No. 2 Limited,
Adaptimmune Limited and Adaptimmune Therapeutics plc relating to 60 Jubilee Avenue Milton Park (incorporated by
reference to Exhibit 10.12 to our Form 10-Q filed with the SEC on November 10, 2016).
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Exhibit
Number
10.41*
10.42*†
10.43*†
10.44*†
10.45*†
10.46*†
10.47*
10.48*
10.49*
10.50*
10.51*
21.1*
23.1**
31.1**
Lease Agreement, dated July 28, 2015, between L/S 351 Rouse Boulevard, LP, and Adaptimmune LLC relating to 351
Rouse Boulevard, Philadelphia, Pennsylvania (incorporated by reference to Exhibit 4.14 to the Company’s Transition
Report on Form 20-F filed with the SEC on October 13, 2015).
Description of Exhibit
Amendment Agreement No. 6, dated July 20, 2018 between Adaptimmune Limited and GlaxoSmithKline Intellectual
Property Development Ltd. (incorporated by reference to Exhibit 10.1 to our Form 10-Q filed with the SEC on August 2,
2018).
Amendment Agreement No. 5, dated September 7, 2017 between Adaptimmune Limited and GlaxoSmithKline
Intellectual Property Development Ltd. (incorporated by reference to Exhibit 10.1 to our Form 10-Q filed with the SEC
on November 2, 2017).
Amendment Agreement No. 2, dated February 2, 2016 between Adaptimmune Limited and GlaxoSmithKline Intellectual
Property Development Ltd (incorporated by reference to Exhibit 4.4 to the Company’s Transition Report on Form 20-F
filed with the SEC on March 17, 2016).
Amendment Agreement No. 1, dated May 8, 2015 between Adaptimmune Limited and GlaxoSmithKline Intellectual
Property Development Ltd (incorporated by reference to Exhibit 4.3 to the Company’s Transition Report on Form 20-F
filed with the SEC on March 17, 2016).
Collaboration and License Agreement, dated May 30, 2014 between Adaptimmune Limited and GlaxoSmithKline
Intellectual Property Development Ltd (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form
F-1 (file no: 333-203267)).
Employment Agreement dated as of January 26, 2022 by and between Adaptimmune, LLC and Cintia Piccina
(incorporated by reference to Exhibit 10.01 to our Form 8-K Filed with the SEC on January 26, 2022).
Employment Agreement dated as of May 4, 2022 by and between Adaptimmune Limited and Joanna Brewer
(incorporated by reference to Exhibit 10.1 to our Form 8-K Filed with the SEC on May 4, 2022).
Deed of Surrender of Part dated June 15, 2022, between MEPC Milton Park No 1 Limited and MEPC Milton Park No. 2
Limited and Adaptimmune Limited relating to a lease of 39 Innovation Drive, Milton Park (incorporated by reference to
Exhibit 10.1 to our Form 8-K Filed with the SEC on June 15, 2022). .
Deed of Variation dated June 15, 2022, between MEPC Milton Park No 1 Limited and MEPC Milton Park No. 2 Limited
and Adaptimmune Limited relating to a lease of 39 Innovation Drive, Milton Park (incorporated by reference to Exhibit
10.2 to our Form 8-K Filed with the SEC on June 15, 2022).
Amendment Agreement No. 8, dated December 19, 2022 between Adaptimmune Limited and GlaxoSmithKline
Intellectual Property Development Ltd (incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on
December 20, 2022).
List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2020 filed with the SEC on February 25, 2021).
Consent of KPMG LLP
Certificate of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a).
101
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Exhibit
Number
31.2**
32.1**
32.2**
Certificate of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a).
Description of Exhibit
Certificate of Chief Executive Officer pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.1350.
Certificate of Chief Financial Officer pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.1350.
101.INS**
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
101.SCH**
Inline XBRL Taxonomy Extension Schema Document.
101.CAL**
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104**
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
* Previously filed.
** Filed herewith.
† Confidential treatment has been granted with respect to portions of this exhibit. A complete copy of this exhibit, including the redacted
terms, has been filed separately with the Securities and Exchange Commission.
Item 16. Form 10-K Summary
None.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, hereunto duly authorized, on March 6, 2023.
SIGNATURES
ADAPTIMMUNE THERAPEUTICS PLC
By:
/s/ Adrian Rawcliffe
Name: Adrian Rawcliffe
Title:
Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Adrian Rawcliffe and Gavin Wood, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
March 6, 2023, in the capacities indicated.
Signature
/s/ Adrian Rawcliffe
Adrian Rawcliffe
/s/ Gavin Wood
Gavin Wood
/s/ David M. Mott
David M. Mott
/s/ Lawrence M. Alleva
Lawrence M. Alleva
/s/ Ali Behbahani, MD
Ali Behbahani, MD
/s/ Barbara Duncan
Barbara Duncan
/s/John Furey
John Furey
/s/ James Noble
James Noble
/s/ Elliott Sigal, MD, PhD
Elliott Sigal, MD, PhD
/s/ Tal Zaks, MD, PhD
Tal Zaks, MD, PhD
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Accounting and Financial Officer)
Date
March 6, 2023
March 6, 2023
Chairman of the Board of Directors
March 6, 2023
Director
Director
Director
Director
Director
Director
Director
103
March 6, 2023
March 6, 2023
March 6, 2023
March 6 2023
March 6, 2023
March 6, 2023
March 6, 2023
Table of Contents
Index to the Financial Statements:
Reports of Independent Registered Public Accounting Firm (PCAOB ID 1118)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Notes to the Consolidated Financial Statements
F-2
F-5
F-6
F-7
F-8
F-9
F-10
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors Adaptimmune Therapeutics plc:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Adaptimmune Therapeutics plc and subsidiaries (the Company)
as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in equity, and cash
flows for each of the years in the three year period ended December 31, 2022, and the related notes (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated March 6, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there
are no critical audit matters.
/s/ KPMG LLP
We have served as the Company’s auditor since 2010.
Reading, United Kingdom
March 6, 2023
F-2
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors Adaptimmune Therapeutics Plc:
Opinion on Internal Control Over Financial Reporting
We have audited Adaptimmune Therapeutics plc and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of
operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31,
2022, and the related notes collectively, the consolidated financial statements, and our report dated March 6, 2023 expressed an unqualified
opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report Regarding
the Effectiveness of Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls
F-3
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may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Reading, United Kingdom
March 6, 2023
F-4
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ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Assets
Current assets
Cash and cash equivalents
Marketable securities - available-for-sale debt securities
Accounts receivable, net of allowance for doubtful accounts of $0 and $0
Other current assets and prepaid expenses
Total current assets
Restricted cash
Operating lease right-of-use assets, net of accumulated amortization of $9,470 and $7,253
Property, plant and equipment, net of accumulated depreciation of $38,588 and $36,253
Intangible assets, net of accumulated amortization of $4,676 and $4,051
Total assets
Liabilities and stockholders’ equity
Current liabilities
Accounts payable
Operating lease liabilities, current
Accrued expenses and other current liabilities
Restructuring provision
Deferred revenue, current
Total current liabilities
Operating lease liabilities, non-current
Deferred revenue, non-current
Other liabilities, non-current
Total liabilities
Stockholders’ equity
December 31,
2022
December 31,
2021
$
$
$
$
$
$
108,033
96,572
7,435
43,330
255,370
1,569
18,019
53,516
442
328,916
4,753
2,728
31,215
2,285
23,520
64,501
20,349
160,892
1,296
247,038
149,948
219,632
752
45,126
415,458
1,718
20,875
30,494
1,000
469,545
8,113
2,320
29,909
—
22,199
62,541
23,148
177,223
673
263,585
Common stock - Ordinary shares par value £0.001, 1,282,773,750 authorized and 987,109,890
issued and outstanding (2021: 1,240,853,520 authorized and 937,547,934 issued and
outstanding)
Additional paid in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' equity
1,399
990,656
(875)
(909,302)
81,878
1,337
959,611
(11,142)
(743,846)
205,960
Total liabilities and stockholders’ equity
$
328,916
$
469,545
See accompanying notes to Consolidated Financial Statements.
F-5
Table of Contents
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Development revenue
Revenue
Operating expenses
Research and development
General and administrative
Total operating expenses
Operating loss
Interest income
Other (expense) income, net
Loss before income tax expense
Income tax expense
Net loss attributable to ordinary shareholders
Net loss per ordinary share
Basic and diluted
Weighted average shares outstanding:
Basic and diluted
$
$
$
December 31,
2022
Period Ended
December 31,
2021
December 31,
2020
27,148
27,148
$
$
6,149
6,149
3,958
3,958
(127,726)
(63,387)
(191,113)
(163,965)
1,542
(536)
(162,959)
(2,497)
(165,456) $
(111,090)
(57,305)
(168,395)
(162,246)
1,095
3,852
(157,299)
(791)
(158,090) $
(91,568)
(45,795)
(137,363)
(133,405)
2,313
1,162
(129,930)
(162)
(130,092)
(0.17) $
(0.17) $
(0.15)
967,242,403
934,833,017
854,783,763
See accompanying notes to Consolidated Financial Statements.
F-6
Table of Contents
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Net loss
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax of $0, $0, and $0
Foreign currency (losses) gains on intercompany loan of a long-term investment nature,
net of tax of $0, $0, and $0
Unrealized holding (losses) gains on available-for-sale debt securities, net of tax of $0,
$0, and $0
Reclassification adjustment for gains on available-for-sale debt securities included in
net loss, net of tax of $0, $0, and $0
Total comprehensive loss for the period
Year ended
December 31,
2022
(165,456)
$
Year ended
December 31,
2021
(158,090) $
Year ended
December 31,
2020
(130,092)
$
60,421
5,808
(19,220)
(49,581)
(6,435)
16,364
(573)
—
(155,189)
$
(461)
(6)
$
(159,184) $
161
(89)
(132,876)
See accompanying notes to Consolidated Financial Statements.
F-7
Table of Contents
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except share data)
Common
stock
Additional
paid in capital
Accumulated
other
comprehensive
(loss)
income
Accumulated
deficit
Total
stockholders’
equity
$
$
(7,264)
—
—
(455,664)
—
—
$
Balance as of January 1, 2020
Issuance of shares upon exercise of stock options
Issuance of shares in the January Offering
Issuance of shares upon exercise of the overallotment
for the January Offering
Issuance of shares in the June Offering
Issuance of shares upon exercise of the overallotment
for the June Offering
Other comprehensive loss
Share-based compensation expense
Net loss
Balance as of December 31, 2020
Issuance of shares upon exercise of stock options
Issue of shares under At The Market sales agreement,
net of commission and expenses
Other comprehensive loss
Share-based compensation expense
Net loss
Balance as of December 31, 2021
Issuance of shares upon exercise of stock options
Issue of shares under At The Market sales agreement,
net of commission and expenses
Other comprehensive profit
Share-based compensation expense
Net loss
Balance as of December 31, 2022
$
Common
stock
631,003,568
11,401,390
126,000,000
18,900,000
123,000,000
18,450,000
—
—
—
928,754,958
5,723,646
3,069,330
—
—
—
937,547,934
5,823,534
$
943
14
165
24
155
24
—
—
—
1,325
8
4
—
—
—
1,337
8
585,623
5,649
78,451
11,914
209,831
33,824
—
10,414
—
935,706
751
2,525
—
20,629
—
959,611
42
12,763
—
18,240
43,738,422
—
—
—
$
987,109,890
54
—
—
—
$
1,399
—
$
990,656
See accompanying notes to Consolidated Financial Statements.
F-8
—
—
—
(2,784)
—
—
(10,048)
—
—
(1,094)
—
—
(11,142)
—
—
10,267
—
—
$
(875)
—
—
—
—
—
(130,092)
(585,756)
—
—
—
-
(158,090)
(743,846)
—
—
—
—
(165,456)
(909,302)
$
123,638
5,663
78,616
11,938
209,986
33,848
(2,784)
10,414
(130,092)
341,227
759
2,529
(1,094)
20,629
(158,090)
205,960
50
12,817
10,267
18,240
(165,456)
81,878
Table of Contents
ADAPTIMMUNE THERAPEUTICS PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
Amortization
Share-based compensation expense
Unrealized foreign exchange (gains)/losses
Amortization on available-for-sale debt securities
Other
Changes in operating assets and liabilities:
(Increase)/decrease in receivables and other operating assets
Decrease in non-current operating assets
Increase in payables and other current liabilities
Increase in deferred revenue
Net cash (used in)/provided by operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Maturity or redemption of marketable securities
Investment in marketable securities
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Proceeds from issuance of common stock from offerings, net of commissions and
issuance costs
Proceeds from exercise of stock options
Net cash provided by financing activities
Effect of currency exchange rate changes on cash, cash equivalents and restricted
cash
Net (decrease)/increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at start of period
Cash, cash equivalents and restricted cash at end of period
Supplemental cash flow information
Interest received
Amortization on available-for-sale debt securities
Income taxes paid
$
$
Year ended
Year ended Year ended
December 31,
December 31,
December 31,
2022
2021
2020
$
(165,456) $
(158,090) $
(130,092)
5,266
809
18,240
(2,438)
2,525
816
(9,813)
—
4,408
3,874
(141,769)
(29,496)
(244)
166,994
(48,117)
89,137
12,817
50
12,867
(2,299)
(42,064)
151,666
109,602
5,149
(2,525)
630
5,630
937
20,629
540
5,276
1,173
(19,358)
—
4,207
149,785
10,729
(8,574)
(207)
224,343
(139,762)
75,800
6,627
967
10,414
(1,333)
3,836
(55)
1,747
2,458
3,867
47,973
(53,591)
(2,341)
(565)
105,022
(381,040)
(278,924)
2,529
759
3,288
334,388
5,663
340,051
365
90,182
61,484
151,666
7,765
(5,276)
535
$
$
$
$
(960)
6,576
54,908
61,484
6,216
(3,836)
75
See accompanying notes to Consolidated Financial Statements.
F-9
Table of Contents
Note 1 — General
ADAPTIMMUNE THERAPEUTICS PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Adaptimmune Therapeutics plc is registered in England and Wales. Its registered office is 60 Jubilee Avenue, Milton Park,
Abingdon, Oxfordshire, OX14 4RX, United Kingdom. Adaptimmune Therapeutics plc and its subsidiaries (collectively “Adaptimmune”
or the “Company”) is a clinical-stage biopharmaceutical company primarily focused on providing novel cell therapies to people with
cancer. The Company is a leader in the development of T-cell therapies for solid tumors. The Company’s proprietary platform enables it to
identify cancer targets, find and develop cell therapy candidates active against those targets and produce therapeutic candidates for
administration to patients.
The Company is subject to a number of risks similar to other biopharmaceutical companies in the early stage of clinical
development including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical programs or
clinical programs, the need to obtain marketing approval for its cell therapies, competitors developing new technological innovations, the
need to successfully commercialize and gain market acceptance of its cell therapies, the need to develop a reliable commercial
manufacturing process, the need to commercialize any cell therapies that may be approved for marketing, and protection of proprietary
technology. If the Company does not successfully commercialize any of its cell therapies, it will be unable to generate product revenue or
achieve profitability. The Company had an accumulated deficit of $909,302,000 as of December 31, 2022.
Note 2 — Summary of Significant Accounting Policies
(a) Basis of presentation
The Consolidated Financial Statements of Adaptimmune Therapeutics plc and its subsidiaries and other financial information
included in this Annual Report have been prepared in accordance with generally accepted accounting principles in the United States of
America (“US GAAP”) and are presented in U.S. dollars. All significant intercompany accounts and transactions between the Company
and its subsidiaries have been eliminated on consolidation.
(b) Use of estimates in financial statements
The preparation of financial statements, in conformity with U.S. GAAP and SEC regulations, requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date
of the Consolidated Financial Statements and reported amounts of revenues and expenses during the reporting period. Estimates and
assumptions are primarily made in relation to revenue recognition, estimation of the incremental borrowing rate for operating leases, and
valuation allowances relating to deferred tax assets. If actual results differ from the Company’s estimates, or to the extent these estimates
are adjusted in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change
in estimate.
(c) Going concern
In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether
there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going
concern within one year after the date the financial statements are issued.
Management considers that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability
to continue as a going concern for a period of at least one year from the date the financial statements are issued. Although the financial
statements have been prepared on a going concern basis, if the Company fails to obtain sufficient additional financing in future, this may
raise substantial doubt over the Company’s ability to continue as a going concern in future reporting periods.
F-10
Table of Contents
(d) Foreign currency
The reporting currency of the Company is the U.S. dollar. The Company has determined the functional currency of the ultimate
parent company, Adaptimmune Therapeutics plc, is U.S. dollars because it predominately raises finance and expends cash in U.S. dollars.
The functional currency of subsidiary operations is the applicable local currency. Transactions in foreign currencies are translated into the
functional currency of the subsidiary in which they occur at the foreign exchange rate in effect on at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the functional currency of the relevant
subsidiary at the foreign exchange rate in effect on the balance sheet date. Foreign exchange differences arising on translation are
recognized within other income (expense) in the Consolidated Statement of Operations.
The Company’s U.K. subsidiary has an intercompany loan balance in U.S dollars payable to the ultimate parent company,
Adaptimmune Therapeutics plc. Beginning on July 1, 2019, the intercompany loan was considered of a long-term investment nature as
repayment is not planned or anticipated in the foreseeable future. It is Adaptimmune Therapeutics plc’s intent not to request payment of the
intercompany loan for the foreseeable future. The foreign exchange gain or losses arising on the revaluation of intercompany loans of a
long-term investment nature are reported within other comprehensive (loss) income, net of tax.
The results of operations for subsidiaries, whose functional currency is not the U.S. dollar, are translated at an average rate for the
period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions and the balance sheet are translated
at foreign exchange rates ruling at the balance sheet date. Exchange differences arising from this translation of foreign operations are
reported as an item of other comprehensive (loss) income.
Foreign exchange losses for the year ended December 31, 2022 of $536,000 and foreign exchange gains of $3,852,000 and
$1,105,000 for the years ended December 31, 2021 and 2020 respectively, are included within Other (expense) income, net in the
Consolidated Statement of Operations.
(e) Fair value measurements
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of
the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature
of those inputs. The hierarchy defines three levels of valuation inputs:
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 of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and
accrued expenses approximate fair value because of the short-term nature of these instruments. The fair value of marketable securities,
which are measured at fair value on a recurring basis is detailed in Note 4, Financial Instruments.
F-11
Table of Contents
(f) Accumulated other comprehensive (loss) income
The Company reports foreign currency translation adjustments and the foreign exchange gain or losses arising on the revaluation
of intercompany loans of a long-term investment nature within Other comprehensive (loss) income. Unrealized gains and losses on
available-for-sale debt securities are also reported within Other comprehensive (loss) income until a gain or loss is realized, at which point
they are reclassified to Other (expense) income, net in the Consolidated Statement of Operations.
The following table shows the changes in Accumulated other comprehensive (loss) income (in thousands):
Balance at January 1, 2020
Foreign currency translation adjustments
Foreign currency gains on intercompany loan of a long-term investment nature, net of
tax of $0
Unrealized holding gains on available-for-sale debt securities, net of tax of $0
Reclassification from accumulated other comprehensive (loss) income of gains on
available-for-sale debt securities included in net income, net of tax of $0
Balance at December 31, 2020
Foreign currency translation adjustments
Foreign currency losses on intercompany loan of a long-term investment nature, net
of tax of $0
Unrealized holding losses on available-for-sale debt securities, net of tax of $0
Reclassification from accumulated other comprehensive (loss) income of gains on
available-for-sale debt securities included in net income, net of tax of $0
Balance at December 31, 2021
Foreign currency translation adjustments
Foreign currency losses on intercompany loan of a long-term investment nature, net
of tax of $0
Unrealized holding losses on available-for-sale debt securities, net of tax of $0
Balance at December 31, 2022
Accumulated
Accumulated
Total
foreign
currency
unrealized
accumulated
gains (losses) on
other
translation available-for-sale
adjustments
debt securities
comprehensive
(loss) income
$
(7,302) $
(19,220)
38 $
—
(7,264)
(19,220)
16,364
—
—
(10,158)
5,808
(6,435)
—
—
(10,785)
60,421
—
161
(89)
110
—
—
(461)
(6)
(357)
—
(49,581)
—
55
$
$
—
(573)
(930) $
16,364
161
(89)
(10,048)
5,808
(6,435)
(461)
(6)
(11,142)
60,421
(49,581)
(573)
(875)
The following amounts were reclassified out of Other comprehensive (loss) income (in thousands):
Component of accumulated other comprehensive income
Unrealized gains on available-for-sale securities
Reclassification adjustment for gains on available-for-sale debt
securities
Year ended
December 31,
Amount reclassified
Year ended
December 31,
Year ended
December 31,
Affected line item in
2022
2021
2020
the Statement of Operations
$
— $
(6) $
(89)
Other (expense) income, net
F-12
Table of Contents
(g) Cash, cash equivalents and restricted cash
The Company considers all highly liquid investments with a maturity at acquisition date of three months or less to be cash
equivalents. Cash and cash equivalents comprise cash balances, commercial paper and corporate debt securities with maturities of three
months or less at acquisition and short deposits with maturities of three months or less.
The Company’s restricted cash consists of cash providing security for letters of credit in respect of lease agreements and credit
cards.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheet that
sum to the total of the same such amounts shown in the statement of cash flows (in thousands).
December 31,
2022
December 31,
2021
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows
$
$
108,033
1,569
109,602
$
$
149,948
1,718
151,666
(h) Available-for-sale debt securities
As of December 31, 2022, the Company has the following investments in available-for-sale debt securities, (in thousands):
Available-for-sale debt securities:
Corporate debt securities
U.S. Treasury securities
Agency bonds
Corporate debt securities
Remaining
contractual maturity
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Aggregate
estimated
fair value
Less than 3 months
Less than 3 months
3 months to 1 year
3 months to 1 year
$
$
45,386
5,953
5,008
41,154
97,501
$
$
— $
1
—
—
1
$
(72)
—
(154)
(704)
(930)
$ 45,314
5,954
4,854
40,450
$ 96,572
As of December 31, 2021, the Company had the following investments in available-for-sale debt securities (in thousands):
Available-for-sale debt securities:
Corporate debt securities
Corporate debt securities
Agency bonds
Corporate debt securities
Remaining
contractual maturity
Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Aggregate
estimated
fair value
Less than 3 months
3 months to 1 year
1 year to 2 years
1 year to 2 years
$
45,304
81,590
5,000
88,095
$ 219,989
$
$
22
11
—
—
33
$
$
45,305
(21) $
81,526
(75)
4,993
(7)
(287)
87,808
(390) $ 219,632
F-13
Table of Contents
Management determines the appropriate classification of its investments in available-for-sale debt securities at the time of
purchase and reevaluates such designation as of each reporting date. The securities are classified as current or non-current based on the
maturity dates and management’s intentions.
At December 31, 2022, the Company has classified all of its available-for-sale debt securities as current assets on the
accompanying Consolidated Balance Sheets based on the highly-liquid nature of these investment securities and because these investment
securities are considered available for use in current operations.
The investment in available-for-sale debt securities is measured at fair value at each reporting date. Unrealized gains and losses
are excluded from earnings and are reported as a component of Other comprehensive (loss) income, net of tax. Realized gains and losses
are included in Other income (expense), net. Interest income and amortization of premiums and discounts at acquisition are included in
Interest income. In the year ended December 31, 2022, 2021 and 2020 proceeds from the maturity or redemption of available-for-sale debt
securities were $166,994,000, $224,343,000 and $105,022,000 respectively. There were realized gains of $0, $6,000 and $89,000
recognized on early settlement of available-for-sale debt securities during the years ended December 31, 2022, 2021 and 2020 respectively.
The Company reclassified the gains and losses out of accumulated other comprehensive loss during the same periods.
At each reporting date, the Company assesses whether each individual investment is impaired, which occurs if the fair value is less
than the amortized cost, adjusted for amortization of premiums and discounts at acquisition. If the investment is impaired, the impairment
is assessed to determine if it is other than temporary. Impairments judged to be other than temporary are included in other (expense)
income, net when they are identified.
The aggregate fair value (in thousands) and number of securities held by the Company (including those classified as cash
equivalents) in an unrealized loss position as of December 31, 2022 and 2021 are as follows (in thousands):
Marketable securities in a continuous loss position for
12 months or longer:
Corporate debt securities
Agency bond
Marketable securities in a continuous loss position for
less than 12 months:
Corporate debt securities
Agency bond
December 31, 2022
Fair market
value of
investments in
an unrealized
loss position
Number of
investments
in an
unrealized
loss position
Unrealized
losses
Fair market
value of
investments in
an unrealized
loss position
December 31, 2021
Number of
investments
in an
unrealized
loss position
Unrealized
losses
$
74,481
4,854
16 $
1
(679) $
(154)
8,232
—
$
1
—
(35)
—
$
11,283
—
$
90,618
2 $
—
19 $
(97) $ 163,258
—
4,993
(930) $ 176,483
34 $
1
36 $
(348)
(7)
(390)
As of December 31, 2022 and 2021, these securities are not considered to be other than temporarily impaired because the
impairments are not severe and are due to normal market and exchange rate fluctuations. Nineteen securities have been in an unrealized
loss position for more than one year with a net total unrealized loss of $833,000. Furthermore, the Company does not intend to sell the debt
securities in an unrealized loss position, and it is unlikely that the Company will be required to sell these securities before the recovery of
the amortized cost.
The cost of securities sold is based on the specific-identification method. Interest on debt securities is included in interest income.
F-14
Table of Contents
Our investment in available-for-sale debt securities is subject to credit risk. The Company’s investment policy limits investments
to certain types of instruments, such as money market instruments and corporate debt securities, places restrictions on maturities and
concentration by type and issuer and specifies the minimum credit ratings for all investments and the average credit quality of the portfolio.
(i) Accounts receivable
Accounts receivable include amounts billed to customers and accrued receivables where only the passage of time is required
before payment of amounts due.
Management analyses current and past due accounts and determines if an allowance for uncollectible accounts is required based
on collection experience and other relevant information. As of December 31, 2022 and 2021, the allowance for doubtful accounts is $nil.
The process of estimating the uncollectible accounts involves assumptions and judgments and the ultimate amounts of uncollectible
accounts receivable could be in excess of the amounts provided.
(j) Clinical materials
Clinical materials for use in research and development with alternative future use are capitalized as either other current assets or
other non-current assets, depending on the timing of their expected consumption. The Company assesses whenever events or changes in
circumstances indicate that an asset’s carrying amount may not be recoverable.
(k) Property, plant and equipment
Property, plant and equipment is stated at cost, less any impairment losses, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. The following table
provides the range of estimated useful lives used for each asset type:
Computer equipment
Laboratory equipment
Office equipment
Leasehold improvements
3 to 5 years
5 years
5 years
the expected duration of the lease
Assets under construction are not depreciated until the asset is available and ready for its intended use.
The Company assesses property, plant and equipment for impairment whenever events or changes in circumstances indicate that
an asset’s carrying amount may not be recoverable.
(l) Intangibles
Intangibles primarily include acquired software licenses and third party software in development, which are recorded at cost and
amortized over the estimated useful lives of approximately three years.
Intangibles are assessed for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may
not be recoverable.
(m)
Leases
The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right
to use, or control the use of, identified property, plant, or equipment for a period of time in exchange for consideration. Leases may be
classified as finance leases or operating leases. All the Company’s leases are classified as operating leases. Operating lease right-of-use
(ROU) assets and operating lease liabilities recognized in the
F-15
Table of Contents
Consolidated Balance Sheet represent the right to use an underlying asset for the lease term and an obligation to make lease payments
arising from the lease respectively.
Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present
value of minimum lease payments over the lease term. Since the rate implicit in the lease is not readily determinable, the Company uses its
incremental borrowing rates (the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term
for an amount equal to the lease payments in a similar economic environment) based on the information available at commencement date in
determining the discount rate used to calculate the present value of lease payments. As the Company has no external borrowings, the
incremental borrowing rates are determined using information on indicative borrowing rates that would be available to the Company based
on the value, currency and borrowing term provided by financial institutions, adjusted for company and market specific factors. The lease
term is based on the non-cancellable period in the lease contract, and options to extend the lease are included when it is reasonably certain
that the Company will exercise that option. Any termination fees are included in the calculation of the ROU asset and lease liability when it
is assumed that the lease will be terminated.
The Company accounts for lease components (e.g. fixed payments including rent and termination costs) separately from non-lease
components (e.g. common-area maintenance costs and service charges based on utilization) which are recognized over the period in which
the obligation occurs.
At each reporting date, the operating lease liabilities are increased by interest and reduced by repayments made under the lease
agreements.
The ROU asset is subsequently measured for an operating lease at the amount of the remeasured lease liability (i.e. the present
value of the remaining lease payments), adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or
accrued rent if the lease payments are uneven throughout the lease term, and any unamortized initial direct costs.
The Company has operating leases in relation to property for office and research facilities. All of the leases have termination
options, and it is assumed that the initial termination options for the buildings will be activated for most of these. The maximum lease term
without activation of termination options is to 2041.
In May 2017, the Company entered into an agreement for the lease of a building at Milton Park, Oxfordshire, United Kingdom
and in February 2018 the Company entered into the lease for that facility. The term of the lease expires on October 23, 2041, with
termination options exercisable by the Company in October 2031 and October 2036.
In September 2015, the Company entered into an agreement for a 25-year lease, with early termination options, for a research and
development facility in Oxfordshire, United Kingdom. In October 2016, the Company entered into the lease for that facility following the
completion of construction. The term of the lease expires on October 23, 2041, with termination options exercisable by the Company in
October 2031 and October 2036.
In July 2015, the Company entered into a 15-year lease agreement, with an early termination option at 123 months, for offices and
research facilities in Philadelphia, United States. The lease commenced upon completion of construction in October 2016.
In August 2021, the Company entered into a two-year lease agreement for the lease of a building at Milton Park, Oxfordshire,
United Kingdom with the term of the lease expiring on August 12, 2023. The lease contains termination options exercisable by the
Company on a minimum of four months prior notice. During January 2023, the Company served notice to terminate the lease effective on
May 31, 2023.
The Company has elected not to recognize an ROU asset and lease liability for short-term leases. A short-term lease is a lease with
a lease term of 12 months or less and which does not include an option to purchase the underlying asset that the lessee is reasonably certain
to exercise.
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Operating lease costs are recognized on a straight-line basis over the lease term, and they are categorized within Research and
development and General and administrative expenses in the Consolidated Statement of Operations. The operating lease cash flows are
categorized under Net cash used in operating activities in the Consolidated Statement of Cash Flows.
(n) Segmental reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available
for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The
Company’s chief operating decision maker (the “CODM”), its Chief Executive Officer, manages the Company’s operations on an
integrated basis for the purposes of allocating resources. When evaluating the Company’s financial performance, the CODM reviews total
revenues, total expenses and expenses by function and the CODM makes decisions using this information on a global basis. Accordingly,
the Company has determined that it operates in one operating segment.
(o) Revenue
Revenue is recognized so as to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity
should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Variable consideration
The Company determines the variable consideration to be included in the transaction price by estimating the most likely amount
that will be received and then applies a constraint to reduce the consideration to the amount which is probable of being received. The
determination of whether a milestone is probable includes consideration of the following factors:
·
·
·
·
whether achievement of a development milestone is highly susceptible to factors outside the entity’s influence, such as milestones
involving the judgment or actions of third parties, including regulatory bodies or the customer;
whether the uncertainty about the achievement of the milestone is not expected to be resolved for a long period of time;
whether the Company can reasonably predict that a milestone will be achieved based on previous experience; and
the complexity and inherent uncertainty underlying the achievement of the milestone.
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Percentage of completion
The determination of the percentage of completion requires the Company to estimate the costs-to-complete the project. The
Company makes a detailed estimate of the costs-to-complete, which is re-assessed every reporting period based on the latest project plan
and discussions with project teams. If a change in facts or circumstances occurs, the estimate will be adjusted and the revenue will be
recognized based on the revised estimate. The difference between the cumulative revenue recognized based on the previous estimate and
the revenue recognized based on the revised estimate would be recognized as an adjustment to revenue in the period in which the change in
estimate occurs.
Contract assets and liabilities
The Company recognizes a contract asset, when the value of satisfied (or part satisfied) performance obligations is in excess of the
payment due to the Company, and deferred revenue (contract liability) when the amount of unconditional consideration is in excess of the
value of satisfied (or part satisfied) performance obligations. Once a right to receive consideration is unconditional, that amount is
presented as a receivable.
Changes in deferred revenue typically arise due to:
● adjustments arising from a change in the estimate of the cost to complete the project, which results in a cumulative
catch-up adjustment to revenue that affects the corresponding contract asset or deferred revenue;
● a change in the estimate of the transaction price due to changes in the assessment of whether variable consideration is
constrained because it is not considered probable of being received;
● the recognition of revenue arising from deferred revenue; and
● the reclassification of amounts to receivables when a right to consideration to becomes unconditional.
A change in the estimate of variable consideration constrained (for example, if a development milestone becomes probable of
being received) could result in a significant change in the revenue recognized and deferred revenue.
(p) Research and development expenditures
Research and development expenditures are expensed as incurred.
Expenses related to clinical trials are recognized as services are received. Nonrefundable advance payments for services are
deferred and recognized in the Consolidated Statement of Operations as the services are rendered. This determination is based on an
estimate of the services received and there may be instances when the payments to vendors exceed the level of services provided resulting
in a prepayment of the clinical expense. If the actual timing of the performance of services varies from our estimate, the accrual or prepaid
expense is adjusted accordingly.
Upfront and milestone payments to third parties for in-licensed products or technology which has not yet received regulatory
approval and which does not have alternative future use in R&D projects or otherwise are expensed as incurred. The Company expensed
acquired in-process R&D of $2,316,000, $562,000 and $889,000 in the years ended December 31, 2022, 2021 and 2020, respectively.
Milestone payments made to third parties either on or subsequent to regulatory approval are capitalized as an intangible asset and
amortized over the remaining useful life of the product.
Research and development expenditure is presented net of R&D tax and expenditure credits from the U.K. government, which are
recognized over the period necessary to match the reimbursement with the related costs when it is probable that the Company has complied
with any conditions attached and will receive the reimbursement. As a company that carries out extensive research and development
activities, Adaptimmune Limited is able to surrender the trading losses that arise from its qualifying research and development activities for
a payable tax credit. Reimbursable
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R&D tax and expenditure credits were $30,226,000, $34,082,000 and $19,442,000 in the years ended December 31, 2022, 2021 and 2020,
respectively.
(q) Share-based compensation
The Company awards certain employees options over the ordinary shares of the parent company. The cost of share-based awards
issued to employees are measured at the grant-date fair value of the award and recognized as an expense over the requisite service period.
The fair value of the options is determined using the Black-Scholes option-pricing model. Share options with graded-vesting schedules are
recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company has
elected to account for forfeitures of stock options when they occur by reversing compensation cost previously recognized, in the period the
award is forfeited, for an award that is forfeited before completion of the requisite service period.
(r) Retirement benefits
The Company operates defined contribution pension schemes for its directors and employees. The contributions to this scheme are
expensed to the Consolidated Statement of Operations as they fall due. The pension contributions for the years ended December 31, 2022,
2021, and 2020 were $2,810,000, $2,505,000 and $2,070,700, respectively.
(s) Interest income
Interest income arises on cash, cash equivalents and available-for-sale debt securities and is net of amortization (accretion) of the
premium (discount) on purchase of the debt securities of $2,525,000, $5,276,000, and $3,836,000 in the years ended December 31, 2022,
2021 and 2020, respectively.
(t) Income taxes
Income taxes for the period comprise current and deferred tax. Income tax is recognized in the Consolidated Statement of
Operations except to the extent that it relates to items occurring during the year recognized either in other comprehensive income or
directly in equity, in which case it is recognized in other comprehensive income or equity. We release stranded tax effects from accumulated
other comprehensive income using the portfolio approach.
Current tax is the expected tax payable or receivable on the taxable income or loss for the current or prior periods using tax rates
enacted at the balance sheet date.
Deferred tax is accounted for using the asset and liability method that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the financial statement carrying amount and the tax bases of
assets and liabilities at the applicable tax rates and for operating loss and tax credit carryforwards. A valuation allowance is provided to
reduce deferred tax assets to the amount that is more likely than not to be realized. The Company evaluates the realizability of its deferred
tax assets and adjusts the amount of the valuation allowance, if necessary. The factors used to assess the likelihood of realization include
the Company’s forecast of income, carryback availability, reversing taxable temporary differences and available tax-planning strategies that
could be implemented to realize the deferred tax assets.
Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax positions that
previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that
threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first
subsequent financial reporting period in which that threshold is no longer met. Recognized income tax positions are measured at the largest
amount that is greater than 50 percent likely of being realized. We recognize potential accrued interest and penalties related to an
underpayment of income taxes within the Consolidated Statement of Operations as income tax expense.
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(u) Loss per share
Basic loss per share is determined by dividing net loss attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period. Diluted loss per share is determined by dividing net loss attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding during the period, adjusted for the dilutive effect of all
potential ordinary shares that were outstanding during the period. Potentially dilutive shares are excluded when the effect would be to
increase diluted earnings per share or reduce diluted loss per share.
The following table reconciles the numerator and denominator in the basic and diluted loss per share computation (in thousands):
Numerator for basic and diluted loss per share
Net loss
Net loss attributable to shareholders used for basic and diluted EPS
calculation
Year ended
December 31,
2022
Year ended
December 31,
2021
Year ended
December 31,
2020
$
$
(165,456) $
(158,090) $
(130,092)
(165,456) $
(158,090) $
(130,092)
Denominator for basic and diluted loss per share
Weighted average number of shares used to calculate basic and diluted loss per
share
967,242,403
934,833,017
854,783,763
The effects of the following potentially dilutive equity instruments have been excluded from the diluted loss per share calculation
because they would have an antidilutive effect on the loss per share for the period:
Weighted average number of share options(1)
Year ended
December 31,
2022
Year ended
December 31,
2021
155,673,264
115,225,480
Year ended
December 31,
2020
93,812,818
From January 1, 2023 through to March 6, 2023, the Company granted 21,755,328 options over ordinary shares with an exercise
price determined by reference to the market value of an ADS at the closing rate on the last business day prior to the date of grant, and
19,866,912 options over ordinary shares with an exercise price equal to the nominal value of the ordinary shares (£0.001 per share). These
grants have not been included in the figures above.
(v) Restructuring costs
Restructuring costs are comprised of amounts payable to employees because of redundancy related to restructuring programs. The
Company classifies redundancy payments as either, contractual termination benefits if they relate to an ongoing benefit arrangement,
including terms of employment contracts or termination benefits that arise from employment law in the relevant jurisdiction, or, one-time
employee termination benefits if the benefits are not related to an ongoing benefit arrangement or represent a one-time enhancement to an
ongoing benefit arrangement.
A liability for contractual termination benefits is recognized when it is probable that employees will be entitled to benefits and the
amount can be reasonably estimated.
A liability for one-time employee termination benefits is recognized from the communication date. If employees are not required
to render service until they are terminated or will not be retained to render service beyond the minimum retention period in order to receive
the termination benefits, a liability for one-time employee termination benefits is recognized at the communication date. If employees are
required to render services beyond the minimum retention period in order to receive the termination benefits, a liability is measured
initially at the communication date
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based on the fair value of the liability as of the termination date and is recognized ratably over the required service period.
Restructuring costs are recognized within General and administrative expenses with the corresponding liability recognized in
current or non-current liabilities depending on the expected timing of payments.
(w) New accounting pronouncements
Adopted in the year ended December 31, 2022
Disclosures by Business Entities about Government Assistance
In November 2021, the FASB issued ASU 2021-10 - Disclosures by Business Entities about Government Assistance which
requires entities to increase the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s
accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The guidance is effective for the fiscal
year beginning January 1, 2022. The guidance has been adopted using the retrospective approach however adoption has not had a material
impact on the Company’s consolidated financial statements as the disclosure requirements align with disclosures provided in prior periods
for R&D tax and expenditure credits from the U.K. government.
To be adopted in future periods
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit losses, which replaces the incurred loss impairment
methodology for financial instruments in current GAAP with a methodology that reflects expected credit losses and requires consideration
of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for the fiscal year
beginning January 1, 2020, including interim periods within that fiscal year. In November 2019, the FASB issued ASU 2019-10 which
resulted in the postponement of the effective date of the new guidance for eligible smaller reporting companies (as defined by the SEC),
including the Company, at that time to the fiscal year beginning January 1, 2023. The Company intends to adopt the guidance in the fiscal
year beginning January 1, 2023. The guidance must be adopted using a modified-retrospective approach and a prospective transition
approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The
Company has evaluated the impact of adopting the guidance on its Consolidated financial statements and does not expect there to be a
material impact.
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU 2021-08 – Business Combinations (Topic 805)- Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers, which improves the accounting for acquired revenue contracts with customers in a
business combination by addressing diversity in and inconsistency related to the following: (1) recognition of an acquired contract liability
and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU resolve this
inconsistency by requiring that an entity (acquirer) recognize and measure contract assets and liabilities acquired in a business combination
in accordance with Topic 606, in contrast to current GAAP which requires that assets acquired and liabilities assumed in a business
combination, including contract assets and contract liabilities, are measured at fair value as of the acquisition date. For public business
entities, including the Company, the guidance is effective for fiscal years beginning on or after December 15, 2022, including interim
periods within that fiscal year. The Company intends to adopt the guidance in the fiscal year beginning January 1, 2023; however, earlier
adoption is permitted, and the Company may choose to implement the guidance in an earlier fiscal year. The amendments in this ASU
should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company is
currently evaluating the impact of the guidance on its Consolidated financial statements.
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Note 3 — Revenue
The Company had three revenue-generating contracts with customers in the years ended December 31, 2022 and 2021: a
collaboration and license agreement with GSK, a collaboration agreement with Astellas and a strategic collaboration and license agreement
with Genentech.
Revenue comprises the following categories (in thousands):
Development revenue
2022
Year ended
December 31,
2021
2020
$
$
27,148
27,148
$
$
6,149 $
6,149 $
3,958
3,958
Deferred revenue decreased by $15,010,000 from $199,422,000 at December 31, 2021 to $184,412,000 at December 31, 2022
primarily due to a $20,601,000 decrease caused by the change in the exchange rate between pounds sterling and the U.S. dollar from £1.00
to $1.35 at December 31, 2021 to £1.00 to $1.21 at December 31, 2022 and due to $17,648,000 of revenue recognized during the period.
This was offset by a $20,000,000 additional payment received
under the Genentech Collaboration and License Agreement in December 2022.
Deferred revenue increased by $147,330,000 from $52,092,000 at January 1, 2021 to $199,422,000 at December 31, 2021 due to a
$4,200,000 milestone payment received under the GSK Collaboration and License Agreement in June 2021 and the upfront payment of
$150,000,000 received under the Genentech Collaboration and License Agreement in October 2021. This was offset by $1,498,000 of
revenue recognized during the period.
The aggregate amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied
under the agreements as of December 31, 2022, was $340,713,000.
The Genentech Collaboration and License Agreement
On September 3, 2021, the Company entered into a Strategic Collaboration and License Agreement with Genentech, Inc. and F.
Hoffman-La Roche Ltd, which became effective on October 19, 2021 upon expiry or termination of all applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Under the Agreement, Genentech and Adaptimmune (each, a “party” and together, the “parties”) will collaborate to develop two
types of allogeneic T-cell therapies: (i) “off-the-shelf” αβ T-cell therapies directed to initial collaboration targets, with Genentech having the
right to designate additional collaboration targets, up to five collaboration targets in total, and (ii) personalized therapies utilizing αβ T-cell
receptors (TCRs) isolated from a patient, with such therapies being administered to the same patient.
The parties will collaborate to perform a research program, initially during an eight year period (which may be extended for up to
two additional two year terms at Genentech’s election upon payment of an extension fee for each two-year term), to develop the cell
therapies, following which Genentech will determine whether to further develop and commercialize such therapies. Under the Agreement,
Adaptimmune exclusively licenses Genentech certain intellectual property rights it controls to enable Genentech to research, develop,
manufacture and commercialize (i) “off-the-shelf” T-cell therapies directed to the collaboration targets and (ii) personalized T-cell therapies
developed within the scope of the Agreement, and Genentech is solely responsible for the clinical development and commercialization of
any cell therapies arising from the collaboration. Adaptimmune will manufacture and supply cell therapies for Phase 1 trials of “off-the-
shelf” T-cell therapies unless Genentech decides to assume responsibility for such manufacturing.
Under the Agreement, Adaptimmune is also subject to certain restrictions on its ability to further develop and commercialize
certain cell therapies. In particular restrictions apply in relation to its ability to develop cell therapy products to nominated targets and to
develop competing personalized cell therapies. This restriction does not prevent Adaptimmune from developing cell therapies to other
targets or cell therapies containing different types of receptors.
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Under the terms of the Agreement, Adaptimmune will receive $150 million as an upfront payment, which was received in the
fourth quarter of 2021. Adaptimmune may also receive:
● $150 million in additional payments spread over a period of 5 years from the effective date of the Agreement, unless the
agreement is earlier terminated, of which $20 million was received in the fourth quarter of 2022;
● Research milestones of up to $50 million;
● Development milestones of up to $100 million in relation to the development of “off-the-shelf” T-cell therapies per collaboration
target (unless Adaptimmune exercises its right to opt-in to receive a profit share) and up to $200 million in relation to the
development of personalized T-cell therapies;
● Commercialization milestones of up to $1.1 billion for “off-the-shelf” T-cell therapies (unless Adaptimmune exercises its right to
opt-in to receive a profit share and assuming “off-the-shelf” T-cell therapies are developed to 5 targets) and for personalized T-cell
therapies; and
● Net sales milestones of up to $1.5 billion for “off-the-shelf” T-cell therapies (unless Adaptimmune exercises its right to opt-in to
receive a profit share and assuming “off-the-shelf” T-cell therapies are developed to 5 targets) and for personalized T-cell
therapies.
In addition, Adaptimmune will receive tiered royalties on net sales in the mid-single to low-double digits. Collaboration target
designation fees apply if Genentech exercises its right to designate additional “off-the-shelf” collaboration targets up to a maximum of 5
targets.
Adaptimmune also has a right to opt-in to receive a profit share and to co-promote “off-the-shelf” T-cell therapies. If
Adaptimmune elects to opt in, then Adaptimmune will be eligible to share 50 percent of profits and losses from U.S. sales on such products
and to receive up to $800 million in ex-U.S. regulatory and sales-based milestone payments, as well as royalties on ex-U.S. net sales.
The payments to the Company under the contract are typically due upon achievement of milestones, when rights are exercised by
Genentech or on achievement of specific events for the additional payments, and within standard payment terms. The contract does not
include a significant financing component.
The parties can terminate the Agreement in the event of material breach or insolvency of the other party. Genentech is entitled to
terminate the Agreement in its entirety, on a product-by-product basis or collaboration target by collaboration target basis on provision of
180 days notice. Either party may terminate the Agreement on written notice in the event that the US Federal Trade Commission or US
Department of Justice seeks a preliminary injunction under applicable antitrust laws against the parties or where HSR clearance has not
occurred within 180 days of the effective date of the Agreement. The Agreement became effective on October 19, 2021 upon expiry of all
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
The Company has assessed the agreement under the provisions of ASC 606, Revenue from Contracts with Customers and ASC
808, Collaborative Arrangements. The Company determined that Genentech is a customer and has applied the provisions of ASC 606 to the
contract and related performance obligations. The Company identified the following performance obligations under the agreement: (i)
research services and rights granted under the licenses for each of the initial ‘off-the-shelf’ collaboration targets, (ii) research services and
rights granted under the licenses for the personalized therapies, (iii) material rights relating to the option to designate each of the additional
‘off-the-shelf’ collaboration targets and (iv) material rights relating to the two options to extend the research term. The Company began
recognizing revenue for the performance obligations relating to the initial ‘off-the-shelf’ collaboration targets and the personalized
therapies in 2021.
The aggregate transaction price at inception of the agreement was $313.6 million comprising the $150 million upfront payment,
$150 million of additional payments and $13.6 million of other consideration. The fees for extension of the research program, additional
collaboration target designation fees, and future research, development and commercialization milestones are not considered probable as of
December 31, 2022 and have not been included in the transaction price. The Company may also receive sales milestones and royalties for
future sales of the therapies. These
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amounts have not been included within the transaction price as of December 31, 2022 because they are sales-based and would be
recognized when the subsequent sales occur.
The aggregate transaction price is allocated to the performance obligations depending on the relative standalone selling price of
the performance obligations. In determining the best estimate of the relative standalone selling price, the Company considered internal
pricing objectives it used in negotiating the contract, together with internal data regarding the cost and margin of providing research
services and market data from comparable arrangements.
The amount of the transaction price allocated to the performance obligation is recognized as or when the Company satisfies the
performance obligation. The Company expects to satisfy the performance obligations relating to the initial ‘off-the-shelf’ collaboration
targets and the personalized therapies as development progresses and recognizes revenue based on an estimate of the percentage of
completion of the project determined based on the costs incurred on the project as a percentage of the total expected costs. The Company
considers that this depicts the progress of the project, where the significant inputs would be internal project resources and third-party costs.
The Company expects to satisfy the performance obligations relating to the material rights to designate additional ‘off-the-shelf’
collaboration targets from the point that the options are exercised and then as development progresses, in line with the initial ‘off-the-shelf’
collaboration targets, or at the point in time that the rights expire. The Company expects to satisfy the performance obligations relating to
the material rights to extend the research term from the point that the options are exercised and then over period of the extension, or at the
point in time that the rights expire.
The amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the
agreement as of December 31, 2022 was $283,206,000, of which $174,125,000 is allocated to the research services and rights granted for
the initial ‘off-the-shelf’ collaboration targets, $90,169,000 is allocated to the research services and rights granted for the personalized
therapies, $12,766,000 is allocated to the material rights to designate the additional ‘off-the-shelf’ collaboration targets, $4,917,000 is
allocated to the material right for the first option to extend the research term and $1,229,000 is allocated to the material right for the option
to extend the research term a second time.
The Astellas Collaboration Agreement
On January 13, 2020, the Company entered into the Astellas Collaboration Agreement. The Company received $50,000,000 as a
non-refundable upfront payment in January 2020 after entering into the agreement. Under the agreement the parties will agree on up to
three targets and will co-develop T-cell therapies directed to those targets pursuant to an agreed research plan. For each target, Astellas will
fund co-development up until completion of a Phase 1 trial for products directed to such target.
Upon successful completion of the Phase 1 trial for a product, Astellas and Adaptimmune will elect whether to progress with co-
development and co-commercialization of such product, or to allow the other party to pursue the candidate independently. If the parties
progress with co-development and co-commercialization of a product, then each party will grant the other party a co-exclusive license to
co-develop and co-commercialize such product in the field of T-cell therapy. If a product is developed solely by one party, then the other
party will grant to the continuing party an exclusive license to develop and commercialize such product in the field of T-cell therapy.
In June 2020, the parties nominated the target for the first collaboration program and the Company commenced development of
this target under the agreement and began recognizing revenue for this performance obligation. In July 2021, the parties nominated the
target for the second collaboration program and the Company commenced development of this target under the agreement and began
recognizing revenue for this performance obligation.
In addition, Astellas was also granted the right to develop, independently of Adaptimmune, allogeneic T-cell therapy candidates
directed to two targets selected by Astellas. Astellas will have sole rights to develop and commercialize products resulting from these two
targets.
Under the terms of the agreement, Adaptimmune could be entitled to receive up to $847,500,000 in further payments, including:
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●
●
development milestones of up to $73,750,000 for each co-developed and co-commercialized product; and
development milestones of up to $147,500,000 per product and up to $110,000,000 in sales milestones for products developed
unilaterally by Astellas.
In addition, Adaptimmune is entitled to receive research funding of up to $7,500,000 per year on a per collaboration target basis,
which is payable on a quarterly basis within standard payment terms (typically 30 days), and tiered royalties on net sales in the mid-single
to mid-teen digits.
To the extent that Astellas and Adaptimmune co-develop and co-commercialize any product, the parties would share equally all
worldwide costs and profits.
Either party can terminate the agreement in the event of material breach or insolvency of the other party. Astellas can terminate the
Agreement for convenience in its entirety or partly in relation to any targets and products directed to such targets. Adaptimmune can
terminate the Agreement for convenience in relation to any target it is unilaterally developing and to products directed to such target.
The payments to the Company under the contract are typically billed as the development services are performed or are due on
achievement of milestones and within standard payment terms (typically 30 days for development services and 20 days for milestone
achievement). Management has determined that the contract does not include a significant financing component because (i) the timing of
initiation of the programs, the right to obtain the services and the right to terminate the contract resides with Astellas and (ii) a substantial
amount of the consideration promised by the customer is variable, and the amount or timing of that consideration varies on the basis of the
occurrence or nonoccurrence of a future event that is not substantially within the control of the customer or the Company.
The Company has assessed the agreement under the provisions of ASC 606, Revenue from Contracts with Customers and ASC
808, Collaborative Arrangements. The Company determined that Astellas is a customer and has applied the provisions of ASC 606 to the
contract and related performance obligations. The Company identified the following performance obligations under the agreement: (i)
research services and rights granted under the co-exclusive license for each of the three co-development targets and (ii) the rights granted
for each of the two independent Astellas targets.
The aggregate transaction price at inception of the agreement was the $50,000,000 upfront payment. Future development
milestones are not considered probable as of December 31, 2022 and have not been included in the transaction price. Reimbursement of the
research funding over the co-development period (up until completion of a Phase 1 trial for products directed to such target) is variable
consideration and included in the transaction price as of December 31, 2022 to the extent that a significant reversal of revenue is not
probable. The Company may also receive sales milestones upon the achievement of specified levels of annual net sales by Astellas under an
independent Astellas program. These amounts have not been included within the transaction price as of December 31, 2022 because they
are sales-based and would be recognized when the subsequent sales occur.
The aggregate transaction price is allocated to the performance obligations depending on the relative standalone selling price of
the performance obligations. In determining the best estimate of the relative standalone selling price, the Company considered internal
pricing objectives it used in negotiating the contract, together with internal data regarding the cost and margin of providing research
services and adjusted-market data from comparable arrangements. The variable consideration is allocated to the performance obligation to
which it relates.
The amount of the transaction price allocated to the performance obligation is recognized as or when the Company satisfies the
performance obligation. The Company expects to satisfy the performance obligations relating to the three co-development targets as
development progresses and recognizes revenue based on an estimate of the percentage of completion of the project determined based on
the costs incurred on the project as a percentage of the total expected costs. The Company considers that this depicts the progress of the
project, where the significant inputs would be internal project resources and third-party costs. The revenue allocated to the research services
will be recognized as development of products directed to the target progresses up until completion of a Phase 1 trial.
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The Company has determined that the performance obligations relating to the two independent Astellas targets would be
recognized at a point-in-time, upon commencement of the licenses in the event of nomination of the target, since they are right-to-use
licenses.
The amount of the transaction price that is allocated to performance obligations that are unsatisfied or partially satisfied under the
agreement as of December 31, 2022 was $57,509,000, of which $13,474,000 is allocated to the rights granted for each of the two
independent Astellas targets, $10,071,000 is allocated to research services and rights granted under the co-exclusive license for the first co-
development target, $13,985,000 is allocated to research services and rights granted under the co-exclusive license for the second co-
development target and $6,505,000 is allocated to research services and rights under the co-exclusive license for the third co-development
targets.
The parties mutually agreed to terminate the agreement as of March 6, 2023, see Note 16 for further information. As the
termination was only triggered and effective after December 31, 2022, there was no impact on revenue recognized in relation to the
agreement in the year ended December 31, 2022.
The GSK Collaboration and License Agreement
The GSK Collaboration and License Agreement consisted of multiple performance obligations, including the transition of the NY-
ESO SPEAR T-cell program to GSK, the development of a second and third target, and an exclusive license (the “NY-ESO License”) to
research, develop, and commercialize the Company’s NY-ESO SPEAR T-cell therapy program.
In 2017, GSK exercised its option to obtain the NY-ESO License and in July 2018, the IND for the NY-ESO SPEAR T-cell
program transferred to GSK.
In 2017, GSK nominated a second target program which was completed in 2018.
In 2019, GSK nominated its third target under the Collaboration and License Agreement and the Company received $3,200,000
following the nomination of the target. The development of products to the third target is a separate performance obligation. Revenue
allocated to this performance obligation is recognized as the development progresses.
Under the terms of the GSK Collaboration and License Agreement, the Company was also entitled to development milestones.
The development and regulatory milestones were per product milestones and were dependent on achievement of certain obligations, the
nature of the product being developed, stage of development of product, territory in which an obligation was achieved and type of
indication or indications in relation to which the product was being developed. In June 2021 the Company received a $4,200,000 milestone
payment following achievement of a development milestone for the third target under the GSK Collaboration and License Agreement.
The Company would have also received commercialization milestones upon the first commercial sale of a product based on the
indication and the territory and mid-single to low double-digit royalties on worldwide net sales. No revenue relating to royalties was
recognized relating to the GSK Collaboration and License Agreement because they were sales or usage-based royalties promised in
exchange for a license of intellectual property, which were to be recognized when the subsequent sale or usage occurs, and no such sales or
usage occurred prior to termination.
The payments to the Company under the contract are typically due upon achievement of milestones and within standard payment
terms (approximating to 45 days). The contract does not include a significant financing component.
The amount of the transaction price allocated to the performance obligation was recognized as or when the Company satisfied the
performance obligation. The Company satisfied the performance obligations relating to the development of each target over time and
recognized revenue based on an estimate of the percentage of completion of the project determined based on the costs incurred on the
project as a percentage of the total expected costs. The Company considers that this depicted the progress of the project, where the
significant inputs are internal project resource and third-party clinical and manufacturing costs.
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The collaboration was terminated by GSK in October 2022 and we are in discussions with GSK in relation to the transition of the
NY-ESO and PRAME programs under the collaboration agreement to Adaptimmune. A further amendment to the collaboration agreement
was entered into on December 19, 2022 for the deletion of certain provisions relating to GSK’s post termination manufacturing and supply
obligations and payment of £5,000,000 by GSK to Adaptimmune. The amendment also meant that no further milestone payments or
royalties were due from GSK to the Company.
The Company accounted for the termination of the agreement and December 19, 2022 amendment agreement as a single
combined contract modification. No performance obligations were identified as a result of the modification as there were no further goods
or services to be provided by the Company and the modification resulted in the remaining partially satisfied performance obligation under
the collaboration relating to the third target becoming fully satisfied. As discussions were still ongoing, and no formal agreement had been
reached, as of December 31, 2022 regarding the potential transfer of the NY-ESO cell therapy program to Adaptimmune this was not
accounted for in the year ended December 31, 2022. GSK continues to be responsible for the execution and costs of ongoing clinical trials.
This matter will be assessed in future periods if and when an agreement is reached.
The aggregate transaction price of the contract modification was $6,500,000 comprised of the £5,000,000 ($6,100,000) payment
and the remaining deferred income under the collaboration that had not been recognized as revenue as of the date of the modification of
$400,000. No non-cash consideration was identified and as the contract modification removed the Company’s entitlement to future
milestone payments and royalties, no variable consideration was identified.
The contract modification was accounted for on a cumulative catch-up basis. As all performance obligations were considered
fully satisfied as a result of the modification and no additional performance obligations were identified, the transaction price of the
modification was recognized as revenue in full in the year ended December 31, 2022 and there is no remaining transaction price allocated
to performance obligations that are unsatisfied or partially satisfied under the agreement as of December 31, 2022.
The previous performance obligation relating to the NY-ESO License was recognized at a point-in-time, upon commencement of
the license in 2018.
Note 4 — Financial instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities, restricted cash,
accounts receivable, accounts payable and accrued expenses.
Assets and liabilities measured at fair value on a recurring basis based on Level 1, Level 2, and Level 3 fair value measurement
criteria as of December 31, 2022 are as follows (in thousands):
Assets classified as cash equivalents:
Corporate debt securities
Assets classified as available-for-sale debt securities:
Corporate debt securities
U.S. Treasury securities
Agency bonds
December 31,
2022
$
$
$
2,984
85,764
5,954
4,854
96,572
$
$
$
Fair value measurements using
Level 2
Level 1
Level 3
2,984
$
— $
$
85,764
—
—
85,764 $
— $
5,954
4,854
10,808 $
—
—
—
—
—
Assets and liabilities measured at fair value on a recurring basis based on Level 1, Level 2, and Level 3 fair value measurement
criteria as of December 31, 2021 are as follows (in thousands):
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Assets classified as available-for-sale:
Corporate debt securities
Agency bonds
December 31,
Level 1
Level 2
Level 3
Fair Value Measurements Using
2021
$
$
214,639
4,993
219,632
$
214,639
—
214,639
$
— $
4,993
4,993
—
—
—
The Company estimates the fair value of available-for-sale debt securities and corporate debt securities classified as cash
equivalents with the aid of a third-party valuation service, which uses actual trade and indicative prices sourced from third-party providers
on a daily basis to estimate the fair value. If observed market prices are not available (for example, securities with short maturities and
infrequent secondary market trades), the securities are priced using a valuation model maximizing observable inputs, including market
interest rates.
Significant concentration of credit risk
The Company held cash and cash equivalents of $108,033,000, marketable securities of $96,572,000 and restricted cash of
$1,569,000 as of December 31, 2022. The cash and cash equivalents and restricted cash are held with multiple banks and the Company
monitors the credit rating of those banks. The Company maintains cash balances in excess of amounts insured by the Federal Deposit
Insurance Corporation in the United States and the U.K. Government Financial Services Compensation Scheme in the United Kingdom.
The Company had three customers during the year-ended December 31, 2022, which are Genentech, Astellas and GSK. There
were accounts receivable of $7,435,000 as of December 31, 2022, and $752,000 as of December 31, 2021. The Company has been
transacting with Genentech since October 2021, Astellas since 2020 and GSK since 2014, during which time no impairment losses have
been recognized. As of December 31, 2022, there were no overdue accounts receivable and no receivables, either accrued or billed, due
from GSK that are no longer recoverable following the termination of the GSK Collaboration and License Agreement (see Note 3).
Although there is economic uncertainty in various global markets, including the U.S. and Europe, the Company has determined that this
has not significantly increased the recoverability risk relating to its receivables balances as of December 31, 2022.
Foreign exchange risk
The Company is exposed to foreign exchange rate risk because it operates in the United Kingdom and the United States. Expenses
are generally denominated in the currency in which the Company’s operations are located, which are the United Kingdom and the United
States. However, the U.K.-based subsidiary incurs significant research and development costs in U.S. dollars and, to a lesser extent, Euros.
The results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which
could harm the Company’s business in the future. Management seeks to minimize this exposure by maintaining currency cash balances at
levels appropriate to meet foreseeable expenses in U.S. dollars and pounds sterling. To date, the Company has not used forward exchange
contracts or other currency hedging products to manage exchange rate exposure, although it may do so in the future. The exchange rate as
of December 31, 2022, the last business day of the reporting period, was £1.00 to $1.21.
Interest rate risk
Surplus cash and cash equivalents are invested in interest-bearing savings, money market funds, corporate debt securities and
commercial paper from time to time. Investments in corporate debt securities are subject to fixed interest rates. The Company’s exposure to
interest rate sensitivity is impacted by changes in the underlying U.K. and U.S. bank interest rates and the fair market value of its corporate
debt securities will fall in value if market interest rates increase. Management believes that an immediate one percentage point change in
interest rates would not have a material effect
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on the fair market value of our portfolio, and therefore does not expect the operating results or cash flows to be significantly affected by
changes in market interest rates.
Note 5 — Other current assets
Other current assets consisted of the following (in thousands):
Research and development credits receivable
Prepayments
Clinical materials
VAT receivable
Other current assets
Note 6 — Property, plant and equipment, net
Property and equipment, net consisted of the following (in thousands):
Computer equipment
Laboratory equipment
Office equipment
Leasehold improvements
Assets under construction
Less accumulated depreciation
December 31,
2022
December 31,
2021
30,162 $
9,472
1,279
490
1,927
43,330
$
30,773
9,043
746
2,482
2,082
45,126
December 31,
2022
December 31,
2021
3,818
30,173
925
28,459
28,729
92,104
(38,588)
53,516
$
$
3,692
28,002
953
28,704
5,396
66,747
(36,253)
30,494
$
$
$
$
Depreciation expense was $5,266,000, $5,630,000 and $6,627,000 for the years ended December 31, 2022, 2021 and 2020,
respectively.
Note 7 — Intangible assets, net
Intangible assets, net consisted of the following (in thousands):
Acquired software licenses
Licensed IP rights – completed technology used in R&D
Less accumulated amortization
December 31,
2022
December 31,
2021
$
$
4,930
188
5,118
(4,676)
442
$
$
4,842
209
5,051
(4,051)
1,000
Amortization expense was $809,000, $937,000, and $967,000 for the years ended December 31, 2022, 2021 and 2020
respectively. The estimated aggregate amortization expense expected to be recorded in respect of these assets for each of the five years
ended 2027 is $309,000, $105,000, $43,000, $1,000 and $1,000, respectively.
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Note 8 — Operating leases
The following table shows the lease costs for the years ended December 31, 2022 and 2021 (in thousands):
Lease cost:
Operating lease cost
Short-term lease cost
Other information:
Operating cash outflows from operating leases (in thousands)
Weighted-average remaining lease term - operating leases
Weighted-average discount rate - operating leases
The maturities of operating lease liabilities as of December 31, 2022 are as follows (in thousands):
2023
2024
2025
2026
2027
after 2027
Total lease payments
Less: Imputed interest
Present value of lease liability
Year ended
December 31,
2022
2021
$
$
4,367 $
389
4,756 $
4,259
419
4,678
Year ended
December 31,
2022
2021
$
3,746 $
4,101
December 31,
2022
2021
6.9 years
6.8%
7.8 years
6.8%
Operating leases
$
$
4,170
3,953
4,001
4,055
5,471
7,324
28,974
(5,897)
23,077
The Company has operating leases in relation to property for office, manufacturing and research facilities. The maximum lease
term without activation of termination options is to 2041.
On March 30, 2022, the Company entered into an agreement to modify the lease of 39 Innovation Drive, Milton Park, Abingdon,
Oxfordshire, UK, and on June 15, 2022, the deeds associated with the modification were signed. However, for purposes of ASC 842
Leases, the Company determined that the effective date of the modification is March 30, 2022. The effect of the modification was a partial
reduction of the scope of the lease and an increase in contractual lease payments relating to a non-lease component. The modification did
not result in the identification of a separate contract but did result in the identification of a non-lease component relating to a leasehold
improvement.
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Upon modification, the lease liability has been remeasured using the current estimate of the Company’s incremental borrowing
rate. The remeasurement of the lease liability also resulted in variable lease payments not previously included in the amount of the lease
liability becoming included in the amount of the lease payments as at the date of the modification. The amount of the remeasurement of the
lease liability due to the inclusion of variable lease payments that depend on an index or rate has been recognized as an adjustment to the
corresponding right-of-use asset. The effect of the modification was to increase the lease liability and the corresponding right-of-use asset
by $75,000.
Note 9 — Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
Accrued clinical and development expenditure
Accrued employee expenses
Other accrued expenditure
Other
Note 10 — Contingencies and commitments
Leases
December 31,
2022
December 31,
2021
$
$
16,749
8,232
4,079
2,155
31,215
$
$
13,436
11,758
4,388
327
29,909
Lease payments under operating leases as of December 31, 2022 and information about the Company’s lease arrangements are
disclosed in Note 8.
Capital commitments
As of December 31, 2022, the Company had commitments for capital expenditure totaling $2,459,000 primarily relating to
construction and related expenditure for its properties in the United Kingdom and United States, of which the Company expects to incur
$2,261,000 within one year and $198,000 within one to three years.
Commitments for clinical materials, clinical trials and contract manufacturing
As of December 31, 2022, the Company had non-cancellable commitments for purchase of clinical materials, contract
manufacturing, maintenance, and committed funding under the MD Anderson strategic alliance of up to $10,928,000, which the Company
expects to incur $10,662,000 within one year, $133,000 within one to three years and $133,000 within three to five years. The amount and
timing of these payments vary depending on the rate of progress of development. Future clinical trial expenses have not been included
within the purchase commitments because they are contingent on enrollment in clinical trials and the activities required to be performed by
the clinical sites. The Company’s subcontracted costs for clinical trials and contract manufacturing were $54,689,000, $46,469,000 and
$33,744,000 for the years ended December 31, 2022, 2021, and 2020 respectively.
MD Anderson Strategic Alliance
On September 26, 2016, the Company announced that it had entered into a multi-year strategic alliance with The University of
Texas MD Anderson Cancer Center (“MD Anderson”) designed to expedite the development of T-cell therapies for multiple types of
cancer. The Company and MD Anderson are collaborating on a number of studies
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including clinical and preclinical development of the Company’s SPEAR T-cell therapies and will collaborate on future clinical stage first
and second generation SPEAR T-cell therapies across a number of cancers.
Under the terms of the agreement, the Company committed at least $19,644,000 to fund studies. Payment of this funding is
contingent on mutual agreement to study orders in order for any study to be included under the alliance and the performance of set
milestones by MD Anderson. The Company made an upfront payment of $3,412,000 to MD Anderson in the year ended December 31,
2017 and milestone payments of $2,326,000, $3,549,000 and $454,000 in the years ended December 31, 2018, 2020, and 2021,
respectively. A further milestone of $2,326,000 was met and paid in the year ended December 31, 2022. The Company is obligated to make
further payments to MD Anderson as certain milestones are achieved. These costs are expensed to research and development as MD
Anderson renders the services under the strategic alliance.
The agreement may be terminated by either party for material breach by the other party. Individual studies may be terminated for,
amongst other things, material breach, health and safety concerns or where the institutional review board, the review board at the clinical
site with oversight of the clinical study, requests termination of any study. Where any legal or regulatory authorization is finally withdrawn
or terminated, the relevant study will also terminate automatically.
Universal Cells Research, Collaboration and License Agreement and Co-development and Co-commercialization agreement
On November 25, 2015, the Company entered into a Research, Collaboration and License Agreement relating to gene editing and
Human Leukocyte Antigen (“HLA”) engineering technology with Universal Cells, Inc. (“Universal Cells”). The Company paid an upfront
license and start-up fee of $2,500,000 to Universal Cells in November 2015, a milestone payment of $3,000,000 in February 2016 and
further milestone payments of $200,000 and $900,000 were made in the year ended December 31, 2018 and 2017, respectively.
The agreement was amended and re-stated as of January 13, 2020, primarily to reflect changes to the development plan agreed
between the parties. The agreement was further amended as of July 22, 2022, primarily to make certain changes to development milestones
and to agree on the status thereof, as agreed between the parties. Following the amendment, milestone payments of $500,000, $600,000 and
$400,000 were made in the year ended December 31, 2022. A further milestone of $1,800,000 has been accrued in accordance with the
milestone schedule per the agreement but was not paid as of December 31, 2022. The upfront license and start-up fee and milestone
payments were expensed to research and development when incurred.
This Agreement was terminated by notice on January 27, 2023, effective 30 days following receipt of notice of termination. As a
result of termination, all licenses between the parties to the Agreement will cease and each party is required to return all confidential
information of the other party.
Astellas Collaboration Agreement
Under the Astellas Collaboration Agreement, described further in Note 3, the Company could in certain circumstances elect to
unilaterally develop a product using technology contributed by Astellas. If Adaptimmune unilaterally develops a product with technology
contributed by Astellas, Astellas could be eligible to receive up to $552,500,000, including up to $147,500,000 in milestone payments per
product, and up to $110,000,000 in sales milestones for products developed unilaterally by Adaptimmune. In addition, Astellas is entitled to
receive tiered royalties on net sales in the mid-single to mid-teen digits.
Noile-Immune Collaboration Agreement
On August 26, 2019, the Company entered into a collaboration and license agreement relating to the development of next-
generation SPEAR T-cell products with Noile-Immune. An upfront exclusive license option fee of $2,500,000 was paid to Noile-Immune in
2019. This was recognized within Research and Development in the Consolidated Statement of Operations for the year ended December
31, 2019. Under the agreement, development and
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commercialization milestone payments up to a maximum of $312,000,000 may be payable if all possible targets are selected and
milestones achieved. Noile-Immune would also receive mid-single-digit royalties on net sales of resulting products.
Alpine Collaboration Agreement
On May 14, 2019, the Company entered into a Collaboration Agreement relating to the development of next-generation SPEAR T-
cell products with Alpine. The Company paid an upfront exclusive license option fee of $2,000,000 to Alpine in June 2019. Under the
agreement, Adaptimmune will pay Alpine for ongoing research and development funding costs and development and commercialization
milestone payments up to a maximum of $288,000,000 may be payable if all possible targets are selected and milestones achieved. The
upfront payment of $2,000,000 and the payments for ongoing research was recognized within Research and development in the
Consolidated Statement of Operations for the year ended December 31, 2019. A further payment of $1,000,000 was paid and recognized
within Research and development in the Consolidated Statement of Operations for the year ended December 31, 2022. Alpine would also
receive low single-digit royalties on worldwide net sales of applicable products.
ThermoFisher License Agreement
In 2012, the Company entered into a series of license and sub-license agreements with Life Technologies Corporation, part of
ThermoFisher Scientific, Inc. (“ThermoFisher”) that provide the Company with a field-based license under certain intellectual property
rights owned or controlled by ThermoFisher. The Company paid upfront license fees of $1,000,000 relating to the license and sublicense
agreements and has an obligation to pay minimum annual royalties (in the tens of thousands of U.S. dollars prior to licensed product
approval and thereafter at a level of 50% of running royalties in the previous year), milestone payments and a low single-digit running
royalty payable on the net selling price of each licensed product. The upfront payment made in 2012 was expensed to research and
development when incurred. Subsequent milestone payments have been recognized as an intangible asset due to the technology having
alternative future use in research and development projects at the time of the payment. The minimum annual royalties have been expensed
as incurred.
In 2016, the Company entered into a supply agreement with ThermoFisher for the supply of the Dynabeads® CD3/CD28
technology. The Dynabeads® CD3/CD28 technology is designed to isolate, activate and expand human T-cells, and is being used in the
manufacturing of the Company’s affinity enhanced T-cell therapies. The supply agreement runs until December 31, 2025. Under the supply
agreement the Company is required to purchase its requirements for CD3/CD28 magnetic bead product from ThermoFisher for a period of
5 years. ThermoFisher has the right to terminate the supply agreement for material breach or insolvency.
Note 11 — Stockholders’ equity
Ordinary shares
Subject to any other provisions of our articles of association and without prejudice to any special rights, privileges or restrictions
as to voting attached to any shares forming part of our share capital, the voting rights of shareholders are as follows. On a show of hands,
each shareholder present in person, and each duly authorized representative present in person of a shareholder that is a corporation, has one
vote. On a show of hands, each proxy present in person who has been duly appointed by one or more shareholders entitled to vote on a
resolution has one vote, but a proxy has one vote for and one vote against a resolution if, in certain circumstances, the proxy is instructed
by more than one shareholder to vote in different ways on a resolution. On a poll, each shareholder present in person or by proxy or (being
a corporation) by a duly authorized representative has one vote for each share held by the shareholder. We are prohibited (to the extent
specified by the Companies Act 2006) from exercising any rights to attend or vote at meetings in respect of any shares held by the
Company as treasury shares.
Subject to the Companies Act 2006 and the provisions of all other relevant legislation, we may by ordinary resolution declare
dividends out of our profits available for distribution in accordance with the respective rights of shareholders but no such dividend shall
exceed the amount recommended by the directors. If, in the opinion of the
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directors, our profits available for distribution justify such payments, the directors may from time to time pay interim dividends to the
holders of any class of shares. Subject to any special rights attaching to or terms of issue of any shares, all dividends shall be declared and
paid according to the amounts paid up on the shares on which the dividend is paid. No dividend shall be payable to us in respect of any
shares held by us as treasury shares (except to the extent permitted by the Companies Act 2006 and any other relevant legislation). As of
December 31, 2022, Adaptimmune Therapeutics Plc and Adaptimmune Limited have accumulated net losses and, accordingly, no profits
available for distribution out of which to declare or pay dividends.
Subject to any special rights attaching to or the terms of issue of any shares, on any winding-up of the Company our surplus assets
remaining after satisfaction of our liabilities will be distributed among our shareholders in proportion to their respective holdings of shares
and the amounts paid up on those shares.
Effective from May 25, 2022, the Directors were generally authorized to allot new shares or to grant rights to subscribe for or to
convert any security into shares in the Company up to a maximum aggregate nominal amount of £310,638.00. This authority will expire on
the earlier of the conclusion of the Company’s annual general meeting in 2023 and June 30, 2023 (unless previously renewed, varied or
revoked). Effective from May 25, 2022, the Directors were also empowered to allot equity securities for cash, pursuant to their general
authority to allot described in this paragraph, without first offering them to existing shareholders in proportion to their existing holdings up
to an aggregate maximum nominal amount of £310,638.00. This power will expire on the earlier of the conclusion of the Company’s
annual general meeting in 2023 and June 30, 2023 (unless previously renewed, varied or revoked).
2020 January Offering
On January 24, 2020, the Company closed an underwritten public offering of 21,000,000 American Depository Shares (ADSs),
which together with the full exercise by the underwriters on February 7, 2020 of their option to purchase an additional 3,150,000 ADSs,
generated net proceeds of $90,554,000.
2020 June Offering
On June 4, 2020, the Company closed an underwritten public offering of 20,500,000 ADSs, which together with the full exercise
by the underwriters of their option to purchase an additional 3,075,000 ADSs, generated net proceeds of $243,834,000.
At-the-Market Offerings
On August 10, 2020 the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”) (the “Sales
Agreement”) under which we may from time to time issue and sell American Depositary Shares (“ADSs”) representing our ordinary shares
through Cowen in at-the-market (“ATM”) offerings for an aggregate offering price of up to $200 million. In the year ended
December 31, 2021, the Company sold 511,555 ADSs representing 3,069,330 ordinary shares resulting in net proceeds to the Company of
$2,529,000 after deducting commissions payable under the Sales Agreement and issuance costs. As of December 31, 2021, $197,360,000
remained available for sale under the Sales Agreement.
On April 8, 2022 the Company entered into a new sales agreement with Cowen (the “2022 Sales Agreement”) under which we
may from time to time issue and sell ADSs representing our ordinary shares through Cowen in ATM offerings for an aggregate offering
price of up to $200 million. In the year ended December 31, 2022, the Company sold 7,289,737 ADSs under the agreement representing
43,738,422 ordinary shares resulting in net proceeds to the Company of $12,793,448.13 after deducting commissions payable under the
2022 Sales Agreement and estimated issuance costs. As of December 31, 2022, approximately $186,702,871 remained available for sale
under the 2022 Sales Agreement.
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Note 12 — Share-based compensation
The Company grants options over ordinary shares in Adaptimmune Therapeutics plc under the following option plans: (i) the
Adaptimmune Therapeutics plc Employee Share Option Scheme (adopted on January 14, 2016), (ii) the Adaptimmune Therapeutics plc
2015 Share Option Scheme (adopted on March 16, 2015) and (iii) the Adaptimmune Therapeutics plc Company Share Option Plan
(adopted on March 16, 2015).
The Adaptimmune Therapeutics plc Company Share Option Plan is a tax efficient option scheme intended to comply with the
requirements of Schedule 4 to the Income Tax (Earnings and Pensions) Act 2003 of the United Kingdom, which provides for the grant of
company share option plan (“CSOP”) options. Grants may not exceed the maximum value of £30,000 per participant for the shares under
the option, which is a CSOP compliance requirement.
Generally, the vesting dates for the options granted under these plans up to December 31, 2022 are 25% on the first anniversary of
the grant date and 75% in monthly installments over the following three years. However, the options granted to non-executive directors
under the Adaptimmune Therapeutics plc 2015 Share Option Scheme vest and become exercisable as follows:
Options granted to non-executive directors on May 11, 2015:
Options granted to a non-executive director on June 23, 2016:
Options granted to non-executive directors on August 11, 2016:
Options granted to non-executive directors on November 28, 2016:
Options granted to non-executive directors on July 3, 2017
Options granted to non-executive directors on June 22, 2018:
Options granted to a non-executive director on July 5, 2018:
Options granted to non-executive directors on July 2, 2019:
Options granted to non-executive directors on July 1, 2020:
Options granted to non-executive directors on July 1, 2021:
Options granted to non-executive directors on July 1, 2022:
Immediately on grant date
25% on the first anniversary of the grant date and 75% in monthly
installments over the following two years
100% on the first anniversary of the grant date
25% on the first anniversary of the grant date and 75% in monthly
installments over the following two years
100% on the first anniversary of the grant date
100% on the first anniversary of the grant date
25% on the first anniversary of the grant date and 75% in monthly
instalments over the following two years
100% on the first anniversary of the grant date
100% on the first anniversary of the grant date
100% on the first anniversary of the grant date
100% on the first anniversary of the grant date
Effective from January 2018, the Company has also granted restricted stock unit style options (“RSU-style”). The RSU-style
options over ordinary shares in Adaptimmune Therapeutics plc are granted under the Adaptimmune Therapeutics plc Employee Share
Option Scheme (adopted on January 14, 2016). These options have an exercise price equal to the nominal value of an ordinary share, of
£0.001, and generally vest over four years, with 25% on the first, and each subsequent, anniversary of the grant date.
Options granted under these plans are not subject to performance conditions. The contractual term of options granted under these
plans is ten years.
The maximum aggregate number of options which may be granted under these plans and any incentive plans adopted by the
Company cannot exceed a scheme limit that equates to 8% of the initial fully diluted share capital of the Company immediately following
its IPO plus an automatic annual increase of an amount equivalent to 4% of the issued share capital on each 30 June (or such lower number
as the Board, or an appropriate committee of the Board, may determine). The automatic increase is effective from July 1, 2016.
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Prior to December 31, 2014, the Company granted options to purchase ordinary shares in Adaptimmune Limited under three
option schemes:
(i) The Adaptimmune Limited Share Option Scheme was adopted on May 30, 2008. Under this scheme Enterprise Management
Incentive (“EMI”) options (which are potentially tax-advantaged in the United Kingdom) have been granted (subject to the relevant
conditions being met) to its employees who are eligible to receive EMI options under applicable U.K. tax law and unapproved options
(which do not attract tax advantages) have been granted to its employees who are not eligible to receive EMI options, and to its Directors
and consultants. In May 2014, the Company no longer qualified for EMI status and since that date, no further EMI options were granted
under this scheme; however, unapproved options have been under granted under this scheme since that date.
(ii) The Adaptimmune Limited 2014 Share Option Scheme was adopted on April 11, 2014. EMI options were granted (subject to
the relevant conditions being met) under this scheme to our employees who are eligible to receive EMI options under applicable U.K. tax
law. Unapproved options were granted to its employees who are not eligible to receive EMI options and to directors. In May 2014, the
Company no longer qualified for EMI status and since that date, no further EMI options were granted under this scheme; however,
unapproved options have been under granted under this scheme since that date.
(iii) The Adaptimmune Limited Company Share Option Plan was adopted on December 16, 2014. This scheme allowed the grant
of options to our eligible employees prior to the Company’s corporate reorganization in 2015. This scheme is a tax efficient option scheme
and options were granted on December 19, 2014 and on December 31, 2014 to our part-time and full-time employees.
As part of the corporate reorganization in connection with our IPO, the holders of options granted under these schemes over
ordinary shares of Adaptimmune Limited were granted equivalent options on substantially the same terms over ordinary shares of
Adaptimmune Therapeutics plc (“Replacement Options”) in exchange for the release of these options. The Company does not intend to
grant any further options under these schemes.
As of December 31, 2022, all the Replacement Options under the Adaptimmune Limited schemes have vested.
The contractual life of options granted under these schemes is ten years.
The following table shows the total share-based compensation expense included in the Consolidated Statements of Operations (in
thousands):
Research and development
General and administrative
Year ended
December 31,
2022
Year ended
December 31,
2021
Year ended
December 31,
2020
$
$
6,264
11,976
18,240
$
$
9,052
11,577
20,629
$
$
4,417
5,997
10,414
As of December 31, 2022, there was $14,899,000 of total unrecognized compensation cost related to stock options granted but not
vested under the plans. That cost will be recognized over an expected remaining weighted-average period of 2.6 years. The following table
shows information about share options granted:
Number of options over ordinary shares granted
Weighted average fair value of ordinary shares options
Number of additional options with a nominal exercise price granted
Weighted average fair value of options with a nominal exercise price
Year ended
December 31,
2022
31,826,293
0.37
24,248,424
0.51
$
$
2021
21,300,998
0.70
17,765,778
0.97
$
$
2020
15,595,374
0.59
8,282,152
0.85
$
$
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Table of Contents
The following table summarizes all stock option activity for the year ended December 31, 2022:
Outstanding at January 1, 2022
Changes during the period:
Granted
Exercised
Expired
Forfeited
Outstanding at December 31, 2022
Exercisable at December 31, 2022
Weighted
average
exercise price
per option
£
0.52
Options
114,915,438
56,074,717
£
(5,823,534) £
(3,238,371) £
(9,389,161) £
£
£
152,539,089
75,064,373
0.21
0.01
0.69
0.21
0.44
0.64
Average
remaining
contractual
term (years)
Aggregate
intrinsic value
(thousands)
7.0
5.3
£
£
8,082
1,077
The following table summarizes information about stock options granted based on the market value at grant date which were
outstanding as of December 31, 2022:
Outstanding at January 1, 2022
Changes during the period:
Granted
Exercised
Expired
Forfeited
Outstanding at December 31, 2022
Exercisable at December 31, 2022
Weighted
average
exercise price
per option
Average
remaining
contractual
term (years)
Aggregate
intrinsic value
(thousands)
£
0.68
Options
87,387,314
31,826,293
£
(318,222) £
(3,077,532) £
(3,340,390) £
£
£
112,477,463
69,769,359
0.37
0.11
0.72
0.59
0.60
0.68
6.5
5.2
£
£
68
18
The following table summarizes information about RSU-style options which were outstanding as of December 31, 2022:
Outstanding at January 1, 2022
Changes during the period:
Granted
Exercised
Expired
Forfeited
Outstanding at December 31, 2022
Exercisable at December 31, 2022
Average
remaining
contractual
term (years)
8.5
Aggregate
intrinsic value
(thousands)
12,720
8.4 £
6.6 £
8,014
1,059
Options
27,528,124
24,248,424
(5,505,312)
(160,839)
(6,048,771)
40,061,626
5,295,014
There were 5,823,534, 5,723,646 and 11,401,390 share options exercised in the years ended December 31, 2022, 2021 and 2020
respectively. In the years ended December 31, 2022, 2021 and 2020 the total intrinsic value of stock options exercised was $2,368,000,
$4,321,000 and $8,195,000, respectively and the cash received from exercise of stock options was $50,000, $759,000 and $5,663,000
respectively. The Company recognizes tax benefits arising on the exercise of stock options regardless of whether the benefit reduces current
taxes. The tax benefit
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Table of Contents
arising on the exercise of stock options was $488,000, $862,000 and $1,265,000 for the years ended December 31, 2022, 2021 and 2020
respectively. The Company satisfies the exercise of stock options through newly issued shares.
Outstanding
Exercisable
Exercise price
£
0
0.01 - 0.25
0.26 - 0.50
0.51 - 0.75
0.76 - 1.00
1.01 - 1.50
1.51 - 2.00
Total
Total share
options
40,061,626
8,412,475
38,339,879
36,255,404
24,103,880
3,974,824
1,391,001
152,539,089
Weighted-
average
remaining
contractual life
Weighted-
average
exercise price
8.4 £
9.1
6.9
5.9
6.1
6.3
4.7
7.0
£
0.00
0.22
0.41
0.60
0.84
1.25
1.70
0.44
Total share
options
5,295,014 £
738,325
14,287,927
32,291,011
17,446,630
3,614,465
1,391,001
75,064,373
£
Weighted-
average
exercise price
0.00
0.19
0.42
0.61
0.87
1.26
1.70
0.64
The fair value of the stock options granted during the period was calculated using the Black-Scholes option-pricing model using
the following assumptions:
Expected term
Expected volatility
Risk free rate
Expected dividend yield
Year ended
December 31,
2022
Year ended
December 31,
2021
5 years
99-101%
0.94-3.90%
0%
5 years
98-100%
0.00-0.61%
0%
Year ended
December 31,
2020
5 years
90-99%
0.00-0.42%
0%
The expected term of the option is based on management judgment. The life of the options depends on the option expiration date,
volatility of the underlying shares and vesting features. We do not have sufficient history to determine the expected life based on internal
data and therefore the estimate is based on empirical data. Management uses historical data to determine the volatility of the Company’s
share price. The risk-free rate is based on the Bank of England’s estimates of the gilt yield curve as of the respective grant dates.
Note 13 — Income taxes
Loss before income tax expense is as follows (in thousands):
U.S.
U.K.
Loss before income tax expense
Year ended
December 31,
2022
Year ended
December 31,
2021
Year ended
December 31,
2020
$
$
(3,245)
(159,714)
(162,959)
$
$
1,625
(158,924)
(157,299)
$
$
(1,359)
(128,571)
(129,930)
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Table of Contents
The components of income tax expense are as follows (in thousands):
United States:
Federal
State and local
U.K.
Total current tax expense
United States:
Federal
State and local
U.K.
Total deferred tax expense
Total income tax expense
Year ended
December 31,
2022
Year ended
December 31,
2021
Year ended
December 31,
2020
$
$
2,492
5
—
2,497
—
—
—
—
2,497
$
$
791
—
—
791
—
—
—
—
791
$
$
162
—
—
162
—
—
—
—
162
As of December 31, 2022 and 2021 the tax effects of temporary differences and carryforwards that give rise to deferred tax assets
and liabilities were as follows (in thousands):
Deferred tax liabilities
Property, plant and equipment:
Operating lease right-of-use assets
Other
Total
Deferred tax assets
Share-based compensation expense
Intangible assets
Operating lease liabilities
Net operating loss and tax credit carryforwards
Capitalized research and development expenditure
Other
Total
Valuation allowance
Net deferred tax asset/(liability)
December 31,
2022
December 31,
2021
$
$
(3,486)
(1,529)
(251)
(5,266)
16,963
1,324
1,958
136,592
8,409
532
165,778
(160,512)
5,266
—
$
$
(922)
(1,757)
(238)
(2,917)
15,584
2,401
2,143
114,972
—
260
135,360
(132,443)
2,917
—
The valuation allowance is primarily related to deferred tax assets for operating loss and tax credit carry-forwards and temporary
differences relating to share-based compensation expense and research and development expenditure. Deferred tax assets have been
recognized without a valuation allowance to the extent supported by reversing taxable temporary differences. A valuation allowance has
been provided over the remaining deferred tax assets, which management considered are not more likely than not of being realized after
weighing all available positive and negative evidence including cumulative losses in recent years and projections of future taxable losses.
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The movements in the deferred tax asset valuation allowance for the year ended December 31, 2022 and 2021 are as follows
(thousands):
Valuation allowance at January 1,
Increase in valuation allowance through net loss
Increase in valuation allowance through other comprehensive loss
Foreign currency translation adjustments
Net change in the valuation allowance
$
$
2022
132,443
30,455
9,836
(12,222)
28,069
160,512
$
2021
82,398
50,046
1,512
(1,513)
50,045
$ 132,443
Reconciliation of the U.K. statutory income tax rate, the income tax rate of the country of domicile of the Company, to the
Company's effective income tax rate is as follows (in percentages):
U.K. tax rate
Tax-exempt reimbursable tax credits included within pretax Research and
development expense
Surrender of R&D expenditures for R&D tax credit refund
Expenses not deductible
Change in valuation allowances
Change in tax rates
Difference in tax rates
R&D tax credits generated
Other
Effective income tax rate
Year ended
December 31,
2022
Year ended
December 31,
2021
Year ended
December 31,
2020
19.0 %
19.0 %
19.0 %
3.6 %
(10.5)%
(0.3)%
(18.8)%
— %
5.5 %
2.1 %
(2.1)%
(1.5)%
4.1 %
(10.3)%
(0.2)%
(31.8)%
13.7 %
4.4 %
2.0 %
(1.4)%
(0.5)%
2.8 %
(8.4)%
(1.4)%
(17.8)%
4.1 %
— %
1.8 %
(0.1)%
(0.0)%
The Company is headquartered in the United Kingdom and has subsidiaries in the United Kingdom and the United States. The
Company incurs tax losses in the United Kingdom. The U.K. corporate income tax rate for the years ended December 31, 2022, 2021 and
2020 was 19% in each year. The Company’s subsidiary in the United States has generated taxable profits due to a service agreement
between the Company’s subsidiaries in the United States and the United Kingdom. The U.S. federal corporate income tax rate was 21% for
the years ended December 31, 2022, 2021 and 2020, respectively.
The United Kingdom’s Finance Act 2021, which was enacted on June 10, 2021, maintained the corporate income tax rate at 19%
up until the year commencing April 1, 2023, at which point the rate will rise to 25%. The planned increase remained in place as of
December 31, 2022. As of December 31, 2022, the Company used a 25% and 21% tax rate in respect of the measurement of deferred taxes
existing in the U.K. and the U.S., respectively, which reflects the currently enacted tax rates and the anticipated timing of the reversing of
the deferred tax balances. In respect of the measurement of deferred taxes arising in the U.K, the increase in the income tax rate adopted by
the Company from 19% as of the year ended December 31, 2020 to 25% for temporary differences reversing after the year ended
December 31, 2023 increased the net deferred tax asset and corresponding valuation allowance by $21,481,000 in the year ended December
31, 2021.
As of December 31, 2022, we do not have unremitted earnings in our U.S. subsidiary.
As of December 31, 2022, we had U.K. net operating losses of approximately $526,784,000, expenditure credit carryforwards of
$760,000 and U.S. tax credit carryforwards of $4,136,000. Unsurrendered U.K. tax can be carried forward indefinitely to be offset against
future taxable profits; however, this is restricted to an annual £5,000,000 allowance in each standalone company or group and above this
allowance, there will be a 50% restriction in the profits that can be covered by losses brought forward. U.K. tax credit carryforwards can be
carried forward indefinitely to be
F-40
Table of Contents
offset against future tax liabilities of the company. U.S. tax credit carryforwards can be carried forward for 20 years to be offset against
future tax liabilities, subject to a minimum tax payment of 25% of the tax charge. The tax credit carryforwards expire between 2036 and
2042.
Our tax returns are under routine examination in the U.K. and U.S. tax jurisdictions. The scope of these examinations includes, but
is not limited to, the review of our taxable presence in a jurisdiction, our deduction of certain items, our claims for research and
development credits, our compliance with transfer pricing rules and regulations and the inclusion or exclusion of amounts from our tax
returns as filed. The Company is no longer subject to examinations by tax authorities for the tax years 2015 and prior in the U.K. and there
are no ongoing enquiries in the U.K. However, U.K. net operating losses from the tax years 2015 and prior would be subject to examination
if and when used in a future tax return to offset taxable income. Our U.K. income tax returns have been accepted by His Majesty’s Revenue
and Customs through the period ended December 31, 2016. The Company is subject to examinations by taxing authorities in the United
States for all tax years 2019 through 2022. Our U.S. federal income tax return for the year ended December 31, 2020 is currently
undergoing an examination by the U.S. Internal Revenue Service. We are also subject to audits by U.S. state taxing authorities where we
have operations.
Unrecognized tax benefits arise when the estimated benefit recorded in the financial statements differs from the amounts taken or
expected to be taken in a tax return because of uncertainties in the tax law. As of December 31, 2022 and 2021, the Company had no
unrecognized tax benefits.
Note 14 — Geographic information
Operations by geographic area
Revenue represents recognized income from the Astellas Collaboration Agreement, the GNE Collaboration and License
Agreement and the GSK Collaboration and License Agreement. All revenue was derived in the United Kingdom.
Long-lived assets (excluding intangibles, deferred tax and financial instruments) were located as follows (in thousands):
U.K.
U.S.
Total long-lived assets
Major customers:
December 31,
2022
December 31,
2021
$
$
42,387
29,148
71,535
$
$
29,701
21,668
51,369
During the year ended December 31, 2022, 21%, 50% and 29% of the Company’s revenues were generated from Astellas,
Genentech and GSK, respectively.
Note 15 – Restructuring programme
On November 8, 2022, the Company announced that in order to extend the Company’s cash runway from early 2024 into early
2025, it was re-focusing the business on core programs and deprioritizing non-core programs. It also announced that it was to undertake a
restructuring of the Company including a headcount reduction of approximately 25% to 30% to be completed in the first quarter of 2023.
The redundancy process was initiated in the fourth quarter of 2022 and completed in the first quarter of 2023 with a reduction of
approximately 25% of global headcount. The redundancy packages to be paid to departing staff comprise a combination of contractual
termination benefits, relating to payments that arise from terms of employment contracts and statutory redundancy pay, and one-time
employee termination benefits that were provided or enhanced
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Table of Contents
specifically for this redundancy process. Due to the structure of the redundancy scheme and the different employment regulations affecting
the Company’s U.K. and U.S. employees, some of the expense associated with the one-time employee termination benefits will be
recognized over the remaining period of employee service to be rendered. Contractual termination benefits and other one-time employee
termination benefits have been expensed and recognized in full in the year ended December 31, 2022. All expenses have been recognized
in General and administrative expenses in the Statement of Operations.
The amounts expected to be incurred in relation to the redundancy programme are as follows:
Contractual
One-time
employee
Total
termination
termination
restructuring
benefits
benefits
costs
Amount incurred in the year ended, and cumulative amount incurred to, December 31, 2022
Remaining amount expected to be incurred in future periods
Total amount expected to be incurred
$
$
1,171
—
1,171
$
$
1,114
947
2,061
$
$
2,285
947
3,232
A provision for restructuring costs has been recognised in current liabilities as all payments are expected to be settled in the first
quarter of 2023. The table below is a summary of the changes in the restructuring provision in the consolidated balance sheets in the year
ended December 31, 2022:
Contractual
termination
benefits
One-time
employee
termination
benefits
$
$
— $
1,171
1,171
$
—
1,114
1,114
Provision at January 1, 2022
Costs incurred and charged to General and administrative expenses
Provision at December 31, 2022
No impairment losses were recognised as a result of the restructuring.
Note 16 – Subsequent events
The Astellas Collaboration Agreement termination
Total
restructuring
provision
$
—
2,285
2,285
$
The Company and Universal Cells mutually agreed to terminate the Astellas Collaboration Agreement as of March 6, 2023 (the
“Effective Date”). In connection with the termination, all licenses and sublicenses granted to either party pursuant to the Collaboration
Agreement ceased, and each party is required to return all confidential information of the other party within 30 days of the Effective Date.
Each party also agreed to destroy all cell lines and other materials of the other party in its possession within 30 days of the Effective Date.
There were no termination penalties in connection with the termination.
The termination is expected to result in the deferred income associated with the Astellas Collaboration Agreement of $43,070,000
as of December 31, 2022, being recognized as revenue in Q1 2023, in addition to any revenue relating to reimbursement for development
work performed in the quarter.
TCR2 Therapeutics Inc merger agreement
On March 6, 2023 we announced entry into a definitive agreement under which we will combine with TCR² Therapeutics Inc in
an all-stock transaction to create a preeminent cell therapy company focused on treating solid tumors. The combination provides extensive
advantages for clinical development and product delivery supported by
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Table of Contents
complementary technology platforms. The lead clinical franchises for the combined company utilize engineered T-cell therapies targeting
MAGE A4 and mesothelin. These targets are expressed on a broad range of solid tumors and are supported by compelling early- and late-
stage clinical data. The combined company also has a preclinical pipeline of additional target opportunities with development initially
focused on PRAME and CD70.
The merger agreement was unanimously approved by the boards of directors of both companies. Following the closing of the
transaction, Adaptimmune shareholders will own approximately 75% of the combined company and TCR2 stockholders will own
approximately 25% of the combined company. The transaction is expected to close in Q2 2023, subject to the receipt of approvals by
Adaptimmune shareholders and TCR2 stockholders and satisfaction or waiver of other customary closing conditions. Subject to the
successful closing of the transaction, we currently estimate that the cash runway of the combined company will extend into early 2026.
As the transaction is not expected to close until Q2 2023, an estimate of the other financial effects of this event on the Company
cannot yet be made.
F-43
DESCRIPTION OF THE REGISTRANT'S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE
ACT OF 1934
The following description sets forth certain material terms and provisions of the securities of Adaptimmune Therapeutics plc (the “Company”, “we”
or “us” and “our”) that are registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This description also
summarizes relevant provisions of the laws of England and Wales, including the U.K. Companies Act 2006 (the “Companies Act”). The following summary
does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable provisions of the laws of England and Wales
and our articles of association, a copy of which is filed as an exhibit to the Annual Report on Form 10-K of which this Exhibit is a part. We encourage you
to read our articles of association and the applicable provisions of the laws of England and Wales for additional information.
Exhibit 4.4
General
DESCRIPTION OF ORDINARY SHARES
Our securities include (a) our ordinary shares, par value £0.001 per share, and (b) our American Depositary Shares (“ADSs”), each representing
six ordinary shares. Our ordinary shares are registered under the Exchange Act not for trading, but only in connection with the listing of the ADSs on The
Nasdaq Global Select Market. Our ADSs are listed on The Nasdaq Global Select Market under the trading symbol “ADAP.” The following is a
description of the rights of (i) the holders of ordinary shares and (ii) ADS holders. Ordinary shares underlying the outstanding ADSs are held by Citibank
N.A., as depositary.
Ordinary Shares
Voting Rights
Subject to any other provisions of our articles of association and without prejudice to any special rights, privileges or restrictions as to voting
attached to any shares forming part of our share capital, the voting rights of shareholders are as follows. On a show of hands, each shareholder present in
person, and each duly authorized representative present in person of a shareholder that is a corporation, has one vote. On a show of hands, each proxy
present in person who has been duly appointed by one or more shareholders entitled to vote on a resolution has one vote, but a proxy has one vote for and
one vote against a resolution if, in certain circumstances, the proxy is instructed by more than one shareholder to vote in different ways on a resolution. On
a poll, each shareholder present in person or by proxy or (being a corporation) by a duly authorized representative has one vote for each share held by the
shareholder. We are prohibited (to the extent specified by the Companies Act 2006) from exercising any rights to attend or vote at meetings in respect of
any shares held by the Company as treasury shares.
Under English law, an ordinary resolution is passed on a show of hands if it is approved by a simple majority (more than 50%) of the votes cast by
shareholders present (in person or by proxy) and entitled to vote. If a poll is demanded, an ordinary resolution is passed if it is approved by holders
representing a simple majority of the total voting rights of shareholders present (in person or by proxy) who (being entitled to vote) vote on the resolution.
Special resolutions require the affirmative vote of not less than 75% of the votes cast by shareholders present (in person or by proxy) at the meeting.
Restrictions on Voting Where Sums Overdue on Shares
None of our shareholders (whether present in person by proxy or, in the case of a corporate member, by a duly authorized representative) shall
(unless the directors otherwise determine) be entitled to vote at any general meeting or at any separate class meeting in respect of any share held by him
unless all calls or other sums payable by him in respect of that share have been paid.
Calls on Shares
Subject to the terms of issue of the shares and to the provisions of our articles of association, the directors may from time to time make calls on
shareholders in respect of any moneys unpaid on their shares, whether in respect of the nominal value of the shares or by way of premium. Shareholders
are required to pay called amounts on shares subject to receiving at least 14 clear days’ notice specifying the time and place for payment. If a shareholder
fails to pay any part of a call or instalment of a call on the day fixed for payment, the directors may serve further notice naming another day not being less
than 14 clear days from the date of the further notice requiring payment and stating that in the event of non-payment the shares in respect of which the call
was made or instalment is payable will be liable to be forfeited. Subsequent forfeiture requires a resolution by the directors.
1
Dividend Rights
Subject to the Companies Act 2006 and the provisions of all other relevant legislation, we may by ordinary resolution declare dividends out of our
profits available for distribution in accordance with the respective rights of shareholders but no such dividend shall exceed the amount recommended by
the directors. If, in the opinion of the directors, our profits available for distribution justify such payments, the directors may pay fixed dividends payable
on any of our shares with preferential rights, half-yearly or otherwise, on fixed dates and from time to time pay interim dividends to the holders of any
class of shares. Subject to any special rights attaching to or terms of issue of any shares, all dividends shall be declared and paid according to the amounts
paid up on the shares on which the dividend is paid. No dividend shall be payable to us in respect of any shares held by us as treasury shares (except to the
extent permitted by the Companies Act 2006 and any other relevant legislation).
We may, upon the recommendation of the directors, by ordinary resolution, direct payment of a dividend wholly or partly by the distribution of
specific assets.
The directors may, if so authorized by ordinary resolution passed at any general meeting, offer any holders of the ordinary shares the right to elect to
receive in lieu of that dividend (or part of any of that dividend) an allotment of ordinary shares credited as fully paid.
We or the directors may by resolution specify a “record date” on which persons registered as the holders of shares shall be entitled to receipt of any
dividend.
Distributions of Assets on Winding-up
Subject to any special rights attaching to or the terms of issue of any shares, on any winding-up of the Company our surplus assets remaining after
satisfaction of our liabilities will be distributed among our shareholders in proportion to their respective holdings of shares and the amounts paid up on
those shares.
On any winding-up of the Company (whether the liquidation is voluntary, under supervision or by the Court), the liquidator may with the authority
of a special resolution of the Company and any other sanction required by any relevant legislation, divide among our shareholders (excluding the Company
itself to the extent that it is a shareholder by virtue of its holding any shares or treasury shares) in specie or in kind the whole or any part of our assets,
whether or not the assets shall consist of property of one kind or of properties of different kinds, and may for that purpose set such value as he deems fair
upon any one or more class or classes of property and may determine how that division shall be carried out as between the shareholders or different classes
of shareholders. The liquidator may, with that sanction, vest the whole or any part of the assets in trustees upon such trusts for the benefit of the
shareholders as he with the relevant authority determines, and the liquidation of the Company may be closed and the Company dissolved, but so that no
shareholders shall be compelled to accept any shares or other property in respect of which there is a liability.
Variation of Rights
The rights or privileges attached to any class of shares may (unless otherwise provided by the terms of the issue of the shares of that class) be varied
or abrogated with the consent in writing of the holders of three-fourths in nominal value of the issued shares of that class (excluding any shares of that class
held as treasury shares) or with the sanction of a special resolution passed at a separate general meeting of the shareholders of that class, but not otherwise.
Transfer of Shares
All of our shares are in registered form and may be transferred by a transfer in any usual or common form or any form acceptable to the directors
and permitted by the Companies Act 2006 and any other relevant legislation.
The directors may decline to register a transfer of a share that is:
● not fully paid or on which we have a lien provided that that discretion may not be exercised in such a way as to prevent dealings in shares of
that class from taking place on an open and proper basis;
● (except where uncertificated shares are transferred without a written instrument) not lodged duly stamped at our registered office or at such
other place as the directors may appoint;
● (except where a certificate has not been issued) not accompanied by the certificate of the share to which it relates or such other evidence
reasonably required by the directors to show the right of the transferor to make the transfer;
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● in respect of more than one class of share; or
● in the case of a transfer to joint holders of a share, the number of joint holders to whom the share is to be transferred exceeds four.
Capital Variations
We may, by ordinary resolution, consolidate and divide all or any of our share capital into shares of a larger nominal amount than our existing shares
or sub-divide our shares, or any of them, into shares of a smaller amount than our existing shares. Subject to the provisions of the Companies Act 2006 and
any other relevant legislation, we may by special resolution reduce our share capital, any capital redemption reserve fund or any share premium account
and may redeem or purchase any of our own shares.
Pre-emption Rights
There are no rights of pre-emption under our articles of association in respect of transfers of issued ordinary shares. In certain circumstances, our
shareholders may have statutory pre-emption rights under the Companies Act 2006 in respect of the allotment of new shares in the Company for cash.
These statutory pre-emption rights, when applicable, would require us to offer new shares for allotment to existing shareholders on a pro rata basis before
allotting them to other persons. In such circumstances, the procedure for the exercise of such statutory pre-emption rights would be set out in the
documentation by which such ordinary shares would be offered to our shareholders. These statutory pre-emption rights may be disapplied by a special
resolution passed by shareholders in a general meeting in accordance with the provisions of the Companies Act 2006.
Preferred Shares
Subject to the provisions of the Companies Act 2006 and any other relevant legislation, we may issue shares with such preferred, deferred or other
rights, or such restrictions, whether in relation to dividends, returns of capital, voting or otherwise, as we may determine by ordinary resolution (or, failing
any such determination, as the directors may determine). Any or all of such rights and restrictions may be greater than the rights of the ordinary shares.
Holders of preferred shares may be entitled to receive a preference payment in the event of our liquidation before any payment is made to the holders of
ordinary shares. There are currently no preferred shares outstanding, and we have no present intention to issue any preferred shares.
Directors
Unless and until we in a general meeting of our shareholders otherwise determine, the number of directors shall not be subject to any maximum
but shall not be less than two.
General Meetings
Annual General Meetings
We shall in each year hold an annual general meeting of our shareholders in addition to any other meetings in that year, and shall specify the
meeting as such in the notice convening it. The annual general meeting shall be held at such time and place as the directors may appoint.
Calling of General Meetings
The directors may call a general meeting of shareholders. Under the Companies Act 2006, shareholders holding at least 5% of the paid-up capital
of the Company carrying voting rights at general meetings can require the directors to call a general meeting.
Under the Companies Act 2006, 21 clear days’ notice must be given for an annual general meeting and any resolutions to be proposed at the
meeting. At least 14 clear days’ notice is required for any other general meeting. In addition, certain matters (such as the removal of directors or auditors)
require special notice, which is 28 clear days’ notice.
Quorum of Meetings
No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business but the absence of a
quorum shall not preclude the appointment of a chairman that shall not be treated as part of the business of a meeting. One or more qualifying persons
present at a meeting and between them holding (or being the proxy or corporate representative of the
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holders of) at least one-third in number of the issued shares (excluding any shares held as treasury shares) entitled to vote on the business to be transacted
are a quorum. Notwithstanding that our articles of association provide that one person may be a quorum, under English law a general meeting will
generally require the attendance of more than one person. A qualifying person for these purposes is an individual who is a shareholder, a person authorized
to act as the representative of a shareholder (being a corporation) in relation to the meeting or a person appointed as proxy of a shareholder in relation to
the meeting.
Other English Law Considerations
Mandatory Purchases and Acquisitions
Pursuant to sections 979 to 991 of the Companies Act 2006, where a takeover offer has been made for the Company and the offeror has acquired
or unconditionally contracted to acquire not less than 90 percent of the voting rights carried by those shares, the offeror may give notice, to the holder of
any shares to which the offer relates and which the offeror has not acquired or unconditionally contracted to acquire that he wishes to acquire and is
entitled to so acquire those shares on the same terms as the general offer.
Disclosure of Interest in Shares
Pursuant to Part 22 of the Companies Act 2006 and our articles of association, we are empowered by notice in writing to require any person whom
we know to be, or have reasonable cause to believe to be, interested in the Company, our shares or, at any time during the three years immediately
preceding the date on which the notice is issued has been so interested, within a reasonable time to disclose to us particulars of any interest, rights,
agreements or arrangements affecting any of the shares held by that person or in which such other person as aforesaid is interested (so far as is within his
knowledge).
Under our articles of association, if a person defaults in supplying us with the required particulars in relation to the shares in question (“default
shares”), the directors may by notice direct that:
in respect of the default shares, the relevant shareholder shall not be entitled to vote or exercise any other right conferred by membership in
relation to general meetings; and/or
where the default shares represent at least 0.25 percent of their class, (a) any dividend or other money payable in respect of the default shares shall
be retained by us without liability to pay interest, and/or (b) no transfers by the relevant shareholder of shares other than certain approved transfers may be
registered (unless the shareholder himself is not in default and the transfer does not relate to default shares), and/or (c) any shares held by the relevant
number in uncertificated form shall be converted into certificated form.
Purchase of Own Shares
Under English law, a public limited company may only purchase its own shares out of the distributable profits of the company or the proceeds of a
fresh issue of shares made for the purpose of financing the purchase. A limited company may not purchase its own shares if as a result of the purchase there
would no longer be any issued shares of the company other than redeemable shares or shares held as treasury shares.
Subject to the above, we may purchase our own shares in the manner prescribed below. We may purchase on a recognized investment exchange
our own fully paid shares pursuant to an ordinary resolution of the Company. Under the Companies Act 2006, the resolution authorizing the purchase must:
● specify the maximum number of shares authorized to be acquired;
● determine the maximum and minimum prices that may be paid for the shares; and
● specify a date, not being later than five years after the passing of the resolution, on which the authority to purchase is to expire.
We may purchase our own fully paid shares otherwise than on a recognized investment exchange pursuant to a purchase contract authorized by
special resolution of the Company before the purchase takes place. Any authority will not be effective if any shareholder from whom we propose to
purchase shares votes on the resolution and the resolution would not have been passed if he had not done so. The resolution authorizing the purchase must
specify a date, not being later than five years after the passing of the resolution, on which the authority to purchase is to expire.
Takeover Provisions
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If at the time of a takeover offer the U.K. Panel on Takeovers and Mergers (the “Takeover Panel”) determines that we have our place of central
management and control in the United Kingdom, we would be subject to the U.K. City Code on Takeovers and Mergers (the “Takeover Code”), which is
issued and administered by the Takeover Panel. The Takeover Code provides a framework within which takeovers of companies subject to it are conducted,
including, in particular, certain rules in respect of mandatory offers.
In July 2018, the Takeover Panel confirmed that, based on our current circumstances, we are not subject to the Takeover Code. As a result, our
shareholders are not entitled to the benefit of certain takeover offer protections provided under the Takeover Code. We believe that this position is unlikely
to change at any time in the near future but, in accordance with good practice, we will review the situation on a regular basis and consult with the Takeover
Panel if there is any change in our circumstances, which may have a bearing on whether the Takeover Panel would determine our place of central
management and control to be in the United Kingdom.
Exchange Controls
There are no governmental laws, decrees, regulations or other legislation in the United Kingdom that may affect the import or export of capital,
including the availability of cash and cash equivalents for use by us, or that may affect the remittance of dividends, interest, or other payments by us to
non-resident holders of our ordinary shares, other than withholding tax requirements. There is no limitation imposed by English law or our articles of
association on the right of non-residents to hold or vote shares.
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Citibank, N.A. (the “Depositary”) has agreed to act as the depositary bank for the American Depositary Shares. Citibank’s depositary offices are
located at 388 Greenwich Street, New York, New York 10013. American Depositary Shares are frequently referred to as “ADSs” and represent ownership
interests in securities that are on deposit with the depositary bank. ADSs may be represented by certificates that are commonly known as “American
Depositary Receipts” or “ADRs.” The depositary bank typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian is
Citibank, N.A. London Branch, having its principal office at Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, England.
We have appointed Citibank as depositary bank pursuant to a deposit agreement. A copy of the deposit agreement is on file with the SEC under
cover of a Registration Statement on Form F-6. A copy of the deposit agreement is available from the SEC’s website (www.sec.gov). Please refer to
Registration Number 333-203642, Registration Number 333-212714 or Registration Number 333-233560 when retrieving such copy.
“Holder” means the person or persons in whose name an ADS is registered on the register maintained by the Depositary for such purpose.
Each ADS represents the right to receive six ordinary shares, each of which is frequently referred to as a “Share” or collectively, as “Shares”, on
deposit with the custodian. An ADS also represents the right to receive any other property received by the depositary bank or the custodian on behalf of the
owner of the ADS but that has not been distributed to the owners of ADSs because of legal restrictions or practical considerations. The custodian, the
depositary bank and their respective nominees will hold all deposited property for the benefit of the holders and beneficial owners of ADSs. The deposited
property does not constitute the proprietary assets of the depositary bank, the custodian or their nominees. Beneficial ownership in the deposited property
will under the terms of the deposit agreement be vested in the beneficial owners of the ADSs. The depositary bank, the custodian and their respective
nominees will be the record holders of the deposited property represented by the ADSs for the benefit of the holders and beneficial owners of the
corresponding ADSs. Owners of ADSs will be able to exercise beneficial ownership interests in the deposited property only through the registered holders
of the ADSs, by the registered holders of the ADSs (on behalf of the applicable ADS owners) only through the depositary bank, and by the depositary bank
(on behalf of the owners of the corresponding ADSs) directly, or indirectly through the custodian or their respective nominees, in each case upon the terms
of the deposit agreement.
If you become an owner of ADSs, you will become a party to the deposit agreement and therefore will be bound to its terms and to the terms of
any ADR that represents your ADSs. The deposit agreement and the ADR specify our rights and obligations as well as your rights and obligations as owner
of ADSs and those of the depositary bank. As an ADS holder, you appoint the depositary bank to act on your behalf in certain circumstances. The deposit
agreement and the ADRs are governed by New York law. However, our obligations to the holders of Shares will continue to be governed by the laws of
England and Wales, which may be different from the laws in the United States.
In addition, applicable laws and regulations may require you to satisfy reporting requirements and obtain regulatory approvals in certain
circumstances. You are solely responsible for complying with such reporting requirements and obtaining such approvals. Neither the depositary bank, the
custodian, us nor any of their or our respective agents or affiliates shall be required to take any actions whatsoever on your behalf to satisfy such reporting
requirements or obtain such regulatory approvals under applicable laws and regulations.
As an owner of ADSs, we will not treat you as one of our shareholders and you will not have direct shareholder rights. The depositary bank will
hold on your behalf the shareholder rights attached to the Shares underlying your ADSs. As an owner of ADSs you will be able to exercise the shareholders
rights for the Shares represented by your ADSs through the depositary bank only to the extent contemplated in the deposit agreement. To exercise any
shareholder rights not contemplated in the deposit agreement you will, as an ADS owner, need to arrange for the cancellation of your ADSs and become a
direct shareholder.
Dividends and Distributions
Holders generally have the right to receive the distributions we make on the securities deposited with the custodian. A Holder’s receipt of these
distributions may be limited, however, by practical considerations and legal limitations. Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of ADSs held as of the specified record date, after deduction of the applicable fees, taxes and expenses.
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Distributions of Cash
Whenever we make a cash distribution for the securities on deposit with the custodian, we will deposit the funds with the custodian. Upon receipt
of confirmation of the deposit of the requisite funds, the depositary bank will arrange for the funds to be converted into U.S. dollars and for the distribution
of the U.S. dollars to the holders, subject to the laws and regulations of England and Wales.
The conversion into U.S. dollars will take place only if practicable and if the U.S. dollars are transferable to the United States. The depositary
bank will apply the same method for distributing the proceeds of the sale of any property (such as undistributed rights) held by the custodian in respect of
securities on deposit.
The distribution of cash will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit
agreement. The depositary bank will hold any cash amounts it is unable to distribute in a non-interest bearing account for the benefit of the applicable
holders and beneficial owners of ADSs until the distribution can be effected or the funds that the depositary bank holds must be escheated as unclaimed
property in accordance with the laws of the relevant states of the United States.
Distributions of Shares
Whenever we make a free distribution of ordinary shares for the securities on deposit with the custodian, we will deposit the applicable number of
ordinary shares with the custodian. Upon receipt of confirmation of such deposit, the depositary bank will either distribute to holders new ADSs
representing the ordinary shares deposited or modify the ADS-to-ordinary share ratio, in which case each ADS a Holder holds will represent rights and
interests in an integral number of the additional ordinary shares so deposited. Only whole new ADSs will be distributed. Fractional entitlements will be
sold and the proceeds of such sale will be distributed as in the case of a cash distribution.
The distribution of new ADSs or the modification of the ADS-to-ordinary share ratio upon a distribution of ordinary shares will be made net of the
fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay such taxes or governmental
charges, the depositary bank may sell all or a portion of the new ordinary shares so distributed.
No such distribution of new ADSs will be made if it would violate a law (i.e., the U.S. securities laws) or if it is not practicable. If the depositary
bank does not distribute new ADSs as described above, it may sell the ordinary shares received upon the terms described in the deposit agreement and will
distribute the proceeds of the sale as in the case of a distribution of cash.
Distributions of Rights
Whenever we intend to distribute rights to purchase additional ordinary shares, we will give prior notice to the depositary bank and will indicate
whether we wish the elective distribution to be made available to you. In such case, we will assist the depositary bank in determining whether such
distribution is lawful and reasonably practicable to distribute rights to purchase additional ADSs to holders.
The depositary bank will establish procedures to distribute rights to purchase additional ADSs to holders and to enable such holders to exercise
such rights if it is lawful and reasonably practicable to make the rights available to holders of ADSs, we indicate that we wish such rights to be made
available to holders of ADSs, and if we provide all of the documentation contemplated in the deposit agreement (such as opinions to address the lawfulness
of the transaction). A Holder may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of a
Holder’s rights. The depositary bank is not obligated to establish procedures to facilitate the distribution and exercise by holders of rights to purchase new
ordinary shares other than in the form of ADSs.
The depositary bank will not distribute the rights to a Holder if:
● We do not timely request that the rights be distributed to a Holder or we request that the rights not be distributed to a Holder; or
● We fail to deliver satisfactory documents to the depositary bank; or
● It is not reasonably practicable to distribute the rights.
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The depositary bank will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. The proceeds of such
sale will be distributed to holders as in the case of a cash distribution. If the depositary bank is unable to sell the rights, it will allow the rights to lapse.
Elective Distributions
Whenever we intend to distribute a dividend payable at the election of shareholders either in cash or in additional shares, we will give prior notice
thereof to the depositary bank and will indicate whether we wish the elective distribution to be made available to a Holder. In such case, we will assist the
depositary bank in determining whether such distribution is lawful and reasonably practicable.
The depositary bank will make the election available to a Holder only if it is lawful and reasonably practicable, we indicate that we wish such election
to be made available to holders of ADSs, and if we have provided all of the documentation contemplated in the deposit agreement. In such case, the
depositary bank will establish procedures to enable a Holder to elect to receive either cash or additional ADSs, in each case as described in the deposit
agreement.
If the election is not made available to a Holder, such Holder will receive either cash or additional ADSs, upon the terms described above for
distributions of cash and ordinary shares, respectively, depending on what a shareholder in England and Wales would receive upon failing to make an
election, as more fully described in the deposit agreement.
Other Distributions
Whenever we intend to distribute property other than cash, ordinary shares or rights to purchase additional ordinary shares, we will notify the
depositary bank in advance and will indicate whether we wish such distribution to be made to Holders. If so, we will assist the depositary bank in
determining whether such distribution to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute such property to a Holder, we indicate that we wish such distribution to be made available to holders of
ADSs, and if we provide all of the documentation contemplated in the deposit agreement, the depositary bank will distribute the property to the holders in a
manner it deems practicable.
The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In
order to pay such taxes and governmental charges, the depositary bank may sell all or a portion of the property received.
The depositary bank will not distribute the property to a Holder and will sell the property if:
● We do not request that the property be distributed to a Holder or if we ask that the property not be distributed to a Holder; or
● We do not deliver satisfactory documents to the depositary bank; or
● The depositary bank determines that all or a portion of the distribution to a Holder is not reasonably practicable.
The proceeds of such a sale will be distributed to holders as in the case of a cash distribution.
Redemption
Whenever we decide to redeem any of the securities on deposit with the custodian, we will notify the depositary bank in advance. If it is practicable
and if we provide all of the documentation contemplated in the deposit agreement, the depositary bank will provide notice of the redemption to the holders.
The custodian will be instructed to surrender the shares being redeemed against payment of the applicable redemption price. The depositary bank will
convert the redemption funds received into U.S. dollars upon the terms of the deposit agreement and will establish procedures to enable holders to receive
the net proceeds from the redemption upon surrender of their ADSs to the depositary bank. A Holder may have to pay fees, expenses, taxes and other
governmental charges upon the redemption of a Holder’s ADSs. If less than all ADSs are being redeemed, the ADSs to be retired will be selected by lot or
on a pro rata basis, as the depositary bank may determine.
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Changes Affecting Ordinary Shares
The ordinary shares held on deposit for a Holder’s ADSs may change from time to time. For example, there may be a change in nominal or par value,
a split-up, cancellation, consolidation or any other reclassification of such ordinary shares or a recapitalization, reorganization, merger, consolidation or
sale of assets of the Company.
If any such change were to occur, a Holder’s ADSs would, to the extent permitted by law, represent the right to receive the property received or
exchanged in respect of the ordinary shares held on deposit. The depositary bank may in such circumstances deliver new ADSs to a Holder, amend the
deposit agreement, the ADRs and the applicable Registration Statement(s) on Form F-6, call for the exchange of a Holder’s existing ADSs for new ADSs
and take any other actions that are appropriate to reflect as to the ADSs the change affecting the Shares. If the depositary bank may not lawfully distribute
such property to a Holder, the depositary bank may sell such property and distribute the net proceeds to a Holder as in the case of a cash distribution.
Issuance of ADSs upon Deposit of Ordinary Shares
The depositary bank may create ADSs on a Holder’s behalf if a Holder or a Holder’s broker deposit ordinary shares with the custodian. The depositary
bank will deliver these ADSs to the person a Holder indicates only after a Holder pays any applicable issuance fees and any charges and taxes payable for
the transfer of the ordinary shares to the custodian. A Holder’s ability to deposit ordinary shares and receive ADSs may be limited by U.S. and English
legal considerations applicable at the time of deposit.
The issuance of ADSs may be delayed until the depositary bank or the custodian receives confirmation that all required approvals have been given and
that the ordinary shares have been duly transferred to the custodian. The depositary bank will only issue ADSs in whole numbers.
When a Holder makes a deposit of ordinary shares, a Holder will be responsible for transferring good and valid title to the depositary bank. As such, a
Holder will be deemed to represent and warrant that:
● The ordinary shares are duly authorized, validly issued, fully paid, non-assessable and legally obtained.
● All preemptive (and similar) rights, if any, with respect to such ordinary shares have been validly waived or exercised.
● A Holder is duly authorized to deposit the ordinary shares.
● The ordinary shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are
not, and the ADSs issuable upon such deposit will not be, “restricted securities” (as defined in the deposit agreement).
● The ordinary shares presented for deposit have not been stripped of any rights or entitlements.
If any of the representations or warranties are incorrect in any way, we and the depositary bank may, at a Holder’s cost and expense, take any and all
actions necessary to correct the consequences of the misrepresentations.
Transfer, Combination and Split Up of ADRs
ADR Holders will be entitled to transfer, combine or split up such Holder’s ADRs and the ADSs evidenced thereby. For transfers of ADRs, a Holder
will have to surrender the ADRs to be transferred to the depositary bank and also must:
● ensure that the surrendered ADR is properly endorsed or otherwise in proper form for transfer;
● provide such proof of identity and genuineness of signatures as the depositary bank deems appropriate;
● provide any transfer stamps required by the State of New York or the United States; and
● pay all applicable fees, charges, expenses, taxes and other government charges payable by ADR holders pursuant to the terms of the deposit
agreement, upon the transfer of ADRs.
To have a Holder’s ADRs either combined or split up, such Holder must surrender the ADRs in question to the depositary bank with such Holder’s
request to have them combined or split up, and such Holder must pay all applicable fees, charges and expenses payable by ADR holders, pursuant to the
terms of the deposit agreement, upon a combination or split up of ADRs.
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Withdrawal of Ordinary Shares Upon Cancellation of ADSs
ADS Holders will be entitled to present such Holder’s ADSs to the depositary bank for cancellation and then receive the corresponding number of
underlying ordinary shares at the custodian’s offices. A Holder’s ability to withdraw the ordinary shares held in respect of the ADSs may be limited by U.S.
and English considerations applicable at the time of withdrawal. In order to withdraw the ordinary shares represented by a Holder’s ADSs, such Holder
will be required to pay to the depositary bank the fees for cancellation of ADSs and any charges and taxes payable upon the transfer of the ordinary shares
being withdrawn. A Holder assumes the risk for delivery of all funds and securities upon withdrawal. Once canceled, the ADSs will not have any rights
under the deposit agreement.
The depositary bank may ask a Holder to provide proof of identity and genuineness of any signature and such other documents as the depositary
bank may deem appropriate before it will cancel a Holder’s ADSs. The withdrawal of the ordinary shares represented by a Holder’s ADSs may be delayed
until the depositary bank receives satisfactory evidence of compliance with all applicable laws and regulations. Please keep in mind that the depositary
bank will only accept ADSs for cancellation that represent a whole number of securities on deposit.
Holders will have the right to withdraw the securities represented by such Holder’s ADSs at any time except for:
● Temporary delays that may arise because (i) the transfer books for the ordinary shares or ADSs are closed, or (ii) ordinary shares are immobilized
on account of a shareholders’ meeting or a payment of dividends;
● Obligations to pay fees, taxes and similar charges; and
● Restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit.
The deposit agreement may not be modified to impair a Holder’s right to withdraw the securities represented by a Holder’s ADSs except to comply
with mandatory provisions of law.
Voting Rights
Holders generally have the right under the deposit agreement to instruct the depositary bank to exercise the voting rights for the ordinary shares
represented by a Holder’s ADSs. The voting rights of holders of ordinary shares are described above in “Ordinary Shares—Voting Rights.”
At our request, the depositary bank will distribute to a Holder any notices of shareholders’ meetings received from us together with information
explaining how to instruct the depositary bank to exercise the voting rights of the securities represented by ADSs.
If the depositary bank timely receives voting instructions from a holder of ADSs, it will endeavor to vote the securities (in person or by proxy)
represented by the holder’s ADSs in accordance with the voting instructions received from such holder and as follows.
● In the event of voting by show of hands, the Depositary will vote (or cause the custodian to vote) all Shares held on deposit at that time in
accordance with the voting instructions received from a majority of holders of ADSs who provide timely voting instructions.
● In the event of voting by poll, the Depositary will vote (or cause the custodian to vote) the Shares held on deposit in accordance with the voting
instructions received from the holders of ADSs. Under certain limited circumstances described in the deposit agreement, a person designated by
us shall be entitled to vote the Shares held on deposit for which voting instructions have not been timely received by the depositary from holders
of ADSs.
Securities for which no voting instructions have been received will not be voted (except as otherwise contemplated herein). Please note that the ability
of the depositary bank to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. We
cannot assure that Holders will receive voting materials in time to enable such Holder to return voting instructions to the depositary bank in a timely
manner.
Fees and Charges
The following table shows the fees and charges that a holder of our ADSs may have to pay, either directly or indirectly.
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These fees and charges are set by the Depositary and are subject to change:
Service
Fees
Issuance of ADSs
Cancellation of ADSs
Up to U.S. 5¢ per ADS issued
Up to U.S. 5¢ per ADS canceled
Distribution of cash dividends or other cash distributions
Up to U.S. 5¢ per ADS held
Distribution of ADSs pursuant to stock dividends, free stock distributions or
exercise of rights
Up to U.S. 5¢ per ADS held
Distribution of securities other than ADSs or rights to purchase additional
ADSs
Up to U.S. 5¢ per ADS held
Depositary Services
Up to U.S. 5¢ per ADS held on the applicable record date(s) established by
the depositary bank
As an ADS holder you will also be responsible for paying certain fees and expenses incurred by the depositary bank and certain taxes and
governmental charges such as:
● Fees for the transfer and registration of Shares or other deposited securities, including those charged by the registrar and transfer agent for the
Shares in England and Wales (i.e., upon deposit and withdrawal of Shares).
● Expenses incurred for converting foreign currency into U.S. dollars.
● Expenses for cable, telex and fax transmissions and for delivery of securities.
● Taxes and duties (including applicable interest and penalties) and other governmental charges, including upon the transfer of securities (i.e.,
when Shares are deposited or withdrawn from deposit).
● Fees and expenses as are incurred by the depositary bank in connection with compliance with exchange control regulations and other
regulatory requirements applicable to Shares, deposited securities, ADSs and ADRs.
● Fees and expenses incurred in connection with the delivery or servicing of Shares and other property on deposit.
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their
clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary
bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to
ADS holders and the depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS record date.
The Depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than
cash (i.e., stock dividend, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case
of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the
applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its
fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding
ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount
of the fees paid to the depositary banks.
In the event of a refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested
service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.
Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary bank. You will
receive prior notice of such changes.
The depositary bank may reimburse us for certain expenses incurred by us in respect of the ADS program established pursuant to the deposit
agreement, by making available a portion of the depositary fees charged in respect of the ADS program or otherwise, upon such terms and conditions as we
and the depositary bank may agree from time to time.
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Amendments and Termination
We may agree with the depositary bank to modify the deposit agreement at any time without a Holder’s consent. We undertake to give holders 30
days’ prior notice of any modifications that would materially prejudice any of their substantial rights under the deposit agreement. We will not consider to
be materially prejudicial to a Holder’s substantial rights any modifications or supplements that are reasonably necessary for the ADSs to be registered
under the Securities Act or to be eligible for book-entry settlement, in each case without imposing or increasing the fees and charges such Holder is
required to pay. In addition, we may not be able to provide Holders with prior notice of any modifications or supplements that are required to accommodate
compliance with applicable provisions of law.
Holders will be bound by the modifications to the deposit agreement if such Holder’s continue to hold ADSs after the modifications to the deposit
agreement become effective. The deposit agreement cannot be amended to prevent a Holder from withdrawing the ordinary shares represented by such
Holder’s ADSs (except as permitted by law).
We have the right to direct the depositary bank to terminate the deposit agreement. Similarly, the depositary bank may in certain circumstances on
its own initiative terminate the deposit agreement. In either case, the depositary bank must give notice to the holders at least 30 days before termination.
Until termination, a Holder’s rights under the deposit agreement will be unaffected.
After termination, the depositary bank will continue to collect distributions received (but will not distribute any such property until a Holder
request the cancellation of such Holder’s ADSs) and may sell the securities held on deposit. After the sale, the depositary bank will hold the proceeds from
such sale and any other funds then held for the holders of ADSs in a non-interest bearing account. At that point, the depositary bank will have no further
obligations to holders other than to account for the funds then held for the holders of ADSs still outstanding (after deduction of applicable fees, taxes and
expenses).
Books of Depositary
The depositary bank will maintain ADS holder records at its depositary office. Holders may inspect such records at such office during regular
business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the deposit
agreement.
The depositary bank will maintain in New York facilities to record and process the issuance, cancellation, combination, split-up and transfer of
ADSs. These facilities may be closed from time to time, to the extent not prohibited by law.
Limitations on Obligations and Liabilities
The deposit agreement limits our obligations and the depositary bank’s obligations to Holders. Please note the following:
● We and the depositary bank are obligated only to take the actions specifically stated in the deposit agreement without negligence or bad faith.
● The depositary bank disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the
effect of any vote, provided it acts in good faith and in accordance with the terms of the deposit agreement.
● The depositary bank disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the content of any
document forwarded to Holders on our behalf or for the accuracy of any translation of such a document, for the investment risks associated
with investing in ordinary shares, for the validity or worth of the ordinary shares, for any tax consequences that result from the ownership of
ADSs, for the credit-worthiness of any third party, for allowing any rights to lapse under the terms of the deposit agreement, for the timeliness
of any of our notices or for our failure to give notice.
● We and the depositary bank will not be obligated to perform any act that is inconsistent with the terms of the deposit agreement.
● We and the depositary bank disclaim any liability if we or the depositary bank are prevented or forbidden from or subject to any civil or
criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the deposit agreement,
by reason of any provision, present or future of any law or regulation, or by reason of present or future provision of any provision of our
articles of association or any provision of or governing the securities on deposit, or by reason of any act of God or war or other circumstances
beyond our control.
12
● We and the depositary bank disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for in the
deposit agreement or in our articles of association or in any provisions of or governing the securities on deposit.
● We and the depositary bank further disclaim any liability for any action or inaction in reliance on the advice or information received from
legal counsel, accountants, any person presenting Shares for deposit, any holder of ADSs or authorized representatives thereof, or any other
person believed by either of us in good faith to be competent to give such advice or information.
● We and the depositary bank also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or other benefit
that is made available to holders of ordinary shares but is not, under the terms of the deposit agreement, made available to Holders.
● We and the depositary bank may rely without any liability upon any written notice, request or other document believed to be genuine and to
have been signed or presented by the proper parties.
● We and the depositary bank also disclaim liability for any consequential or punitive damages for any breach of the terms of the deposit
agreement.
● No disclaimer of any Securities Act liability is intended by any provision of the deposit agreement.
Taxes
A Holder will be responsible for the taxes and other governmental charges payable on the ADSs and the securities represented by the ADSs. We,
the depositary bank and the custodian may deduct from any distribution the taxes and governmental charges payable by holders and may sell any and all
property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any deficiency if the sale proceeds do not cover
the taxes that are due.
The depositary bank may refuse to issue ADSs, to deliver, transfer, split-up or combine ADRs or to release securities on deposit until all taxes and
charges are paid by the applicable holder. The depositary bank and the custodian may take reasonable administrative actions to obtain tax refunds and
reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary bank and to the custodian proof of
taxpayer status and residence and such other information as the depositary bank and the custodian may require to fulfill legal obligations. You are required
to indemnify us, the depositary bank and the custodian for any claims with respect to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary bank will arrange for the conversion of all foreign currency received into U.S. dollars if such conversion is practical, and it will
distribute the U.S. dollars in accordance with the terms of the deposit agreement. You may have to pay fees and expenses incurred in converting foreign
currency, such as fees and expenses incurred in complying with currency exchange controls and other governmental requirements.
If the conversion of foreign currency is not practicable or lawful, or if any required approvals are denied or not obtainable at a reasonable cost or
within a reasonable period, the depositary bank may take the following actions in its discretion:
● Convert the foreign currency to the extent practical and lawful and distribute the U.S. dollars to the holders for whom the conversion and
distribution is lawful and practical.
● Distribute the foreign currency to holders for whom the distribution is lawful and practical.
● Hold the foreign currency (without liability for interest) for the applicable holders.
Governing Law/Waiver of Jury Trial
The deposit agreement, the ADRs and the ADSs will be interpreted in accordance with the laws of the State of New York. The rights of holders of
ordinary shares (including ordinary shares represented by ADSs) are governed by the laws of England and Wales. As an owner of ADSs, holders
irrevocably agree that any legal action arising out of the Deposit Agreement, the ADSs or the ADRs, involving the Company or the Depositary, may only
be instituted in a state or federal court in the city of New York.
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Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the registration statements No. 333-233557 on Form S-3 and Nos. 333-233558 and 333-203929
on Form S-8 of Adaptimmune Therapeutics plc of our reports dated March 6, 2023, with respect to the consolidated financial statements of Adaptimmune
Therapeutics plc and the effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Reading, United Kingdom
March 6, 2023
Form of Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Exhibit 31.1
I, Adrian Rawcliffe, certify that:
1.
I have reviewed this annual report on Form 10-K of Adaptimmune Therapeutics plc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)), for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably
likely to materially affect the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 6, 2023
/s/ Adrian Rawcliffe
Adrian Rawcliffe
Chief Executive Officer and Director
Form of Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Exhibit 31.2
I, Gavin Wood, certify that:
1.
I have reviewed this annual report on Form 10-K of Adaptimmune Therapeutics plc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)), for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably
likely to materially affect the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 6, 2023
/s/ Gavin Wood
Gavin Wood
Chief Financial Officer
Exhibit 32.1
Section 906 Certificate
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I,
Adrian Rawcliffe, Chief Executive Officer of Adaptimmune Therapeutics plc, a public limited company incorporated under English law (the “Company”),
hereby certify, to my knowledge, that:
1.
2.
The Company’s annual report on Form 10-K for the year ended December 31, 2022, to which this Certification is attached as Exhibit 32.1
(the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Date: March 6, 2023
/s/ Adrian Rawcliffe
Adrian Rawcliffe
Chief Executive Officer and Director
Exhibit 32.2
Section 906 Certificate
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I,
Gavin Wood, Chief Financial Officer of Adaptimmune Therapeutics plc, a public limited company incorporated under English law (the “Company”),
hereby certify, to my knowledge, that:
1.
2.
The Company’s annual report on Form 10-K for the year ended December 31, 2022, to which this Certification is attached as Exhibit 32.2
(the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Date: March 6, 2023
/s/ Gavin Wood
Gavin Wood
Chief Financial Officer