Atara Biotherapeutics
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File Number 001-36548 ATARA BIOTHERAPEUTICS, INC.(Exact name of Registrant as specified in its Charter) Delaware 46-0920988( State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)611 Gateway Blvd., Suite 900South San Francisco, CA 94080(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (650) 278-8930 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.0001 per share, traded on The Nasdaq Stock MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate 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 15(d) of the Act. YES ☐ NO ☒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 preceding12 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and postedpursuant 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 suchfiles). YES ☒ NO ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best ofRegistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “largeaccelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer ☐ Accelerated filer ☒Non-accelerated filer ☐ (Do not check if a small reporting company) Small 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 financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒ The aggregate market value of common stock held by non-affiliates of the Registrant, based on the closing sales price for such stock on June 30, 2017 as reported by The NasdaqStock Market, was $271,251,806. This calculation excludes 10,528,420 shares held by executive officers, directors and stockholders that the Registrant has concluded are affiliates ofthe Registrant. Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of themanagement or policies of the registrant or that such person is controlled by or under common control with the Registrant.The number of outstanding shares of the Registrant’s Common Stock as of February 15, 2018 was 38,825,835.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s definitive proxy statement relating to its 2018 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report where indicated.Such proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. ATARA BIOTHERAPEUTICS, INC.TABLE OF CONTENTS PagePART I Item 1.Business4Item 1A.Risk Factors21Item 1B.Unresolved Staff Comments52Item 2.Properties52Item 3.Legal Proceedings52Item 4.Mine Safety Disclosures52 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities53Item 6.Selected Financial Data55Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations56Item 7A.Quantitative and Qualitative Disclosures About Market Risk68Item 8.Financial Statements and Supplementary Data69Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure90Item 9A.Controls and Procedures90Item 9B.Other Information91 PART III Item 10.Directors, Executive Officers and Corporate Governance92Item 11.Executive Compensation92Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters92Item 13.Certain Relationships and Related Transactions, and Director Independence92Item 14.Principal Accounting Fees and Services92 PART IV Item 15.Exhibits, Financial Statement Schedules93 2 FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements,which represent our intent, belief or current expectations, involve risks and uncertainties and other factors that could cause actual results and the timing ofcertain events to differ materially from future results expressed or implied by such forward-looking statements. In some cases you can identify thesestatements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “predict,”“plan,” “expect” or the negative or plural of these words or similar expressions. Forward-looking statements in this Annual Report on Form 10-K include, butare not limited to, statements about: •our expectations regarding the timing of initiating clinical trials, enrolling clinical trials and reporting results of clinical trials for our T-cellprograms; •the likelihood and timing of regulatory submissions or related approvals for our product candidates; •the potential market opportunities for commercializing our product candidates; •our expectations regarding the potential market size and the size of the patient populations for our product candidates, if approved forcommercial use; •estimates of our expenses, capital requirements and need for additional financing; •our expectation that our existing capital resources will be sufficient to enable us to fund our planned operations into the first half of 2020; •our ability to develop, acquire and advance product candidates into, and successfully complete, clinical trials; •the initiation, timing, progress and results of future preclinical studies and clinical trials and our research and development programs; •the scope of protection we are able to obtain and maintain for our intellectual property rights covering our product candidates; •our financial performance; •developments and projections relating to our competitors and our industry; •our ability to manufacture our product candidates for our clinical trials, including our Phase 3 trials; •our ability to sell or manufacture approved products at commercially reasonable values; and •timing and costs related to building our manufacturing plant.These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or ourindustry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements.We discuss many of these risks in this report in greater detail under the heading “1A. Risk Factors” and elsewhere in this report. You should not rely uponforward-looking statements as predictions of future events. New risk factors and uncertainties may emerge from time to time, and it is not possible formanagement to predict all risks and uncertainties.In this Annual Report on Form 10-K, unless the context requires otherwise, “Atara,” “Atara Biotherapeutics,” “Company,” “we,” “our,” and “us”means Atara Biotherapeutics, Inc. and, where appropriate, its subsidiaries. 3 PART I Item 1. BusinessOverviewAtara Biotherapeutics is a leading T-cell immunotherapy company developing novel treatments for patients with cancer, autoimmune and viraldiseases. The Company's off-the-shelf, or allogeneic, T-cells are bioengineered from donors with healthy immune function and allow for rapid delivery frominventory to patients without a requirement for pretreatment. Atara's T-cell immunotherapies are designed to precisely recognize and eliminate cancerous ordiseased cells without affecting normal, healthy cells. Atara's most advanced T-cell immunotherapy in development, tabelecleucel (formerly known asATA129), is being developed for the treatment of patients with Epstein-Barr virus, or EBV, associated post-transplant lymphoproliferative disorder, or EBV+PTLD, who have failed rituximab, as well as other EBV associated hematologic and solid tumors, including nasopharyngeal carcinoma, or NPC. Off-the-shelfATA188 and autologous, or patient derived, ATA190, the Company's T-cell immunotherapies using a complementary targeted antigen recognitiontechnology, target specific EBV antigens believed to be important for the potential treatment of multiple sclerosis, or MS. Atara's clinical pipeline alsoincludes ATA520 targeting Wilms Tumor 1, or WT1, and ATA230 directed against cytomegalovirus, or CMV.Our technology allows for rapid delivery of a T-cell immunotherapy product that has been manufactured in advance and stored in inventory, with eachmanufactured lot of cells providing therapy for numerous potential patients. This differs from autologous, or patient-derived, treatments, in which eachpatient’s own cells must be extracted, modified outside the body and then delivered back to the patient. We utilize a proprietary cell selection algorithm toselect the appropriate set of cells for use based on a patient’s unique immune profile, and, unlike many other T-cell programs, there is neither a requirementfor pre-treatment before our cells are administered nor is there extended monitoring following administration. For example, in our ongoing trials with ourmost advanced product candidate, tabelecleucel, patients are monitored for one to two hours following receipt of tabelecleucel. Our T-cell immunotherapyplatform is applicable to a broad array of targets and diseases. With more than 200 patients treated across the platform, we have observed clinical proof ofconcept across both viral and non-viral targets in conditions ranging from liquid and solid tumors to infectious and autoimmune diseases. We have alsoobserved a safety profile characterized by few treatment-related serious adverse events, or SAEs, and no evidence of cytokine release syndrome to date.Our T-cell immunotherapy product candidates are engineered from cells donated by healthy individuals with normal immune function. Once cells arecollected from a donor, they are bioengineered to expand those T-cells that recognize the antigens of interest. The resulting expanded T-cells are thencharacterized and held as inventory. From inventory, these cells can be selected, distributed and prepared for infusion in a partially human leukocyte antigen,or HLA, matched patient in approximately 3-5 days. Following administration, our T-cells home to their target, undergo target-controlled proliferation,eliminate diseased cells and eventually recede. Target-controlled proliferation means that our T-cells expand in number when they encounter diseased cellsin a patient’s body that express the antigen the cells are designed to recognize.We have two technology platforms. One of our technology platforms was developed from more than a decade of experience at Memorial SloanKettering Cancer Center, or MSK. The other was developed at QIMR Berghofer Medical Research Institute, or QIMR Berghofer, in Australia. We licensedrights to certain know-how and T-cell product candidates from MSK in June 2015. Our most advanced product candidate, tabelecleucel, targets EBV.Tabelecleucel received Breakthrough Therapy Designation, or BTD, from the U.S. Food and Drug Administration, or FDA, and Priority Medicines, or PRIME,designation from the European Medicines Agency, or EMA, and is currently being evaluated as monotherapy in two Phase 3 trials for the treatment ofpatients with EBV+ PTLD. We believe that tabelecleucel has the potential to be the first commercially available off-the-shelf T-cell immunotherapy and thefirst FDA and EMA approved therapy for EBV+ PTLD. With a European conditional marketing authorization application planned for the first half of 2019and U.S. biologics licensing applications planned following the completion of one of our ongoing Phase 3 trials, we are currently developing theinfrastructure to commercialize tabelecleucel globally in EBV+ PTLD. We are also evaluating the potential utility of tabelecleucel in patients with otherEBV associated cancers, such as NPC, to continue its development in solid tumors. Additional product candidates derived from the collaboration with MSKare being developed to treat various cancers and severe viral infections.In October 2015 and September 2016, we licensed rights to certain know-how and technology from QIMR Berghofer that are complementary to thosewe which was licensed from MSK. This know-how and technology uses targeted antigen recognition to create off-the-shelf T-cell immunotherapy productcandidates applicable to a variety of diseases, including autoimmune conditions such as multiple sclerosis, or MS. We are also working with QIMR Berghoferon the development of EBV and other virally targeted T-cells. Through this technology, we are expanding the role of immunotherapy beyond oncology andviral infections to autoimmune disease. Our most advanced off-the-shelf T-cell product candidate utilizing this technology, ATA188, targets select antigensof EBV and is currently being evaluated in a Phase 1 trial in an initial cohort for the treatment of patients with progressive MS. In connection with the initiallicense from QIMR Berghofer, we received an option to exclusively license an autologous version of ATA188, also known as ATA190, which recentlydemonstrated clinical activity in a Phase 1 trial in progressive MS. We expect to broadly explore the utility of our targeted antigen recognition technology inEBV and other virally driven diseases, and additional product candidates derived from our collaboration with QIMR Berghofer are being developed.4 Overall, we believe that Atara is a leading allogeneic T-cell immunotherapy company with a robust and late stage oncology pipeline and potentiallytransformative T-cell immunotherapies for MS and other viral diseases. With tabelecleucel poised to potentially become the first approved off-the-shelf T-celltherapy and a robust pipeline of high potential candidates, our ambition is to be recognized as the leader in off-the-shelf T-cell immunotherapy.Tabelecleucel for EBV+ PTLD following HCT or SOTSince its discovery as the first human oncovirus, EBV has been implicated in the development of a wide range of diseases, including lymphomas andother cancers. EBV is widespread in human populations and persists as a lifelong, asymptomatic infection. In healthy individuals, a small percentage of T-cells are devoted to keeping EBV in check. In contrast, immunocompromised patients, such as those undergoing hematopoietic cell transplants, or HCT, orsolid organ transplants, or SOT, have a reduced ability to control EBV. Left without appropriate immune surveillance, EBV transformed cells can, in somepatients, proliferate and cause an aggressive, life-threatening cancer called EBV+ PTLD. Nearly all cases of PTLD that occur following HCT are EBV positivewhile approximately 70% of PTLD cases that occur following SOT are EBV positive. Approximately 10-15% of PTLD patients are children. Patients withEBV+ PTLD are currently treated with rituximab or rituximab plus chemotherapy when systemic treatment is indicated, with approximately 50-60% ofpatients either not responding to or progressing following this first line of therapy. Historical studies suggest a high unmet medical need for improvedtherapies in patients with EBV+ PTLD who have failed rituximab. Median overall survival in patients with EBV+ PTLD following HCT who have failed rituximab-based first line therapy is 16-56 days, with a one-year survival rate of approximately 23% based on our evaluation of available historical outcomesdata. One- and two-year survival following incomplete response to rituximab in patients with high-risk EBV+ PTLD after SOT is 36% and 0%, respectively.The use of chemotherapy in patients with EBV+ PTLD who have failed rituximab is frequently associated with significant rates of treatment-related mortalitydue to the frailty of the patients and severe toxicities associated with chemotherapy.We believe that the global commercial opportunity for PTLD is attractive. We expect the number of EBV+ PTLD patients to grow over time as a resultof increases in the number of transplant procedures and an increasing rate of PTLD following these procedures. Based on our market research, we estimate thatin 2019, approximately 164,000 HCT and SOT transplant procedures are expected to be performed in the United States, the European Union, or EU,Australia, Canada, China, Japan, South Korea and Turkey, with this number expected to increase to approximately 207,000 by 2024, predominantly due toincreases in bone marrow, peripheral blood and umbilical cord blood donation and more haploidentical transplants. Similarly, the number of cases of EBV+PTLD is expected to increase from approximately 4,700 in 2019 to 6,000 in 2024 due to the use of more potent immuno-suppression in haploidenticaltransplants.Our most advanced T-cell immunotherapy product candidate, tabelecleucel, is an allogeneic EBV-specific T-cell immunotherapy that is currentlybeing investigated for the treatment of patients with EBV+ PTLD who have failed rituximab. In February 2015, the FDA granted tabelecleucel BTD in thetreatment of patients with EBV+ PTLD after HCT who have failed rituximab. BTD is an FDA process designed to accelerate the development and review ofdrugs intended to treat a serious condition when early trials show that the drug may be substantially better than current treatment. In October 2016,tabelecleucel was accepted into the EMA PRIME regulatory pathway for the same indication, providing enhanced regulatory support. In addition,tabelecleucel has received orphan status in the United States and European Union for the treatment of patients with EBV+ PTLD following HCT or SOT. InDecember 2016, we announced that we had reached agreement with the FDA on the designs of two Phase 3 trials for tabelecleucel intended to supportapproval in two separate indications, the treatment of EBV+ PTLD following HCT and SOT in patients who have failed rituximab. In December 2017,following discussion with the FDA of manufacturing and comparability data generated on material manufactured by our contract manufacturingorganization, we initiated these trials in the United States. We expect to expand these trials geographically to include Europe, Canada, and Australia.The Phase 3 MATCH trial (EBV+ PTLD following HCT) is a multicenter, open label, single arm trial designed to enroll approximately 35 patientswith EBV+ PTLD following HCT who have failed rituximab. The Phase 3 ALLELE trial (EBV+ PTLD following SOT) is a multicenter, open label trial withtwo non-comparative cohorts. Each cohort is designed to enroll approximately 35 patients. The first cohort will include patients who previously receivedrituximab monotherapy, and the second cohort will include patients who previously received rituximab plus chemotherapy. Both cohorts are planned toenroll concurrently. The primary endpoint of both the MATCH and ALLELE trials is confirmed best objective response rate, or ORR, defined as the percentof patients achieving either a complete or partial response to treatment with tabelecleucel confirmed after the initial tumor assessment showing a response.The protocols are designed to rule out a 20% ORR as the null hypothesis. This means that if the lower bound of the 95% confidence interval on ORR amongpatients receiving at least one dose of tabelecleucel exceeds 20% at the end of the study, then the trial would be expected to meet the primary endpoint forthe treatment of PTLD. For example, assuming anticipated enrollment of 35 patients in MATCH, an observed ORR above approximately 37% would beexpected to meet the primary endpoint. In ALLELE, each of the two cohorts with an anticipated enrollment of 35 patients will be analyzed separately withrespect to the primary endpoint and, similarly, as an example, with 35 patients enrolled in either cohort, an observed ORR above approximately 37% wouldbe expected to meet the primary endpoint. Secondary endpoints for both trials include duration of response, overall survival, safety, quality of life metrics,and other measures to evaluate its health economic impact. A safety committee will meet periodically to monitor for safety. Results from the firsttabelecleucel Phase 3 study, or cohort in the case of ALLELE, to reach the primary endpoint are expected to be available in the first half of 2019.5 In clinical trials conducted at MSK that have enrolled patients with EBV+ PTLD following HCT and SOT, efficacy following treatment withtabelecleucel monotherapy compared favorably with historical data in these patient populations. Patients with EBV+ PTLD after HCT who have failedrituximab and were treated with tabelecleucel had one-year overall survival of approximately 70% in two separate clinical trials. In the setting of EBV+PTLD after SOT in patients who have failed rituximab, similar results were observed, with one-year overall survival of approximately 60% in tabelecleucel-treated patients. A response rate of greater than or equal to 50% was observed in HCT and SOT patients in these studies. In June 2016, we opened amulticenter expanded access protocol, or EAP, trial. The trial is currently open at more than ten clinical sites in the United States. The primary objective ofthis trial is to provide tabelecleucel monotherapy to patients with EBV-associated diseases or certain EBV positive malignancies for whom there are no othertherapeutic options. Key secondary objectives include evaluation of efficacy and safety through a robust collection of data. We recently announced thepresentation of positive interim results from this multicenter EAP trial at the 59th American Society of Hematology, or ASH, Annual Meeting. Efficacy resultsin 11 patients from the planned Phase 3 populations with EBV+ PTLD following HCT and SOT who had failed rituximab were consistent with the single-institution safety profile and response rates previously reported by our collaborating investigators at MSK. The response rates in both the five evaluable HCTpatients treated in the EAP and the six evaluable SOT patients was greater than 70%. An additional patient with EBV+ PTLD following HCT remains alivebut was not evaluable due to lack of post-baseline assessment. We believe these results are consistent with the tabelecleucel profile observed in the Phase 2trials conducted at MSK. The Phase 3 trials for tabelecleucel are expected to enroll the same EBV+ PTLD patient populations. Tabelecleucel was generallywell tolerated in this study population. In this study, five patients experienced treatment-related SAEs. One patient died due to PTLD disease progression.Two possibly related cases of graft versus host disease, or GvHD, in patients with EBV+ PTLD following HCT were reported. A tumor flare was observed inone patient with EBV+HIV-associated plasmablastic lymphoma that resolved without clinical sequelae.With respect to the total safety population following treatment with tabelecleucel, few treatment-related SAEs have been observed. Among 173patients treated with tabelecleucel in clinical trials, there have been 12 patients with possibly related SAEs, with no infusion related toxicities, no cytokinerelease syndrome and three possibly related cases of GvHD.We are also pursuing marketing approval of tabelecleucel in the European Union. In March 2016, the EMA issued a positive opinion for orphan drugdesignation for tabelecleucel for the treatment of patients with EBV+ PTLD. In October 2016, the EMA Committee for Medicinal Products for Human Useand the Committee for Advanced Therapies granted tabelecleucel access to the EMA’s recently established PRIME regulatory initiative for the treatment ofpatients with EBV+ PTLD following HCT who have failed rituximab. PRIME provides early enhanced regulatory support to facilitate regulatory applicationsand accelerate the review of medicines that address a high unmet need. In January 2017, we received parallel scientific advice from the EMA’s ScientificAdvice Working Group and several national Health Technology Assessment agencies in the EU, including those in the United Kingdom, Germany andFrance. Based on these discussions, we plan to submit an application for Conditional Marketing Authorization, or CMA, of tabelecleucel in the treatment ofpatients with EBV+ PTLD following HCT who have failed rituximab in the first half of 2019. The CMA will be based on clinical data from Phase 1 and 2trials conducted at MSK and supported by available data from our Phase 3 MATCH and ALLELE trials in patients with EBV+ PTLD after HCT and SOT whohave failed rituximab, which will be ongoing at the time of filing.In 2017, we began pre-commercial preparation to support the planned tabelecleucel EU CMA submission. For example, we are developing aproprietary, web-based, off-the-shelf delivery solution for commercial use that we call Atara MatchMe™. The Atara MatchMe system will be a portal forhealth care professionals and institutions that allows for order input including the provision of required patient HLA and other information, the execution ofour cell selection algorithm, product shipment and tracking, as well as the capture of data on outcomes following treatment. In the first quarter of 2017, wealso signed a lease for an approximately 90,580 square foot facility in Thousand Oaks, California. We are building out a multi-product cellular therapymanufacturing facility with operations expected to commence in 2018. Overall, we believe that tabelecleucel monotherapy has a compelling valueproposition in the treatment of patients with EBV+ PTLD who have failed rituximab. We expect to pursue approvals globally for tabelecleucel in patientswith EBV+ PTLD following HCT and SOT who have failed rituximab and may seek partners to aid in our commercialization efforts in select markets. Inaddition, we expect to pursue development of tabelecleucel in earlier lines of therapy, including first line EBV+ PTLD in combination with rituximab.Tabelecleucel for nasopharyngeal carcinoma, or NPCNPC, is a type of head and neck cancer that is primarily EBV associated. Standard treatment for NPC includes radiation therapy with or withoutplatinum-based chemotherapy. In the setting of metastatic disease after the failure of chemotherapy, median survival is approximately five to 11 monthsbased on historical data, and there are no approved therapeutic agents available to treat this disease today. Based on our market research, we estimate that in2015 there were approximately 9,400 patients with metastatic or recurrent Type III NPC in the United States, the United Kingdom, France, Germany, Italy andSpain and approximately 93,000 in Asia. Treatment with tabelecleucel as a monotherapy has been evaluated in 14 patients with metastatic NPC after failureof one to three lines of chemotherapy in the studies conducted by MSKCC. An ORR of 21% was observed in these patients with one complete response andtwo partial responses. In addition, 11 of the 14 patients were alive at a median follow up of 18 months with a Kaplan-6 Meier survival estimate of 84% at two years. Tabelecleucel was administered to this immune competent patient population without prior lymphodepletingchemotherapy. Additionally, evidence of T-cell expansion following administration was observed. In April 2017, we entered into an agreement with Merck(known as MSD outside of the United States and Canada) to provide drug supply for a trial sponsored and conducted by us to evaluate tabelecleucel incombination with Merck’s anti-PD-1 (programmed death receptor-1) therapy, KEYTRUDA ® (pembrolizumab), in patients with platinum-resistant orrecurrent EBV-associated NPC. The Phase 1/2 trial will evaluate the safety, pharmacokinetics, pharmacodynamics, and preliminary efficacy of thecombination and is planned for initiation in the second half of 2018.Other T-Cell ProgramsATA188 and ATA190 for multiple sclerosisMS is a chronic disorder of the central nervous system, or CNS, that disrupts the myelination and normal functioning of the brain, optic nerves andspinal cord through inflammation and tissue loss. The evolution of MS results in an increasing loss of both physical and cognitive (e.g., memory) function.This has a substantial negative impact on the approximately 2.3 million people worldwide affected by MS.There are two categories of MS: progressive MS, or PMS; and relapsing-remitting MS, or RRMS. PMS is a severe form of MS with few therapeuticoptions. Within PMS there are two types of MS: secondary progressive MS, or SPMS; and primary progressive MS, or PPMS. According to the NationalMultiple Sclerosis Society, there are approximately one million people affected by PMS. Both types of PMS are characterized by persistent progression andworsening of MS symptoms and physical disability over time. PPMS occurs when the patient has a disease course characterized by steady and progressiveworsening after disease onset. SPMS initially begins as RRMS, but once patients have continuous progression of their disease, they have developed SPMS.This is distinct from RRMS, where patients have flares of the disease that are followed by periods of recovery and quiescence during which the disease doesnot progress. There is substantial unmet medical need for new and effective therapies for patients with PMS. Most of the treatment options that work well inreducing the flares in RRMS have not been shown to be effective in slowing or reversing the progression of disability in PMS. The two approved therapeuticoptions for PMS patients have a modest impact on symptoms and disease progression and, therefore, we believe that unmet need remains. In the UnitedStates, mitoxantrone is approved for SPMS and ocrelizumab was approved in March 2017 for PPMS. Siponimod is currently being studied in Phase 3 trialsfor SPMS.There is a strong biologic connection between EBV and MS. EBV is present in nearly all patients with MS. For example, in an international study ofpatients with clinically isolated syndrome, a CNS demyelinating event isolated in time that is compatible with the possible future development of MS, onlyone patient out of 1,407 was seronegative for, or not infected with, EBV. In addition, in separate studies, clusters of EBV infected B-cells and plasma cellswere evident in the brains of MS patients but not found in brains of patients without MS. In these studies, the EBV infected B-cells and plasma cells were inclose proximity to areas of active demyelination. Studies suggest that EBV positive B-cells and plasma cells in the CNS have the potential to catalyze anautoimmune response and the MS pathophysiology. In patients with MS, their T-cells may be unable to control EBV positive B-cells and plasma cells so thatB-cells and plasma cells could then accumulate in the brain and generate antibodies that attack and destroy myelin, the protective layer that insulates nervesin the brain and spinal cord. This loss of myelin ultimately leads to MS symptoms. MS disease course has also been shown to correlate with measures of EBVactivity. The role of B-cells in MS is supported by the recent approval by the FDA of ocrelizumab for PPMS which broadly targets B-cells through theirexpression of a cell surface marker known as CD20. Low vitamin D also suppresses T-cells and is associated with MS.Our second T-cell immunotherapy product candidate, ATA188, is an off-the-shelf EBV-specific T-cell that utilizes a targeted antigen recognitiontechnology that enables the T-cells we administer to selectively identify cells expressing the EBV antigens that we believe are important for the potentialtreatment of MS. We are also developing an autologous version of this product candidate that we call ATA190. ATA190 utilizes the same approach totargeted antigen recognition as ATA188. These product candidates are designed to selectively target only those cells which are EBV positive while sparingthose that are not. We believe that eliminating only EBV positive B-cells, including plasma cells, has the potential to benefit some patients with MS throughenhanced efficacy and a better side-effect profile. In October 2015, we obtained an exclusive, worldwide license to develop and commercialize allogeneic T-cell immunotherapy product candidates targeting EBV, including ATA188, utilizing technology and know-how developed by QIMR Berghofer. Inconnection with this license, we also received an option to exclusively license the autologous version of EBV product candidates, including ATA190.In the fourth quarter of 2017, we initiated an open label, single arm, multi-center, multi-national Phase 1 trial with allogeneic ATA188 for patientswith MS and in January 2018 received clearance of our investigational new drug, or IND, application from the FDA to proceed with patient enrollment at U.S.sites. The primary objective of this Phase 1 trial is to assess the safety of ATA188 in patients followed for at least one year after the first dose. Key secondaryendpoints in the trial include measures of clinical improvement such as Expanded Disability Status Scale, or EDSS, and annualized relapse rate, or ARR, aswell as MRI imaging. The trial is expected to enroll a total of 60 patients across the United States, Australia and Europe: 30 patients with PMS, either PPMSor SPMS, and 30 patients with RRMS. We expect to announce results from our ATA188 Phase 1 trial in patients with PMS in the first half of 2019.7 In addition, based on the Phase 1 clinical results observed to date with ATA190, we believe the continued development of ATA190 will enhance ourunderstanding of the potential therapeutic utility of targeting EBV in the treatment of MS and further inform and complement our development of ATA188,and we are planning a multicenter Phase 1/2 trial with ATA190 in PMS.Our collaborating investigators at QIMR Berghofer are currently conducting a Phase 1 trial utilizing autologous ATA190 for the treatment of patientswith PMS. We believe this is the first clinical trial to prospectively explore both the feasibility and potential utility of targeting EBV in MS. The trial isdesigned to: •enroll 10 patients: five with PPMS and five with SPMS; •assess the safety and tolerability of ATA190 in patients with PMS; •document preliminary evidence of efficacy through the evaluation of both clinically measured and patient reported changes in MS symptomsduring and following treatment; and •determine if autologous ATA190 can be generated to clinical scale from the blood of patients with PMS.Each patient receives four escalating doses of ATA190 over six weeks, with each individual dose given once every two weeks. Patients are followedfor 20 weeks after the last dose. An abstract from our collaborating investigators describing interim results from this Phase 1 trial was selected for inclusion inthe Emerging Science Program during the 69th American Academy of Neurology Annual Meeting in April 2017 and updated interim results for all tenpatients were recently presented at the MSParis 2017 Congress, the 7th Joint Meeting of the European Committee for Treatment and Research in MultipleSclerosis and the Americas Committee for Treatment and Research in Multiple Sclerosis.Results presented include data on five SPMS patients and five PPMS patients. Clinical improvements were reported in six of the ten patients treatedand these improvements were observed within two to fourteen weeks after the first dose. Three patients improved their EDSS score. EDSS is a method forquantifying disability and monitoring changes over time. Reduction in fatigue was a consistent observation in responding patients. Five of the six patientswho showed clinical improvements received ATA190 with greater than or equal to 7% EBV reactivity, or T-cell reactivity against target EBV antigensfollowing manufacturing. This suggests that EBV reactivity may be an important product characterization metric for future development. ATA190 was well-tolerated, and no significant treatment-related adverse events were observed. A summary of study results is highlighted in the table below. Subject Age/Gender(MS Type) EDSS1BL2/PostTx3 CD8+T cellReactivityto EBV Observed Improvement60 yo F (SPMS) 6.5/6.0 47% Yes60 yo M (PPMS) 5.0/3.5 31% Yes49 yo F (PPMS) 8.0/8.0 15% Yes61 yo M (SPMS) 6.5/6.5 10% Equivocal55 yo F (PPMS) 5.0/4.5 8% Yes—still in follow up46 yo M (SPMS)4 8.0/8.0 7% Yes42 yo F (PPMS) 6.5/7.0 3% None53 yo M (PPMS) 6.0/6.0 <1% None54 yo F (SPMS) 6.5/6.5 <1% None49 yo F (SPMS) 6.5/6.5 <1% Mild 1 EDSS = Expanded Disability Scale Score.2 BL = Baseline EDSS score prior to treatment with ATA190.3 Post Tx = EDSS score following treatment with ATA190.4 This patient received ATA190 under a compassionate use protocol approximately 4 years prior to entry into the Phase 1 trial.Overall, we believe these results are encouraging and support the continued development of ATA188 and ATA190 in MS.ATA520 for hematologic malignanciesOur third T-cell immunotherapy product candidate, ATA520, is an off-the-shelf WT1 specific T-cell immunotherapy, that targets cancers expressingthe antigen WT1 and is currently in Phase 1 clinical trials. WT1 is an intracellular protein that is overexpressed in a number of cancers, includinghematological malignances as well as solid tumors. MSK has two Phase 1 clinical trials evaluating ATA520. The first trial is a dose escalation trial ofATA520 for residual or relapsed leukemia after HCT. The second trial is a dose escalation trial of ATA520 following T-cell depleted HCT for patients withrelapsed or refractory multiple myeloma, including plasma cell leukemia, or PCL. Based on data from these trials, we intend to develop ATA520 in a selectset of hematologic malignancies and solid tumors. Given the advances of our EBV-related pipeline programs in NPC and MS, as well as the opportunity topursue a conditional marketing authorization in the EU for tabelecleucel, we expect to initiate an additional clinical trial with8 ATA520 following the further process development of ATA520 as well as the clinical and regulatory advancement of tabelecleucel and ATA188.ATA230 for CMV viremia and diseaseOur fourth T-cell immunotherapy product candidate, ATA230, is an off-the-shelf CMV specific T-cell immunotherapy, that is in Phase 2 clinical trialsfor refractory CMV infection that occurs in some patients who have received an HCT or SOT or are otherwise immunocompromised. We met with the FDA foran end of Phase 2 meeting to discuss late stage development of ATA230 for the treatment of anti-viral refractory or resistant CMV infection following eitherHCT or SOT. Our collaborating investigators presented updated ATA230 results from 50 post-transplant patients with refractory CMV viremia and disease,including those with disease in the central nervous system, at the 59th ASH Annual Meeting in Atlanta, Georgia, in December 2017. Results reported includea response rate of approximately 60% in all patients, which was similar in those with CMV viremia and disease. Patients who responded to ATA230 showedimproved 6- and 12-month survival rates of approximately 80% and 60%, respectively, versus those patients who did not respond to treatment. One of the 32patients who responded died of CMV disease. ATA230 was generally well tolerated. Five patients experienced grade 4 or higher adverse events deemedpossibility related to ATA230. Recently, the FDA granted orphan drug designation for ATA230 for the treatment of CMV viremia and disease inimmunocompromised patients as well as Rare Pediatric Disease Designation for the treatment of congenital CMV infection. The EMA has also granted usorphan status for ATA230 for CMV infection in patients with impaired cell-mediated immunity. Given the opportunity to pursue a CMA in the EU fortabelecleucel, we have decided to prioritize our EBV related programs ahead of ATA230 at this time, and plan to further evaluate our development strategyfor ATA230 in 2018.ATA621 for BK and JC virus associated diseasesThrough our ongoing collaboration with QIMR Berghofer, we recently developed a new T-cell immunotherapy product candidate, ATA621, for BKand JC virus associated diseases. These two viruses are closely related and there are no available antiviral agents approved for use in BK or JC associateddiseases. JC virus is associated with progressive multifocal leukoencephalopathy, or PML, which occurs in transplant, HIV and cancer patients as well as inpatients treated with other immunosuppressive therapies, including certain therapies utilized for the treatment of MS. Based on our market research, weestimate that there are approximately 7,800 cases of PML annually, worldwide. BK virus is associated with hemorrhagic cystitis, or BKVHC, which mainlyoccurs following HCT or cyclophosphamide treatment as well as BK virus associated nephropathy, or BKVAN, which is a disease most commonly associatedwith kidney transplant. Based on Atara market research, we estimate that there are approximately 2,100 cases of BKVAN and 2,300 cases of BKVHCannually, worldwide. We are currently conducting investigational new drug application enabling manufacturing process development and plan to initiate aPhase 1 trial with ATA621 in 2019.9 Our pipeline of product candidates is highlighted in the figure below.Additional Platform Expansion ActivitiesWe believe our T-cell technology platform will have utility beyond the current set of targets to which it has been directed. We expect to furtherresearch and develop additional cellular therapies, which may include T-cell programs targeted against other antigens as well as engineered T-cellimmunotherapies such as chimeric antigen receptor, or CAR-T, cell programs. We believe that viral antigens are well suited to adoptive immunotherapygiven that people with normal immune systems are able to mount robust responses to these viral targets, but immunocompromised patients and some cancerpatients are not. We also intend to license or acquire additional product candidates or technologies to enhance our existing T-cell technology platform.CompetitionThe biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis onproprietary products. While we believe that our innovative technology, knowledge, experience and scientific resources provide us with competitiveadvantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnologycompanies, academic institutions and public and private research institutions. Some of these potential competitors may have a more established presence inthe market and significantly greater financial, technical and human resources than we have. Our commercial opportunity will be reduced or eliminated if ourcompetitors develop and commercialize products that are safer, more effective, have fewer side effects or are less expensive than any products that we maydevelop.T-Cell Product CandidatesShould our T-cell product candidates be approved for use, we will face substantial competition. In addition to the current standard of care for patients,commercial and academic clinical trials are being pursued by a number of parties in the field of immunotherapy. Early results from these trials have fueledcontinued interest in T-cell immunotherapy. In addition, if approved, our T-cell programs would compete with currently marketed drugs and therapies usedfor treatment of the following indications, and potentially with drug candidates currently in development for the same indications.10 EBV+ PTLDThere are currently no FDA or EMA approved products for the treatment of EBV+ PTLD. However, some approved products and therapies are currentlyused off-label in this setting. Companies and academic institutions that may license therapies to companies in the future are or may be developing newtreatments. These therapies, as well as promotional efforts by competitors and clinical trial results of competitive products, could diminish the ability tomarket and sell tabelecleucel. The current treatment for EBV+ PTLD involves administration of rituximab as a single agent or in the SOT setting, incombination with chemotherapy regimens. Additionally, companies and academic institutions are developing drug candidates for EBV+ PTLD and otherEBV associated diseases, including Cell Medica Ltd., or Cell Medica, which is conducting Phase 1 clinical trials for baltaleucel-T, an autologous EBVspecific T-cell therapy in post-transplant lymphoproliferative disorder and Viracta Therapeutics, Inc., or Viracta, which has initiated Phase 1b/2 clinical trialsfor VRx-3996 in relapsed/refractory EBV+ lymphomas.Multiple SclerosisCompetition in the MS market is high with fourteen therapies approved for the treatment of RRMS in the United States and European Union. Thereare many U.S. and international competitors in the RRMS market, including major multi-national fully-integrated pharmaceutical companies and establishedbiotechnology companies. Most recently, Ocrevus®, marketed by F. Hoffmann-La Roche, was approved for the treatment of relapsing MS in the UnitedStates and European Union. There are numerous other development candidates in Phase 3 trials for RRMS including Novartis’ anti-CD20 monoclonalantibody ofatumumab; Alkermes’ monomethyl fumarate prodrug ALKS 8700; Teva’s laquinimod, and Actelion’s next-generation sphingosine 1-phosphatereceptor, or S1PR, agonist ponesimod. Celgene recently reported positive results from Phase 3 clinical trials evaluating ozamimod, a S1PR agonist, inrelapsing MS.Only three therapies have been approved for the treatment of progressive MS. Recently, Ocrevus® was approved in the United States and EuropeanUnion for the treatment of PPMS. Extavia® (marketed by Novartis) is approved in the United States and European Union for the treatment ofSPMS. Betaseron® (marketed by Bayer AG) is also approved in the European Union. Few therapies have been approved for progressive MS because manycandidates have failed during clinical trial testing. In the United States, there is one drug (mitoxantrone) approved to treat SPMS. The SPMS and PPMS markets have active development pipelines and additional novel agents could be approved in the future. Several developmentcandidates are being evaluated in clinical trials including a number of Phase 3 programs: MedDay SA is evaluating MD-1003, a concentrated form of biotin,for progressive MS; AB Science is evaluating masitinib, a tyrosine kinase inhibitor, for progressive MS; and Novartis is evaluating siponimod, an S1P1modulator, for SPMS; and Actelion Pharmaceuticals is evaluating ponesimod, for SPMS. Multiple Myeloma including Plasma Cell LeukemiaSeveral products are approved for the treatment of relapsed or refractory multiple myeloma, or MM, including immunomodulatory drugs, or IMIDs,such as Thalomid® (Celgene Corporation), Revlimid® (Celgene Corporation) and Pomalyst® (Celgene Corporation); monoclonal antibodies such asDarzalex® (Janssen Research & Development, LLC) and Empliciti® (Bristol Myers Squibb); and proteasome inhibitors such as Velcade® (MillenniumPharmaceuticals, Inc.) and Kyprolis® (Amgen Inc.).A number of companies and institutions are pursuing development programs for relapsed or refractory MM. These development programs includedrug candidates being evaluated in clinical trials as a monotherapy or in combination with other approved agents. In addition, many groups are developingnovel T-cell therapies such as autologous CAR T-cell or autologous TCR T-cell candidates. These include bluebird bio, Inc., which is conducting Phase 2clinical trials testing bb2121, an anti-BCMA CART; Gilead Sciences, Inc., which is testing KTE-585, an anti-BCMA CART in Phase 1 clinical trials; JunoTherapeutics, which is testing an anti-BCMA CART in Phase 1 clinical trials; Autolus Limited, which is testing AUTO-2, a bi-specific anti-BCMA/TACICART in Phase 1 clinical trials and Adaptimmune Therapeutics PLC, which is testing an anti-NY-ESO TCR in Phase 1/2 clinical trials.CMV InfectionThere are numerous approved products and therapies for the treatment of CMV infection, and a number of companies and academic institutions thatmay license therapies to companies in the future are or may be developing new treatments for CMV infection. These therapies, as well as promotional effortsby competitors and clinical trial results of competitive products, could significantly diminish any ability to market and sell the CMV T-cell immunotherapy.Drug therapies approved or commonly used for CMV infection include antiviral compounds such as Prevymis®, marketed by Merck & Co. Inc.; ganciclovir,valganciclovir, cidofovir or foscarnet.11 Additionally, a number of companies and academic institutions are developing drug candidates for CMV infection and other CMV-associateddiseases, including Shire Plc which is conducting Phase 3 clinical trials of maribavir, a UL97 protein kinase inhibitor; Vical Inc., recently announcedASP0113, a therapeutic bivalent plasma DNA CMV vaccine being evaluated in patients undergoing an allogeneic stem cell transplant, failed to meet primaryor secondary endpoints in Phase 3 clinical trials. In addition, Helocyte, Inc., is conducting two Phase 2 clinical trials for a CMV MVA-vaccine and a CMVpeptide vaccine in patients undergoing an allogeneic hematopoietic stem cell transplant; Merck is conducting Phase 1 clinical trials for V160, a CMV DNAvaccine; VBI Vaccines Inc., has completed Phase 1 clinical trials for VBI-1501A, an eVLP vaccine; Hookipa Biotech, is conducting Phase 1 clinical trials forHB101, a bivalent vaccine, ViraCyte, is conducting Phase 1 clinical trials for Viralym-C, a CMV-specific allogeneic cell therapy product; Fate Therapeuticsis conducting a Phase 1/2 clinical trial for ProTmune, a small molecule programmed mobilized peripheral blood graft; Chimerix is conducting Phase 1clinical trials for intravenous Brincidofovir (BCV IV), a nucleotide analog and Moderna Therapeutics is conducting Phase 1 clinical trials for mRNA-1647,an mRNA based prophylactic vaccine.License AgreementsMSK Option and License AgreementIn September 2014, we entered into an exclusive option agreement with MSK under which we acquired the right to exclusively license from MSK theworldwide rights to three clinical stage T-cell programs. The initial option period was for 12 months. In exchange for the exclusive option, we paid MSK$1.25 million in cash and issued 59,761 shares of our common stock to MSK. We and MSK also agreed to collaborate on further research to developadditional cellular therapies, which may include T-cell programs targeted against other antigens and/or CAR-T, and which we also would hold an option tolicense, if developed.In June 2015, we exercised the option and entered into a license agreement with MSK. Under the terms of the license agreement, MSK granted us aworldwide, exclusive license under certain patent rights, know-how and a library of T-cells and cell lines, to research, develop, manufacture andcommercialize T-cell products specific to CMV, EBV or WT1 that comprise or are based on or made using such licensed rights. MSK also agreed to transfercertain INDs related to the licensed products to us. We have agreed to use commercially reasonable efforts to commercialize the licensed products and, ifcommercialized, continue active marketing efforts for any commercialized licensed product through the term of the license agreement.In connection with the option exercise and the execution of the license agreement, we made an upfront cash payment to MSK of $4.5 million. We areobligated to make additional milestone payments of up to $33.0 million with respect to the three licensed clinical stage T-cell programs based onachievement of specified development, regulatory and sales-related milestones. We are also required to make escalating mid to high single-digit royaltypayments to MSK based on sales of any licensed products. In addition, under certain circumstances, we must make certain minimum annual royalty paymentsto MSK, which are creditable against earned royalties owed for the same annual period. We are also obligated to pay a low double-digit percentage ofconsideration we receive for sublicensing the licensed rights.The license agreement expires for each licensed T-cell product on a licensed product-by-licensed product basis and a country-by-country basis, on thelatest of: (i) expiration of the last licensed patent rights related to such licensed product in such country, (ii) expiration of any market exclusivity periodgranted by law with respect to such licensed product in such country, and (iii) a specified number of years after the first commercial sale of the licensedproduct in such country. Upon expiration of the license agreement, the licenses granted to us will become non-exclusive royalty-free, perpetual andirrevocable. MSK may terminate the license agreement if we materially breach the agreement and does not cure such breach within a specified period or if weexperience certain insolvency events.Intellectual PropertyPatentsOur commercial success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, to operate withoutinfringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietaryposition by, among other methods, filing U.S. and non-U.S. patent applications related to our proprietary technology, inventions and improvements that areimportant to the development and implementation of our business. We also rely on trade secrets, know-how, continuing technological innovation andpotential in-licensing opportunities to develop and maintain our proprietary position. Additionally, we expect to benefit from a variety of statutoryframeworks in the United States, Europe and other countries that relate to the regulation of biosimilar molecules and orphan drug status. These statutoryframeworks provide certain periods of regulatory exclusivity for qualifying molecules. See “Government Regulation.”We seek composition-of-matter and/or associated method patents, including method-of-treatment patents, for each of our product candidates in keytherapeutic areas. The United States patent system permits the filing of provisional and non-provisional patent applications. A provisional patent applicationis not examined for patentability by the USPTO and automatically expires 1212 months after its filing date. As a result, a provisional patent application cannot mature into an issued patent. Provisional patent applications are often used,among other things, to establish an early effective filing date for a later-filed non-provisional patent application. A non-provisional patent application isexamined by the USPTO and can mature into a patent once the USPTO determines that the claimed invention meets the standards of patentability.Individual patents extend for varying periods of time depending on the date of filing of the patent application, the priority date claimed and the legalterm of patents as determined by the applicable law in the countries in which those patents are obtained. Generally, patents issued from applications filed inthe United States are effective for 20 years from the earliest non-provisional filing date. In addition, in certain instances, a patent term can be extended torecapture a portion of the term effectively lost as a result of the FDA regulatory review period; however, the restoration period cannot be longer than fiveyears and the total patent term including the restoration period must not exceed 14 years following FDA approval. Additionally, patent term adjustments canextend term to account for certain delays by the U.S. Patent and Trademark Office, or USPTO, during prosecution before that office. The duration of non-U.S.patents varies in accordance with provisions of applicable local law, but typically, the life of a non-U.S. patent is 20 years from the earliest internationalfiling date, not inclusive of any patent term extension that may be available. The actual protection afforded by a patent varies on a product-by-product basis,from country to country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of extensions of patent term,the availability of legal remedies in a particular country and the validity and enforceability of the patent.National and international patent laws concerning protein-based biologics such as our products remain highly unsettled. No consistent policyregarding the patent-eligibility or the breadth of claims allowed in such patents has emerged to date among the United States, Europe and other countries.Changes in either the patent laws or in interpretations of patent laws in the United States and other countries can diminish our ability to protect ourinventions and enforce our intellectual property rights. Accordingly, we cannot predict the breadth or enforceability of claims that may be granted in ourpatents or in third-party patents. The biotechnology and pharmaceutical industries are characterized by extensive intellectual property litigation. Our abilityto maintain and solidify our proprietary position for our product candidates and technology will depend on our success in obtaining effective claims for anypatent and enforcing those claims once a patent is granted. We do not know whether any of the patent applications that we may file or license from thirdparties will result in the issuance of any patents. The issued patents that we own or may receive in the future may be challenged, invalidated or circumvented,and the rights granted under any issued patents may not provide us with sufficient protection or competitive advantages against competitors with similartechnology. Furthermore, our competitors may independently develop and commercialize similar drugs or duplicate our technology, business model orstrategy without infringing our patents. Because of the extensive time required for clinical development and regulatory review of any drug we may developfrom our product candidates, it is possible that, before any of our drugs can be commercialized, any related patent may expire or remain in force for only ashort period following commercialization, thereby reducing any advantage of any such patent. The patent positions for our product candidates aresummarized below:Our global patent estate consists of both issued patents and pending patent applications and includes wholly-owned patent applications, in-licensedpatents and patent applications to which we generally hold exclusive commercial rights, and patents and patent applications to which we hold an exclusiveoption to license commercial rights. Regarding our tabelecleucel for EBV+PTLD following HCT or SOT, tabelecleucel for NPC, ATA188, ATA190, ATA520,ATA230 and ATA621 programs, and our platform technologies underlying these programs, our global patent estate is directed to compositions of matterand/or associated methods, including methods of treatment, and consists of 25 patent families having a total of 95 issued patents or patent applications. Theissued patents and patent applications (if issued) of our global patent estate are expected to expire between 2023 and 2038, not inclusive of any patent termextension that may be available is any associated jurisdiction.Trade SecretsIn addition to patents, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain ourcompetitive position. We seek to protect our proprietary information, in part, using confidentiality agreements with our commercial partners, collaborators,employees and consultants and invention assignment agreements with our employees. These agreements are designed to protect our proprietary informationand, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed by an employee. These agreements may bebreached, and we may not have adequate remedies for any such breach or any unauthorized disclosure of our proprietary information. In addition, our tradesecrets may otherwise become known or be independently discovered by competitors. To the extent that our commercial partners, collaborators, employeesand consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how andinventions.13 Government RegulationOverview of U.S. Government RegulationThe preclinical studies and clinical testing, manufacture, labeling, storage, recordkeeping, advertising, promotion, export, marketing and sales, amongother things, of our product candidates are subject to extensive regulation by governmental authorities in the United States and other countries. In the UnitedStates, pharmaceutical products are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act and other laws, including, in the case of biologics,the Public Health Service Act.Our T-cell immunotherapy product candidates, including tabelecleucel (formerly known as ATA129), are regulated by the FDA as biologics, reviewedby the Center for Biological Evaluation and Research, and will require the submission of BLAs and approval by the FDA prior to being marketed in theUnited States. For T-cell immunotherapy trials conducted at, or sponsored by, institutions receiving NIH funding for recombinant DNA research, prior to thesubmission of an IND to the FDA, a protocol and related documents must be submitted to, and the study registered with, the NIH Office of BiotechnologyActivities, or the OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or the NIH Guidelines. Compliance with theNIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA. However, many companies andother institutions, not otherwise subject to the NIH Guidelines, voluntarily follow them. The NIH is responsible for convening the recombinant DNA advisorycommittee, or RAC, that discusses protocols that raise novel or particularly important scientific, safety or ethical considerations at one of its quarterly publicmeetings. The OBA will notify the FDA of the RAC’s decision regarding the necessity for full public review of a protocol. RAC proceedings and reports areposted to the OBA website and may be accessed by the public.Failure to comply with FDA requirements, both before and after product approval, may subject us or our partners, contract manufacturers, and suppliersto administrative or judicial sanctions, including FDA refusal to approve applications, warning letters, product recalls, product seizures, total or partialsuspension of production or distribution, fines and/or criminal prosecution.The steps required before a biologic may be approved for marketing of an indication in the United States generally include: •completion of preclinical laboratory tests, animal studies and formulation studies conducted according to good laboratory practices, or GLP,and other applicable regulations; •submission to the FDA of an investigational new drug, or IND, application, which must become effective before human clinical trials maycommence; •completion of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish that thebiological product is “safe, pure and potent”, which is analogous to the safety and efficacy approval standard for a chemical drug product for itsintended use; •submission to the FDA of a BLA; •satisfactory completion of an FDA preapproval inspection of the manufacturing facility or facilities at which the product is produced to assesscompliance with applicable current good manufacturing practices, or cGMP and in the case of our T-cell immunotherapy product candidates,good tissue practices, or GTP; and •FDA review of the BLA and issuance of a biologics license.Before conducting studies in humans, laboratory evaluation of product chemistry, toxicity and formulation as well as animal studies to assess thepotential safety and efficacy of the biologic candidate must be conducted. Preclinical toxicology studies in animals must be conducted in compliance withFDA regulations. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND.Some preclinical testing may continue even after the IND is submitted. In addition to including the results of the preclinical testing, the IND will also includea protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to beevaluated if the first phase or phases of the clinical trial lend themselves to an efficacy determination. The IND will automatically become effective 30 daysafter receipt by the FDA, unless the FDA within the 30-day time period places the IND on clinical hold because of safety concerns about the productcandidate or the conduct of the trial described in the clinical protocol included in the IND. The IND sponsor and the FDA must resolve any outstandingconcerns before clinical trials can proceed.All clinical trials for new drugs and biologics must be conducted under the supervision of one or more qualified principal investigators in accordancewith GCP. They must be conducted under protocols detailing the objectives of the applicable phase of the trial, dosing procedures, research subject selectionand exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and progressreports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors must also report to the FDA, within certain timeframes,serious and unexpected adverse reactions, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocolor14 investigator’s brochure, or any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the productcandidate. An institutional review board, or IRB, at each institution participating in the clinical trial must review and approve the protocol before a clinicaltrial commences at that institution, approve the information regarding the trial and the consent form that must be provided to each research subject or thesubject’s legal representative, and monitor the trial until completed.Clinical trials are typically conducted in three sequential phases, but the phases may overlap and different trials may be initiated with the sameproduct candidate within the same phase of development in similar or differing patient populations.Phase 1 clinical studies may be conducted in a limited number of patients or healthy volunteers, as appropriate. The product candidate is initiallytested for safety and, as appropriate, for absorption, metabolism, distribution, excretion, pharmacodynamics and pharmacokinetics.Phase 2 usually involves trials in a larger, but still limited, patient population to evaluate preliminarily the efficacy of the product candidate forspecific, targeted indications to determine dosage tolerance and optimal dosage and to identify possible short-term adverse effects and safety risks.Phase 3 trials are undertaken to further evaluate clinical efficacy of a specific endpoint and to test further for safety within an expanded patientpopulation at geographically dispersed clinical trial sites. Phase 1, Phase 2 or Phase 3 testing might not be completed successfully within any specific timeperiod, if at all, with respect to any of our product candidates. Results from one trial are not necessarily predictive of results from later trials. Furthermore, theFDA or the sponsor may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to anunacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted inaccordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients.The results of the preclinical studies and clinical trials, together with other detailed information, including information on the manufacture andcomposition of the product, are submitted to the FDA as part of a BLA requesting approval to market the product candidate for a proposed indication. Underthe Prescription Drug User Fee Act the fees payable to the FDA for reviewing a BLA, as well as annual fees for commercial manufacturing establishments andfor approved products, can be substantial but are subject to certain limited deferrals, waivers and reductions that may be available. The fees typically increaseeach year. Each BLA submitted to the FDA for approval is reviewed for administrative completeness and reviewability within 60 days following receipt bythe FDA of the application. If the BLA is found complete, the FDA will file the BLA, triggering a full review of the application. The FDA may refuse to fileany BLA that it deems incomplete or not properly reviewable at the time of submission. The FDA’s established goal is to review 90% of priority BLAapplications within six months after the application is accepted for filing and 90% of standard BLA applications within 10 months of the acceptance date,whereupon a review decision is to be made. The FDA, however, may not approve a product candidate within these established goals and its review goals aresubject to change from time to time. Further, the outcome of the review, even if generally favorable, may not be an actual approval but a “complete responseletter” that describes additional work that must be done before the application can be approved. Before approving a BLA, the FDA may inspect the facility orfacilities at which the product is manufactured and will not approve the product unless the facility complies with cGMP. The FDA may deny approval of aBLA if applicable statutory or regulatory criteria are not satisfied, or may require additional testing or information, which can extend the review process. FDAapproval of any application may include many delays or never be granted. If a product is approved, the approval may impose limitations on the uses forwhich the product may be marketed, may require that warning statements be included in the product labeling, may require that additional studies beconducted following approval as a condition of the approval, and may impose restrictions and conditions on product distribution, prescribing, or dispensingin the form of a Risk Evaluation and Mitigation Strategy, or REMS, or otherwise limit the scope of any approval. The FDA must approve a BLA supplementor a new BLA before a product may be marketed for other uses or before certain manufacturing or other changes may be made. Further post-marketing testingand surveillance to monitor the safety or efficacy of a product is required. Also, product approvals may be withdrawn if compliance with regulatory standardsis not maintained or if safety or manufacturing problems occur following initial marketing. In addition, new government requirements may be establishedthat could delay or prevent regulatory approval of our product candidates under development.Under the Biologics Price Competition and Innovation Act of 2009, or the BPCIA, a statutory pathway has been created for licensure, or approval, ofbiological products that are biosimilar to, and possibly interchangeable with, earlier biological products licensed under the Public Health Service Act. Alsounder the BPCIA, innovator manufacturers of original reference biological products are granted 12 years of exclusivity before biosimilars can be approved formarketing in the United States. The approval of a biologic product biosimilar to one of our products could have a material adverse impact on our business asit may be significantly less costly to bring to market and may be priced significantly lower than our products.15 Both before and after the FDA approves a product, the manufacturer and the holder or holders of the BLA for the product are subject to comprehensiveregulatory oversight. For example, quality control and manufacturing procedures must conform, on an ongoing basis, to cGMP and GTP requirements, asapplicable and the FDA periodically inspects manufacturing facilities to assess compliance with these standards. Accordingly, manufacturers must continueto spend time, money and effort to maintain compliance.Orphan Drug ActThe Orphan Drug Act provides incentives to manufacturers to develop and market drugs for rare diseases and conditions affecting fewer than 200,000persons in the United States at the time of application for orphan drug designation. Orphan drug designation must be requested before submitting a BLA.Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product that hasorphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the holder of the approval is entitledto a seven-year exclusive marketing period in the United States for that product except in very limited circumstances. For example, a drug that the FDAconsiders to be clinically superior to, or different from, another approved orphan drug, even though for the same indication, may also obtain approval in theUnited States during the seven-year exclusive marketing period. In addition, holders of exclusivity for orphan drugs are expected to assure the availability ofsufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal of marketing exclusivity for the drug.Legislation similar to the Orphan Drug Act has been enacted outside the United States, including in the EU. The orphan legislation in the EU isavailable for therapies addressing chronic debilitating or life-threatening conditions that affect five or fewer out of 10,000 persons or are financially notviable to develop. The market exclusivity period is for ten years, although that period can be reduced to six years if, at the end of the fifth year, availableevidence establishes that the product is sufficiently profitable not to justify maintenance of market exclusivity. The market exclusivity may be extended to12 years if the sponsor completes a pediatric investigation plan agreed upon with the relevant committee of the EMA.Expedited Review and ApprovalThe FDA has various programs, including Fast Track and Regenerative Medicine Advanced Therapy, or RMAT, priority review and acceleratedapproval, which are intended to expedite or simplify the process for developing and reviewing promising drugs, or to provide for the approval of a drug onthe basis of a surrogate endpoint. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets theconditions for qualification or that the time period for FDA review or approval will be shortened. Generally, drugs that are eligible for these programs arethose for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existingtreatments. For example, Fast Track and RMAT are processes designed to facilitate the development and expedite the review of drugs to treat serious or life-threatening diseases or conditions and fill unmet medical needs. Priority review is designed to give drugs that offer major advances in treatment or provide atreatment where no adequate therapy exists an initial review within six months as compared to a standard review time of 10 months. Although Fast Track,RMAT, and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a FastTrack designated drug and expedite review of the application for a drug designated for priority review. Accelerated approval provides for an earlier approvalfor a new drug that is intended to treat a serious or life-threatening disease or condition and that fills an unmet medical need based on a surrogate endpoint. Asurrogate endpoint is a laboratory measurement or physical sign used as an indirect or substitute measurement representing a clinically meaningful outcome.As a condition of approval, the FDA may require that a sponsor of a product candidate receiving accelerated approval perform post-marketing clinical trialsto confirm the clinically meaningful outcome as predicted by the surrogate marker trial.In addition to the Fast Track, accelerated approval and priority review programs discussed above, breakthrough therapy designation may be pursued.A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threateningdisease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one ormore clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs designated as breakthroughtherapies are also eligible for accelerated approval. The FDA will seek to ensure the sponsor of a breakthrough therapy product candidate receives: intensiveguidance on an efficient drug development program; intensive involvement of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary review; and rolling review.ReimbursementIn both domestic and foreign markets, sales and reimbursement of any approved products will depend, in part, on the extent to which the costs of suchproducts will be covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. Thesethird-party payors are increasingly challenging the prices charged for medical products and services and imposing controls to manage costs. The containmentof healthcare costs has become a priority of federal and state governments and the prices of drugs have been a focus in this effort. Governments have shownsignificant interest in implementing16 cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. For example, therehave been several recent U.S. Congressional inquiries and proposed federal legislation designed to, among other things, bring more transparency to drugpricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform governmentprogram reimbursement methodologies for drugs. Further, Congress and the Trump administration have each indicated that it will continue to seek newlegislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and implementedregulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictionson certain product access and marketing cost disclosure and transparency measures, and, in some cases, to encourage importation from other countries andbulk purchasing. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controlsand measures, could further limit our net revenue and results. In addition, there is significant uncertainty regarding the reimbursement status of newlyapproved healthcare products. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products.If third-party payors do not consider our products to be cost-effective compared to other therapies, the payors may not cover our products after approved as abenefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.Within the United States, if we obtain appropriate approval in the future to market any of our current product candidates, we may seek approval andcoverage for those products under Medicaid, Medicare and the Public Health Service, or PHS, pharmaceutical pricing program and also seek to sell theproducts to federal agencies.Medicaid is a joint federal and state program that is administered by the states for low income and disabled beneficiaries. Under the Medicaid DrugRebate Program, manufacturers are required to pay a rebate for each unit of product reimbursed by the state Medicaid programs. The amount of the rebate foreach product is set by law and may be subject to an additional discount if certain pricing increases more than inflation.Medicare is a federal program administered by the federal government that covers individuals age 65 and over as well as those with certaindisabilities. Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that do not need to be administered by aphysician). Medicare Part D is administered by private prescription drug plans approved by the U.S. government and each drug plan establishes its ownMedicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time-to-time.Medicare Part B covers most injectable drugs given in an in-patient setting, and some drugs administered by a licensed medical provider in hospitaloutpatient departments and doctors’ offices. Medicare Part B is administered by Medicare Administrative Contractors, which generally have theresponsibility of making coverage decisions. Subject to certain payment adjustments and limits, Medicare generally pays for Part B covered drugs based on apercentage of manufacturer-reported average sales price.Drug products are subject to discounted pricing when purchased by federal agencies via the Federal Supply Schedule, or FSS.FFS participation is required for a drug product to be covered and paid for by certain federal agencies and for coverage under Medicaid, Medicare PartB and the PHS pharmaceutical pricing program. FSS pricing is negotiated periodically with the Department of Veterans Affairs. FSS pricing is intended to notexceed the price that a manufacturer charges its most-favored non-federal customer for its product. In addition, prices for drugs purchased by the VeteransAdministration, Department of Defense (including drugs purchased by military personnel and dependents through the TRICARE retail pharmacy program),Coast Guard, and PHS are subject to a cap on pricing (known as the “federal ceiling price”) and may be subject to an additional discount if pricing increasesmore than inflation.To maintain coverage of drugs under the Medicaid Drug Rebate Program, manufacturers are required to extend discounts to certain purchasers underthe PHS pharmaceutical pricing program. Purchasers eligible for discounts include hospitals that serve a disproportionate share of financially needy patients,community health clinics and other entities that receive health services grants from the PHS.The United States and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. In March 2010, theUnited States Congress enacted the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act, or the Affordable CareAct, which included changes to the coverage and payment for drug products under government health care programs. Some of the provisions of theAffordable Care Act have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, aswell as recent efforts by the Trump administration to repeal or replace certain aspects of the Affordable Care Act. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of therequirements for health insurance mandated by the Affordable Care Act. Concurrently, Congress has considered legislation that would repeal or repeal andreplace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation ofcertain taxes under the Affordable Care Act have been17 enacted. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposedby the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the“individual mandate”. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayedthe implementation of certain mandated fees under the Affordable Care Act, including the so-called “Cadillac” tax on certain high cost employer-sponsoredinsurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Congress also could consider additional legislation to repeal or replace other elements of the Affordable Care Act. Outside the United States,ensuring adequate coverage and payment for our products will face challenges. Pricing of prescription pharmaceuticals is subject to governmental control inmany countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory approval for a product and may requireus to conduct a clinical trial that compares the cost effectiveness of our product candidates or products to other available therapies. The conduct of such aclinical trial could be expensive and result in delays in our commercialization efforts. Third-party payors are challenging the prices charged for medicalproducts and services, and many third-party payors limit reimbursement for newly-approved health care products. Recent budgetary pressures in manyEuropean Union countries are also causing governments to consider or implement various cost-containment measures, such as price freezes, increased pricecuts and rebates. If budget pressures continue, governments may implement additional cost-containment measures. Cost-control initiatives could decrease theprice we might establish for products that we may develop or sell, which would result in lower product revenues or royalties payable to us. There can be noassurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricingarrangements for any of our products.Foreign RegulationIn addition to regulations in the United States, we expect to be subject to a variety of foreign regulations governing clinical trials and commercialsales and distribution of our product candidates. Whether or not we obtain FDA approval for a product candidate, we must obtain approval from thecomparable regulatory authorities of foreign countries or economic areas, such as the European Union, before we may commence clinical trials or marketproducts in those countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing andreimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.Certain countries outside of the United States have a process that requires the submission of a clinical trial application, or CTA, much like an INDprior to the commencement of human clinical trials. In Europe, for example, a CTA must be submitted to the competent national health authority and toindependent ethics committees in each country in which a company intends to conduct clinical trials. Once the CTA is approved in accordance with acountry’s requirements, clinical trial development may proceed in that country. In all cases, the clinical trials must be conducted in accordance with GCP andother applicable regulatory requirements.Under European Union regulatory systems, a company may submit marketing authorization applications either under a centralized or decentralizedprocedure. The centralized procedure is compulsory for medicinal products produced by biotechnology or those medicinal products containing new activesubstances for specific indications such as the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, viral diseases and designated orphanmedicines, and optional for other medicines which are highly innovative. Under the centralized procedure, a marketing application is submitted to theEuropean Medicines Agency, or EMA, where it will be evaluated by the Committee for Medicinal Products for Human Use and a favorable opinion typicallyresults in the grant by the European Commission of a single marketing authorization that is valid for all European Union member states within 67 days ofreceipt of the opinion. The initial marketing authorization is valid for five years, but once renewed is usually valid for an unlimited period. As withaccelerated approval in the U.S., conditional marketing authorization in the European Union is permitted based on incomplete clinical data for a limitednumber of medicinal products for human use, including products designated as orphan medicinal products under EU law, if (1) the risk-benefit balance of theproduct is positive, (2) it is likely that the applicant will be in a position to provide the required comprehensive clinical trial data, (3) unmet medical needswill be fulfilled and (4) the benefit to public health of the immediate availability on the market of the medicinal product outweighs the risk inherent in thefact that additional data are still required. Specific obligations, including with respect to the completion of ongoing or new studies, and with respect to thecollection of pharmacovigilance data, may be specified in the conditional marketing authorization. Conditional marketing authorizations are valid for oneyear and may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for additional or modified conditions.As in the United States, we may apply for designation of a product as an orphan drug for the treatment of a specific indication in the European Unionbefore the application for marketing authorization is made. Orphan drugs in Europe enjoy economic and marketing benefits, including up to 11 years ofexclusivity for the approved indication unless another applicant can show that its product is safer, more effective or otherwise clinically superior to theorphan designated product. The PRIority MEdicines, or PRIME, initiative was established by the EMA to help promote and foster the development of newmedicines in the European Union that demonstrate potential for a major therapeutic advantage in areas of unmet medical need. Benefits from the PRIMEdesignation include early confirmation of potential for accelerated assessment, early dialogue and increased interaction with relevant regulatory committeesto discuss development options, scientific advice at key development milestones, and proactive regulatory support from the EMA.18 Additional RegulationAs a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid orother third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to ourbusiness. We are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances ControlAct, the Resource Conservation and Recovery Act and other present and potential federal, state or local regulations. These and other laws govern our use,handling and disposal of various biological and chemical substances used in, and waste generated by, our operations. Our research and development involvesthe controlled use of hazardous materials, chemicals and viruses. Although we believe that our safety procedures for handling and disposing of such materialscomply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot becompletely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed ourresources.There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biological products,government control and other changes to the healthcare system of the United States. It is uncertain what legislative proposals will be adopted or what actionsfederal, state or private payers for medical goods and services may take in response to any healthcare reform proposals or legislation. We cannot predict theeffect medical or healthcare reforms may have on our business, and no assurance can be given that any such reforms will not have a material adverse effect.ManufacturingOur initial strategy is to outsource the manufacturing, packaging, labeling, storage, and distribution for our preclinical studies and clinical trials. Inselecting contract manufacturing organizations, or CMOs, to manufacture our product candidates, we generally strive to select the CMO based on theparticular technical needs of the product candidate and quality and regulatory compliance. In addition, we aim to work with CMOs that possess the requisitescale, expertise and experience to support clinical as well as commercial product manufacturing. We have transferred the manufacturing processes fortabelecleucel (formerly known as ATA129) from MSK to our CMO. The transfer of manufacturing processes to our CMO includes modifications to theprocesses, improvements in the manufacturing process as well as product testing. Moreover, we are currently developing commercial-scale manufacturingprocesses for tabelecleucel for the Phase 3 trials, with the proposed dose and schedule to be used in clinical practice and at a cost sufficient to supportprofitable commercialization. In December 2017, following discussion with the FDA of manufacturing and comparability data generated on materialmanufactured by our contract manufacturing organization, we initiated these trials in the United States. We are building our own manufacturing facility, which is designed to support clinical production and ultimately commercialization of tabelecleucel,if approved. In addition, we would expect our facility to support the supply needs for our other cellular therapy product candidates. We would expect tomaintain our relationships with our CMOs in order to have redundant sources of supply. Our internal capabilities and experience in manufacturingencompass a broad range of activities including cell line development, process, analytical and formulation development, clinical and commercial scale GMPmanufacturing, quality control and quality assurance. We are building the internal technical expertise in the manufacture of cellular therapeutics throughhiring well experienced staff. This breadth of experience will allow us to effectively oversee our own manufacturing facility as well as direct the activities ofour contract manufacturers and testing facilities. Benefits of owning our own facility may include improved cost of goods, increased control and oversight ofmanufacturing and supply chain activities, greater control over maintenance and management of production capacity across multiple products, developmentof redundant supply capabilities to reduce risk, and reduced reliance on third parties.Our T-cell product candidates require blood from healthy, consenting third-party donors as starting materials. The manufacturing process involves co-culturing and incubating viral or cancer specific antigen transformed B-cells collected from the blood of third party-donors with T-cells collected from thesame donor, all under Good Tissue Practices, or GTPs. GTPs are FDA regulations and guidance documents that govern the methods used in, and the facilitiesand controls used for, the manufacture of human cells, tissues and cellular and tissue based products, or HCT/Ps, which are human cells or tissue intended forimplantation, transplant, infusion or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue basedproducts are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also requiretissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing.Pursuant to our June 2015 license agreement with MSK, we acquired the right to use certain manufacturing process know-how related to producingclinical research-related drug supply. This included materials to support the manufacturing of clinical trial material including key starting materials andintermediates as well as existing inventory of clinical trial materials. We have also entered into a supply agreement with a third party to ensure we have thenecessary blood donated from healthy consenting third-party donors. 19 EmployeesAs of February 15, 2018, we had 185 full-time employees consisting of research and development, regulatory affairs, technical operations, commercialoperations, medical affairs and general administrative functions. We consider our relations with our employees to be good.Corporate InformationWe were incorporated in Delaware in 2012 and completed our initial public offering in October 2014. Our principal corporate offices are located at611 Gateway Blvd., Suite 900, South San Francisco, CA 94080 and our telephone number at that address is (650) 278-8930.Available InformationOur website address is www.atarabio.com. We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,proxy statements and other materials with the SEC. We are subject to the informational requirements of the Exchange Act and file or furnish reports, proxystatements, and other information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge on ourwebsite at investors.atarabio.com.The public may also read and copy any materials filed by Atara with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580,Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. TheSEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with theSEC at www.sec.gov. 20 Item 1A. Risk FactorsInvesting in our common stock involves a high degree of risk. You should carefully consider all of the risk factors and uncertainties described below,in addition to the other information contained in this Annual Report on Form 10-K, including the section of this report titled “Management’s Discussionand Analysis of Financial Condition and Results of Operations” and our consolidated and combined financial statements and related notes, beforeinvesting in our common stock. If any of the following risks materialize, our business, financial condition and results of operations could be seriouslyharmed. In these circumstances, the market price of our common stock could decline, and you may lose all or a part of your investment.Risks Related to Our Financial Results and Capital NeedsWe have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing losses for the foreseeablefuture.We are a clinical-stage biopharmaceutical company. Investment in biopharmaceutical product development is highly speculative because it entailssubstantial upfront capital expenditures and significant risk that a product candidate will fail to prove effective, gain regulatory approval or becomecommercially viable. We do not have any products approved by regulatory authorities and have not generated any revenues from product sales to date, andhave incurred significant research, development and other expenses related to our ongoing operations and expect to continue to incur such expenses. As aresult, we have not been profitable and have incurred significant operating losses in every reporting period since our inception. For the year ended December31, 2017, we reported a net loss of $119.5 million and we had an accumulated deficit of $296.7 million as of December 31, 2017.We do not expect to generate revenues for many years, if at all. We expect to continue to incur significant expenses and operating losses for theforeseeable future. We anticipate these losses to increase as we continue to research, develop and seek regulatory approvals for our product candidates andany additional product candidates we may acquire, and potentially begin to commercialize product candidates that may achieve regulatory approval. Wemay encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of ourfuture net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. If any of our product candidates fails inclinical trials or does not gain regulatory approval, or if approved, fails to achieve market acceptance, we may never become profitable. Even if we achieveprofitability in the future, we may not be able to sustain profitability in subsequent periods. We anticipate that our expenses will increase in the future as wecontinue to invest in research and development of our existing product candidates, investigate and potentially acquire new product candidates and expandour manufacturing and commercialization activities.We have a limited operating history, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.Our company was formed in August 2012. Our operations to date have been limited to organizing and staffing our company, acquiring product andtechnology rights and conducting product development activities for our product candidates. We have not yet demonstrated our ability to successfullycomplete any Phase 2 or Phase 3 clinical trials, obtain regulatory approval, consistently manufacture a commercial scale product or arrange for a third party todo so on our behalf, or conduct sales and marketing activities necessary for successful commercialization for any of our product candidates. In addition, theadoptive immunotherapy technology underlying our T-cell product candidates is new and largely unproven. Any predictions about our future success,performance or viability, particularly in view of the rapidly evolving cancer immunotherapy field, may not be as accurate as they could be if we had a longeroperating history or approved products on the market.In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities.We may not be successful in such a transition. We expect our financial condition and operating results to continue to fluctuate significantly from quarter toquarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, any of our quarterly or annual periods’ results are notindicative of future operating performance.21 We currently have no source of revenues. We may never generate revenues or achieve profitability.To date, we have not generated any revenues from product sales or otherwise. Even if we are able to successfully achieve regulatory approval for ourproduct candidates, we do not know when we will generate revenues or become profitable, if at all. Our ability to generate revenues from product sales andachieve profitability will depend on our ability to successfully commercialize products, including any of our current product candidates, and other productcandidates that we may develop, in-license or acquire in the future. Our ability to generate revenues and achieve profitability also depends on a number ofadditional factors, including our ability to: •successfully complete development activities, including the necessary clinical trials; •complete and submit BLAs to the FDA and obtain U.S. regulatory approval for indications for which there is a commercial market; •complete and submit applications to, and obtain regulatory approval from, foreign regulatory authorities in Europe, Asia and otherjurisdictions; •obtain coverage and adequate reimbursement from third parties, including government and private payors; •set commercially viable prices for our products, if any; •establish and maintain adequate supply with sufficient breadth to treat patients •establish and maintain manufacturing relationships with reliable third parties or build our own manufacturing facility and ensure adequate,legally globally compliant manufacturing of bulk drug substances and drug products to maintain that supply; •develop manufacturing and distribution processes for our novel T-cell immunotherapy product candidates; •develop commercial quantities of our products at acceptable cost levels; •achieve market acceptance of our products, if any; •attract, hire and retain qualified personnel; •protect our rights in our intellectual property portfolio; •develop a commercial organization capable of sales, marketing and distribution for any products we intend to sell ourselves in the markets inwhich we choose to commercialize on our own; and •find suitable distribution partners to help us market, sell and distribute our approved products in other markets.Our revenues for any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in theterritories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, and whether we own thecommercial rights for that territory. If the number of our addressable disease patients is not as significant as we estimate, the indication approved byregulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice ortreatment guidelines, we may not generate significant revenues from sales of such products, even if approved. In addition, we anticipate incurring significantcosts associated with commercializing any approved product candidate. As a result, even if we generate revenues, we may not become profitable and mayneed to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then wemay be unable to continue our operations at planned levels and may be forced to reduce our operations.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay,limit, reduce or terminate our product development or commercialization efforts.We expect to expend substantial resources for the foreseeable future to continue the clinical development and manufacturing of our T-cellimmunotherapy product candidates, and the advancement and expansion of our preclinical research pipeline. We also expect to continue to expend resourcesfor the development and manufacturing of product candidates and the technology we have licensed or have an exclusive right to license from QIMRBerghofer, including ATA188 and ATA190, which are in development for the treatment of MS. These expenditures will include costs associated withresearch and development, potentially acquiring new product candidates or technologies, conducting preclinical studies and clinical trials and potentiallyobtaining regulatory approvals and manufacturing products, as well as marketing and selling products approved for sale, if any. Under the terms of ourlicense agreements with each of MSK and QIMR Berghofer, we are obligated to make payments upon the achievement of certain development, regulatoryand commercial milestones. In addition, other unanticipated costs may arise. Because the design and outcome of our planned and anticipated clinical trials ishighly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of ourproduct candidates.22 Our future capital requirements depend on many factors, including: •the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinicaltrials; •the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates, if clinical trials are successful; •the cost of commercialization activities for our product candidates, if any of these product candidates is approved for sale, including marketing,sales and distribution costs; •the cost of manufacturing our product candidates for clinical trials in preparation for regulatory approval and in preparation forcommercialization; •our ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements; •the costs to in-license future product candidates or technologies; •the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costsand the outcome of such litigation; •the timing, receipt and amount of sales of, or royalties on, our future products, if any; and •the emergence of competing technologies or other adverse market developments.We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our planned operations into the first half of2020. As of December 31, 2017, we had total cash, cash equivalents and short-term investments of $166.1 million, and in January 2018, we completed anunderwritten public offering, resulting in net proceeds to us of approximately $131.4 million. However, our operating plan may change as a result of manyfactors currently unknown to us, and we may need additional funds sooner than planned. In addition, we may seek additional capital due to favorable marketconditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. We do not have any committedexternal source of funds. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are notavailable to us on a timely basis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities forone or more of our product candidates or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may benecessary to commercialize our product candidates.Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our productcandidates on unfavorable terms to us.We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the extentthat we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may includeliquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that includecovenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures, entering into licensingarrangements, or declaring dividends. If we raise additional funds from third parties, we may have to relinquish valuable rights to our technologies or productcandidates, or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, wemay be required to delay, limit, reduce or terminate our product development or commercialization efforts for our product candidates, or grant to others therights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.23 Risks Related to the Development of Our Product CandidatesWe are very early in our development efforts and have only a small number of product candidates in clinical development. All of our other productcandidates are still in preclinical development. If we or our collaborators are unable to successfully develop and commercialize product candidates orexperience significant delays in doing so, our business may be materially harmed.We are very early in our development efforts, and only a small number of our product candidates are in clinical development. All of our other productcandidates are currently in preclinical development. We have invested substantially all of our efforts and financial resources in identifying and developingpotential product candidates and conducting preclinical studies, clinical trials and manufacturing activities. Our ability to generate revenues, which we donot expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates.The success of our product candidates will depend on several factors, including the following: •completion of preclinical studies and clinical trials with positive results; •receipt of regulatory approvals from applicable authorities; •obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; •establishing or making arrangements with third-party manufacturers or building our own manufacturing facility for commercial manufacturingpurposes; •developing manufacturing and distribution processes for our novel T-cell product candidates; •manufacturing our product candidates at an acceptable cost; •launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others; •acceptance of the product candidates, if approved, by patients, the medical community and third-party payors; •effectively competing with other therapies; •obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for our productcandidates; •protecting our rights in our intellectual property portfolio; •maintaining a continued acceptable safety profile of the products following approval; and •maintaining and growing an organization of scientists and business people who can develop and commercialize our products and technology.If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfullydevelop and commercialize our product candidates, which could materially harm our business.Our future success is dependent on the regulatory approval of our product candidates.We do not have any products that have gained regulatory approval. Currently, our only clinical-stage product candidates are tabelecleucel (formerlyknown as ATA129), for which we recently initiated Phase 3 clinical trials in the United States, ATA188, which is in a Phase 1 clinical trial, ATA190, which isin a Phase 1 clinical trial conducted by QIMR Berghofer, and ATA230, which is in Phase 2 clinical trials. Our business is substantially dependent on ourability to obtain regulatory approval for, and, if approved, to successfully commercialize our product candidates in a timely manner. We cannotcommercialize product candidates in the United States without first obtaining regulatory approval for the product from the FDA; similarly, we cannotcommercialize product candidates outside of the United States without obtaining regulatory approval from comparable foreign regulatory authorities. Beforeobtaining regulatory approvals for the commercial sale of any product candidate for a target indication, we must demonstrate with substantial evidencegathered in preclinical studies and clinical trials, generally including two well-controlled Phase 3 trials, that the product candidate is safe and effective foruse for that target indication and that the manufacturing facilities, processes and controls are adequate with respect to such product candidate.The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable but typically takes many yearsfollowing the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of theregulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during thecourse of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidateand it is possible that none of our existing product candidates or any future product candidates will ever obtain regulatory approval.24 Our product candidates could fail to receive regulatory approval from the FDA or a comparable foreign regulatory authority for many reasons,including: •disagreement with the design or implementation of our clinical trials; •failure to demonstrate that a product candidate is safe and effective for its proposed indication; •failure of clinical trials to meet the level of statistical significance required for approval; •failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; •disagreement with our interpretation of data from preclinical studies or clinical trials; •the insufficiency of data collected from clinical trials of our product candidates to support the submission and filing of a BLA or othersubmission or to obtain regulatory approval; •failure to obtain approval of our manufacturing processes or facilities of third-party manufacturers with whom we contract for clinical andcommercial supplies or our own manufacturing facility; or •changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.The FDA or a comparable foreign regulatory authority may require more information, including additional preclinical or clinical data to supportapproval, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. If we were toobtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request (including failing toapprove the most commercially promising indications), may grant approval contingent on the performance of costly post-marketing clinical trials, or mayapprove a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that productcandidate.Even if a product candidate were to successfully obtain approval from the FDA and comparable foreign regulatory authorities, any approval mightcontain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject toburdensome post-approval study or risk management requirements. If we are unable to obtain regulatory approval for one of our product candidates in one ormore jurisdictions, or any approval contains significant limitations, we may not be able to obtain sufficient funding to continue the development of thatproduct or generate revenues attributable to that product candidate. Also, any regulatory approval of our current or future product candidates, once obtained,may be withdrawn.Our T-cell immunotherapy product candidates, represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinicaldevelopment or delays in or our inability to achieve regulatory approval or commercialization of our product candidates.Our future success is dependent on the successful development of T-cell immunotherapies in general and our product candidates in particular. Becausethese programs represent a new approach to immunotherapy for the treatment of cancer and other diseases, developing and commercializing our productcandidates subject us to a number of challenges, including: •obtaining regulatory approval from the FDA and other regulatory authorities, which have limited experience with regulating the developmentand commercialization of T-cell immunotherapies; •developing and deploying consistent and reliable processes for procuring blood from consenting third-party donors, isolating T-cells from theblood of such donors, activating the isolated T-cells against a specific antigen, characterizing and storing the resulting activated T-cells forfuture therapeutic use, selecting and delivering a sufficient supply and breadth of appropriate partially HLA matched cell line from among theavailable T-cell lines, and finally infusing these activated T-cells into patients; •utilizing these product candidates in combination with other therapies, which may increase the risk of adverse side effects; •educating medical personnel regarding the potential side effect profile of each of our product candidates; •developing processes for the safe administration of these products, including long-term follow-up for all patients who receive these productcandidates; •sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process these product candidates that are freefrom viruses and other pathogens that may increase the risk of adverse side effects; •developing a manufacturing process and distribution network that can provide a stable supply with a cost of goods that allows for an attractivereturn on investment;25 •establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance, and obtaining adequatecoverage, reimbursement and pricing by third-party payors and government authorities; and •developing therapies for types of diseases beyond those initially addressed by our current product candidates.We cannot be sure that the manufacturing processes used in connection with our T-cell immunotherapy product candidates will yield a sufficientsupply of satisfactory products that are safe and effective, comparable to those T-cells produced by MSK or QIMR Berghofer historically, scalable orprofitable.Moreover, actual or perceived of safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence thewillingness of subjects to participate in clinical trials, or if approved, of physicians to subscribe to the novel treatment mechanics.Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment practices that require additional upfrontcosts and training. Physicians may not be willing to undergo training to adopt this novel therapy, may decide the therapy is too complex to adopt withoutappropriate training and may choose not to administer the therapy. Based on these and other factors, hospitals and payors may decide that the benefits of thisnew therapy do not or will not outweigh its costs.The results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. Our existing product candidates in clinical trials,and any other product candidate we advance into clinical trials, may not have favorable results in later clinical trials or receive regulatory approval.Success in preclinical studies and early clinical trials does not ensure that later clinical trials will generate adequate data to demonstrate the efficacyand safety of an investigational drug. A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources andexperience than us, have suffered significant setbacks in clinical trials, even after seeing promising results in earlier preclinical studies or clinical trials. Forexample, in December 2015, we announced that our Phase 2 proof-of-concept trial of PINTA 745 did not meet its primary endpoint even though earlierclinical trials and preclinical studies had indicated that it might be effective to treat protein energy wasting in patients with end stage renal disease. Despitethe results reported in earlier preclinical studies or clinical trials for our product candidates, we do not know whether the clinical trials we may conduct willdemonstrate adequate efficacy and safety to result in regulatory approval to market tabelecleucel, ATA520, ATA188, ATA190, ATA230 or any of our otherproduct candidates in any particular jurisdiction. Tabelecleucel has been predominantly evaluated in a single-center trial under investigator-sponsored INDsheld by MSK, utilizing a different response criteria and endpoints from those we may utilize in later clinical trials. For example, the primary endpoint of boththe MATCH and ALLELE trials is confirmed best objective response rate defined as the percent of patients achieving either a complete or partial response totreatment with tabelecleucel confirmed after the initial tumor assessment showing a response. In contrast, the prior MSK trials did not include responseconfirmation. The findings may not be reproducible in multi-center trials we conduct. For regulatory approvals, we are using independent radiologist and/oroncologist assessment of responses which may not correlate with the MSK reported assessments. In addition, the Phase 2 clinical trials with tabelecleucelenrolled a heterogeneous group of patients with a variety of EBV-associated malignancies, including but not limited to EBV+ PTLD after HCT and EBV+PTLD after SOT. These Phase 2 trials were not prospectively designed to evaluate the efficacy of tabelecleucel in the treatment of a single disease state forwhich we may later seek approval. Moreover, final trial results may not be consistent with interim trial results. Efficacy data from prospectively designedtrials may differ significantly from those obtained from retrospective subgroup analyses. In addition, clinical data obtained from a clinical trial with anautologous product candidate may not yield the same or better results with an allogeneic product candidate. If later-stage clinical trials do not producefavorable results, our ability to achieve regulatory approval for any of our product candidates may be adversely impacted. Even if we believe that we haveadequate data to support an application for regulatory approval to market any of our product candidates, the FDA or other regulatory authorities may notagree and may require that we conduct additional clinical trials.Clinical drug development involves a lengthy and expensive process with an uncertain outcome.Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during theclinical trial process. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressedthrough preclinical and clinical trials.26 We may experience delays in our ongoing or future clinical trials and we do not know whether planned clinical trials will begin or enroll subjects ontime, will need to be redesigned or will be completed on schedule, if at all. There can be no assurance that the FDA will not put clinical trials of any of ourproduct candidates on clinical hold in the future. Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons, such as: •delay or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a trial design that we are able to execute; •delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authorityregarding the scope or design of a trial; •delay or failure in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites,the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; •delay or failure in obtaining institutional review board, or IRB, approval or the approval of other reviewing entities, including comparableforeign regulatory authorities, to conduct a clinical trial at each site; •withdrawal of clinical trial sites from our clinical trials or the ineligibility of a site to participate in our clinical trials; •delay or failure in recruiting and enrolling suitable subjects to participate in a trial; •delay or failure in subjects completing a trial or returning for post-treatment follow-up; •clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, ordropping out of a trial; •inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs,including some that may be for the same indication; •failure of our third-party clinical trial managers to satisfy their contractual duties, meet expected deadlines or return trustworthy data; •delay or failure in adding new trial sites; •interim results or data that are ambiguous or negative or are inconsistent with earlier results or data; •feedback from the FDA, the IRB, data safety monitoring boards or a comparable foreign regulatory authority, or results from earlier stage orconcurrent preclinical studies and clinical trials, that might require modification to the protocol for a trial; •a decision by the FDA, the IRB, a comparable foreign regulatory authority, or us, or a recommendation by a data safety monitoring board orcomparable foreign regulatory authority, to suspend or terminate clinical trials at any time for safety issues or for any other reason; •unacceptable risk-benefit profile, unforeseen safety issues or adverse side effects; •failure to demonstrate a benefit from using a product candidate; •difficulties in manufacturing or obtaining from third parties sufficient quantities and breadth of appropriate partially HLA matched cell linefrom among the available T-cell lines to start or to use in clinical trials; •lack of adequate funding to continue a trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conductadditional studies or increased expenses associated with the services of our CROs and other third parties; or •changes in governmental regulations or administrative actions or lack of adequate funding to continue a clinical trial.Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patientpopulation, the severity of the disease under investigation, the proximity of subjects to clinical sites, the patient referral practices of physicians, theeligibility criteria for the trial, the design of the clinical trial, ability to obtain and maintain patient consents, risk that enrolled subjects will drop out or diebefore completion, competition for patients from other clinical trials, risk that we do not have an appropriately matched HLA cell line, competing clinicaltrials and clinicians’ and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available therapies,including any new drugs that may be approved for the indications we are investigating. We may not be able to initiate or continue to support clinical trials oftabelecleucel, ATA188, ATA520, ATA230 or any future product candidates if we are unable to locate and enroll a sufficient number of eligible participantsin these trials as required by the FDA or other regulatory authorities. Even if we are able to enroll a sufficient number of patients in our clinical trials, if thepace of enrollment is slower than we expect, the development costs for our product candidates may increase and27 the completion of our trials may be delayed or our trials could become too expensive to complete. We rely on CROs, other vendors and clinical trial sites toensure the proper and timely conduct of our clinical trials, and while we have agreements governing their committed activities, we have limited influenceover their actual performance.If we experience delays in the completion or termination of any clinical trial of our product candidates, the approval and commercial prospects of suchproduct candidate will be harmed, and our ability to generate product revenues from such product candidate will be delayed. In addition, any delays incompleting our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability tocommence product sales and generate revenues. Any delays in completing our clinical trials for our product candidates may also decrease the period ofcommercial exclusivity. In addition, many of the factors that could cause a delay in the commencement or completion of clinical trials may also ultimatelylead to the denial of regulatory approval of our product candidates.Our product candidates, the methods used to deliver them or their dosage levels may cause undesirable side effects or have other properties that coulddelay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following anyregulatory approval.Undesirable side effects caused by our product candidates, their delivery methods or dosage levels could cause us or regulatory authorities tointerrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparableforeign regulatory authority. For example, hypoxia has been observed in some patients receiving ATA230 for the treatment of their CMV pneumonitis. As aresult of safety or toxicity issues that we may experience in our clinical trials, we may not receive approval to market any product candidates, which couldprevent us from ever generating revenues or achieving profitability. Results of our trials could reveal an unacceptably high severity and incidence of sideeffects. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease furtherdevelopment of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment orthe ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may have a material adverse effecton our business, results of operations, financial condition, cash flows and future prospects.Additionally, if any of our product candidates receives regulatory approval, and we or others later identify undesirable side effects caused by suchproduct, a number of potentially significant negative consequences could result, including that: •we may be forced to suspend marketing of such product; •regulatory authorities may withdraw their approvals of such product; •regulatory authorities may require additional warnings on the label or limit access of such product to selective specialized centers withadditional safety reporting and with requirements that patients be geographically close to these centers for all or part of their treatment thatcould diminish the usage or otherwise limit the commercial success of such products; •we may be required to conduct post-marketing studies; •we may be required to change the way the product is administered; •we could be sued and held liable for harm caused to subjects or patients; and •our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved.We may not be able to obtain or maintain orphan drug exclusivity for our product candidates.Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations asorphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition,which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. Both the FDA and the EMA have grantedus orphan status for tabelecleucel for EBV+ PTLD after HCT or SOT. EMA has granted us orphan status for ATA230 for CMV infection in patients withimpaired cell-mediated immunity and FDA has granted us orphan status for the ATA230 for the treatment of CMV viremia and disease inimmunocompromised patients.28 Generally, if a product with an orphan drug designation subsequently receives the first regulatory approval for the indication for which it has suchdesignation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing applicationfor the same drug for that time period. The applicable period is seven years in the United States and ten years in Europe. The European exclusivity period canbe 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 isno longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if themanufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not be maintained or effectively protect the product from competitionbecause different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve a new drug for thesame condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution topatient care.Failure to obtain regulatory approval in international jurisdictions would prevent our product candidates from being marketed abroad.In addition to regulations in the United States, to market and sell our products in the European Union, many Asian countries and other jurisdictions,we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies amongcountries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. Theregulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. Clinical trials accepted inone country may not be accepted by regulatory authorities in other countries. In addition, many countries outside the United States require that a product beapproved for reimbursement before it can be approved for sale in that country. A product candidate that has been approved for sale in a particular countrymay not receive reimbursement approval in that country. We may not be able to obtain approvals from regulatory authorities outside the United States on atimely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by oneregulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We maynot be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtainapproval of any of our product candidates by regulatory authorities in the European Union, Asia or elsewhere, the commercial prospects of that productcandidate may be significantly diminished, our business prospects could decline and this could materially adversely affect our business, results of operationsand financial condition.Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties.Even if we obtain regulatory approval for a product candidate, it would be subject to ongoing requirements by the FDA and comparable foreignregulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, adverse event reporting,safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-marketing information. These requirementsinclude submissions of safety and other post-marketing information and reports, registration, as well as continued compliance by us and/or our contractmanufacturing organizations, or CMOs, and CROs for any post-approval clinical trials that we conduct. The safety profile of any product will continue to beclosely monitored by the FDA and comparable foreign regulatory authorities after approval. If the FDA or comparable foreign regulatory authorities becomeaware of new safety information after approval of any of our product candidates, they may require labeling changes or establishment of a risk evaluation andmitigation strategy, impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.In addition, manufacturers of drug products and their facilities are subject to initial and continual review and periodic inspections by the FDA andother regulatory authorities for compliance with current good manufacturing practices, or cGMP, current Good Clinical Practices, or GCP, current good tissuepractices, or cGTP, and other regulations. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events ofunanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on thatproduct, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, ourproduct candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agencymay: •issue warning letters or untitled letters; •mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners; •require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due datesfor specific actions and penalties for noncompliance;29 •seek an injunction or impose civil or criminal penalties or monetary fines; •suspend or withdraw regulatory approval; •suspend any ongoing clinical trials; •refuse to approve pending applications or supplements to applications filed by us; •suspend or impose restrictions on operations, including costly new manufacturing requirements; or •seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.The occurrence of any event or penalty described above may inhibit our ability to successfully commercialize our products and generate revenues.Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, theDepartment of Justice, or the DOJ, the Office of Inspector General of the Department of Health and Human Services, or HHS, state attorneys general, membersof Congress and the public. Additionally, advertising and promotion of any product candidate that obtains approval outside of the United States will beheavily scrutinized by comparable foreign regulatory authorities. Violations, including actual or alleged promotion of our products for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA. Any actual or alleged failure tocomply with labeling and promotion requirements may have a negative impact on our business.Regulations, guidelines and recommendations published by various government agencies and organizations may affect the use of our product candidates.Although treatment with EBV specific T-cells is recognized as a recommended treatment for persistent or progressive EBV+ PTLD as set forth in the2017 National Comprehensive Cancer Network Guidelines, future guidelines from governmental agencies, professional societies, practice managementgroups, private health/science foundations and organizations involved in various diseases may relate to such matters as product usage, dosage, and route ofadministration and use of related or competing therapies. Changes to these recommendations or other guidelines advocating alternative therapies could resultin decreased use of our product candidates, which may adversely affect our results of operations.We may not successfully identify, acquire, develop or commercialize new potential product candidates.Part of our business strategy is to expand our product candidate pipeline by identifying and validating new product candidates, which we maydevelop ourselves, in-license or otherwise acquire from others. In addition, in the event that our existing product candidates do not receive regulatoryapproval or are not successfully commercialized, then the success of our business will depend on our ability to expand our product pipeline through in-licensing or other acquisitions. We may be unable to identify relevant product candidates. If we do identify such product candidates, we may be unable toreach acceptable terms with any third party from which we desire to in-license or acquire them.We may not realize the benefits of strategic alliances that we may form in the future.We may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe willcomplement or augment our existing business. These relationships, or those like them, may require us to incur nonrecurring and other charges, increase ournear- and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we facesignificant competition in seeking appropriate strategic alliances and the negotiation process is time-consuming and complex. Moreover, we may not besuccessful in our efforts to establish a strategic alliance or other alternative arrangements for any future product candidates and programs because our researchand development pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a stage of development forcollaborative effort and third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy.If we license products or acquire businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them withour existing operations and company culture. We cannot be certain that, following a strategic transaction or license, we will achieve the revenues or specificnet income that justifies such transaction. Any delays in entering into new strategic alliances agreements related to our product candidates could also delaythe development and commercialization of our product candidates and reduce their competitiveness even if they reach the market.30 Risks Related to ManufacturingWe are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our product candidates.Concurrent with the license of our existing product candidates, we acquired manufacturing process know-how and certain intermediates, as well ascertain supplies intended for clinical use, from MSK and QIMR Berghofer. To facilitate the manufacture of additional drug product for our Phase 3 clinicaltrials using the MSK manufacturing testing and process know-how, we undertook the process of transferring this know-how to our CMO. Transferringmanufacturing testing and processes and know-how is complex and involves review and incorporation of both documented and undocumented processes thatmay have evolved over time. In addition, transferring production to different facilities may require utilization of new or different processes to meet thespecific requirements of a given facility. We and our CMOs will need to conduct significant development work to transfer these processes and manufactureeach of our product candidates for studies, trials and commercial launch readiness. We cannot be certain that all relevant know-how has been adequatelyincorporated into the manufacturing process until the completion of studies (and the related evaluations) intended to demonstrate the comparability ofmaterial previously produced by MSK with that generated by our CMO. The inability to manufacture comparable drug product by us or our CMO coulddelay the continued development of our product candidates. Although we believe we have manufactured material that is comparable to that previouslyproduced by MSK, the FDA, EMA, and other comparable regulatory authorities may not agree.The processes by which our product candidates are manufactured were initially developed by MSK or QIMR Berghofer for clinical purposes. We andour CMO intend to evolve these existing processes for more advanced clinical trials or commercialization. Developing commercially viable manufacturingprocesses is a difficult and uncertain task, and there are risks associated with scaling to the level required for advanced clinical trials or commercialization,including cost overruns, potential problems with process scale-up, process reproducibility, stability issues, consistency and timely availability of reagents orraw materials. The manufacturing facilities in which our product candidates will be made could be adversely affected by earthquakes and other naturaldisasters, equipment failures, labor shortages, power failures, and numerous other factors.Additionally, the process of manufacturing biologics and cellular therapies is complex, highly regulated and subject to several risks, including but notlimited to: •the process of manufacturing cellular therapies is extremely susceptible to product loss due to contamination, equipment failure or improperinstallation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing and distributionprocesses for any of our product candidates could result in reduced production yields, product defects, and other supply disruptions. Productdefects can also occur unexpectedly. If microbial, viral or other contaminations are discovered in our product candidates or in themanufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended periodof time to allow us to investigate and remedy the contamination; and •because our T-cell immunotherapy product candidates are manufactured from the blood of third-party donors, the process of manufacturing issusceptible to the availability of the third-party donor material. The process of developing products that can be commercialized may beparticularly challenging, even if they otherwise prove to be safe and effective. The manufacture of these product candidates involves complexprocesses. Some of these processes require specialized equipment and highly skilled and trained personnel. The process of manufacturing theseproduct candidates will be susceptible to additional risks, given the need to maintain aseptic conditions throughout the manufacturing process.Contamination with viruses or other pathogens in either the donor material or materials utilized in the manufacturing process or ingress ofmicrobiological material at any point in the process may result in contaminated or unusable product. Such contaminations could result indelays in the manufacture of products which could result in delays in the development of our product candidates. Such contaminations couldalso increase the risk of adverse side effects. Furthermore, the product ultimately consists of many individual cell lines, each with a differentHLA profile. As a result, the selection and distribution of the appropriate cell line for therapeutic use in a patient will require close coordinationbetween clinical and manufacturing personnel. Any adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lotfailures, withdrawals or recalls or other interruptions in the supply of our drug product which could delay the development of our product candidates. Wemay also have to write off inventory, incur other charges and expenses for supply of drug product that fails to meet specifications, undertake costlyremediation efforts, or seek more costly manufacturing alternatives. Inability to meet the demand for our product candidates could damage our reputation andthe reputation of our products among physicians, healthcare payors, patients or the medical community, and cancer treatment centers, which could adverselyaffect our ability to operate our business and our results of operations.31 We intend to manufacture at least a portion of our product candidates ourselves. Delays in building, commissioning and receiving regulatory approvalsfor our manufacturing facility could delay our development plans and thereby limit our ability to generate revenues.In February 2017, we entered into a lease to build a manufacturing facility in Thousand Oaks, California, which we intend to use to manufacturepreclinical and clinical trial materials for our product candidates. This new manufacturing facility is expected to be completed to support clinical productionin 2019. This project may result in unanticipated delays and cost more than expected due to a number of factors, including regulatory requirements. Ifconstruction or regulatory approval of our new facility is delayed, we may not be able to manufacture sufficient quantities of our drug candidates, whichwould limit our development activities and our opportunities for growth. Cost overruns associated with constructing our manufacturing facility could requireus to raise additional funds from other sources.In addition to the similar manufacturing risks described in "Risks Related to Our Dependence on Third Parties," our manufacturing facility will besubject to ongoing, periodic inspection by the FDA, EMA or other comparable regulatory agencies to ensure compliance with cGMP and GTP. Our failure tofollow and document our adherence to such cGMP and GTP regulations or other regulatory requirements may lead to significant delays in the availability ofproducts for clinical or, in the future, commercial use, may result in the termination of or a hold on a clinical trial, or may delay or prevent filing or approvalof marketing applications for our drugs. We also may encounter problems with the following: •achieving adequate or clinical-grade materials that meet FDA, EMA or other comparable regulatory agency standards or specifications withconsistent and acceptable production yield and costs; •shortages of qualified personnel, raw materials or key contractors; and •ongoing compliance with cGMP regulations and other requirements of the FDA, EMA or other comparable regulatory agencies.Failure to comply with applicable regulations could also result in sanctions being imposed on us, including fines, injunctions, civil penalties, arequirement to suspend or put on hold one or more of our clinical trials, failure of regulatory authorities to grant marketing approval of our drug candidates,delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of drug candidates, operating restrictions and criminal prosecutions, anyof which could harm our business.Developing advanced manufacturing techniques and process controls is required to fully utilize our facility. Advances in manufacturing techniquesmay render our facility and equipment inadequate or obsolete, without further investment.In order to produce our drugs in the quantities that we believe will be required to meet anticipated market demand of any of our drug candidates ifapproved, we will need to increase, or "scale up," the production process by a significant factor over the initial level of production. If we are unable to do so,are delayed, or if the cost of this scale up is not economically feasible for us or we cannot find a third-party supplier, we may not be able to produce our drugsin a sufficient quantity to meet future demand.If our sole clinical manufacturing facility is damaged or destroyed or production at this facility is otherwise interrupted, our business and prospects wouldbe negatively affected.If our manufacturing facility or the equipment in it is damaged or destroyed, we may not be able to quickly or inexpensively replace ourmanufacturing capacity or replace it at all. In the event of a temporary or protracted loss of this facility or equipment, we may not be able to transfermanufacturing to a third party. Even if we could transfer manufacturing to a third party, the shift would likely be expensive and time-consuming, particularlysince the new facility would need to comply with the necessary regulatory requirements and we would need FDA approval before selling any productsmanufactured at that facility. Such an event could delay our clinical trials or reduce our product sales.Currently, we maintain insurance coverage against damage to our property and to cover business interruption and research and developmentrestoration expenses. However, our insurance coverage may not reimburse us, or may not be sufficient to reimburse us, for any expenses or losses we maysuffer. We may be unable to meet our requirements for our product candidates if there were a catastrophic event or failure of our current manufacturing facilityor processes.32 Risks Related to Our Dependence on Third PartiesWe rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties ormeet expected deadlines, or if we lose any of our CROs, we may not be able to obtain regulatory approval for or commercialize our product candidates ona timely basis, if at all.We have relied upon and plan to continue to rely upon third-party CROs and contractors to monitor and manage data for our ongoing preclinical andclinical programs. For example, our collaborating investigators at MSK manage the conduct of the ongoing clinical trials for ATA520 as well as perform theanalysis, publication and presentation of data and results related to this program and the tabelecleucel and ATA230 programs. We also rely on studiespreviously conducted by MSK. Our collaborating investigators at QIMR Berghofer manage the conduct of the ongoing clinical trials for ATA190. We areutilizing a CRO for our EAP trial of tabelecleucel and for our open Phase 3 trials for EBV+ PTLD after HCT and SOT. We rely on these parties for theexecution of our preclinical studies and clinical trials, and we control only some aspects of their activities. Nevertheless, we are responsible for ensuring thateach of our trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs doesnot relieve us of our regulatory responsibilities. We also rely on third parties to assist in conducting our preclinical studies in accordance with GoodLaboratory Practices, or GLP, and the Animal Welfare Act requirements. We and our CROs are required to comply with federal regulations, GCP, which areinternational standards meant to protect the rights and health of patients that are enforced by the FDA, the Competent Authorities of the Member States of theEuropean Economic Area and comparable foreign regulatory authorities for all of our products in clinical development, and cGTP, which are standardsdesigned to ensure that cell and tissue based products are manufactured in a manner designed to prevent the introduction, transmission and spread ofcommunicable diseases. Regulatory authorities enforce GCP and cGTP through periodic inspections of trial sponsors, principal investigators and trial sites. Ifwe, or any of our partners or CROs, fail to comply with applicable GCP or cGTP, the clinical data generated in our clinical trials may be deemed unreliableand the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our regulatory applications.We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complywith GCP or cGTP requirements. In addition, our clinical trials must be conducted with product produced under cGMP and cGTP requirements. We are alsorequired to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, clinicaltrials.gov, within aspecified timeframe. Failure to comply with these regulations may require us to repeat preclinical studies and clinical trials, which would delay the regulatoryapproval process and result in adverse publicity.Our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or notthey devote sufficient time and resources, including experienced staff, to our ongoing clinical, nonclinical and preclinical programs. They may also haverelationships with other entities, some of which may be our competitors. If CROs do not successfully carry out their contractual duties or obligations or meetexpected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols,regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approvalfor or successfully commercialize our product candidates. CRO or contractor errors could cause our results of operations and the commercial prospects for ourproduct candidates to be harmed, our costs to increase and our ability to generate revenues to be delayed.Our internal capacity for clinical trial execution and management is limited and therefore we have relied on third parties. Outsourcing these functionsinvolves risk that third parties may not perform to our standards, may not produce results or data in a timely manner or may fail to perform at all. Other datafrom studies or trials previously conducted by MSK or QIMR Berghofer may emerge in the future. In addition, the use of third-party service providers requiresus to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. We currently have asmall number of employees, which limits the internal resources we have available to identify and monitor our third-party providers. To the extent we areunable to identify and successfully manage the performance of third-party service providers in the future, our business may be adversely affected. Though wecarefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delaysor challenges will not have a material adverse impact on our business, financial condition and prospects.Our CROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of our CROs have anability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinical trialswarrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated. Identifying, qualifying and managingperformance of third-party service providers can be difficult, time consuming and cause delays in our development programs. In addition, there is a naturaltransition period when a new CRO commences work and the new CRO may not provide the same type or level of services as the original provider. If any ofour relationships with our third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so timely or oncommercially reasonable terms.33 We have limited experience manufacturing our product candidates on a clinical scale and no experience manufacturing on a commercial scale. We are,and expect to continue to be, dependent on third parties for the manufacturing of our product candidates and our supply chain, and if we experienceproblems with any of these third parties, the manufacturing of our product candidates could be delayed.We do not currently operate our own facilities for the manufacturing of our product candidates. In the case of tabelecleucel, we currently rely on ourCMO for the production of this product candidate and the acquisition of materials incorporated in or used in the manufacturing or testing of these productcandidates. In the case of ATA230, we currently rely on MSK for the production of this product candidate and acquisition of the materials incorporated in orused in the manufacturing or testing. In the case of ATA520, we currently rely on our CMO for the production of this product candidate. In the case ofATA188 and ATA190, we currently rely on an affiliate of QIMR Berghofer for the production of these product candidates and acquisition of the materialsincorporated in or used in the manufacturing or testing. Our CMOs or partners are not our employees, and except for remedies available to us under ouragreements with such CMOs or partners, we cannot control whether or not they devote sufficient time and resources, including experienced staff, to themanufacturing of supply for our ongoing clinical, nonclinical and preclinical programs. To meet our projected needs for clinical and commercial materials tosupport our activities through regulatory approval and commercial manufacturing of ATA188, ATA190, ATA520 and ATA230, we will need to transition themanufacturing of such materials to a CMO and/or our own facility, and such CMOs or we will need to develop relationships with suppliers of critical startingor other materials, increase the scale of production and demonstrate comparability of the material produced at these facilities to the material that waspreviously produced. Transferring manufacturing processes and know-how is complex and involves review and incorporation of both documented andundocumented processes that may have evolved over time. In addition, transferring production to different facilities may require utilization of new ordifferent processes to meet the specific requirements of a given facility. We would expect additional comparability work will also need to be conducted tosupport the transfer of certain manufacturing processes and process improvements. We cannot be certain that all relevant know-how and data has beenadequately incorporated into the manufacturing process until the completion of studies (and the related evaluations) intended to demonstrate thecomparability of material previously produced with that generated by our CMO. For example, we generated and evaluated data from new materialmanufactured by our CMO and identified certain assays that need refinement prior to initiating the Phase 3 trials. We have generated comparability datausing our refined assays and cell lines produced by our CMO which data we believe supports the demonstration of comparability, and we recently initiatedthe Phase 3 trials in the U.S. following discussions with FDA.If we are not able to successfully transfer this know-how and produce comparable product candidates our ability to further develop and manufactureour product candidates may be negatively impacted. We may need to identify additional CMOs for continued production of supply for all of our productcandidates. In addition, given the manufacturing processes for our T-cell immunotherapy product candidates, the number of CMOs who possess the requisiteskill and capability to manufacture our T-cell immunotherapy product candidates is limited. We have not yet identified alternate suppliers in the event thecurrent CMOs that we utilize are unable to scale production, or if we otherwise experience any problems with them. In February 2017, we entered into a leaseagreement to build our own cellular therapy manufacturing facility in Thousand Oaks, CA. At this facility, we intend to manufacture our product candidatesfor clinical or commercial use, if approved. Manufacturing cellular therapies is complicated and tightly regulated by the FDA and comparable regulatoryauthorities around the world, and although alternative third-party suppliers with the necessary manufacturing and regulatory expertise and facilities exist, itcould be expensive and take a significant amount of time to arrange for alternative suppliers, transfer manufacturing procedures to these alternative suppliers,and demonstrate comparability of material produced by such new suppliers. New manufacturers of any product would be required to qualify under applicableregulatory requirements. These manufacturers may not be able to manufacture our compounds at costs, or in quantities, or in a timely manner necessary tocomplete development of our product candidates or make commercially successful products. If we are unable to arrange for alternative third-partymanufacturing sources, or to do so on commercially reasonable terms or in a timely manner, we may not be able to complete development of our productcandidates, or market or distribute them. In addition, should the FDA not agree with our product candidate specifications and comparability assessments forthese materials, further clinical development of our product candidate could be substantially delayed and we would incur substantial additional expenses.Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, includingreliance on the third party for regulatory compliance and quality assurance, the possibility that the third-party manufacturer does not maintain the financialresources to meet its obligations under the manufacturing agreement, the possibility of breach of the manufacturing agreement by the third party because offactors beyond our control, including a failure to synthesize and manufacture our product candidates or any products we may eventually commercialize inaccordance with our specifications, misappropriation of our proprietary information, including our trade secrets and know-how, and the possibility oftermination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to us. In addition, theFDA and other regulatory authorities require that our product candidates and any products that we may eventually commercialize be manufactured accordingto cGMP, cGTP and similar jurisdictional standards. These requirements include, among other things, quality control, quality assurance and the maintenanceof records and documentation. The FDA or similar foreign regulatory agencies may also implement new standards at any time, or change their interpretationsand enforcement of existing standards for manufacture, packaging or testing of products. We have little control over our manufacturers’ compliance withthese regulations and standards. Any failure by our third-party manufacturers to comply with cGMP or cGTP or failure to scale up34 manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure toobtain, regulatory approval of any of our product candidates. In addition, such failure could be the basis for the FDA to issue a warning letter, withdrawapprovals for product candidates previously granted to us, or take other regulatory or legal action, including recall or seizure of outside supplies of theproduct candidate, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplementalapplications, detention or product, refusal to permit the import or export of products, injunction or imposing civil and criminal penalties.Any significant disruption in our supplier relationships could harm our business. Any significant delay in the supply of a product candidate for anongoing clinical trial could considerably delay initiation or completion of our clinical trials, product testing and potential regulatory approval of our productcandidates. If our manufacturers or we are unable to purchase key materials after regulatory approval has been obtained for our product candidates, thecommercial launch of our product candidates could be delayed or there could be a shortage in supply, which could impair our ability to generate revenuesfrom the sale of our product candidates.Risks Related to Our Intellectual PropertyIf we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual propertyprotection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete effectively may be adversely affected.We rely upon a combination of patents, trade secrets and confidentiality agreements to protect the intellectual property related to our technology andproduct candidates. The T-cell immunotherapy product candidates and platform technology we have licensed from MSK and QIMR Berghofer are protectedprimarily as confidential know-how and trade secrets. If we do not adequately protect our intellectual property, competitors may be able to use ourtechnologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. Thepatentability of inventions and the validity, enforceability and scope of patents in the biotechnology field is generally uncertain because it involvescomplex legal, scientific and factual considerations, and it has in recent years been the subject of significant litigation. Moreover, the standards applied bythe U.S. Patent and Trademark Office, or USPTO, and non-US patent offices in granting patents are not always applied uniformly or predictably. For example,there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology patents.Consequently, the patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates inthe United States or in other countries. There is no assurance that all potentially relevant prior art relating to our patents and patent applications is known tous or has been found in the instances where searching was done. We may be unaware of prior art that could be used to invalidate an issued patent or prevent apending patent application from issuing as a patent. There also may be prior art of which we are aware, but which we do not believe affects the validity orenforceability of a claim of one of our patents or patent applications, which may, nonetheless, ultimately be found to affect the validity or enforceability ofsuch claim.Even if patents have issued or do successfully issue from patent applications, and even if such patents cover our product candidates, third parties maychallenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held to be unenforceable. Noassurance can be given that if challenged, our patents would be declared by a court to be valid or enforceable. Furthermore, even if they are unchallenged, ourpatents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates or prevent others fromdesigning around our claims. There is no guarantee that we will be able to obtain a license from this other entity on commercially reasonable terms, or at all.If this entity licenses its rights elsewhere, our competitors might gain access to this intellectual property. Also, the possibility exists that others will developproducts on an independent basis which have the same effect as our product candidates and which do not infringe our patents or other intellectual propertyrights, or that others will design around the claims of patents that we have had issued that cover our product candidates. If the breadth or strength ofprotection provided by the patents and patent applications we hold, license or pursue with respect to our product candidates is threatened, it could jeopardizeour ability to commercialize our product candidates. In addition, the USPTO and various foreign governmental patent agencies require compliance with anumber of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in manycases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result inabandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Any of theseoutcomes could have an adverse impact on our business.If patent applications that we hold or in-license with respect to our technology or product candidates fail to issue, if their breadth or strength ofprotection is threatened, or if they fail to provide meaningful exclusivity for our product candidates, it could dissuade companies from collaborating with us.We have filed a number of patent applications covering our product candidates. We cannot offer any assurances about which, if any, patents will be issuedwith respect to these pending patent applications, the breadth of any such patents, whether any issued patents will be found invalid and unenforceable or willbe threatened by third parties. Any successful challenge to these patents or any other patents owned by or exclusively licensed to us could deprive us ofrights necessary for the35 successful commercialization of any product candidate that we or our collaborators may develop. Because patent applications in the United States and mostother countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patentapplication related to a product candidate. Furthermore, if third parties have filed such patent applications that have never had a claim with an effective filingdate on or after March 16, 2013, an interference proceeding in the United States can be initiated by the USPTO to determine who was the first to invent any ofthe subject matter covered by the patent claims of our applications or patents. Similarly, we could become involved in derivation proceedings before theUSPTO to determine inventorship with respect to our patent applications. We may become involved in inter partes review or post-grant review proceedingsin the USPTO regarding our intellectual property rights. We may also become involved in opposition proceedings in the European Patent Office orcounterpart offices in other jurisdictions regarding our intellectual property rights. In addition, patents have a limited lifespan. In the United States, thenatural expiration of a patent generally occurs 20 years after it is filed. Although various extensions may be available if certain conditions are met, the life ofa patent and the protection it affords is limited. If we encounter delays in our clinical trials or in obtaining regulatory approvals, the period of time duringwhich we could exclusively market any of our product candidates under patent protection, if approved, could be reduced. Even if patents covering ourproduct candidates are obtained, once the patent life has expired for a product, we may be vulnerable to competition from biosimilar products. Any loss ofpatent protection could have a material adverse impact on our business. We may be unable to prevent competitors from entering the market with a productthat is similar or identical to our product candidates, which could harm our business and ability to achieve profitability.Furthermore, the research resulting in certain of our licensed patent rights and technology was funded by the U.S. government. As a result, thegovernment has certain rights, such as march-in rights, to such patent rights and technology. When new technologies are developed with governmentfunding, the government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the government to practicethe invention for or on behalf of the United States. These rights may permit the government to disclose our confidential information to third parties and toexercise march-in rights to use or allow third parties to use our licensed technology. The government can exercise its march-in rights if it determines thataction is necessary because we fail to achieve practical application of the government-funded technology, because action is necessary to alleviate health orsafety needs, to meet requirements of federal regulations or to give preference to U.S. industry. In addition, our rights in such inventions may be subject tocertain requirements to manufacture products embodying such inventions in the United States. Any exercise by the government of such rights could harm ourcompetitive position, business, results of operations, financial condition and future prospects.If we are sued for infringing the intellectual property rights of third parties, such litigation could be costly and time-consuming and could prevent or delayour development and commercialization efforts.Our commercial success depends, in part, on us and our collaborators not infringing the patents and proprietary rights of third parties. There is asubstantial amount of litigation and other adversarial proceedings, both within and outside the United States, involving patent and other intellectualproperty rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interference or derivation proceedings,oppositions, and inter partes and post-grant review proceedings before the USPTO and non-U.S. patent offices. Numerous U.S. and non-U.S. issued patentsand pending patent applications owned by third parties exist in the fields in which we are developing and may develop our product candidates. As thebiotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims ofinfringement of third parties’ patent rights as it may not always be clear to industry participants, including us, which patents cover various types of productsor methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform or predictable.Third parties may assert infringement claims against us based on existing or future intellectual property rights, alleging that we are employing theirproprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods ofmanufacture or methods for treatment related to the use or manufacturing of our product candidates that we failed to identify. For example, applications filedbefore November 29, 2000, and certain applications filed on or after that date that will not be filed outside the United States, remain confidential until issuedas patents. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period ofapproximately 18 months after the earliest filing date. Therefore, patent applications covering our product candidates could have been filed by otherswithout our knowledge. In addition, pending patent applications that have been published, including some of which we are aware, could be later amended ina manner that could cover our product candidates or their use or manufacture. We may analyze patents or patent applications of our competitors that webelieve are relevant to our activities and believe that we are free to operate in relation to any of our product candidates, but our competitors may obtainissued claims, including in patents we consider to be unrelated, which may block our efforts or potentially result in any of our product candidates or ouractivities infringing such claims. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products and methodseither do not infringe the patent claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving that a patent isinvalid is difficult. For example, in the United States, proving invalidity in a district court proceeding requires a showing of clear and convincing evidence toovercome the presumption of validity enjoyed by issued patents, and proving invalidity in an inter partes36 review proceeding in the USPTO requires a showing of a preponderance of the evidence. Even if we are successful in these proceedings, we may incursubstantial costs and the time and attention of our management and scientific personnel could be diverted, which could have a material adverse effect on us.If any issued third-party patents were held by a court of competent jurisdiction to cover aspects of our materials, formulations, methods of manufacture ormethods for treatment, we could be forced, including by court order, to cease developing, manufacturing or commercializing the relevant product candidateuntil such patent expired. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and tocontinue developing, manufacturing or marketing the infringing product candidate. However, we may not be able to obtain any required license oncommercially reasonably terms, or at all. Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitorsgaining access to the same intellectual property licensed to us. Ultimately, we could be prevented from commercializing a product candidate, or be forced tocease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses onacceptable terms. This could harm our business significantly.Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop andcommercialize one or more of our product candidates. Defending against claims of patent infringement or misappropriation of trade secrets could be costlyand time consuming, regardless of the outcome. Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us withsubstantial unanticipated costs. In addition, litigation or threatened litigation could result in significant demands on the time and attention of ourmanagement team, distracting them from the pursuit of other company business. In the event of a successful claim of infringement against us, we may have topay substantial damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent, or to redesign our infringingproduct candidates, which may be impossible or require substantial time and monetary expenditure. We may also elect to enter into license agreements inorder to settle patent infringement claims prior to litigation, and any such license agreement may require us to pay royalties and other fees that could besignificant.We may face claims that we misappropriated the confidential information or trade secrets of a third party. If we are found to have misappropriated athird party’s trade secrets, we may be prevented from further using such trade secrets, which could limit our ability to develop our product candidates. We arenot aware of any material threatened or pending claims related to these matters, but in the future litigation may be necessary to defend against such claims. Ifwe fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we aresuccessful in defending against such claims, litigation could result in substantial costs and be a distraction to management. During the course of any patent orother intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedings in thelitigation. If securities analysts or investors regard these announcements as negative, the perceived value of our product candidates, programs or intellectualproperty could be diminished. Accordingly, the market price of our common stock may decline.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting, enforcing and defending patents on all of our product candidates in all countries throughout the world would be prohibitivelyexpensive. Our or our licensors’ intellectual property rights in certain countries outside the United States may be less extensive than those in the UnitedStates. In addition, the laws of certain foreign countries do not protect intellectual property rights to the same extent as laws in the United States.Consequently, we and our licensors may not be able to prevent third parties from practicing our and our licensors’ inventions in countries outside the UnitedStates, or from selling or importing infringing products made using our and our licensors’ inventions in and into the United States or other jurisdictions.Competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patent protection or where we do not have exclusiverights under the relevant patent(s) to develop their own products and, further, may export otherwise infringing products to territories where we and ourlicensors have patent protection but where enforcement is not as strong as that in the United States. These infringing products may compete with our productcandidates in jurisdictions where we or our licensors have no issued patents or where we do not have exclusive rights under the relevant patent(s), or ourpatent claims and other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encounteredsignificant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularlycertain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating tobiopharmaceuticals, which could make it difficult for us and our licensors to stop the infringement of our and our licensors’ patents or marketing ofcompeting products in violation of our and our licensors’ proprietary rights generally. Proceedings to enforce our and our licensors’ patent rights in foreignjurisdictions could result in substantial costs and divert our attention from other aspects of our business, could put our and our licensors’ patents at risk ofbeing invalidated or interpreted narrowly, could put our and our licensors’ patent applications at risk of not issuing, and could provoke third parties to assertclaims against us or our licensors. We or our licensors may not prevail in any lawsuits that we or our licensors initiate, and even if we or our licensors aresuccessful the damages or other remedies awarded, if any, may not be commercially meaningful.37 We have in-licensed a significant portion of our intellectual property from MSK and QIMR Berghofer. If we breach any of our license agreements withMSK or QIMR Berghofer, we could lose the ability to continue the development and potential commercialization of one or more of our productcandidates.We hold rights under license agreements with MSK and QIMR Berghofer that are important to our business. Our discovery and development platformis built, in part, around patent rights exclusively in-licensed from MSK and QIMR Berghofer. The MSK agreement generally grants us an exclusive license toresearch, develop, make, use, offer for sale, sell and import, tabelecleucel, ATA520 and ATA230. Under our existing MSK license agreement, we are subjectto various obligations, including diligence obligations with respect to development and commercialization activities, payment obligations uponachievement of certain milestones and royalties on product sales, as well as other material obligations. If there is any conflict, dispute, disagreement or issueof nonperformance between us and MSK regarding our rights or obligations under the license agreements, including any such conflict, dispute ordisagreement arising from our failure to satisfy diligence or payment obligations under any such agreement, we may be liable to pay damages and MSK mayhave a right to terminate the affected license. The loss our license agreement with MSK could materially adversely affect our ability to proceed to utilize theaffected intellectual property in our drug discovery and development efforts, our ability to enter into future collaboration, licensing and/or marketingagreements for one or more affected product candidates and our ability to commercialize the affected product candidates. The risks described elsewherepertaining to our patents and other intellectual property rights also apply to the intellectual property rights that we license, and any failure by us or ourlicensors to obtain, maintain and enforce these rights could have a material adverse effect on our business.We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful and havea material adverse effect on the success of our business and on our stock price.Third parties may infringe our patents, the patents of our licensors, or misappropriate or otherwise violate our or our licensor’s intellectual propertyrights. Our and our licensor’s patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless anduntil a patent issues from such applications, and then only to the extent the issued claims cover the technology. In the future, we or our licensors may elect toinitiate legal proceedings to enforce or defend our or our licensors’ intellectual property rights, to protect our or our licensor’s trade secrets or to determinethe validity or scope of intellectual property rights we own or control. Any claims that we assert against perceived infringers could also provoke these partiesto assert counterclaims against us alleging that we infringe their intellectual property rights or that our intellectual property rights are invalid. In addition,third parties may initiate legal proceedings against us or our licensors to challenge the validity or scope of intellectual property rights we own or control. Theproceedings can be expensive and time-consuming. Many of our or our licensor’s adversaries in these proceedings may have the ability to dedicatesubstantially greater resources to prosecuting these legal actions than we or our licensors can. Accordingly, despite our or our licensors’ efforts, we or ourlicensors may not be able to prevent third parties from infringing upon or misappropriating intellectual property rights we own or control, particularly incountries where the laws may not protect our rights as fully as in the United States. Litigation could result in substantial costs and diversion of managementresources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by orlicensed to us is invalid or unenforceable, in whole or in part, or may refuse to stop the other party from using the technology at issue on the grounds that ouror our licensors’ patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our or our licensors’patents at risk of being invalidated, held unenforceable or interpreted narrowly.Interference or derivation proceedings provoked by third parties, brought by us or our licensors or collaborators, or brought by the USPTO or any non-US patent authority may be necessary to determine the priority of inventions or matters of inventorship with respect to our patents or patent applications. Wemay also become involved in other proceedings, such as reexamination or opposition proceedings, inter partes review, post-grant review or other preissuanceor post-grant proceedings in the USPTO or its foreign counterparts relating to our intellectual property or the intellectual property of others. An unfavorableoutcome in any such proceeding could require us or our licensors to cease using the related technology and commercializing our product candidates, or toattempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us or our licensors a license oncommercially reasonable terms if any license is offered at all. Even if we or our licensors obtain a license, it may be non-exclusive, thereby giving ourcompetitors access to the same technologies licensed to us or our licensors. In addition, if the breadth or strength of protection provided by our or ourlicensor’s patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize currentor future product candidates. Even if we successfully defend such litigation or proceeding, we may incur substantial costs and it may distract our managementand other employees. We could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfullyinfringed a patent.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some ofour confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of theresults of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it couldhave a substantial adverse effect on the price of shares of our common stock.38 Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents.Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity, and obtaining and enforcingbiopharmaceutical patents are costly, time-consuming, and inherently uncertain. The Supreme Court has ruled on several patent cases in recent years, eithernarrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition toincreasing uncertainty with regard to our and our licensors’ ability to obtain patents in the future, this combination of events has created uncertainty withrespect to the value of patents once obtained. Depending on future decisions by the U.S. Congress, the federal courts and/or the USPTO, the laws andregulations governing patents could change in unpredictable ways that may weaken our and our licensors’ ability to obtain new patents or to enforce existingpatents and patents we and our licensors or collaborators may obtain in the future.Patent reform legislation that has occurred could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ patentapplications and the enforcement or defense of our or our licensors’ issued patents.If we are unable to protect the confidentiality of our trade secrets and other proprietary information, the value of our technology could be materiallyadversely affected and our business could be harmed.In addition to seeking the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietaryknow-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and other elements of our technology,discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. The T-cellimmunotherapy product candidates and platform technology we have licensed from MSK and QIMR Berghofer are protected primarily as confidential know-how and trade secrets. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quicklyduplicate or surpass our technological achievements, including by enabling them to develop and commercialize products substantially similar to orcompetitive with our product candidates, thus eroding our competitive position in the market. Trade secrets can be difficult to protect. We seek to protect ourproprietary technology and processes, in part, by entering into confidentiality agreements and invention assignment agreements with our employees,consultants, and outside scientific advisors, contractors and collaborators. These agreements are designed to protect our proprietary information. Although weuse reasonable efforts to protect our trade secrets, our employees, consultants, contractors, or outside scientific advisors might intentionally or inadvertentlydisclose our trade secrets or confidential, proprietary information to competitors. In addition, competitors may otherwise gain access to our trade secrets orindependently develop substantially equivalent information and techniques. If any of our confidential proprietary information were to be lawfully obtainedor independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete withus, which could harm our competitive position.Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome isunpredictable. In addition, the laws of certain foreign countries do not protect proprietary rights such as trade secrets to the same extent or in the same manneras the laws of the United States. Misappropriation or unauthorized disclosure of our trade secrets to third parties could impair our competitive advantage inthe market and could materially adversely affect our business, results of operations and financial condition.Risks Related to Commercialization of Our Product CandidatesOur commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients,healthcare payors and cancer treatment centers.Even if we obtain regulatory approval for any of our product candidates that we may develop or acquire in the future, the product may not gain marketacceptance among physicians, healthcare payors, patients or the medical community, including cancer treatment centers. Market acceptance of any of ourproduct candidates for which we receive approval depends on a number of factors, including: •the efficacy and safety of such product candidates as demonstrated in clinical trials; •the clinical indications and patient populations for which the product candidate is approved; •acceptance by physicians, major cancer treatment centers and patients of the drug as a safe and effective treatment; •the adoption of novel cellular therapies by physicians, hospitals and third-party payors; •the potential and perceived advantages of product candidates over alternative treatments; •the safety of product candidates seen in a broader patient group, including its use outside the approved indications;39 •any restrictions on use together with other medications; •the prevalence and severity of any side effects; •product labeling or product insert requirements of the FDA or other regulatory authorities; •the timing of market introduction of our products as well as competitive products; •the development of manufacturing and distribution processes for our novel T-cell immunotherapy product candidates; •the cost of treatment in relation to alternative treatments; •the availability of coverage and adequate reimbursement and pricing by third-party payors and government authorities; •relative convenience and ease of administration; and •the effectiveness of our sales and marketing efforts and those of our collaborators.If any of our product candidates are approved but fail to achieve market acceptance among physicians, patients, healthcare payors or cancer treatmentcenters, we will not be able to generate significant revenues, which would compromise our ability to become profitable.Even if we are able to commercialize our product candidates, the products may not receive coverage and adequate reimbursement from third-party payorsin the United States and in other countries in which we seek to commercialize our products, which could harm our business.Our ability to commercialize any product successfully will depend, in part, on the extent to which coverage and adequate reimbursement for theseproducts and related treatments will be available from government health administration authorities, private health insurers and other organizations.Government authorities and third-party payors, such as private health insurers and health maintenance organizations, determine which medicationsthey will cover and establish reimbursement levels. A primary trend in the healthcare industry is cost containment. Government authorities and third-partypayors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors arerequiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Third-party payors may also seek additional clinical evidence, beyond the data required to obtain regulatory approval, demonstrating clinical benefits and value inspecific patient populations before covering our products for those patients. We cannot be sure that coverage and adequate reimbursement will be availablefor any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impactthe demand for, or the price of, any product candidate for which we obtain regulatory approval. If reimbursement is not available or is available only atlimited levels, we may not be able to successfully commercialize any product candidate for which we obtain regulatory approval.There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than thepurposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement doesnot imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution.Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates mayvary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs andmay be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required bygovernment healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they maybe sold at lower prices than in the United States. Third-party payors in the United States often rely upon Medicare coverage policy and payment limitationsin setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded andprivate payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed tocommercialize products and our overall financial condition.Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase thedifficulty and cost for us to obtain regulatory approval of and commercialize our product candidates and affect the prices we may obtain.The regulations that govern, among other things, regulatory approvals, coverage, pricing and reimbursement for new drug products vary widely fromcountry to country. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changesregarding the healthcare system that could prevent or delay regulatory40 approval of our product candidates, restrict or regulate post-approval activities and affect our ability to successfully sell any product candidates for which weobtain regulatory approval. In particular, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and EducationReconciliation Act, collectively, the Affordable Care Act, was enacted, which substantially changes the way health care is financed by both governmentaland private insurers, and significantly impacts the U.S. pharmaceutical industry. The Affordable Care Act and its implementing regulations, among otherthings, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs andbiologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed bymanufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolledin Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, provided incentives toprograms that increase the federal government’s comparative effectiveness research and established a new Medicare Part D coverage gap discount program, inwhich manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during theircoverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, theBudget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction,tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, therebytriggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of2% per fiscal year, which went into effect in April 2013, and will remain in effect through 2025 unless additional Congressional action is taken. In January2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, further reduced Medicarepayments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recoveroverpayments to providers from three to five years.There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening theavailability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. Thecontinuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs ofhealthcare and/or impose price controls may adversely affect: •the demand for our product candidates, if we obtain regulatory approval; •our ability to set a price that we believe is fair for our products; •our 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.Since its enactment, there have been judicial and Congressional challenges to numerous provisions of the Affordable Care Act, as well as recent effortsby the Trump administration to repeal or replace certain aspects of the Affordable Care Act. Since January 2017, President Trump has signed two ExecutiveOrders designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for healthinsurance mandated by the Affordable Care Act. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of theAffordable Care Act. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under theAffordable Care Act have been enacted. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based sharedresponsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a yearthat is commonly referred to as the “individual mandate”. Additionally, on January 22, 2018, President Trump signed a continuing resolution onappropriations for fiscal year 2018 that delayed the implementation of certain mandated fees under the Affordable Care Act, including the so-called“Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share,and the medical device excise tax on non-exempt medical devices. Congress may consider other legislation to repeal and replace elements of the AffordableCare Act. Any repeal and replace legislation may have the effect of limiting the amounts that government agencies will pay for healthcare products andservices, which could result in reduced demand for our products or additional pricing pressure, or may lead to significant deregulation, which could make theintroduction of competing products and technologies much easier. Policy changes, including potential modification or repeal of all or parts of the AffordableCare Act or the implementation of new health care legislation could result in significant changes to the health care system, which could have a materialadverse effect on our business, results of operations and financial condition.41 Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities forpharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance orinterpretations will be changed, or what the impact of such changes on the regulatory approvals of our product candidates, if any, may be.In the United States, the European Union and other potentially significant markets for our product candidates, government authorities and third-partypayors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies,which has resulted in lower average selling prices. For example, in the United States, there have been several recent Congressional inquiries and proposedbills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,and reform government program reimbursement methodologies for drugs. Further, Congress and the Trump administration have each indicated that it willcontinue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation andimplemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts,restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, to encourage importation from othercountries and bulk purchasing. Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional pricing andreimbursement controls in the European Union will put additional pressure on product pricing, reimbursement and usage, which may adversely affect ourfuture product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmentallaws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general.Price controls may be imposed in foreign markets, which may adversely affect our future profitability.In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In thesecountries, pricing negotiations with governmental authorities can take considerable time after receipt of regulatory approval for a product. In addition, therecan be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures.Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursementhas been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we, or our collaborators, may be required to conduct a clinical trial or other studies thatcompare the cost-effectiveness of our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval.Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country ofpublication and other countries. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, ourbusiness could be adversely affected.We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.We face competition from numerous pharmaceutical and biotechnology enterprises, as well as from academic institutions, government agencies andprivate and public research institutions for our current product candidates. Our commercial opportunities will be reduced or eliminated if our competitorsdevelop and commercialize products that are safer, more effective, have fewer side effects or are less expensive than any products that we may develop.Competition could result in reduced sales and pricing pressure on our product candidates, if approved, which in turn would reduce our ability to generatemeaningful revenues and have a negative impact on our results of operations. In addition, significant delays in the development of our product candidatescould allow our competitors to bring products to market before us and impair any ability to commercialize our product candidates.There are currently no FDA or EMA approved products for the treatment of EBV+ PTLD. However, some approved products and therapies are used off-label in the treatment of EBV+ PTLD, such as rituximab and combination chemotherapy regimens. In addition, a number of companies and academicinstitutions are developing drug candidates for EBV+ PTLD and other EBV associated diseases including: Cell Medica Ltd., which is conducting Phase 1clinical trials for baltaleucel-T, an autologous EBV specific T-cell therapy in post-transplant lymphoproliferative disorder and Viracta Therapeutics, Inc., orViracta, which has initiated Phase 1b/2 clinical trials for VRx-3996 in relapsed/refractory EBV+ lymphomas. In addition, Tessa Therapeutics Pte Ltd. isdeveloping TT10, an autologous EBV specific T-cell therapy, which is currently being evaluated in Phase 3 clinical trials for the treatment ofnasopharyngeal carcinoma. Drug therapies approved or commonly used for CMV infection include antiviral compounds such as ganciclovir, valganciclovir, cidofovir andfoscarnet. In addition, a number of companies and academic institutions are developing drug candidates for CMV infection and other CMV-associateddiseases. These companies and academic institutions are in various stages of development with their product candidates with Merck & Co, Inc. completingPhase 3 clinical trials of letermovir, a CMV terminase inhibitor; Shire Plc which is conducting Phase 3 clinical trials of maribavir, a UL97 protein kinaseinhibitor; Vical Inc., recently announced ASP0113, a42 therapeutic bivalent plasma DNA CMV vaccine being evaluated in patients undergoing an allogeneic stem cell transplant, failed to meet primary orsecondary endpoints in Phase 3 clinical trials. In addition, Helocyte, Inc., is conducting two Phase 2 clinical trials for a CMV MVA-vaccine and a CMVpeptide vaccine in patients undergoing an allogeneic hematopoietic stem cell transplant; a monoclonal antibody combination therapy; Merck is conductingPhase 1 clinical trials for V160, a CMV DNA vaccine; VBI Vaccines Inc., has completed Phase 1 clinical trials for VBI-1501A, an eVLP vaccine; HookipaBiotech, is conducting Phase 1 clinical trials for HB101, a bivalent vaccine, ViraCyte, is conducting Phase 1 clinical trials for Viralym-C, a CMV-specificallogeneic cell therapy product; Fate Therapeutics is conducting a Phase 1/2 clinical trial for ProTmune, a small molecule programmed mobilized peripheralblood graft; Chimerix is conducting Phase 1 clinical trials for intravenous Brincidofovir (BCV IV), a nucleotide analog and Moderna Therapeutics isconducting Phase 1 clinical trials for mRNA-1647, an mRNA based prophylactic vaccine.Competition in the MS market is high with fourteen therapies approved for the treatment of relapsing-remitting multiple sclerosis (RRMS) in the U.S.and European Union. There are many U.S. and international competitors in the RRMS market, including major multi-national fully-integratedpharmaceutical companies and established biotechnology companies. Most recently, Ocrevus®, marketed by F. Hoffmann-La Roche, was approved for thetreatment of relapsing MS in the U.S. and European Union. There are numerous other development candidates in Phase 3 trials for RRMS including Novartis’anti-CD20 monoclonal antibody ofatumumab; Alkermes’ monomethyl fumarate prodrug ALKS 8700; Teva’s laquinimod, and Actelion’s next-generationsphingosine 1-phosphate receptor (S1PR) agonist ponesimod. Celgene recently reported positive results from Phase 3 clinical trials evaluating ozamimod, aS1PR agonist, in relapsing MS.Only three therapies have been approved for the treatment of progressive MS. Recently, Ocrevus® was approved in the U.S. and European Union forthe treatment of primary progressive MS (PPMS). Extavia® (marketed by Novartis) is approved in the U.S. and European Union for the treatment ofsecondary progressive MS (SPMS). Betaseron® (marketed by Bayer AG) is also approved in the European Union. Few therapies have been approved forprogressive MS because many candidates have failed during clinical trial testing. In the U.S., there is one drug (mitoxantrone) approved to treat SPMS. The SPMS and PPMS markets have active development pipelines and additional novel agents could be approved in the future. Several developmentcandidates are being evaluated in clinical trials including a number of Phase 3 programs: MedDay SA is evaluating MD-1003, a concentrated form of biotin,for progressive MS; AB Science is evaluating masitinib, a tyrosine kinase inhibitor, for progressive MS; and Novartis is evaluating siponimod, an S1P1modulator, for SPMS; and Actelion Pharmaceuticals is evaluating ponesimod, for SPMS. Several products are approved for the treatment of relapsed or refractory multiple myeloma (MM) including immunomodulatory drugs (IMIDs) such asThalomid® (Celgene Corporation), Revlimid® (Celgene Corporation) and Pomalyst® (Celgene Corporation); monoclonal antibodies such as Darzalex®(Janssen Research & Development, LLC) and Empliciti® (Bristol Myers Squibb); and proteasome inhibitors such as Velcade® (Millennium Pharmaceuticals,Inc.) and Kyprolis® (Amgen Inc.). A number of companies and institutions are pursuing development programs for relapsed or refractory MM. These development programs includedrug candidates being evaluated in clinical trials as a monotherapy or in combination with other approved agents. In addition, many groups are developingnovel T-cell therapies such as autologous CAR T-cell or autologous TCR T-cell candidates. These include bluebird bio, Inc., which is conducting Phase 2clinical trials testing bb2121, an anti-BCMA CART; Gilead Sciences, Inc., which is testing KTE-585, an anti-BCMA CART in Phase 1 clinical trials; JunoTherapeutics, which is testing an anti-BCMA CART in Phase 1 clinical trials; Autolus Limited, which is testing AUTO-2, a bi-specific anti-BCMA/TACICART in Phase 1 clinical trials and Adaptimmune Therapeutics PLC, which is testing an anti-NY-ESO TCR in Phase 1/2 clinical trials.Many of the approved or commonly used drugs and therapies for EBV+ PTLD, CMV and relapsed or refractory multiple myeloma are well-establishedand are widely accepted by physicians, patients and third-party payors. Some of these drugs are branded and subject to patent protection, and other drugs andnutritional supplements are available on a generic basis. Insurers and other third-party payors may encourage the use of generic products or specific brandedproducts. We expect that, if any of these product candidates is approved, it will be priced at a significant premium over competitive generic products. Thispricing premium may make it difficult for us to differentiate these products from currently approved or commonly used therapies and impede adoption of ourproduct, which may adversely impact our business. In addition, many companies are developing new therapeutics, and we cannot predict what the standard ofcare will become as our products continue in clinical development.Many of our competitors or potential competitors have significantly greater established presence in the market, financial resources and expertise inresearch and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved productsthan we do, and as a result may have a competitive advantage over us. Smaller or early-stage companies may also prove to be significant competitors,particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retainingqualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologiesand technology licenses complementary to our programs or advantageous to our business.43 As a result of these factors, these competitors may obtain regulatory approval of their products before we are able to obtain patent protection or otherintellectual property rights, which will limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that aresafer, more effective, more widely used and cheaper than ours, and may also be more successful than us in manufacturing and marketing their products. Theseappreciable advantages could render our product candidates obsolete or noncompetitive before we can recover the expenses of development andcommercialization.Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smallernumber of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborativearrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, management andcommercial personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, ornecessary for, our programs.If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, wemay be unable to generate any revenue.We do not currently have an organization for the sale, marketing and distribution of pharmaceutical products and the cost of establishing andmaintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved by the FDA andcomparable foreign regulatory authorities, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements withthird parties to perform these services. There are significant risks involved in building and managing a sales organization, including our ability to hire, retainand incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage ageographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilitieswould adversely impact the commercialization of these products. If we are unable to establish adequate sales, marketing and distribution capabilities,whether independently or with third parties, we may not be able to generate product revenues and may not become profitable. We will be competing withmany companies that currently have extensive and well-funded sales and marketing operations. Without an internal commercial organization or the supportof a third party to perform sales and marketing functions, we may be unable to compete successfully against these more established companies. If we are notsuccessful in commercializing our current or future product candidates either on our own or through collaborations with one or more third parties, our futureproduct revenue will suffer and we would incur significant additional losses.We will need to grow the size of our organization, and we may experience difficulties in managing this growth.As of February 15, 2018, we had 185 employees. We need to grow the size of our organization in order to support our continued development andpotential commercialization of our product candidates. In particular, we will need to add substantial numbers of additional personnel and other resources tosupport our development and potential commercialization of our product candidates. As our development and commercialization plans and strategiescontinue to develop, or as a result of any future acquisitions, our need for additional managerial, operational, manufacturing, sales, marketing, financial andother resources will increase. Our management, personnel and systems currently in place may not be adequate to support this future growth. Future growthwould impose significant added responsibilities on members of management, including: •managing our preclinical studies and clinical trials effectively; •identifying, recruiting, maintaining, motivating and integrating additional employees; •managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors andother third parties; •improving our managerial, development, operational, information technology, and finance systems; and •expanding our facilities.As our operations expand, we will also need to manage additional relationships with various strategic partners, suppliers and other third parties. Ourfuture financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability tomanage any future growth effectively. To that end, we must be able to manage our development efforts and preclinical studies and clinical trials effectivelyand hire, train and integrate additional management, research and development, manufacturing, administrative and sales and marketing personnel. Our failureto accomplish any of these tasks could prevent us from successfully growing our company.Our future success depends on our ability to retain our executive officers and to attract, retain and motivate qualified personnel.We are highly dependent upon our personnel, including Isaac E. Ciechanover, M.D., our President, Chief Executive Officer and founder, andChristopher Haqq, Ph.D., M.D., our EVP, Chief Scientific Officer. Our employment agreements with Drs. Ciechanover44 and Haqq are at-will and do not prevent them from terminating their employment with us at any time. The loss of the services of either of them could impedethe achievement of our research, development and commercialization objectives.Our future growth and success depend on our ability to recruit, retain, manage and motivate our employees. The loss of any member of our seniormanagement team or the inability to hire or retain experienced management personnel could compromise our ability to execute our business plan and harmour operating results. Because of the specialized scientific and managerial nature of our business, we rely heavily on our ability to attract and retain qualifiedscientific, technical and managerial personnel. The competition for qualified personnel in the pharmaceutical field is intense and as a result, we may beunable to continue to attract and retain qualified personnel necessary for the development of our business.Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse, privacy and other laws andregulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and futureearnings.Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates forwhich we obtain regulatory approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuseand other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we would market, selland distribute our products. As a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly toMedicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are andwill be applicable to our business. Restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operateinclude the following: •the federal healthcare Anti-Kickback Statute will constrain our marketing practices, educational programs, pricing policies, and relationshipswith healthcare providers or other entities, by prohibiting, among other things, persons from knowingly and willfully soliciting, offering,receiving or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either thereferral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federalhealthcare program such as Medicare and Medicaid; •federal civil and criminal false claims laws and civil monetary penalty laws impose criminal and civil penalties, including through civilwhistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federalgovernment, including the Medicare and Medicaid programs, claims for payment or approval that are false or fraudulent or making a falsestatement to avoid, decrease or conceal an obligation to pay money to the federal government; •the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a schemeto defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing orcovering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits,items or services; •HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, also imposes obligations,including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable healthinformation held by covered entities and their business associates; •the federal physician sunshine requirements under the Affordable Care Act requires manufacturers of drugs, devices, biologics and medicalsupplies to report annually to HHS information related to payments and other transfers of value to physicians, other healthcare providers, andteaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate familymembers and applicable group purchasing organizations; •analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketingarrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers;some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and therelevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related topayments and other transfers of value to physicians and other healthcare providers; and •marketing expenditures; and state and foreign laws govern the privacy and security of health information in specified circumstances, many ofwhich differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantialcosts. It is possible that governmental authorities will conclude that our business practices may not comply45 with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations arefound to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal andadministrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid,disgorgement, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolveallegations of non-compliance with these laws, and the curtailment or restructuring of our operations. If any physicians or other healthcare providers orentities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrativesanctions, including exclusions from government funded healthcare programs.Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which couldcause significant liability for us and harm our reputation.We are exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with FDA regulations or similarregulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply withmanufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulationsestablished and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities tous. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatorysanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect andprevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or otheractions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are notsuccessful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, includingthe imposition of significant fines or other sanctions.Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an evengreater risk if we commercially sell any products that we may develop. Product liability claims may be brought against us by subjects enrolled in our clinicaltrials, patients, healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that ourproduct candidates or products caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in: •decreased demand for any product candidates or products that we may develop; •termination of clinical trial sites or entire trial programs; •injury to our reputation and significant negative media attention; •withdrawal of clinical trial participants; •significant costs to defend the related litigation; •substantial monetary awards to trial subjects or patients; •loss of revenue; •diversion of management and scientific resources from our business operations; and •the inability to commercialize any products that we may develop.We currently hold product liability insurance coverage at a level that we believe is customary for similarly situated companies and adequate toprovide us with insurance coverage for foreseeable risks, but which may not be adequate to cover all liabilities that we may incur. Insurance coverage isincreasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that mayarise. We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain regulatory approval for our productcandidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products that receive regulatoryapproval. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claimor series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.46 If we and our third-party manufacturers fail to comply with environmental, health and safety laws and regulations, we could become subject to fines orpenalties or incur costs that could have a material adverse effect on the success of our business.We and our third-party manufacturers are subject to numerous environmental, health and safety laws and regulations, including those governinglaboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardousand flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract withthird parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event ofcontamination or injury resulting from our or our third-party manufacturers’ use of hazardous materials, we could be held liable for any resulting damages,and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resultingfrom the use of hazardous materials with a policy limit that we believe is customary for similarly situated companies and adequate to provide us withinsurance coverage for foreseeable risks, this insurance may not provide adequate cover age against potential liabilities. We do not maintain insurance forenvironmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Thesecurrent or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also mayresult in substantial fines, penalties or other sanctions, which could adversely affect our business, financial condition, results of operations and prospects.Our business and operations would suffer in the event of computer system failures or security breaches.Our internal computer systems, and those of MSK, QIMR Berghofer, our CROs, our CMOs, and other business vendors on which we rely, arevulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical failures. Weexercise little or no control over these third parties, which increases our vulnerability to problems with their systems. If such an event were to occur and causeinterruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data fromcompleted, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosureof confidential or proprietary information, we could incur liability, the further development of our product candidates could be delayed and our businesscould be otherwise adversely affected.The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.On December 22, 2017, President Trump signed into law new tax legislation, or the Tax Act, which significantly reforms the Internal Revenue Code of1986, as amended. The Tax Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from atop marginal rate of 35% to a flat rate of 21%; limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain smallbusinesses); limitation of the deduction of net operating losses generated in tax years beginning after December 31, 2017 to 80% of taxable income,indefinite carryforward of net operating losses generated in tax years after 2018 and elimination of net operating loss carrybacks; changes in the treatment ofoffshore earnings regardless of whether they are repatriated; current inclusion in U.S. federal taxable income of certain earnings of controlled foreigncorporations, mandatory capitalization of research and development expenses beginning in 2022; immediate deductions for certain new investments insteadof deductions for depreciation expense over time; further deduction limits on executive compensation; and modifying, repealing and creating many other business deductions and credits, including the reduction in the orphan drug credit from 50% to 25% of qualifying expenditures. We continue to examine theimpact this tax reform legislation may have on our business. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the TaxAct is uncertain and our business and financial condition could be adversely affected. The impact of this tax reform on holders of our common stock is alsouncertain and could be adverse. This periodic report does not discuss any such tax legislation or the manner in which it might affect us or our stockholders inthe future. We urge our stockholders to consult with their legal and tax advisors with respect to such legislation.Our ability to use net operating loss carryforwards to offset future taxable income, and our ability to use tax credit carryforwards, may be subject tocertain limitations. Our ability to use our federal and state net operating losses, or NOLs, to offset potential future taxable income and related income taxes that wouldotherwise be due is dependent upon our generation of future taxable income, and we cannot predict with certainty when, or whether, we will generatesufficient taxable income to use all of our NOLs.As of December 31, 2017, we reported U.S. federal and state NOLs of approximately $76.0 million, $231.4 million, respectively. These federal NOLsgenerated prior to 2018 will continue to be governed by the NOL tax rules as they existed prior to the adoption of the new Tax Act, which means thatgenerally they will expire 20 years after they were generated if not used prior thereto. Many states have similar laws. Accordingly, these federal and stateNOLs could expire unused and be unavailable to offset future income tax47 liabilities. Under the newly enacted Tax Act, federal NOLs incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility ofsuch federal NOL’s is limited to 80% of current year taxable income. It is uncertain if and to what extent various states will conform to the newly enactedfederal tax law. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, our ability to utilize these NOLs and other taxattributes, such as federal tax credits, in any taxable year may be limited if we have experienced an “ownership change.” Generally, a Section 382 ownershipchange occurs if one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50percentage points over its lowest ownership percentage within a three-year testing period. Similar rules may apply under state tax laws. We completed aSection 382 study of transactions in our stock through December 31, 2017 and concluded that we have experienced an ownership change that we believeunder Section 382 of the Code will result in limitations in our ability to use certain of our NOLs and credits. In addition, we may experience future ownershipchanges as a result of future offerings or other changes in the ownership of our stock, some of which are beyond our control. As a result, the amount of theNOL’s and tax credit carryforwards presented in our financial statements could be limited and, in the case of NOL’s generated in 2017 and before, may expireunused. Any such material limitation or expiration of our NOL’s may harm our future operating results by effectively increasing our future tax obligations.Business disruptions could seriously harm our future revenues and financial condition and increase our costs and expenses.Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires,extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which we are predominantly self-insured. Two of our corporate locations are located in California, an area prone to earthquakes. The occurrence of any of these business disruptions couldseriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce our productcandidates. Our ability to obtain clinical supplies of product candidates could be disrupted, if the operations of these suppliers are affected by a man-made ornatural disaster or other business interruption. The ultimate impact on us, our significant suppliers and our general infrastructure is unknown, but ouroperations and financial condition could suffer in the event of a major earthquake, fire or other natural disaster.Risks Related to Ownership of Our Common StockOur stock price has been and will likely continue to be volatile and may decline regardless of our operating performance.Our stock price has fluctuated in the past and can be expected to be volatile in the future. From October 16, 2014, the first date of trading of ourcommon stock, through December 31, 2017, the reported sale price of our common stock has fluctuated between $9.66 and $65.56 per share. The stockmarket in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to theoperating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our common stock. Themarket price of our common stock may be influenced by many factors, including the following: •the success of competitive products or technologies; •regulatory actions with respect to our product candidates or products or our competitors’ product candidates or products; •actual or anticipated changes in our growth rate relative to our competitors; •announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capitalcommitments; •results of clinical trials of our product candidates or those of our competitors; •regulatory or legal developments in the United States and other countries; •developments or disputes concerning patent applications, issued patents or other proprietary rights; •the recruitment or departure of key personnel; •the level of expenses related to any of our product candidates or clinical development programs; •the results of our efforts to in-license or acquire additional product candidates or products; •actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; •variations in our financial results or those of companies that are perceived to be similar to us; •fluctuations in the valuation of companies perceived by investors to be comparable to us; •inconsistent trading volume levels of our shares; •announcement or expectation of additional financing efforts;48 •sales of our common stock by us, our insiders or our other stockholders; •changes in the structure of healthcare payment systems; •market conditions in the pharmaceutical and biotechnology sectors; •general economic, industry and market conditions; and •the other risks described in this “Risk Factors” section.We may be subject to securities litigation, which is expensive and could divert management attention.The market price of our common stock has been volatile, and in the past companies that have experienced volatility in the market price of their stockhave been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could resultin substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject tostockholder approval.Our executive officers, directors and stockholders own a significant portion of our outstanding voting stock. These stockholders may be able todetermine the outcome of all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors,amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourageunsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The interests of thisgroup of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their bestinterests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing marketprice for our common stock.Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the marketthat the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Moreover, certain holders of shares ofour common stock will have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares inregistration statements that we may file for ourselves or other stockholders. We have registered and intend to continue to register all shares of common stockthat we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject tovolume limitations applicable to affiliates.We are an “emerging growth company” and are taking advantage of reduced disclosure and governance requirements applicable to emerging growthcompanies, which could result in our common stock being less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act, and we are taking advantage of certain exemptions from various reportingrequirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required tocomply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executivecompensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executivecompensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our commonstock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less activetrading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longeran emerging growth company, which in certain circumstances could be for up to five years from the date of our initial public offering. We will cease to be an“emerging growth company” upon the earliest of: (1) December 31, 2019; (2) the last day of the first fiscal year in which our annual gross revenues are $1billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities;and (4) the date on which we are deemed to be a “large accelerated filer” as defined in the Exchange Act.Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” we may be less attractive toinvestors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with othercompanies in our industry if they believe that our financial accounting is not as transparent as other49 companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may bematerially and adversely affected.We have incurred and will continue to incur increased costs as a result of being a public company and our management expects to devote substantial timeto public company compliance programs.As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses. We are subject to the reportingrequirements of the Exchange Act, which require, among other things, that we file with the SEC annual, quarterly and current reports with respect to ourbusiness and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and The Nasdaq Stock Market toimplement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenanceof effective disclosure and financial controls and changes in corporate governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform andConsumer Protection Act of 2010, the SEC has adopted and will adopt additional rules and regulations, such as mandatory “say on pay” voting requirements,that will apply to us when we cease to be an emerging growth company. Stockholder activism, the current political environment and the potential for futureregulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the mannerin which we operate our business in ways we cannot currently anticipate.The rules and regulations applicable to public companies have substantially increased our legal and financial compliance costs and make someactivities more time-consuming and costly. To the extent these requirements divert the attention of our management and personnel from other businessconcerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our netincome or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services.Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole sourceof potential gain.We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance thegrowth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capitalappreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result inadditional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.We expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital, we may sell substantialamounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of common stock or common stock-related securities, together with the exercise of outstanding options and any additional shares issued in connection with acquisitions or in-licenses, if any,may result in material dilution to our investors. Such sales may also result in material dilution to our existing stockholders, and new investors could gainrights, preferences and privileges senior to those of holders of our common stock.50 Pursuant to our equity incentive plans, our compensation committee is authorized to grant equity-based incentive awards to our employees, non-employee directors and consultants. Future grants of RSUs, options and other equity awards and issuances of common stock under our equity incentive planswill result in dilution and may have an adverse effect on the market price of our common stock. Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if anacquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management.Provisions in our amended and restated certificate of incorporation, or certificate of incorporation, and amended and restated bylaws, or bylaws, aswell as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so wouldbenefit our stockholders, or remove our current management. These include provisions that will: •permit our board of directors to issue up to 20,000,000 shares of preferred stock, with any rights, preferences and privileges as they maydesignate; •provide that all vacancies on our board of directors, including as a result of newly created directorships, may, except as otherwise required bylaw, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; •require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not betaken by written consent; •provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at ameeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’snotice; •not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of common stock entitled to vote in anyelection of directors to elect all of the directors standing for election; and •provide that special meetings of our stockholders may be called only by the board of directors or by such person or persons requested by amajority of the board of directors to call such meetings.These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficultfor stockholders to replace members of our board of directors, who are responsible for appointing the members of our management. For example, our board isdivided into three classes. Each class has a three-year term. These classes make it more difficult to replace a majority of our directors in a short period of time.Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which maydiscourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. Under Delawarelaw, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held thestock for three years or, among other things, the board of directors has approved the transaction. Any provision of our amended and restated certificate ofincorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity forour stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for ourcommon stock.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and tradingvolume could decline.The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness. In the event securities or industry analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, ourstock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for ourstock could decrease, which might cause our stock price and trading volume to decline. 51 Item 1B. Unresolved Staff CommentsNone. Item 2. PropertiesOur corporate headquarters are currently located in South San Francisco, California and consists of approximately 13,670 square feet of leased officespace. The lease is expected to expire in April 2021. We also lease office space in Westlake Village, California under a lease agreement that expires in April2019. In February 2017, we entered into a lease agreement for approximately 90,580 square feet of office, lab and cellular therapy manufacturing space inThousand Oaks, California. The term of the lease commences upon the substantial completion of landlord’s work as defined under the agreement, which iscurrently estimated to be in the second quarter of 2018. Upon the commencement of the lease, the initial term of the lease is fifteen years. Item 3. Legal ProceedingsNone. Item 4. Mine Safety DisclosuresNot applicable. 52 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock has been listed on The Nasdaq Global Select Market under the symbol "ATRA" since October 16, 2014. Prior to that time, therewas no public market for our common stock. The following table sets forth for the indicated periods the high and low intra-day sales prices per share for ourcommon stock on The Nasdaq Global Select Market. Year ended December 31, 2016 High Low First Quarter $26.00 $13.31 Second Quarter $23.25 $14.29 Third Quarter $25.73 $19.00 Fourth Quarter $21.85 $12.45 Year ended December 31, 2017 High Low First Quarter $23.00 $12.45 Second Quarter $21.20 $11.80 Third Quarter $17.55 $13.00 Fourth Quarter $21.80 $12.65 On February 15, 2018, there were 11 stockholders of record of our common stock and the closing price of our common stock was $47.05 per share asreported on The Nasdaq Global Select Market. We are unable to estimate the total number of stockholders represented by these record holders, as many of ourshares are held by brokers and other institutions on behalf of our stockholders. Dividend PolicyWe have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings for use in the operation of ourbusiness and do not intend to declare or pay any cash dividends in the foreseeable future. Any further determination to pay dividends on our capital stockwill be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capitalrequirements, general business conditions and other factors that our board of directors considers relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.Stock Performance GraphSet forth below is a graph comparing the cumulative total return on an indexed basis of a $100 investment in the Company’s common stock, theNasdaq Composite Index and the Nasdaq Biotechnology Index commencing on October 16, 2014 (the date our common stock began trading on The NasdaqGlobal Select Market) and continuing through December 31, 2017. The graph assumes our closing sale price on October 16, 2014 of $10.65 per share as theinitial value of our common stock for indexing purposes. Points on the graph represent the performance as of the last business day of each of the fiscalquarters indicated.This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act orincorporated by reference into any filing of Atara Biotherapeutics, Inc. under the Securities Act or the Exchange Act, except to the extent we specificallyincorporate it by reference into such filing. The past performance of our common stock is no indication of future performance.53 COMPARISON OF CUMULATIVE TOTAL RETURN* Among Atara Biotherapeutics, Inc., the Nasdaq Composite Index and the Nasdaq Biotechnology Index *Assumes $100 invested in our common stock or the related index on October 16, 2014.54 Item 6. Selected Consolidated and Combined Financial DataThe following selected consolidated and combined financial data of the Company for each of the periods indicated are derived from the Company’saudited consolidated and combined financial statements. The consolidated financial statements of the Company as of December 31, 2017 and 2016 and forthe years ended December 31, 2017, 2016 and 2015, and the related reports of the independent registered public accounting firm are included elsewhere inthis Annual Report on Form 10-K. The data presented below should be read in conjunction with the Company’s financial statements, the notes thereto, and"Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this report. Year ended Year ended Year ended Year ended Year ended Consolidated and Combined Statements of Operations December 31, December 31, December 31, December 31, December 31, and Comprehensive Loss Data: 2017 2016 2015 2014 2013 (In thousands, except per share amounts) Operating expenses: Research and development $81,206 $56,514 $41,618 $15,446 $4,859 General and administrative 40,326 24,728 16,830 12,710 3,756 Total operating expenses 121,532 81,242 58,448 28,156 8,615 Loss from operations (121,532) (81,242) (58,448) (28,156) (8,615)Interest and other income, net 2,027 2,203 1,218 125 12 Loss before provision for income taxes (119,505) (79,039) (57,230) (28,031) (8,603)Provision (benefit) for income taxes (14) 10 (9) (25) 170 Net loss $(119,491) $(79,049) $(57,221) $(28,006) $(8,773)Other comprehensive loss: Unrealized gain (loss) on available-for-sale securities 32 335 (418) (100) — Comprehensive loss $(119,459) $(78,714) $(57,639) $(28,106) $(8,773)Basic and diluted net loss per common share $(4.00) $(2.75) $(2.24) $(5.62) $(9.08) As of December 31, Consolidated and Combined Balance Sheet Data: 2017 2016 2015 2014 2013 (In thousands) Cash, cash equivalents and short-term investments $166,096 $255,682 $320,482 $104,116 $51,615 Working capital $144,544 $250,878 $314,888 $103,302 $50,284 Total assets $217,779 $263,914 $324,975 $106,122 $51,828 Long-term liabilities $12,269 $503 $166 $216 $230 Convertible preferred stock $- $- $- $- $61,091 Total stockholders' equity (deficit) $177,864 $253,736 $315,100 $103,182 $(11,017) 55 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsYou should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidatedfinancial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Reportcontain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a resultof many factors, including those factors set forth in the “Risk Factors” section of this Annual Report, our actual results could differ materially from theresults described in or implied by the forward-looking statements contained in the following discussion and analysis.Atara Biotherapeutics is a leading T-cell immunotherapy company developing novel treatments for patients with cancer, autoimmune and viraldiseases. The Company's off-the-shelf, or allogeneic, T-cells are bioengineered from donors with healthy immune function and allow for rapid delivery frominventory to patients without a requirement for pretreatment. Atara's T-cell immunotherapies are designed to precisely recognize and eliminate cancerous ordiseased cells without affecting normal, healthy cells. Atara's most advanced T-cell immunotherapy in development, tabelecleucel (formerly known asATA129), is being developed for the treatment of patients with Epstein-Barr virus (EBV) associated post-transplant lymphoproliferative disorder (EBV+PTLD), who have failed rituximab, as well as other EBV associated hematologic and solid tumors, including nasopharyngeal carcinoma (NPC). Off-the-shelfATA188 and autologous ATA190, the Company's T-cell immunotherapies using a complementary targeted antigen recognition technology, target specificEBV antigens believed to be important for the potential treatment of multiple sclerosis (MS). Atara's clinical pipeline also includes ATA520 targeting WilmsTumor 1 (WT1) and ATA230 directed against cytomegalovirus (CMV).Our technology allows for rapid delivery of a T-cell immunotherapy product that has been manufactured in advance and stored in inventory, with eachmanufactured lot of cells providing therapy for numerous potential patients. This differs from autologous, or patient-derived, treatments, in which eachpatient’s own cells must be extracted, modified outside the body and then delivered back to the patient. We utilize a proprietary cell selection algorithm toselect the appropriate set of cells for use based on a patient’s unique immune profile, and, unlike many other T-cell programs, there is no requirement for pre-treatment before our cells are administered nor is there extended monitoring following administration. For example, in our ongoing trials with our mostadvanced product candidate, tabelecleucel, patients are monitored for two hours following receipt of tabelecleucel. Our T-cell immunotherapy platform isapplicable to a broad array of targets and diseases. With more than 200 patients treated across the platform, we have observed clinical proof of concept acrossboth viral and non-viral targets in conditions ranging from liquid and solid tumors to infectious and autoimmune diseases. We have also observed a safetyprofile characterized by few treatment-related serious adverse events, or SAEs, and no evidence of cytokine release syndrome to date.Our T-cell immunotherapy product candidates are engineered from cells donated by healthy individuals with normal immune function. Once cells arecollected from a donor, they are bioengineered to expand those T-cells that recognize the antigen of interest. The resulting expanded T-cells are thencharacterized and held as inventory. From inventory, these cells can be selected, distributed and prepared for infusion in a partially human leukocyte antigen,or HLA, matched patient in approximately 3-5 days. Following administration, our T-cells home to their target, undergo target-controlled proliferation,eliminate diseased cells and eventually recede. Target-controlled proliferation means that our T-cells expand in number when they encounter diseased cellsin a patient’s body that express the antigen the cells are designed to recognize.We have two technology platforms. One of our technology platforms was developed from more than a decade of experience at Memorial SloanKettering Cancer Center, or MSK. The other was developed at QIMR Berghofer Medical Research Institute, or QIMR Berghofer, in Australia. We licensedrights to certain know-how and T-cell product candidates from MSK in June 2015. Our most advanced product candidate, tabelecleucel, targets Epstein-Barrvirus, or EBV. Tabelecleucel received Breakthrough Therapy Designation, or BTD, from the U.S. Food and Drug Administration, or FDA, and PriorityMedicines, or PRIME, designation from the European Medicines Agency, or EMA, and is currently being evaluated as monotherapy in two Phase 3 trials forthe treatment of patients with EBV associated post-transplant lymphoproliferative disease, or EBV+ PTLD who have failed rituximab. We believe thattabelecleucel has the potential to be the first commercially available off-the-shelf T-cell immunotherapy and the first FDA and EMA approved therapy forEBV+ PTLD. With a European conditional marketing authorization application planned for the first half of 2019 and U.S. biologics licensing applicationsplanned following the completion of one of our ongoing Phase 3 trials, we are currently developing the infrastructure to commercialize tabelecleucelglobally in EBV+ PTLD. We are also evaluating the potential utility of tabelecleucel in patients with other EBV associated cancers, such as nasopharyngealcarcinoma, or NPC, to continue its development in solid tumors. Additional product candidates derived from the collaboration with MSK are beingdeveloped to treat various cancers and severe viral infections.In October 2015 and September 2016, we licensed rights to certain know-how and technology from QIMR Berghofer that is complementary to thatwhich was licensed from MSK. This know-how and technology uses targeted antigen recognition to create off-the-shelf T-cell immunotherapy productcandidates applicable to a variety of diseases, including autoimmune conditions such as multiple sclerosis, or MS. We are also working with QIMR Berghoferon the development of EBV and other virally targeted T-cell immunotherapies. Through this technology, we are expanding the role of immunotherapybeyond oncology and viral infections to56 autoimmune disease. Our most advanced off-the-shelf T-cell product candidate utilizing this technology, ATA188, targets select antigens of EBV and iscurrently being evaluated in a Phase 1 trial initially for the treatment of patients with progressive MS. In connection with the initial license from QIMRBerghofer, we received an option to exclusively license an autologous version of ATA188, also known as ATA190, which recently demonstrated clinicalactivity in a Phase 1 trial in progressive MS. We expect to broadly explore the utility of our targeted antigen recognition technology in EBV and othervirally driven diseases, and additional product candidates derived from our collaboration with QIMR Berghofer are being developed.Overall, we believe that Atara is a leading allogeneic T-cell immunotherapy company with a robust and late stage oncology pipeline and potentiallytransformative T-cell immunotherapies for MS and other viral associated diseases. With tabelecleucel poised to potentially become the first approved off-the-shelf T-cell therapy and a robust pipeline of high potential candidates, our ambition is to be recognized as the leader in off-the-shelf T-cell immunotherapy.We have a limited operating history. Since our inception in 2012, we have devoted substantially all of our resources to identify, acquire and developour product candidates, including conducting preclinical studies and clinical trials and providing general and administrative support for these operations.We have never generated revenues and have incurred losses since inception. Our net losses were $119.5 million, $79.0 million and $57.2 million forthe years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, we had an accumulated deficit of $296.7 million. Substantiallyall of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrativeexpenses associated with our operations. As of December 31, 2017, our cash, cash equivalents and short-term investments totaled $166.1 million, which weintend to use to fund our operations. In January 2018, we completed an underwritten public offering of 7,675,072 shares of common stock at $18.25 pershare, resulting in net proceeds to us of approximately $131.4 million. Financial OverviewRevenuesTo date, we have not generated any revenues. We do not expect to receive any revenues from any product candidates that we develop until we obtainregulatory approval and commercialize our products or enter into collaborative agreements with third parties.Research and Development ExpensesThe largest component of our total operating expenses since inception has been our investment in research and development activities, including thepreclinical and clinical development of our product candidates. Research and development expenses consist primarily of compensation and benefits forresearch and development employees, including stock-based compensation; expenses incurred under agreements with contract research organizations andinvestigative sites that conduct clinical trials and preclinical studies; the costs of acquiring and manufacturing clinical trial materials and other supplies;payments under licensing and research and development agreements; other outside services and consulting costs; and an allocation of facilities, informationtechnology and overhead expenses. Research and development costs are expensed as incurred.We plan to increase our research and development expenses as we continue the development of our product candidates. Our current planned researchand development activities include the following: •initiating sites and enrolling patients in tabelecleucel Phase 3 clinical trials for the treatment of patients with EBV+ PTLD after HCT and SOTwho have failed rituximab; •process development, testing and manufacturing of drug supply to support clinical trials and IND-enabling studies; •continuing development of ATA190 and enrolling patients to the Phase 1 trial of ATA188 in MS; •continuing development of ATA520 for the treatment of hematologic malignancies, including PCL, and solid tumors; •continuing to develop our product candidates in additional indications, including tabelecleucel for NPC; •continuing to develop other product candidates, including ATA621 for JCV and BK-associated diseases; and •leveraging our relationships and experience to in-license or acquire additional product candidates or technologies.In addition, we believe it is important to invest in the development of new product candidates to continue to build the value of our product candidatepipeline and our business. We plan to continue to advance our most promising early product candidates into preclinical development with the objective toadvance these early-stage programs to human clinical trials over the next several years.57 Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost tocompletion. The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including: •the availability of qualified drug supply for use in our planned Phase 3 or other clinical trials; •the scope, rate of progress, and expenses of our ongoing as well as any additional clinical trials and other research and development activities; •future clinical trial results; •uncertainties in clinical trial enrollment rates or discontinuation rates of patients; •potential additional safety monitoring or other studies requested by regulatory agencies; •significant and changing government regulation; and •the timing and receipt of any regulatory approvals.The process of conducting the necessary clinical research to obtain FDA approval is costly and time consuming and the successful development of ourproduct candidates is highly uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in thesection of this report titled “1A. Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty theduration and completion costs of our research and development projects, or if, when, or to what extent we will generate revenues from the commercializationand sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our productcandidates.General and Administrative ExpensesGeneral and administrative expenses consist primarily of compensation and benefits for general and administrative employees, including stock-basedcompensation; outside professional service costs, including legal, patent, human resources, audit and accounting services; other outside services andconsulting costs; and allocated information technology and facilities costs. We anticipate that our general and administrative expenses will continue toincrease in the future as we increase our headcount to support our continued research and development and the potential commercialization of one or more ofour product candidates.Interest and Other Income, netInterest and other income, net consists primarily of interest earned on our cash, cash equivalents and short-term investments.58 Critical Accounting Policies and Significant Judgments and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements,which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statementsrequires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses. On an on-going basis, we evaluate ourcritical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonablein the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates under different assumptions and conditions. Our significant judgments and estimates aredetailed below, and our significant accounting policies are more fully described in Note 2 of the accompanying consolidated financial statements. Description Judgments and UncertaintiesEffect if Actual Results Differ fromAssumptionsAccrued Research and Development Expenses As part of the process of preparing our financialstatements, we are required to estimate and accrueexpenses, the largest of which is related to research anddevelopment expenses, including those related to clinicaltrials and drug manufacturing. This process involvesreviewing contracts and purchase orders, identifying andevaluating the services that have been performed on ourbehalf, and estimating the associated cost incurred for theservices when we have not yet been invoiced or otherwisenotified of the actual costs.Costs for preclinical studies, clinical trials andmanufacturing activities are recognized basedon an evaluation of our vendors’ progresstowards completion of specific tasks, using datasuch as patient enrollment, clinical siteactivations or information provided to us by ourvendors regarding their actual costs incurred.Payments for these activities are based on theterms of individual contracts and paymenttiming may differ significantly from the periodin which the services were performed. Wedetermine accrual estimates through reports fromand discussions with applicable personnel andoutside service providers as to the progress orstate of completion of trials, or the servicescompleted. Our estimates of accrued expenses asof each balance sheet date are based on the factsand circumstances known at the time. Costs thatare paid in advance of performance are deferredas a prepaid expense and amortized over theservice period as the services are provided.For the years ended December 31, 2017 and2016, there were no material changes fromour estimates of accrued research anddevelopment expenses. We do not believe there is a reasonablelikelihood that there will be a materialchange in the future estimates of accruedresearch and development expenses.However, if actual results are not consistentwith our estimates, we may be exposed tochanges in accrued research and developmentexpenses that could be material or theaccrued research and development expensesreported in our financial statements may notbe representative of the actual economic costof accrued research and development. A 10% change in accrued research anddevelopment expenses could have impactedour net loss by $0.4 million for 2017. 59 Stock-based Compensation We have stock-based compensation programs, whichinclude restricted stock agreements, or RSAs, restrictedstock units, or RSUs, stock options and an employee stockpurchase plan. See Note 2– “Summary of SignificantAccounting Policies” and Note 8 – “Stockholders' Equity”in the Notes to Consolidated Financial Statements,included in Item 8. Financial Statements andSupplementary Data of this report for a completediscussion of our stock-based compensation programs. Weaccount for stock-based compensation expense, includingthe expense for RSAs, grants of RSUs and stock optionsthat may be settled in shares of our common stock, basedon the fair values of the equity instruments issued. The fairvalue is determined on the measurement date, which isgenerally the date of grant for employee awards and thedate when the service performance is completed for non-employees. The fair value for our RSAs is their intrinsicvalue, which is the difference between the fair value of theunderlying stock at the measurement date and thepurchase price. The fair value of our RSUs is the fair valueof the underlying stock at the measurement date. The fairvalue for our stock option awards is determined at thegrant date using the Black-Scholes valuation model. Foremployees’ awards with performance-based vestingcriteria, we assess the probability of the achievement ofthe performance conditions at the end of each reportingperiod and recognize the share-based compensation costswhen it becomes probable that the performance conditionswill be met. For non-employees’ awards with performance-based vesting criteria, we assess all possible outcomes atthe end of each reporting period and recognize the lowestaggregate fair value in the range of possible outcomes.The lowest value in the range of possible outcomes maybe zero. For awards that are subject to both service andperformance conditions, no expense is recognized until itis probable that performance conditions will be met.Stock-based compensation expense for awards with time-based vesting criteria is recognized as expense on astraight-line basis over the requisite service period. Stock-based compensation for awards with performance andother vesting criteria is recognized as expense under theaccelerated graded vesting model. Key assumptions for the Black-Scholesvaluation model used for employee stock awardsinclude: Expected term – We derived the expected termusing the “simplified” method (the expectedterm is determined as the average of the time-to-vesting and the contractual life of the options),as we have limited historical information todevelop expectations about future exercisepatterns and post vesting employmenttermination behavior. Expected term for non-employee awards is based on the remainingcontractual term of an option on eachmeasurement date. Expected volatility – Expected volatility isestimated using comparable public companies’volatility for similar terms. Expected dividend – We have not historicallydeclared or paid dividends to our stockholdersand have no plans to pay dividends; thereforewe have assumed an expected dividend yield of0%. Risk-free interest rate – The risk-free interest rateis based on the yields of U.S. Treasury securitieswith expected terms similar to that of theassociated award. The fair value of non-employee stock options isestimated using the Black-Scholes valuationmodel with assumptions generally consistentwith those used for employee stock options,with the exception of the expected term, whichis the remaining contractual life at eachmeasurement date. Prior to our initial public offering in October2014, due to the absence of an active market forour common stock, we estimated the fair valueof our common stock in accordance with theframework of the American Institute of CertifiedPublic Accountants Technical Practice Aid,Valuation of Privately-Held Company EquitySecurities Issued as Compensation. Eachvaluation included estimates and assumptionsthat required management’s judgment,including assumptions regarding the probabilityand estimated time to completion of our initialpublic offering. Subsequent to the completionof our initial public offering in October 2014,the fair value of our common stock is based onobservable market prices.We do not believe there is a reasonablelikelihood that there will be a materialchange in the future estimates or assumptionswe use to determine stock-basedcompensation expense. However, if actualresults are not consistent with our estimates orassumptions, we may be exposed to changesin stock-based compensation expense thatcould be material or the stock-basedcompensation expense reported in ourfinancial statements may not berepresentative of the actual economic cost ofthe stock-based compensation. 60 Accounting for Income Taxes See Note 9 – “Income Taxes” in the Notes to ConsolidatedFinancial Statements, included in Item 8. FinancialStatements and Supplementary Data of this report for acomplete discussion of the components of Atara's incometax expense, as well as the temporary differences that existas of December 31, 2017.Our consolidated effective income tax rate isinfluenced by tax planning opportunitiesavailable to us in the various jurisdictions inwhich we conduct business. Significantjudgment is required in determining oureffective tax rate and in evaluating our taxpositions, including those that may beuncertain. Atara is also required to exercise judgment withrespect to the realization of our net deferred taxassets. Management evaluates all positive andnegative evidence and exercises judgmentregarding past and future events to determine ifit is more likely than not that all or some portionof the deferred tax assets may not be realized. Ifappropriate, a valuation allowance is recordedagainst deferred tax assets to offset future taxbenefits that may not be realized. We do not believe that there is a reasonablelikelihood that there will be a materialchange in our liability for uncertain incometax positions or our effective income tax rate.However, if actual results are not consistentwith our estimates or assumptions, we may beexposed to losses that could be material.Atara recorded a valuation allowance ofapproximately $47.3 million as of December31, 2017 related primarily to net operatinglosses and stock-based compensation. Income TaxesOn December 22, 2017, President Trump signed into law new tax legislation, or the Tax Act, which significantly reforms the Internal Revenue Code of1986, as amended. As of December 31, 2017, we have made a reasonable estimate of the effects on our existing deferred taxes and related disclosures for thereduction in corporate tax rate and adjustments to the expected deductibility of executive compensation. Due to current year taxable losses and our federalvaluation allowance position, we did not recognize any income tax expense or benefit as a result of the Tax Act. Due to accumulated foreign deficits theCompany does not expect a current inclusion in U.S. federal taxable income for the transition tax on earnings of controlled foreign corporations. The SEC staff has issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), whichallows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. We consider the key estimates onthe deferred tax remeasurement and the impact of the changes to the deductibility of executive compensation to be provisional due to expected forthcomingguidance from federal and state tax authorities, our continuing analysis of final year-end data and tax positions, as well as further guidance expected for theassociated income tax accounting. We expect to complete our analysis within the measurement period in accordance with SAB 118.Emerging Growth Company StatusWe are an “emerging growth company” as defined in the JOBS Act, and therefore we may take advantage of certain exemptions from various publiccompany reporting requirements. As an “emerging growth company”, •we will avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of ourinternal control over financial reporting pursuant to the Sarbanes-Oxley Act; •we will provide less extensive disclosure about our executive compensation arrangements; and •we will not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements.However, we are choosing to irrevocably opt out of the extended transition periods available under the JOBS Act for complying with new or revisedaccounting standards. We will remain an “emerging growth company” for up to five years, although we will cease to be an “emerging growth company” uponthe earliest of: (1) December 31, 2019; (2) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (3) the date onwhich we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the date on which we aredeemed to be a “large accelerated filer” as defined in the Exchange Act.61 Results of OperationsComparison of the Years Ended December 31, 2017, 2016 and 2015Research and development expenses by program for the periods indicated were as follows: Year Ended December 31, Increase (Decrease) 2017 2016 2015 2017 compared to2016 2016 comparedto 2015 (in thousands) Tabelecleucel (formerly known as ATA129)$15,078 $8,821 $970 $6,257 7,851 ATA188 2,697 - - 2,697 - ATA230 2,493 2,572 78 (79) 2,494 T-cell manufacturing and other T-cell program expenses 22,239 18,673 9,123 3,566 9,550 Molecular program expenses 389 1,110 18,511 (721) (17,401) Employee and overhead costs 38,310 25,338 12,936 12,972 12,402 Total research and development$81,206 $56,514 $41,618 $24,692 $14,896 Tabelecleucel costs were $15.1 million in 2017 as compared to $8.8 million in 2016 and $1.0 million in 2015. The increases in 2017 and 2016 wereprimarily due to manufacturing and outside service costs related to the preparation for the two Phase 3 clinical trials of tabelecleucel in patients with EBV+PTLD who have failed rituximab and ongoing costs for our tabelecleucel EAP clinical trial, which was initiated in mid-2016. We anticipate that tabelecleucelcosts will increase in 2018 due to the initiation of two Phase 3 clinical trials for this product candidate in December 2017.ATA188 costs were $2.7 million in 2017 as compared to zero in 2016 and 2015. The increase in 2017 was primarily related to clinical manufacturingand preparations for the Phase 1 clinical trial of allogeneic ATA188, which was initiated in October 2017. We anticipate that ATA188 costs will increase in2018 as the Phase 1 trial expands into additional territories.ATA230 costs were $2.5 million in 2017 as compared to $2.6 million in 2016 and $0.1 million in 2015. The decrease in 2017 was primarily due todecreased clinical trial activity in the year. The increase in 2016 was primarily related to outside services costs associated with the Phase 2 clinical trial forthis product candidate. We anticipate that ATA230 costs will decrease in 2018 as we are prioritizing our EBV related programs ahead of ATA230 at this time.T-cell manufacturing and other T-cell program expenses were $22.2 million in 2017 as compared to $18.7 million in 2016 and $9.1 million in 2015.The increase of $3.5 million in 2017 was primarily due to increased tabelecleucel production to prepare for the pivotal trials and increased spending on ourBKV and HPV programs through our collaboration with QIMR Berghofer. The increase of $9.6 million in 2016 was primarily due to an increase of $14.1million for manufacturing-related activities, including the technical transfer of tabelecleucel manufacturing to a third party CMO, partially offset by a $4.5million license payment made to MSK in 2015. Expenses in 2016 included cash payments to QIMR Berghofer of $3.3 million related to the license ofadditional T-cell immunotherapy programs and the option to license additional technologies from them. Expenses in 2015 included a $4.5 million cashpayment to MSK to exercise our option to license certain T-cell immunotherapy programs, and $3.0 million paid to QIMR Berghofer for an exclusive,worldwide license to develop and commercialize allogeneic T-cell immunotherapy programs utilizing technology and know-how developed by them. Weanticipate that T-cell manufacturing and other T-cell program expenses will continue to increase in 2018 due to an increase in manufacturing activity, thecontinued development of our manufacturing processes, and the development of products obtained from our collaboration with QIMR Berghofer.Molecular program expenses were $0.4 million in 2017 as compared to $1.1 million in 2016 and $18.5 million in 2015. The decrease of $0.7 millionin 2017 and $17.4 million in 2016 were primarily due to the suspension of the PINTA 745 and ATA 842 programs in December 2015 and the STM 434program in the third quarter of 2017.Employee and overhead costs were $38.3 million in 2017 as compared to $25.3 million in 2016 and $12.9 million in 2015. The increases of $13.0million in 2017 and $12.4 million in 2016 were primarily a result of higher compensation-related costs from increased headcount in support of ourcontinuing expansion of research and development activities. In particular, payroll and related costs increased by $8.0 million in 2017 as compared to 2016,and by $8.5 million in 2016 as compared to 2015, from increased headcount. Also, facility related costs and other outside services costs increased by $3.4million and $0.8 million, respectively, in 2017 as compared to 2016, and by $2.3 million and $1.2 million, respectively, in 2016 as compared to 2015. Weanticipate that employee and overhead costs will continue to increase in future periods as we continue to expand our research and development activities.62 General and administrative expensesGeneral and administrative expenses for the periods indicated were as follows: Year ended December 31, Increase (Decrease) 2017 2016 2015 2017 compared to2016 2016 compared to2015 (in thousands) General and administrative $40,326 $24,728 $16,830 $15,598 $7,898 General and administrative expenses were $40.3 million in 2017 compared to $24.7 million in 2016 and $16.8 million in 2015. The increase of $15.6million in 2017 was primarily due to a $10.1 million increase in compensation-related costs driven by increased headcount, a $4.7 million increase inprofessional services costs and a $0.8 million increase in travel and other related costs. The increase of $7.9 million in 2016 was primarily due to a $7.0million increase in compensation-related costs driven by increased headcount, a $1.1 million increase in professional services costs, partially offset by a $0.2million decrease in travel and other related costs. We expect that general and administrative costs will continue to increase in 2018 as we continue to expandour operations.63 Quarterly Results of Operations Data (unaudited)The following table sets forth our unaudited consolidated statement of operations data for each of the eight quarters in the period ended December 31,2017. The unaudited quarterly statement of operations data set forth below have been prepared on a basis consistent with our audited annual consolidatedfinancial statements in this Annual Report on Form 10-K and include, in our opinion, all normal recurring adjustments necessary for a fair statement of thefinancial information contained in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future. Thefollowing quarterly financial data should be read in conjunction with our audited consolidated financial statements and the related notes included elsewherein this Annual Report on Form 10-K. Three months ended March 31 June 30 September 30 December 31 2017 (In thousands) Operating expenses: Research and development $17,541 $18,296 $20,598 $24,771 General and administrative 8,620 9,613 11,062 11,031 Total operating expenses 26,161 27,909 31,660 35,802 Loss from operations (26,161) (27,909) (31,660) (35,802)Interest and other income, net 509 481 564 473 Loss before provision for income taxes (25,652) (27,428) (31,096) (35,329)Provision (benefit) for income taxes 2 — — (16)Net loss (25,654) (27,428) (31,096) (35,313)Other comprehensive loss: Unrealized gain (loss) on available-for-sale securities 31 38 26 (63)Comprehensive loss $(25,623) $(27,390) $(31,070) $(35,376) Basic and diluted net loss per common share $(0.88) $(0.94) $(1.02) $(1.15) Three months ended March 31 June 30 September 30 December 31(1) 2016 (In thousands) Operating expenses: Research and development $11,247 $12,991 $18,802 $13,474 General and administrative 5,814 6,494 7,140 5,280 Total operating expenses 17,061 19,485 25,942 18,754 Loss from operations (17,061) (19,485) (25,942) (18,754)Interest and other income, net 503 605 576 519 Loss before provision for income taxes (16,558) (18,880) (25,366) (18,235)Provision (benefit) for income taxes 3 — 7 — Net loss (16,561) (18,880) (25,373) (18,235)Other comprehensive loss: Unrealized gain (loss) on available-for-sale securities 569 142 (158) (218)Comprehensive loss $(15,992) $(18,738) $(25,531) $(18,453) Basic and diluted net loss per common share $(0.58) $(0.66) $(0.88) $(0.63) (1)Subsequent to issuance of our interim consolidated financial statements for the three and nine months ended September 30, 2016, we identified certainshare-based awards provided in 2016 and 2015 with only time-based vesting conditions for which we recorded stock based compensation expenseusing the graded accelerated expensing method instead of a straight-line expensing method in accordance with our accounting policy, certain share-based awards where stock-based compensation expense was not appropriately adjusted for unvested awards of terminated employees during 2016, andcertain stock-based compensation expense related to non-employee options recorded incorrectly during the first quarter of 2016. We corrected forthese errors by recording a $3.3 million out-of-period adjustment to stock-based compensation expense during the fourth quarter of 2016. Therecorded adjustment included $0.7 million related to the three months ended September 30, 2016, $1.1 million related to the three months ended June30, 2016, $0.7 million related to the three months ended March 31, 2016 and $0.7 million related to the fiscal year ended December 31, 2015. Theadjustment was not considered material to the fiscal year ended December 31, 2016 or any previously issued interim or annual consolidated financialstatements.64 Liquidity and Capital ResourcesSources of LiquiditySince our inception in 2012, we have funded our operations primarily through the issuance of common and preferred stock.In March 2017, we entered into a sales agreement, or the ATM facility, with Cowen and Company, LLC, or Cowen, under which we may offer and sell,in our sole discretion, shares of our common stock, having an aggregate offering price of up to $75.0 million through Cowen, as our sales agent. We will payCowen a commission of up to 3.0% of the gross sales proceeds of any common stock sold under the ATM facility. The issuance and sale of these shares by uspursuant to the ATM facility are deemed “at the market” offerings and are available under the Securities Act of 1933, as amended.During the fiscal year ended December 31, 2017, we sold an aggregate of 1,349,865 shares of common stock, under the ATM facility, at an averageprice of approximately $14.82 per share, for gross proceeds of $20.0 million, and net proceeds of $19.2 million, after deducting commissions and otheroffering expenses. As of December 31, 2017, $55.0 million of common stock remained available to be sold under this facility, subject to certain conditions asspecified in the agreement.In January 2018, we completed an underwritten public offering of 7,675,072 shares of common stock, including 675,072 from the exercise by theunderwriters of their option to purchase additional shares, at an offering price of $18.25 per share. We received net proceeds of approximately $131.4million, after deducting underwriting discounts and commissions and offering expenses.We have incurred losses and negative cash flows from operations in each year since inception. As of December 31, 2017, we had an accumulateddeficit of $296.7 million. It will be several years, if ever, before we have a product candidate ready for commercialization, and we anticipate that we willcontinue to incur losses for at least the next several years. We expect that our research and development and general and administrative expenses willcontinue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination of equity offerings,debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements.We may borrow funds on terms that may include restrictive covenants, including covenants that restrict the operation of our business, liens on assets, higheffective interest rates and repayment provisions that reduce cash resources and limit future access to capital markets. In addition, we expect to continue toopportunistically seek access to the equity capital markets to support our development efforts and operations. To the extent that we raise additional capitalby issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration orpartnering arrangements, we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certaingeographies, grant licenses on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders.Cash in excess of immediate requirements is invested in accordance with our written investment policy, primarily with a view to liquidity and capitalpreservation. Currently, our cash, cash equivalents and short-term investments are held in bank and custodial accounts and consist of money market funds,U.S. Treasury, government agency and corporate debt obligations, commercial paper and asset-backed securities. In 2018, we expect to spend approximately$21.3 million of cash to complete the build-out of our office, lab and cellular therapy manufacturing space in Thousand Oaks, California. Managementexpects that our cash, cash equivalents and short-term investments as of December 31, 2017, along with the proceeds from the public offering completed inJanuary 2018, will be sufficient to fund our planned operations into the first half of 2020. Our cash, cash equivalents and short-term investments balances as of the dates indicated were as follows: December 31, December 31, 2017 2016 (in thousands) Cash and cash equivalents $79,223 $47,968 Short-term investments 86,873 207,714 Total cash, cash equivalents and short-term investments $166,096 $255,682 65 Cash FlowsThe following table details the primary sources and uses of cash for each of the periods set forth below: Year Ended December 31, 2017 2016 2015 (in thousands) Net cash provided by (used in): Operating activities $(87,502) $(60,025) $(37,156)Investing activities 98,709 83,741 (220,127)Financing activities 20,048 506 259,226 Effect of exchange rates on cash — — (94)Net increase in cash and cash equivalents $31,255 $24,222 $1,849 Operating activitiesNet cash used in operating activities was $87.5 million in 2017 as compared to $60.0 million in 2016. The increase of $27.5 million was primarily dueto a $40.4 million increase in net loss, partially offset by a $6.3 million increase stock-based compensation, a $4.3 million increase in accrued research anddevelopment expenses, a $1.2 million increase in accounts payable and a $0.8 million increased in accrued compensation. Net cash used in operating activities was $60.0 million in 2016 as compared to $37.2 million in 2015. The increase of $22.9 million was primarily dueto a $21.8 million increase in net loss and a $7.0 million decrease in accrued research and development expenses, partially offset by a $6.5 million increase instock-based compensation. Investing activitiesNet cash provided by investing activities in 2017 consisted primarily of $189.0 million received from maturities and $107.6 million from sales ofavailable-for-sale securities, partially offset by $176.5 million used to purchase available-for-sale securities and $20.2 million used to purchase property andequipment.Net cash provided by investing activities in 2016 consisted primarily of $149.0 million received from maturities and $242.6 million from sales ofavailable-for-sale securities, partially offset by $304.9 million used to purchase available-for-sale securities and $3.0 million used to purchase property andequipment.Net cash used in investing activities in 2015 consisted primarily of $379.8 million of purchases of short-term available-for-sale securities, partiallyoffset by $96.1 million received from maturities and $64.0 million from sales of available-for-sale securities.Financing activities Net cash provided by financing activities in the 2017 consisted of $19.2 million of net proceeds from the ATM facility and $1.3 million of netproceeds from employee stock transactions, partially offset by $0.4 million of taxes paid related to the net share settlement of restricted stock. Net cashprovided by financing activities in 2016 of $0.5 million consists primarily of net proceeds from employee stock transactions. Net cash provided by financingactivities in 2015 consisted primarily of $263.4 million in aggregate net proceeds from the sale of common stock in two separate follow-on offerings.Operating Capital RequirementsTo date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We donot expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current orfuture product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as wecontinue the development of and seek regulatory approvals for our product candidates and begin to commercialize any approved products. We are subject toall of the risks inherent in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and otherunknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuingoperations.66 We expect that our existing cash, cash equivalents and short-term investments will be sufficient to fund our planned operations into the first half of2020. In order to complete the process of obtaining regulatory approval for our lead product candidates and to build the sales, marketing and distributioninfrastructure that we believe will be necessary to commercialize our lead product candidates, if approved, we will require substantial additional funding.We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our availablecapital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization ofpharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend onmany factors, including, but not limited to: •the timing and costs of our planned clinical trials and preclinical studies for our product candidates; •our success in establishing and scaling commercial manufacturing capabilities; •the number and characteristics of product candidates that we pursue; •the outcome, timing and costs of seeking regulatory approvals; •subject to receipt of regulatory approval, costs associated with the commercialization of our product candidates and the amount of revenuesreceived from commercial sales of our product candidates; •the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish; •the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance,defense and enforcement of any patents or patent applications or other intellectual property rights; •the extent to which we in-license or acquire other products and technologies; and •the timing of capital expenditures, including the building of our own manufacturing facility.Contractual Obligations and CommitmentsWe lease our current corporate headquarters in South San Francisco, California under a non-cancellable lease agreement for approximately 13,670square feet of office space. The lease is expected to expire in April 2021.In January 2015, we entered into a non-cancellable lease agreement for office and laboratory space in Westlake Village, California. In September2015, we amended the lease agreement to add additional office space and extend the term of the agreement to April 2019. In February 2017, we entered into a lease agreement for approximately 90,580 square feet of office, lab and cellular therapy manufacturing space inThousand Oaks, California, or the Thousand Oaks lease. The term of the Thousand Oaks lease commences when the landlord delivers possession of thefacility to us. Upon commencement, the initial term of the lease is fifteen years. We have the option to extend the lease for two additional periods of ten andnine years, respectively, after the initial term. We are accounting for this lease under build to suit accounting guidance, which requires us to capitalize the fairvalue of the building as well as the construction costs incurred on our consolidated balance sheet along with a corresponding financing liability for landlord-paid construction costs. Upon occupancy for build-to-suit leases, we are also required to assess whether the circumstances qualify for sale recognition under“sale-leaseback” accounting guidance.In fourth quarter of 2017, we entered into multiple lease agreements to lease certain equipment that have been accounted for as capital leases. The termof the lease agreements range between 2-3 years.Aggregate future minimum commitments for our leases as of December 31, 2017 are as follows: Payments Due by Period Less than More than Total 1 Year 1-3 Years 3-5 Years 5 Years (in thousands) Operating lease obligations$ 3,674 1,979 1,436 259 — Capital lease obligations 1,204 546 658 — — Financing lease obligations 16,387 372 1,849 1,962 12,204 Total contractual obligations$ 21,265 $ 2,897 $ 3,943 $ 2,221 $ 12,204 67 The above amounts exclude potential milestone and royalty payments related to our license and collaboration agreements, as the achievement ofthese milestones is currently not fixed and determinable.We may also enter into contracts in the normal course of business with clinical research organizations for clinical trials, with contract manufacturingorganizations for clinical supplies, and with other vendors for preclinical studies and supplies and other services and products for operating purposes. Thesecontracts generally provide for termination on notice, with the exception of potential termination charges related to one of our contract manufacturingagreements in the event certain minimum purchase volumes are not met. Payments in the table above are based on current operating forecasts, which aresubject to change, and do not include any termination fees.Off-Balance Sheet ArrangementsWe did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules andregulations of the SEC. Item 7A. Quantitative and Qualitative Disclosures about Market RiskInterest Rate and Market RiskWe are exposed to market risk related to changes in interest rates. As of December 31, 2017, we had cash and cash equivalents and short-terminvestments of $166.1 million. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level ofU.S. interest rates, particularly because our investments are in short-term securities. Our available-for-sale securities are subject to interest rate risk and willfall in value if market interest rates increase, which could result in a realized loss if we are forced to sell an investment before its scheduled maturity.We currently do not hedge our interest rate risk exposure. Due to the short-term duration of our investment portfolio and the low risk profile of ourinvestments, an immediate change in interest rates of 10 basis points would not result in a significant change in the fair market value of our portfolio.The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from ourinvestments without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and short-term and long-terminvestments in a variety of securities, including money market funds, U.S. Treasury, government agency and corporate debt obligations, commercial paperand asset-backed securities. These securities are all classified as available-for-sale and consequently are recorded on the balance sheet at fair value, withunrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss). Our holdings of the securities of any oneissuer, except obligations of the U.S. Treasury or U.S. Treasury guaranteed securities, do not exceed 5% of our portfolio. 68 Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements PageReport of Independent Registered Public Accounting Firm 70Consolidated Balance Sheets 71Consolidated Statements of Operations and Comprehensive Loss 72Consolidated Statements of Stockholders’ Equity 73Consolidated Statements of Cash Flows 74Notes to Consolidated Financial Statements 75 69 Report of Independent Registered Public Accounting Firm To the stockholders and the Board of Directors ofAtara Biotherapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Atara Biotherapeutics, Inc. and subsidiaries (the "Company") as of December 31, 2017and 2016, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in theperiod ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements presentfairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows foreach of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America(GAAP). Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 ofthe 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 reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ DELOITTE & TOUCHE LLP San Jose, CaliforniaFebruary 27, 2018 We have served as the Company's auditor since 2013. 70 ATARA BIOTHERAPEUTICS, INC.Consolidated Balance Sheets(In thousands, except per share amounts) December 31, December 31, 2017 2016 Assets Current assets: Cash and cash equivalents $79,223 $47,968 Short-term investments 86,873 207,714 Restricted cash 194 194 Prepaid expenses and other current assets 5,900 4,677 Total current assets 172,190 260,553 Property and equipment, net 44,129 3,259 Restricted cash, long term 1,200 — Other assets 260 102 Total assets $217,779 $263,914 Liabilities and stockholders’ equity Current liabilities: Accounts payable $14,711 $2,778 Accrued compensation 5,664 3,745 Accrued research and development expenses 4,006 2,408 Other current liabilities 3,265 744 Total current liabilities 27,646 9,675 Long-term liabilities 12,269 503 Total liabilities 39,915 10,178 Commitments and contingencies (Note 7) Stockholders’ equity: Common stock—$0.0001 par value, 500,000 shares authorized as of December 31, 2017 and December 31, 2016; 30,730 and 28,933 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively 3 3 Additional paid-in capital 474,662 431,075 Accumulated other comprehensive loss (151) (183)Accumulated deficit (296,650) (177,159)Total stockholders’ equity 177,864 253,736 Total liabilities and stockholders’ equity $217,779 $263,914 71 ATARA BIOTHERAPEUTICS, INC.Consolidated Statements of Operations and Comprehensive Loss(In thousands, except per share amounts) Years Ended December 31, 2017 2016 2015 Operating expenses: Research and development $81,206 $56,514 $41,618 General and administrative 40,326 24,728 16,830 Total operating expenses 121,532 81,242 58,448 Loss from operations (121,532) (81,242) (58,448)Interest and other income, net 2,027 2,203 1,218 Loss before provision (benefit) for income taxes (119,505) (79,039) (57,230)Provision (benefit) for income taxes (14) 10 (9)Net loss $(119,491) $(79,049) $(57,221)Other comprehensive gain (loss): Unrealized gain (loss) on available-for-sale securities 32 335 (418)Comprehensive loss $(119,459) $(78,714) $(57,639)Net loss per common share: Basic and diluted net loss per common share $(4.00) $(2.75) $(2.24) Weighted-average common shares outstanding used to calculate basic and diluted net loss per common share 29,863 28,732 25,583 72 ATARA BIOTHERAPEUTICS, INC.Consolidated Statements of Stockholders’ Equity(In thousands) Accumulated Common Additional Other Total Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Loss Deficit Equity Balance as of December 31, 2014 19,693 $2 $144,169 $(100) $(40,889) $103,182 Issuance of common stock in February 2015, net of discounts and offering costs of $5,166 4,147 1 69,486 — — 69,487 Issuance of common stock in July 2015, net of discounts and offering costs of $13,053 3,981 — 193,947 — — 193,947 Issuance of common stock upon vesting of restricted stock awards 287 — 80 — — 80 RSU settlements, net of shares withheld 327 — (4,647) — — (4,647)Issuance of common stock pursuant to stock option exercises 24 — 439 — — 439 Stock-based compensation expense — — 10,251 — — 10,251 Net loss — — — — (57,221) (57,221)Unrealized loss on available-for-sale securities — — — (418) — (418)Balance as of December 31, 2015 28,459 3 413,725 (518) (98,110) 315,100 Issuance of common stock upon vesting of restricted stock awards 233 — 60 — — 60 RSU settlements, net of shares withheld 199 — (94) — — (94)Issuance of common stock pursuant to employee stock awards 42 — 600 — — 600 Stock-based compensation expense — — 16,784 — — 16,784 Net loss — — — — (79,049) (79,049)Unrealized gain on available-for-sale securities — — — 335 — 335 Balance as of December 31, 2016 28,933 3 431,075 (183) (177,159) 253,736 Issuance of common stock through ATM facility, net of commissions and offering costs of $844 1,350 — 19,156 — — 19,156 RSU settlements, net of shares withheld 305 — (357) — — (357)Issuance of common stock pursuant to employee stock awards 142 — 1,688 — — 1,688 Stock-based compensation expense — — 23,100 — — 23,100 Net loss — — — — (119,491) (119,491)Unrealized gain on available-for-sale securities — — — 32 — 32 Balance as of December 31, 2017 30,730 $3 $474,662 $(151) $(296,650) $177,864 73 ATARA BIOTHERAPEUTICS, INC.Consolidated Statements of Cash Flows(In thousands) Year Ended December 31, 2017 2016 2015 Operating activities Net loss $(119,491) $(79,049) $(57,221)Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 23,100 16,784 10,251 Amortization of investment premiums and discounts 732 2,582 3,465 Depreciation and amortization expense 956 383 48 Loss on foreign exchange — — 94 Write-off of property and equipment — — 21 Changes in operating assets and liabilities: Prepaid expenses and other current assets (784) (742) (767)Other assets 2 6 (61)Accounts payable 2,163 981 1,005 Accrued compensation 1,919 1,121 1,399 Accrued research and development expenses 1,598 (2,704) 4,288 Other current liabilities 1,896 215 293 Long-term liabilities 407 398 29 Net cash used in operating activities (87,502) (60,025) (37,156)Investing activities Purchases of short-term investments (176,459) (304,928) (379,776)Sales of short-term investments 107,627 242,643 64,020 Maturities of short-term investments 188,973 149,046 96,113 Purchases of property and equipment (20,232) (3,020) (290)Restricted cash (1,200) — (194)Net cash provided by (used in) investing activities 98,709 83,741 (220,127)Financing activities Proceeds from sale of common stock in underwritten offerings, net — — 263,434 Proceeds from issuance of common stock through ATM facility, net 19,156 — — Taxes paid related to net share settlement of restricted stock units (357) (94) (4,647)Proceeds from employee stock awards 1,249 600 439 Net cash provided by financing activities 20,048 506 259,226 Effect of exchange rates on cash — — (94)Increase in cash and cash equivalents 31,255 24,222 1,849 Cash and cash equivalents at beginning of period 47,968 23,746 21,897 Cash and cash equivalents at end of period $79,223 $47,968 $23,746 Non-cash investing and financing activities Property and equipment purchases included in accounts payable and other accrued liabilities $10,122 $352 $— Capitalized lease obligations $9,904 $— $— Property & equipment acquired under capital leases $1,076 $— $— Asset retirement cost $580 $— $— Interest capitalized during construction period for build-to-suit lease transaction $264 $— $— Proceeds from options exercised not yet received $439 $— $— Accrued costs related to underwritten public offering $160 $— $— Issuance of common stock upon vesting of stock awards $— $60 $80 Change in long-term liabilities related to non-vested stock awards $— $(60) $(80)Supplemental cash flow disclosure Cash paid for taxes $— $10 $3 74 ATARA BIOTHERAPEUTICS, INC.Notes to Consolidated Financial Statements 1.Description of BusinessAtara Biotherapeutics, Inc. (“Atara”, “we”, “our” or “the Company”) was incorporated in August 2012 in Delaware. Atara is a cell therapy companydeveloping novel treatments for patients with cancer and multiple sclerosis (“MS”). The Company’s off-the-shelf, or allogeneic, T-cells are engineered fromdonors with healthy immune function and allow for rapid delivery from inventory to patients without a requirement for pretreatment. Atara’s T-cellimmunotherapies are designed to precisely recognize and eliminate cancerous or diseased cells without affecting normal, healthy cells. We licensed rights to T-cell product candidates from Memorial Sloan Kettering Cancer Center (“MSK”) in June 2015 and to know-how andtechnology from QIMR Berghofer Medical Research Institute (“QIMR Berghofer”) in October 2015 and September 2016. See Note 6 for further information.In 2017, we received net proceeds of $19.2 million from the aggregate sale of 1,349,865 shares of our common stock through our ATM facility withCowen (see Note 8). Further, in January 2018, we completed an underwritten public offering of 7,675,072 shares of common stock at an offering price of$18.25 per share and received net proceeds of $131.4 million (see Note 10). 2.Summary of Significant Accounting PoliciesBasis of PresentationThe accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the UnitedStates of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).Principles of ConsolidationThe consolidated financial statements include the accounts of Atara and its wholly owned subsidiaries Nina Biotherapeutics, Inc., Santa MariaBiotherapeutics, Inc., Pinta Biotherapeutics, Inc., Atara Biotherapeutics Cayman Limited, a Cayman Islands corporation, Atara Biotherapeutics IrelandLimited, an Ireland corporation and Atara Biotherapeutics Switzerland GmbH, a Swiss corporation. All intercompany balances and transactions have beeneliminated in consolidation.Segment and Geographic InformationWe operate and manage our business as one reporting and one operating segment, which is the business of developing and commercializingtherapeutics. Our Chief Executive Officer, who is our chief operating decision maker, reviews financial information on an aggregate basis for purposes ofallocating resources and evaluating financial performance. Substantially all of our assets are located in the United States.Liquidity RiskWe have incurred significant operating losses since inception and have relied on public and private equity financings to fund our operations. As ofDecember 31, 2017, we had an accumulated deficit of $296.7 million. As we continue to incur losses, our transition to profitability will depend on thesuccessful development, approval and commercialization of product candidates and on the achievement of sufficient revenues to support our cost structure.We may never achieve profitability, and unless and until we do, we will need to continue to raise additional capital. Management expects that our cash, cashequivalents and short-term investments as of December 31, 2017, along with the proceeds from the public offering completed in January 2018, will besufficient to fund our planned operations into the first half of 2020.Concentration of Credit Risk and Other UncertaintiesWe place cash and cash equivalents in the custody of financial institutions that management believes are of high credit quality, the amount of whichat times, may be in excess of the amount insured by the Federal Deposit Insurance Corporation. We also have short-term investments in money market funds,U.S. Treasury, government agency and corporate debt obligations, commercial paper and asset-backed securities, which can be subject to certain credit risk.However, we mitigate the risks by investing in high-grade instruments, limiting our exposure to any one issuer, and monitoring the ongoing creditworthinessof the financial institutions and issuers.75 We are subject to certain risks and uncertainties and believe that changes in any of the following areas could have a material adverse effect on futurefinancial position or results of operations: our ability to obtain future financing; regulatory approval and market acceptance of, and reimbursement for, ourproduct candidates, if approved; performance of third-party clinical research organizations and manufacturers upon which we rely; development of saleschannels; protection of our intellectual property; litigation or claims against us based on intellectual property, patent, product, regulatory or other factors;and our ability to attract and retain employees necessary to support our growth.Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions and judgments that affectthe amounts reported in the financial statements and accompanying notes. Significant estimates relied upon in preparing these financial statements includeestimates related to clinical trial and other accruals, stock-based compensation expense, fair value of investments and income taxes. Actual results coulddiffer materially from those estimates.LeasesWe lease office space in multiple locations. In addition, we are constructing a manufacturing facility in Thousand Oaks, California under a non-cancelable lease agreement. The leases are reviewed for classification as operating or capital leases. For operating leases, rent is recognized on a straight-linebasis over the lease period. For capital leases, we record the leased asset with a corresponding liability for principal and interest. Payments are recorded asreductions to these liabilities with interest being charged to interest expense in our statements of operations and comprehensive loss.We analyzed the nature of the renovations and our involvement during the construction period of our manufacturing facility and determined that weare the deemed “owner” of the construction project during the construction period. As a result, we are required to capitalize the fair value of the building aswell as the construction costs incurred on our consolidated balance sheet along with a corresponding financing liability for landlord-paid construction costs(i.e. “build-to-suit” accounting). Upon occupancy for build-to-suit leases, we are also required to assess whether the circumstances qualify for sale recognitionunder “sale-leaseback” accounting guidance.Asset Retirement Obligations (“ARO”)ARO are legal obligations associated with the retirement of long-lived assets pertaining to leasehold improvements. These liabilities are initiallyrecorded at fair value and the related asset retirement costs are capitalized by increasing the carrying amount of the related assets by the same amount as theliability. Asset retirement costs are subsequently depreciated over the useful lives of the related assets. Subsequent to initial recognition, the Companyrecords period-to-period changes in the ARO liability resulting from the passage of time and revisions to either the timing or the amount of the originalestimate of undiscounted cash flows. The Company derecognizes ARO liabilities when the related obligations are settled.Foreign CurrencyTransactions and foreign currency-denominated monetary assets and liabilities that are denominated in a foreign currency are translated into U.S.dollars at the current exchange rate on the transaction date and as of each balance sheet date, respectively, with gains or losses on foreign exchange changesrecognized in interest and other income (expense), net in the consolidated statements of operations and comprehensive loss. We held no foreign currency asof December 31, 2017 and 2016.Cash Equivalents and Short-Term InvestmentsCash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase, and generallyconsist of money market funds, U.S. Treasury, government agency and corporate debt obligations, and commercial paper.Investments with original maturities of greater than 90 days are classified as short-term investments on the balance sheet, and consist primarily of U.S.Treasury, government agency and corporate debt obligations, commercial paper and asset-backed securities.As our entire investment portfolio is considered available for use in current operations, we classify all investments as available-for-sale and as currentassets, even though the stated maturity may be more than one year from the current balance sheet date. Available-for-sale securities are carried at fair value,with unrealized gains and losses reported in accumulated other comprehensive loss, which is a separate component of stockholders’ equity in theconsolidated balance sheet.76 The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity, which are both recorded to interestand other income (expense), net in the consolidated statements of operations and comprehensive loss.Changes in the fair value of available-for-sale securities impact the statements of operations only when such securities are sold or if an other-than-temporary impairment is recognized. Realized gains and losses on the sale of securities are determined by specific identification of each security’s cost basis.We regularly review our investment portfolio to determine if any security is other-than-temporarily impaired, which would require us to record an impairmentcharge in the period any such determination is made. In making this judgment, we evaluate, among other things, the duration and extent to which the fairvalue of a security is less than its cost, the financial condition of the issuer and any changes thereto, our intent to sell, or whether it is more likely than notthat we will be required to sell the security before recovery of its amortized cost basis. Our assessment on whether a security is other-than-temporarilyimpaired could change in the future due to new developments or changes in assumptions related to any particular security. Realized gains and losses anddeclines in value judged to be other-than-temporary on available-for-sale securities, if any, are recorded to interest and other income (expense), net in thestatements of operations and comprehensive loss. Fair Value MeasurementThe carrying amounts of certain of our financial instruments including cash equivalents, prepaid expenses, accounts payable and accrued liabilitiesapproximate fair value due to their short maturities. Short-term investments are comprised of available-for-sale securities, which are carried at fair value.Fair Value of Financial InstrumentsOur financial assets and liabilities are measured at fair value on a recurring basis using the following hierarchy to prioritize valuation inputs, inaccordance with applicable GAAP: Level 1: Quoted prices in active markets for identical assets or liabilities that we have the ability to access Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data such as quoted prices, interestrates and yield curves Level 3: Inputs that are unobservable data points that are not corroborated by market dataWe review the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassificationof levels of certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy in the period inwhich the actual event or change in circumstances that caused the transfer occurs. There have been no transfers between Level 1, Level 2, and Level 3 in anyperiods presented.Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can bederived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow modelswith yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments andmodels that use readily observable market data as their basis. U.S. Treasury, government agency and corporate debt obligations, and commercial paper andasset-backed securities are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and areincluded in Level 2.Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flowmethodologies, or similar techniques, and at least one significant model assumption or input is unobservable. We have no Level 3 financial assets orliabilities.Property and Equipment, netProperty and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging fromthree to five years. Costs incurred to acquire, construct or install property and equipment during the construction stage of a capital project or costs incurred topurchase and develop internal use software during the application development stage are recorded as construction in progress. Leasehold improvements areamortized over the lesser of the life of the leasehold improvements or the lease term. Equipment leased under capital leases is amortized over the shorter ofthe lease term or the asset’s estimated useful life. Maintenance and repairs are charged to operations as incurred.77 Long-lived AssetsWe evaluate the carrying amount of our long-lived assets whenever events or changes in circumstances indicate that the assets may not be recoverable.An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are lessthan the carrying amount of the asset. To date, there have been no such impairment losses.Stock-Based Compensation ExpenseWe account for stock-based compensation expense, including the expense of restricted common stock awards (“RSAs”) and grants of restricted stockunits (“RSUs”) and stock options that may be settled in shares of our common stock, based on the fair values of the equity instruments issued. The fair valueis determined on the measurement date, which is generally the date of grant for employee awards and the date when the service performance is completed fornon-employees. The fair value for our RSAs is their intrinsic value, which is the difference between the fair value of the underlying stock at the measurementdate and the purchase price. The fair value of our RSUs is the fair value of the underlying stock at the measurement date. The fair value for our stock optionawards is determined at the grant date using the Black-Scholes valuation model. For employees’ awards with performance-based vesting criteria, we assess theprobability of the achievement of the performance conditions at the end of each reporting period and recognize the share-based compensation costs when itbecomes probable that the performance conditions will be met. For non-employees’ awards with performance-based vesting criteria, we assess all possibleoutcomes at the end of each reporting period and recognize the lowest aggregate fair value in the range of possible outcomes. The lowest value in the rangeof possible outcomes may be zero. For awards that are subject to both service and performance conditions, no expense is recognized until it is probable thatperformance conditions will be met. Stock-based compensation expense for awards with time-based vesting criteria is recognized as expense on a straight-line basis over the requisite service period. Stock-based compensation expense for awards with performance and other vesting criteria is recognized asexpense under an accelerated graded vesting model. Key assumptions used in the Black-Scholes valuation model used for employee stock awards include:Expected term – We derived the expected term using the “simplified” method (the expected term is determined as the average of the time-to-vestingand the contractual life of the options), as we have limited historical information to develop expectations about future exercise patterns and postvesting employment termination behavior.Expected volatility – Expected volatility is estimated using comparable public companies’ volatility for similar terms.Expected dividend – We have not historically declared or paid dividends to our stockholders and have no plans to pay dividends; therefore weassumed an expected dividend yield of 0%.Risk-free interest rate – The risk-free interest rate is based on the yield on U.S. Treasury securities with the expected term of the associated award.The fair value of non-employee stock options is estimated using the Black-Scholes valuation model with assumptions generally consistent with thoseused for employee stock options, with the exception of the expected term, which is the remaining contractual life at each measurement date.Prior to our IPO in October 2014, due to the absence of an active market for our common stock, we estimated the fair value of our common stock inaccordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held CompanyEquity Securities Issued as Compensation. Each valuation included estimates and assumptions that required management’s judgment, including assumptionsregarding the probability and estimated time to completion of our IPO. Subsequent to the completion of our IPO, the fair value of our common stock is basedon observable market prices.Research and Development ExpenseResearch and development expense consists of costs incurred in performing research and development activities, including compensation and benefitsfor research and development employees, including stock-based compensation; expenses incurred under agreements with contract research organizations andinvestigative sites that conduct clinical trials and preclinical studies, the costs of acquiring and manufacturing clinical trial materials and other supplies;payments under licensing and research and development agreements; other outside services and consulting costs, and an allocation of facility, informationtechnology and overhead expenses. Research and development costs are expensed as incurred.78 Clinical Trial AccrualsCosts for preclinical study and clinical trial activities are recognized based on an evaluation of our vendors’ progress towards completion of specifictasks, using data such as patient enrollment, clinical site activations or information provided to us by our vendors regarding their actual costs incurred.Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the servicesare performed. We determine accrual estimates through reports from and discussions with applicable personnel and outside service providers as to theprogress or state of completion of trials, or the services completed. Our estimates of accrued expenses as of each balance sheet date are based on the facts andcircumstances known at the time. Costs that are paid in advance of performance are deferred as a prepaid expense and amortized over the service period as theservices are provided.Other Current LiabilitiesAs of December 31, 2017, other current liabilities included $2.6 million of accrued operating expenses, $0.5 million of current portion of capital leaseobligations and $0.2 million of other accrued liabilities. As of December 31, 2016, other current liabilities included $0.6 million of accrued operatingexpenses and $0.1 million of other accrued liabilities.Income TaxesWe use the assets and liabilities method to account for income taxes. We record deferred tax assets and liabilities for the expected future taxconsequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax ratesexpected to be in effect when the differences are expected to reverse. Valuation allowances are provided when necessary to reduce net deferred tax assets tothe amount that is more likely than not to be realized. Based on the available evidence, we are unable, at this time, to support the determination that it is morelikely than not that our deferred tax assets will be utilized in the future. Accordingly, we recorded a full valuation allowance as of December 31, 2017 and2016. We intend to maintain valuation allowances until sufficient evidence exists to support their reversal.Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit.Interest and penalties related to unrecognized tax benefits are included within the provision for income tax.Comprehensive LossComprehensive loss is defined as a change in equity of a business enterprise during a period resulting from transactions from non-owner sources. Ourother comprehensive loss is comprised solely of unrealized gains (losses) on available-for-sale securities and is presented net of taxes. We have not recordedany reclassifications from other comprehensive loss to net loss during any period presented.Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic842), which is intended to increase the transparency and comparability in the reporting of leasing arrangements by generally requiring leased assets andliabilities to be recorded on the balance sheet. The new standard is effective for fiscal years and interim periods within those fiscal years beginning afterDecember 15, 2018, with early adoption permitted. We have not yet determined the potential effect the new standard will have on our consolidated financialstatements.In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifiesseveral aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity orliabilities, and classification in the statement of cash flows. We prospectively adopted the new standard on January 1, 2017 and that adoption did not have amaterial effect on our consolidated financial statements due to the full valuation allowance of our deferred tax assets. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.ASU 2016-13 requires that expected credit losses relating to both (a) financial assets measured on an amortized cost basis, and (b) available-for-sale debtsecurities be recorded through an allowance for credit losses. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debtsecurities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases.The new standard will be effective for us on January 1, 2020. Early adoption will be available on January 1, 2019. We are currently evaluating the effect thatthe updated standard will have on our consolidated financial statements and related disclosures. 79 In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments, which clarifies how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The new standardwill be effective for us on January 1, 2018. We do not expect the adoption of this new standard to have a significant impact on our consolidated financialstatements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies the statement of cashflow treatment of restricted cash or restricted cash equivalents. The new standard will be effective for us on January 1, 2018. The standard should be appliedusing a retrospective transition method to each period presented. We do not expect the adoption of this new standard to have a significant impact on ourconsolidated financial statements and related disclosures. 3.Net Loss per Common ShareBasic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding duringthe period, without consideration of common stock equivalents. Diluted net loss per common share is computed by dividing the net loss by the weighted-average number of shares of common stock and common share equivalents outstanding for the period. Common share equivalents are only included in thecalculation of diluted net loss per common share when their effect is dilutive.Potential dilutive securities, which include unvested RSAs, unvested RSUs, vested and unvested options and ESPP share purchase rights, have beenexcluded from the computation of diluted net loss per share as their effect is antidilutive. Therefore, the denominator used to calculate both basic and dilutednet loss per common share is the same in all periods presented.The following table represents the potential common shares issuable pursuant to outstanding securities as of the related period end dates that wereexcluded from the computation of diluted net loss per common share as their inclusion would have an antidilutive effect: As of December 31, 2017 2016 2015 Unvested RSAs — — 233,413 Unvested RSUs 1,685,000 1,286,262 427,605 Vested and unvested options 5,229,648 3,733,847 3,137,529 ESPP share purchase rights 14,905 7,037 — Total 6,929,553 5,027,146 3,798,547 80 4.Financial InstrumentsThe following tables summarize the estimated fair value and related valuation input hierarchy of our available-for-sale securities as of each periodend: Total Total Total Total Amortized Unrealized Unrealized Estimated As of December 31, 2017: Input Level Cost Gain Loss Fair Value (in thousands) Money market funds Level 1 $68,730 $— $— $68,730 U.S. Treasury obligations Level 2 39,068 — (28) 39,040 Government agency obligations Level 2 4,749 — (21) 4,728 Corporate debt obligations Level 2 46,532 2 (98) 46,436 Commercial paper Level 2 1,592 — — 1,592 Asset-backed securities Level 2 4,122 — (6) 4,116 Total available-for-sale securities 164,793 2 (153) 164,642 Less amounts classified as cash equivalents (77,769) — — (77,769)Amounts classified as short-term investments $87,024 $2 $(153) $86,873 Total Total Total Total Amortized Unrealized Unrealized Estimated As of December 31, 2016: Input Level Cost Gain Loss Fair Value (in thousands) Money market funds Level 1 $28,816 $— $— $28,816 U.S. Treasury obligations Level 2 65,403 3 (21) 65,385 Government agency obligations Level 2 23,860 5 (5) 23,860 Corporate debt obligations Level 2 113,649 8 (172) 113,485 Commercial paper Level 2 699 — — 699 Asset-backed securities Level 2 13,414 4 (6) 13,412 Total available-for-sale securities 245,841 20 (204) 245,657 Less amounts classified as cash equivalents (37,944) — 1 (37,943)Amounts classified as short-term investments $207,897 $20 $(203) $207,714 The amortized cost and fair value of our available-for-sale securities by contractual maturity were as follows: As of December 31, 2017 As of December 31, 2016 Amortized Estimated Amortized Estimated Cost Fair Value Cost Fair Value (in thousands) (in thousands) Maturing within one year$151,938 $151,852 $198,022 $197,956 Maturing in one to five years 12,855 12,790 47,819 47,701 Total available-for-sale securities$164,793 $164,642 $245,841 $245,657 As of December 31, 2017, certain available-for-sale securities had been in a continuous unrealized loss position, each for less than twelve months. Asof this date, no significant facts or circumstances were present to indicate a deterioration in the creditworthiness of the respective issuers, and the Companyhad no requirement or intention to sell these securities before maturity or recovery of their amortized cost basis. During the years ended December 31, 2017,2016 and 2015, we did not recognize any other-than-temporary impairment loss.In addition, restricted cash collateralized by money market funds is a financial asset measured at fair value and is a Level 1 financial instrument underthe fair value hierarchy. 81 5.Property and EquipmentProperty and equipment consisted of the following as of each period end: December 31, December 31, 2017 2016 (in thousands) Construction in progress $40,797 $970 Lab equipment 2,156 1,506 Manufacturing equipment 885 - Leasehold improvements 623 580 Furniture and fixtures 536 526 Computer equipment and software 477 66 45,474 3,648 Less accumulated depreciation and amortization (1,345) (389)Property and equipment, net $44,129 $3,259 Construction in progress represents capitalized costs for our manufacturing facility in Thousand Oaks, California and capitalizable costs incurred fordevelopment of internal use software. Depreciation and amortization expense was $1.0 million, $0.4 million and $48,000 for the years ended December 31,2017, 2016 and 2015, respectively. 6.License and Collaboration AgreementsMSK Agreements – In September 2014, the Company entered into an exclusive option agreement with MSK under which it had the right to acquirethe exclusive worldwide license rights to three clinical stage T-cell therapies from MSK. In June 2015, the Company exercised the option and entered into an exclusive license agreement with MSK. In connection with the execution of thelicense agreement, the Company paid $4.5 million in cash to MSK, which was recorded as research and development expense in our consolidated statementsof operations and comprehensive loss. We are required to make additional payments of up to $33.0 million to MSK based on achievement of specifiedregulatory and sales-related milestones, as well as mid-single-digit percentage tiered royalty payments based on future sales of products resulting from thedevelopment of the licensed product candidates, if any. In addition, under certain circumstances, we are required to make certain minimum annual royaltypayments to MSK, which are creditable against earned royalties owed for the same annual period. We are also required to pay a low double-digit percentageof any consideration we receive for sublicensing the licensed rights. The license agreement expires on a product-by-product and country-by-country basis onthe later of: (i) expiration of the last licensed patent rights related to each licensed product, (ii) expiration of any market exclusivity period granted by lawwith respect to each licensed product, and (iii) a specified number of years after the first commercial sale of the licensed product in each country. Uponexpiration of the license agreement, Atara will retain non-exclusive rights to the licensed products.QIMR Berghofer Agreements – In October 2015, the Company entered into an exclusive license agreement and a research and developmentcollaboration agreement with QIMR Berghofer. Under the terms of the license agreement, the Company obtained an exclusive, worldwide license to develop and commercialize allogeneic cytotoxicT-lymphocyte (“CTL”) therapy programs utilizing technology and know-how developed by QIMR Berghofer. In consideration for the exclusive license, wepaid $3.0 million in cash to QIMR Berghofer, which was recorded as research and development expense in our consolidated statements of operations andcomprehensive loss in the fourth quarter of 2015. In September 2016, the exclusive license agreement and research and development collaboration agreementwere amended and restated. Under the amended and restated agreements, we obtained an exclusive, worldwide license to develop and commercializeadditional CTL programs as well as the option to license additional technology in exchange for $3.3 million in cash, which was recorded as research anddevelopment expense in our consolidated statement of operations and comprehensive loss in the third quarter of 2016 and paid in October 2016. Theamended and restated license agreement also provides for various milestone and royalty payments to QIMR Berghofer based on future product sales, if any.Under the terms of the amended and restated research and development collaboration agreement, we are also required to reimburse the cost of agreed-upon development activities related to programs developed under the collaboration. These payments are expensed as incurred over the related developmentperiods and resulted in research and development expense of $2.9 million, $1.6 million and $0.2 million for the years ended December 31, 2017, 2016 and2015, respectively. The agreement also provides for various milestone payments to QIMR Berghofer based on achievement of certain developmental andregulatory milestones.82 Milestones and royalties under each of the above agreements are contingent upon future events and will be recorded as expense when it is probablethat the milestones will be achieved or royalties are due. As of December 31, 2017 and 2016, there were no outstanding obligations for milestones androyalties to MSK and QIMR Berghofer.Amgen License Agreements – In September 2012, we entered into license agreements with Amgen, Inc., for several molecular programs, includingPINTA745, ATA842 and STM434. In December 2015, we announced the suspension of further development of PINTA745 and, in June 2016, we returned therights related to this and the ATA842 program to Amgen. In October 2017, we returned all remaining rights under the license agreements to Amgen. 7.Commitments and ContingenciesLicense and Collaboration AgreementsPotential payments related to our license and collaboration agreements, including milestone and royalty payments, are detailed in Note 6.Other Research and Development AgreementsWe may also enter into contracts in the normal course of business with clinical research organizations for clinical trials, with contract manufacturingorganizations for clinical supplies, and with other vendors for pre-clinical studies, supplies and other services and products for operating purposes. Thesecontracts generally provide for termination on notice, with the exception of potential termination charges related to one of our contract manufacturingagreements in the event certain minimum purchase volumes are not met. As of December 31, 2017 and 2016, there were no amounts accrued related totermination charges for minimum purchase volumes not being met.LeasesWe lease our corporate headquarters in South San Francisco, California under a non-cancellable lease agreement that expires in April 2021. Inconnection with the lease, we are required to maintain a letter of credit in the amount of $0.2 million to the landlord, which expires and is renewed every 12months, and is classified as restricted cash in our consolidated balance sheet. We also lease office space in Westlake Village, California under a leaseagreement that expires in April 2019. Future minimum payments under our operating and capital leases as of December 31, 2017 were as follows: Operating Leases Capital Leases Years Ending December 31, (in thousands) 2018 $1,979 $546 2019 823 498 2020 613 160 2021 259 — 2022 — — Thereafter — — Total minimum payments $3,674 $1,204 Less: amount representing interest 128 Present value of capital lease obligations 1,076 Less: current portion 463 Capital lease obligation, net of current portion $613 Rent expenses under operating leases for the years ended December 31, 2017, 2016 and 2015 were $1.4 million, $1.2 million and $0.4 million,respectively. Financing Obligation—Build-to-Suit Lease In February 2017, we entered into a lease agreement for approximately 90,580 square feet of office, lab and cellular therapy manufacturing space inThousand Oaks, California. The initial 15-year term of the lease commences upon the substantial completion of landlord’s work as defined under theagreement. The contractual obligations during the initial term are $16.4 million in aggregate. We have the option to extend the lease for two additionalperiods of ten and nine years, respectively, after the initial term. In connection with the lease, we were required to issue a letter of credit in the amount of $1.2million to the landlord, which is recorded as long-term restricted cash in our consolidated balance sheet.83 Based on the terms of the lease agreement and due to our involvement in certain aspects of the construction, we have been deemed the owner of thebuilding (for accounting purposes only) during the construction period in accordance with GAAP. Under this build-to-suit lease arrangement, we recognizeconstruction in progress based on all construction costs incurred by both us and the landlord. We also recognize a financing obligation equal to all costsfunded by the landlord. As of December 31, 2017, we have recorded $9.9 million of construction in progress relating to landlord’s costs of the building incurred through thatdate, and have recorded a corresponding long-term financing obligation for the same amount included in the long-term liabilities in our consolidated balancesheets. In addition, we have recorded $25.0 million of construction in progress for construction costs incurred by us and $0.3 million of capitalized interestduring the construction period through December 31, 2017. Further, we recorded ground lease expense of $0.3 million for the year ended December 31, 2017,in our consolidated statement of operations and comprehensive loss, representing the estimated cost of renting the land during the construction period.Ground lease expense for the years ended December 31, 2016 and 2015 was zero. Future minimum lease payments, under the Company’s facility lease financing obligations as of December 31, 2017 were as follows: Years Ending December 31, (in thousands) 2018 $372 2019 911 2020 938 2021 966 2022 996 Thereafter 12,204 Total minimum payments $16,387 Asset Retirement ObligationThe Company recognizes its estimate of the fair value of its ARO in long-term liabilities in the period incurred. The fair value of the ARO is alsocapitalized as construction in progress. The fair value of our ARO was estimated by discounting projected cash flows over the estimated life of the relatedassets using our credit adjusted risk-free rate. The Company’s ARO consists of a contractual requirement to remove the tenant improvements at ourmanufacturing facility in Thousand Oaks, California and restore the facility to a condition specified in the lease agreement.The following table presents the activity for our ARO liabilities: (in thousands) Balance as of December 31, 2016 $— Liabilities incurred during the year 580 Balance as of December 31, 2017 $580Indemnification AgreementsIn the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide forindemnification for certain liabilities. The exposure under these agreements is unknown because it involves claims that may be made against us in the futurebut have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However,we may record charges in the future as a result of these indemnification obligations. We also have indemnification obligations to our directors and executiveofficers for specified events or occurrences, subject to some limits, while they are serving at our request in such capacities. There have been no claims to dateand we believe the fair value of these indemnification agreements is minimal. Accordingly, we have not recorded any liabilities for these agreements as ofDecember 31, 2017 and 2016.ContingenciesFrom time to time, we may be involved in legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course ofour business or otherwise. The ultimate outcome of any litigation is uncertain and unfavorable outcomes could have a negative impact on our results ofoperations and financial condition. Regardless of outcome, litigation can have an adverse impact on us because of the defense costs, diversion ofmanagement resources and other factors. We are not currently involved in any material legal proceedings.84 8.Stockholders’ EquityOur authorized capital stock consists of 520,000,000 shares, all with a par value of $0.0001 per share, of which 500,000,000 shares are designated ascommon stock and 20,000,000 shares are designated as preferred stock. There were no shares of preferred stock outstanding as of December 31, 2017 and2016.ATM FacilityIn March 2017, we entered into a sales agreement (the “ATM facility”) with Cowen under which we may offer and sell, in our sole discretion, shares ofour common stock, having an aggregate offering price of up to $75.0 million through Cowen, as our sales agent. We will pay Cowen a commission of up to3.0% of the gross sales proceeds of any common stock sold under the ATM facility. The issuance and sale of these shares by us pursuant to the ATM facilityare deemed “at the market” offerings and are available under the Securities Act of 1933, as amended. During the fiscal year ended December 31, 2017, we sold an aggregate of 1,349,865 shares of common stock, under the ATM facility, at an averageprice of approximately $14.82 per share, for gross proceeds of $20.0 million, and net proceeds of $19.2 million, after deducting commissions and offeringexpenses. As of December 31, 2017, $55.0 million of common stock remained available to be sold under this facility, subject to certain conditions asspecified in the agreement.Restricted Stock AwardsIn August 2012, in connection with our formation, our CEO purchased 1,066,154 post-recap, post-split shares of restricted common stock at a nominalper share purchase price. The shares were issued subject to certain vesting conditions, restrictions on transfer and a Company right of repurchase of anyunvested share at their original purchase price. The combined grant date intrinsic value for this award was $1.7 million.In March 2013, an Atara employee purchased 269,230 post-recap, post-split shares of restricted common stock for $0.3 million. The shares were issuedunder our 2012 Equity Incentive Plan and were subject to certain vesting conditions, restrictions on transfer and a Company right of repurchase of anyunvested shares at their original purchase price.The amounts paid for both RSAs were initially recorded as other long-term liabilities. As the shares vested, we reclassified liabilities to equity. As ofDecember 31, 2016, all of these shares had vested and are reported as common stock shares outstanding in the consolidated financial statements.There were no grants of RSAs in the years ended December 31, 2017, 2016 and 2015. Stock-based compensation expense related to the RSAs isrecorded using the accelerated graded vesting model and was none, $0.2 million and $0.8 million for the years ended December 31, 2017, 2016 and 2015,respectively.Equity Incentive PlanIn March 2014, we adopted the 2014 Equity Incentive Plan (the “2014 EIP”), which was amended and restated on October 15, 2014 upon the pricingof our IPO.The 2014 EIP provides for annual increases in the number of shares available for issuance thereunder on the first business day of each fiscal year,beginning with 2015 and ending in 2024, equal to five percent of the number of shares of the Company’s common stock outstanding as of such date or alesser number of shares as determined by our board of directors.Under the terms of the 2014 EIP, we may grant options, RSAs and RSUs to employees, directors, consultants and other service providers. RSUstypically require settlement by the earlier of seven years from the date of grant or the service termination (or, for RSUs granted prior to February 2014, twoyears following the service termination date). Stock options are granted at prices no less than 100% of the estimated fair value of the shares on the date ofgrant as determined by the board of directors, provided, however, that the exercise price of an option granted to a 10% shareholder cannot be less than 110%of the estimated fair value of the shares on the date of grant. Options granted to employees and non-employees generally vest over four years and expire inseven years. As of December 31, 2017, a total of 10,214,174 shares of common stock were reserved for issuance under the 2014 Plan, of which 3,557,041shares were available for future grant and 6,657,133 were subject to outstanding options and RSUs.85 Restricted Stock Units and AwardsThe weighted average grant date fair value of RSUs granted during the years ended December 31, 2017, 2016 and 2015 was $15.07, $17.83 and$25.15, respectively. As of December 31, 2017, there was $20.6 million of unrecognized stock-based compensation expense related to RSUs that is expectedto be recognized over a weighted average period of 2.6 years. The aggregate intrinsic value of the RSUs outstanding as of December 31, 2017 was$30.8 million.The following is a summary of RSU activity under our 2014 EIP: RSUs Shares Weighted AverageGrant Date Fair Value Unvested as of December 31, 2016 1,286,262 $16.61 Granted 782,413 15.07 Forfeited (64,313) 15.33 Vested (319,362) 11.57 Unvested as of December 31, 2017 1,685,000 $16.90 Vested and unreleased 17,485 Outstanding as of December 31, 2017 1,702,485 Under our RSU net settlement procedures, we withhold shares at settlement to cover the minimum payroll withholding tax obligations. During 2017,we settled 327,282 RSUs, of which 52,624 RSUs were net settled by withholding 22,274 shares. The value of the RSUs withheld was $0.4 million, based onthe closing price of our common stock on the settlement date. During 2016, we settled 204,611 RSUs, of which 13,573 RSUs were net settled by withholding5,222 shares. The value of the RSUs withheld was $0.1 million, based on the closing price of our common stock on the settlement date. The value of RSUswithheld in each period was remitted to the appropriate taxing authorities and has been reflected as a financing activity in our consolidated statements ofcash flows.Stock OptionsThe following is a summary of option activity under our 2014 EIP: Shares Weighted AverageExercise Price Weighted AverageRemainingContractual Term(Years) Aggregate IntrinsicValue(in thousands) Outstanding as of December 31, 2016 3,733,847 $24.14 Granted 1,694,000 15.79 Exercised (60,125) 12.37 Forfeited or expired (413,074) 23.77 Outstanding as of December 31, 2017 4,954,648 $21.46 5.21 $7,433 Vested and expected to vest as of December 31, 2017 4,954,648 $21.46 5.21 $7,433 Exercisable as of December 31, 2017 2,030,454 $24.06 4.39 $2,465 Aggregate intrinsic value represents the difference between the closing stock price of our common stock on December 31, 2017 and the exercise priceof outstanding, in-the-money options. As of December 31, 2017, there was $30.3 million of unrecognized stock-based compensation expense related to stockoptions that is expected to be recognized over a weighted average period of 2.6 years.Options for 60,125, 18,947 and 23,822 shares of our common stock were exercised during the years ended December 31, 2017, 2016 and 2015, withan intrinsic value of $0.2 million, $0.2 million and $0.6 million, respectively. As we believe it is more likely than not that no stock option related taxbenefits will be realized, we do not record any net tax benefits related to exercised options.86 The fair value of each option issued was estimated at the date of grant using the Black-Scholes valuation model. The following table summarizes theweighted-average assumptions used as inputs to the Black-Scholes model, and resulting weighted-average grant date fair values of stock options granted toemployees during the periods indicated: Year ended December 31, 2017 2016 2015 Assumptions: Expected term (years) 4.5 4.5 4.5 Expected volatility 71.3% 69.0% 72.4%Risk-free interest rate 1.9% 1.3% 1.6%Expected dividend yield 0.0% 0.0% 0.0%Fair Value: Weighted-average estimated grant date fair value per share $9.01 $11.02 $16.63 Options granted 1,694,000 966,250 2,601,174 Total estimated grant date fair value $15,263,000 $10,648,000 $43,258,000 The estimated fair value of stock options that vested in the years ended December 31, 2017, 2016 and 2015 was $14.0 million, $14.0 million and $2.9million, respectively.Employee Stock Purchase Plan In May 2014, we adopted the 2014 Employee Stock Purchase Plan (“2014 ESPP”), which became effective on October 15, 2014 upon the pricing ofour IPO. The 2014 ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods.Eligible employees can purchase shares of the Company’s common stock at 85% of the lower of the fair market value of the common stock at (i) thebeginning of a 12-month offering period, or (ii) at the end of one of the two related 6-month purchase periods. No participant in the 2014 ESPP may be issuedor transferred shares of common stock valued at more than $25,000 per calendar year. On June 1, 2016, the first offering under the 2014 ESPP commenced,and the Company recorded $0.4 million of expense in the year ended December 31, 2016. A total of 22,844 shares were purchased at the end of the firstpurchase period on November 30, 2016. The 2017 offering period commenced on June 1, 2017 and will end on May 31, 2018. The Company recorded $0.6million of expense related to the 2014 ESPP in the year ended December 31, 2017. A total of 81,922 shares were purchased under the ESPP during the yearended December 31, 2017. As of December 31, 2017, there was $0.2 million of unrecognized stock-based compensation expense related to ESPP that is expected to berecognized by the end of second quarter of 2018. The 2014 ESPP provides for annual increases in the number of shares available for issuance thereunder on the first business day of each fiscal year,beginning with 2015 and ending in 2024, equal to the lower of (i) one percent of the number of shares of our common stock outstanding as of such date, (ii)230,769 shares of our common stock, or (iii) a lesser number of shares as determined by our board of directors. As of December 31, 2017, there were 789,669shares available for purchase under the 2014 ESPP. Options issued outside the 2014 EIP During the year ended December 31, 2017, we granted 275,000 options, at a weighted average exercise price of $13.96 per share, outside of our 2014EIP. These options have terms similar to the options granted under the 2014 EIP. The weighted average grant date fair value of such grants was $2.2 million.No options were granted outside the 2014 EIP during the years ended December 31, 2016 and 2015. As of December 31, 2017, there was $2.0 million ofunrecognized stock-based compensation expense related to options issued outside the 2014 EIP that is expected to be recognized over a weighted averageperiod of 3.5 years. The aggregate intrinsic value of such options as of December 31, 2017 was $1.1 million. The following shares of common stock were reserved for future issuance as of December 31, 2017: Total SharesReserved 2014 Equity Incentive Plan 10,214,174 2014 Employee Stock Purchase Plan 789,669 Options issued outside the 2014 EIP 275,000 Total reserved shares of common stock 11,278,84387 Stock-based Compensation ExpenseTotal stock-based compensation expense related to all employee and non-employee awards was as follows: Year Ended December 31, 2017 2016 2015 (in thousands) Research and development $8,778 $7,612 $4,822 General and administrative 14,322 9,172 5,429 Total stock-based compensation expense $23,100 $16,784 $10,251 9.Income TaxesLosses before provision for income taxes were as follows in each period presented: Year Ended December 31, 2017 2016 2015 (in thousands) United States $(12,894) $(48,795) $(57,230)Foreign (106,611) (30,244) — Total loss before provision for income taxes $(119,505) $(79,039) $(57,230) The components of income tax provision (benefit) were as follows in each period presented: Year Ended December 31, 2017 2016 2015 Current provision (benefit) for income taxes: (in thousands) Federal $(14) $— $(1)State — 10 (8)Total current provision (benefit) for income taxes $(14) $10 $(9) A reconciliation of statutory tax rates to effective tax rates were as follows in each of the periods presented: Year Ended December 31, 2017 2016 2015 Federal income taxes at statutory rate 34.0% 34.0% 34.0%Impact of stock compensation (1.5%) (1.3%) (0.6%)Foreign income tax at different rate (30.3%) (13.0%) — Impact of US tax reform (11.3%) — — Other (3.8%) (0.9%) — Change in valuation allowance 12.9% (18.8%) (33.4%)Effective tax rate 0.0% 0.0% 0.0% In the first quarter of 2017, the Company adopted ASU 2016-09, which requires excess tax benefits and tax deficiencies generated by the settlement ofshare-based awards to be recognized as part of the income tax provision. The adoption of ASU 2016-09 did not have an impact on our balance sheet, resultsof operations, cash flows or statement of stockholders’ equity because we have a full valuation allowance on our deferred tax assets. Upon adoption, theCompany recognized the previously unrecognized excess tax benefits. The previously unrecognized excess tax effects were recorded as a deferred tax asset,which was fully offset by a valuation allowance. Upon adoption, the Company recorded additional federal and state net operating losses of $10.5 million.These net operating losses are offset with a valuation allowance. Beginning in 2017, the impact of excess tax benefits and tax deficiencies are included in theImpact of Stock Compensation tax rate line. 88 Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows as of thedates indicated: As of December 31, 2017 2016 Deferred tax assets: (in thousands) Net operating losses $31,110 $36,911 License fees 2,940 5,800 Stock-based compensation 10,489 9,600 Legal fees 1,490 1,933 Other 1,268 1,643 Total deferred tax assets 47,297 55,887 Valuation allowance (47,297) (55,887)Net deferred tax assets $— $— We recognize deferred income taxes for temporary differences between the basis of assets and liabilities for financial statement and income taxpurposes, as well as for tax attribute carryforwards. We regularly evaluate the positive and negative evidence in determining the realizability of our deferredtax assets. Based upon the weight of available evidence, which includes our historical operating performance and reported cumulative net losses sinceinception, we maintained a full valuation allowance on the net deferred tax assets as of December 31, 2017 and 2016. We intend to maintain a full valuationallowance on our deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. The valuation allowancedecreased by $8.6 million and increased by $18.9 million for the years ended December 31, 2017 and 2016, respectively.As of December 31, 2017, we had federal and state net operating loss carryforwards for tax return purposes of $76.0 million and $231.4 million,respectively. The federal and state net operating loss carryforwards begin to expire in 2032 in various amounts if not utilized.Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), our ability to utilize net operating loss carryforwards or other taxattributes in any taxable year may be limited if we have experienced an “ownership change.” Generally, a Section 382 “ownership change” occurs if one ormore stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50% over its lowestownership percentage within a specified testing period. Similar rules may apply under state tax laws.We have completed a Section 382 study of transactions in our stock through December 31, 2015. The study concluded that we have experienced atleast one ownership change since inception and that our utilization of net operating loss carryforwards will be subject to annual limitations. However, it isnot expected that these limitations will result in the expiration of tax attribute carryforwards prior to utilization. The Company has also completed anupdated analysis since the previous ownership change through December 31, 2017. As a result, no new ownership changes have occurred that would limit thecurrent generated NOLs.On December 22, 2017, the Tax Act was enacted into law. The Tax Act, among other things, contains significant changes to corporate taxation,including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%; limitation of the tax deduction for interest expense to 30%of adjusted earnings (except for certain small businesses); limitation of the deduction of net operating losses generated in tax years beginning after December31, 2017 to 80% of taxable income, indefinite carryforward of net operating losses generated in tax years after 2018 and elimination of net operating losscarrybacks; changes in the treatment of offshore earnings regardless of whether they are repatriated; current inclusion in U.S. federal taxable income of certainearnings of controlled foreign corporations, mandatory capitalization of research and development expenses beginning in 2022; immediate deductions forcertain new investments instead of deductions for depreciation expense over time; further deduction limits on executive compensation; and modifying,repealing and creating many other business deductions and credits, including the reduction in the orphan drug credit from 50% to 25% of qualifyingexpenditures. As of December 31, 2017, we have made a reasonable estimate of the effects on our existing deferred taxes and related disclosures by reducingthe expected deductibility of certain executive compensation by $0.6 million due to the application of new limitations under Internal Revenue Section162(m) and reducing our net federal and state deferred tax assets by $13.5 million for the reduction in corporate tax rate. These adjustments to our deferredtax assets are offset against the valuation allowance. Due to accumulated foreign deficits the Company does not expect a current inclusion in U.S. federaltaxable income for the transition tax on earnings of controlled foreign corporations.Additionally, the SEC staff has issued SAB 118, which allows us to record provisional amounts during a measurement period not to extend beyondone year of the enactment date. On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of U.S. GAAP insituations when a registrant does not have the necessary information available,89 prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. Because theCompany is still in the process of analyzing certain provisions of the Act including the application of new executive compensation limitation provisionsunder Internal Revenue Section 162(m) in accordance with SAB 118, the Company has determined that the adjustment to its deferred taxes was a provisionalamount and a reasonable estimate at December 31, 2017.A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: (In thousands) Balance as of December 31, 2014$1,643 Gross increases for tax positions related to current year 2,671 Balance as of December 31, 2015 4,314 Gross increases for tax positions related to current year 4,971 Balance as of December 31, 2016 9,285 Gross increases for tax positions related to current year 16,371 Gross increases for tax positions related to prior year 9,534 Gross decreases for tax positions related to prior year (4,643)Impact of change in tax rate (496)Balance as of December 31, 2017$30,051 The Company currently has a full valuation allowance against its U.S. net deferred tax assets, which would impact the timing of the effective tax ratebenefit should any uncertain tax position be favorably settled in the future. Of the $30.1 million total unrecognized tax benefits as of December 31, 2017,$0.1 million, if recognized, would affect the Company’s effective tax rate. During July 2016, the Company licensed certain intellectual property rights to a wholly-owned subsidiary outside the United States. Although thelicense of intellectual property rights between consolidated entities did not result in any gain in the consolidated statements of operations andcomprehensive loss, the transaction generated a taxable gain in the United States. However, as this gain is offset by current and existing tax losses, there wasno cash tax impact from the transaction in the periods presented. As a result of the transaction, there was an increase of $0.4 million and $0.8 million inunrecognized tax benefits during the year ended December 31, 2016 and December 31, 2017, respectively. The remaining increases and decreases inunrecognized tax benefits related to changes to federal and state research and development and orphan drug tax credit carryforwards. The Company expectsto record an uncertain tax benefit of $0.8 million during the next 12 months related to the licensed intellectual property rights. The Company’s policy is toaccount for interest and penalties related to uncertain tax positions as a component of the income tax provision. The amount of accrued interest and penaltiesas of December 31, 2017 and for the years ended December 31, 2017, 2016 and 2015 was immaterial. Our significant jurisdictions are the Cayman Islands, the U.S. federal, and the California state jurisdiction. All of our tax years remain open toexamination by the U.S. federal and California tax authorities. 10.Subsequent events In January 2018, we completed an underwritten public offering of 7,675,072 shares of common stock, including 675,072 from the exercise by theunderwriters of their option to purchase additional shares, at an offering price of $18.25 per share. We received net proceeds of approximately $131.4million, after deducting underwriting discounts and commissions and offering expenses. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresUnder the supervision of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls andprocedures (as defined in Rules 13a-15(e) of the Exchange Act as of December 31, 2017. Based on that evaluation, our Chief Executive Officer and ChiefFinancial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2017 to ensure that information required to bedisclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified inthe SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and ChiefFinancial Officer, as appropriate to allow timely discussion regarding required disclosures. In designing and evaluating our disclosure90 controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that thereare resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to theircosts.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rules 13a-15(f) and 15d-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting asof December 31, 2017 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission.Based on the results of its evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2017.Inherent Limitations on Controls and ProceduresOur management, including the Chief Executive and Financial Officer and Principal Accounting Officer, does not expect that our disclosure controlsand procedures and our internal controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can only providereasonable assurances that the objectives of the control system are met. The design of a control system reflects resource constraints; the benefits of controlsmust be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, within the Company have been or will be detected. As these inherent limitations are knownfeatures of the financial reporting process, it is possible to design into the process safeguards to reduce, though not eliminate, these risks. These inherentlimitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of simple error or mistake. Controls canbe circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of anysystem of controls is based in part upon certain assumptions about the likelihood of future events. While our disclosure controls and procedures are designedto provide reasonable assurance of achieving their objectives, there can be no assurance that any design will succeed in achieving its stated goals under allfuture conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with thepolicies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not bedetected.We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis and to improve ourcontrols and procedures over time and to correct any deficiencies that we may discover in the future. While our Chief Executive and Financial Officer andPrincipal Accounting Officer have concluded that, as of December 31, 2017, the design of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act, was effective, future events affecting our business may cause us to significantly modify our disclosure controls and procedures.Changes in Internal Control over Financial ReportingThere was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 2017 that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.Report of the Independent Registered Public Accounting FirmThis Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established bythe JOBS Act for “emerging growth companies.” Item 9B. Other InformationNone. 91 PART III Certain information required by Part III is omitted from this Annual Report on Form 10-K since we intend to file our definitive proxy statement for our2017 annual meeting of stockholders, or the Definitive Proxy Statement, pursuant to Regulation 14A of the Securities Exchange Act of 1934, asamended, not later than 120 days after December 31, 2017, and certain information to be included in the Definitive Proxy Statement is incorporatedherein by reference. Item 10. Directors, Executive Officers and Corporate GovernanceInformation required by this Item is hereby incorporated by reference to our Definitive Proxy Statement.We have adopted a Code of Conduct that applies to our officers, directors and employees which is available on our internet website atwww.atarabio.com. The Code of Conduct contains general guidelines for conducting the business of our company consistent with the higheststandards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 andItem 406 of Regulation S-K. In addition, we intend to promptly disclose (1) the nature of any amendment to our Code of Conduct that applies to ourprincipal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions and (2) thenature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name ofsuch person who is granted the waiver and the date of the waiver on our website in the future. Item 11. Executive CompensationInformation required by this Item is hereby incorporated by reference to our Definitive Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersInformation required by this Item is hereby incorporated by reference to our Definitive Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director IndependenceInformation required by this Item is hereby incorporated by reference to our Definitive Proxy Statement. Item 14. Principal Accounting Fees and ServicesInformation required by this Item is hereby incorporated by reference to our Definitive Proxy Statement.92 PART IV Item 15. Exhibits, Financial Statement Schedules(a)(1)Financial Statements.The response to this portion of Item 15 is set forth under Item 8 above.(a)(2)Financial Statement Schedules.All schedules have been omitted because they are not required or because the required information is given in the financial statements or notes theretoset forth under Item 8 above.(a)(3)Exhibits.A list of exhibits filed with this report or incorporated herein by reference can be found in the Exhibit Index immediately following the signature pageof this Report.93 EXHIBIT INDEX ExhibitNumber Incorporated by Reference Filed Exhibit Description Form File No. Exhibit Filing Date Herewith 3.1 Amended and Restated Certificate of Incorporation of AtaraBiotherapeutics, Inc. S-1 333-196936 3.2 06/20/2014 3.2 Amended and Restated Bylaws of Atara Biotherapeutics, Inc. S-1 333-196936 3.4 06/20/2014 4.1 Form of Common Stock Certificate S-1/A 333-196936 4.1 07/10/2014 4.2 Investors’ Rights Agreement, by and among Atara Biotherapeutics, Inc. andthe stockholders named therein, dated March 31, 2014 S-1 333-196936 4.2 06/20/2014 10.1* Amended and Restated 2014 Equity Incentive Plan 10-Q 001-36548 10.2 08/08/2016 10.2* Forms of Option Agreement and Option Grant Notice under the 2014Equity Incentive Plan S-1 333-196936 10.2 06/20/2014 10.3* Form of Restricted Stock Unit Agreement and Restricted Stock Unit GrantNotice under the 2014 Equity Incentive Plan S-1 333-196936 10.3 06/20/2014 10.4* Nina Biotherapeutics, Inc. 2012 Equity Incentive Plan S-1 333-196936 10.4 06/20/2014 10.5* Pinta Biotherapeutics, Inc. 2012 Equity Incentive Plan S-1 333-196936 10.5 06/20/2014 10.6* Santa Maria Biotherapeutics, Inc. 2012 Equity Incentive Plan S-1 333-196936 10.6 06/20/2014 10.7* Form of Stock Unit Agreement under the Nina Biotherapeutics, Inc. 2012Equity Incentive Plan, Pinta Biotherapeutics, Inc. 2012 Equity IncentivePlan and Santa Maria Biotherapeutics, Inc. 2012 Equity Incentive Plan S-1 333-196936 10.7 06/20/2014 10.8* 2014 Employee Stock Purchase Plan S-1/A 333-196936 10.8 07/10/2014 10.9* Form of Indemnification Agreement made by and between AtaraBiotherapeutics, Inc. and each of its directors and executive officers S-1 333-196936 10.9 06/20/2014 10.10* Amended and Restated Executive Employment Agreement by and betweenAtara Biotherapeutics, Inc. and Isaac E. Ciechanover, dated October 12,2015 8-K 001-36548 10.1 10/16/2015 10.11* Amended and Restated Executive Employment Agreement between AtaraBiotherapeutics, Inc. and John F. McGrath, Jr., dated October 12, 2015 8-K 001-36548 10.2 10/16/2015 10.12* Amended and Restated Executive Employment Agreement between AtaraBiotherapeutics, Inc. and Christopher M. Haqq, dated October 12, 2015 8-K 001-36548 10.3 10/16/2015 10.13* Amended and Restated Executive Employment Agreement between AtaraBiotherapeutics, Inc. and Mitchall Clark, dated October 12, 2015 8-K 001-36548 10.4 10/16/2015 10.14* Amended and Restated Executive Employment Agreement between AtaraBiotherapeutics, Inc. and Heather D. Turner, dated October 12, 2015 10-Q 001-36548 10.1 05/06/2016 10.15† Exclusive Option Agreement, by and between Atara Biotherapeutics, Inc.and Memorial Sloan Kettering Cancer Center, dated as of September 19,2014 10-Q 001-36548 10.29 05/11/2015 10.16† Amendment Number One to the Exclusive Option Agreement, by andbetween Atara Biotherapeutics, Inc. and Memorial Sloan Kettering CancerCenter, dated as of June 12, 2015 10-Q 001-36548 10.32 08/07/2015 94 ExhibitNumber Incorporated by Reference Filed Exhibit Description Form File No. Exhibit Filing Date Herewith 10.17† Exclusive License Agreement, by and between Atara Biotherapeutics, Inc.and Memorial Sloan Kettering Cancer Center, dated as of June 12, 2015 S-1 333-205347 10.30 06/29/2015 10.18 Office Lease, by and between Atara Biotherapeutics, Inc. and BPG RockWestlake, LLC, dated January 7, 2015 10-Q 001-36548 10.33 11/06/2015 10.19 First Amendment to Lease, by and between BPG Rock Westlake, LLC andAtara Biotherapeutics, Inc., dated as of September 9, 2015 10-Q 001-36548 10.34 11/06/2015 10.20 Office Lease, by and between BXP 611 Gateway Center LP and AtaraBiotherapeutics, Inc., dated as of December 9, 2015 10-K 001-36548 10.29 03/04/2016 10.21* Amended and Restated Executive Employment Agreement between AtaraBiotherapeutics, Inc. and Gad Soffer, dated October 12, 2015 10-K 001-36548 10.21 03/09/2017 10.22* Standard Industrial Lease by and between Thousand Oaks IndustrialPortfolio, LLC and Atara Biotherapeutics, Inc. dated February 6, 2017 10-Q 001-36548 10.1 05/04/2017 10.23* Executive Employment Agreement between Atara Biotherapeutics, Inc.and Joe Newell, dated March 20, 2017 10-Q 001-36548 10.1 08/07/2017 10.24* Executive Employment Agreement between Atara Biotherapeutics, Inc.and Derrell Porter, M.D. dated March 23, 2017 10-Q 001-36548 10.2 08/07/2017 10.25* Forms of Inducement Grant Notice and Inducement Grant Agreement 10-Q 001-36548 10.3 08/07/2017 21.1 List of Subsidiaries X 23.1 Consent of Independent Registered Public Accounting Firm X 24.1 Power of Attorney (included on signature page) 31.1 Certification of the Chief Executive Officer pursuant to SecuritiesExchange Act Rules 13A-14A and 15D-14A X 31.2 Certification of the Chief Financial Officer pursuant to SecuritiesExchange Act Rules 13A-14A and 15D-14A X 32.1(1) Certifications of Chief Executive Officer and Chief Financial Officerpursuant to 18 USC Section 1350 as adopted pursuant to Section 906 ofThe Sarbanes-Oxley Act of 2002. X 101.INS XBRL Instance Document. X 101.SCH XBRL Taxonomy Extension Schema Document. X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB XBRL Taxonomy Extension Labels Linkbase Document. X 101.PRE XBRL Taxonomy Extension Presentation LinkbaseDocument. X †Confidential treatment has been requested or granted for a portion of this exhibit.*Indicates management contract or compensatory plan or arrangement.(1)The certifications attached as Exhibit 32.1 accompany this Annual Report on Form 10-K pursuant to 18 USC. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the SecuritiesExchange Act of 1934, as amended.95 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized, in the City of South San Francisco, State of California, on the 27th day of February, 2018. Atara Biotherapeutics, Inc. By: /s/ Isaac E. Ciechanover Isaac E. Ciechanover, M.D. President and Chief Executive OfficerKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Isaac E. Ciechanover andJohn F. McGrath, Jr., and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and inhis or her name, place or stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report onForm 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, grantingunto 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 tobe done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that saidattorneys-in-fact and agents, or their, his or her 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 below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/ Isaac E. Ciechanover Isaac E. Ciechanover, M.D. President and Chief Executive Officer (principal executive officer) February 27, 2018 /s/ John F. McGrath, Jr. John F. McGrath, Jr. Executive Vice President and Chief Financial Officer(principal financial and accounting officer) February 27, 2018 /s/ Eric Dobmeier Eric Dobmeier Director February 27, 2018 /s/ Matthew K. Fust Matthew K. Fust Director February 27, 2018 /s/ Carol G. Gallagher Carol G. Gallagher, Pharm.D. Director February 27, 2018 /s/ William Heiden William Heiden Director February 27, 2018 /s/ Joel S. Marcus Joel S. Marcus Director February 27, 2018 /s/ Beth Seidenberg Beth Seidenberg, M.D. Director February 27, 2018 96 Exhibit 21.1LIST OF SUBSIDIARIESThe following is a list of subsidiaries of the Company as of December 31, 2017: Subsidiary Legal Name State or other Jurisdiction of IncorporationNina Biotherapeutics, Inc. DelawarePinta Biotherapeutics, Inc. DelawareSanta Maria Biotherapeutics, Inc. DelawareAtara Biotherapeutics Cayman Limited Cayman IslandsAtara Biotherapeutics Ireland LimitedAtara Biotherapeutics Switzerland GmbH IrelandSwitzerland Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in registration statements No. 333-207876 on Form S-3 and No. 333-199508, No. 333-204076, No. 333-209961, No. 333-214431, No. 333-219763 on Form S-8 of our report dated February 27, 2018, relating to the consolidated financial statements appearing inthis Annual Report on Form 10-K of Atara Biotherapeutics, Inc. for the year ended December 31, 2017./s/ DELOITTE & TOUCHE LLPSan Jose, CaliforniaFebruary 27, 2018 Exhibit 31.1CERTIFICATION OF THE CHIEF EXECUTIVE OFFICERPURSUANT TOSECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)I, Isaac Ciechanover, certify that:1.I have reviewed this Annual Report on Form 10-K of Atara Biotherapeutics, Inc.;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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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 inExchange 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, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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 reasonablylikely 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 controlover financial reporting. Date: February 27, 2018 /s/ Isaac CiechanoverIsaac CiechanoverPresident and Chief Executive Officer(Principal Executive Officer) Exhibit 31.2CERTIFICATION OF THE CHIEF FINANCIAL OFFICERPURSUANT TOSECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)I, John McGrath, certify that:1.I have reviewed this Annual Report on Form 10-K of Atara Biotherapeutics, Inc.;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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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 inExchange 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, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’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 reasonablylikely 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 controlover financial reporting. Date: February 27, 2018 /s/ John McGrathJohn McGrathExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)  Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in connection with theAnnual Report of Atara Biotherapeutics, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2017, as filed with the Securities andExchange Commission (the “Report”), Isaac Ciechanover, Chief Executive Officer of the Company, and John McGrath, Chief Financial Officer of theCompany, respectively, do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 27, 2018 /s/ Isaac Ciechanover Isaac CiechanoverPresident and Chief Executive Officer(Principal Executive Officer) /s/ John McGrath John McGrathExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer) This certification accompanies the Annual Report on Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and isnot to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made beforeor after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. 

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